EXHIBIT 10.25
AGREEMENT AND PLAN OF MERGER
Dated as of
December 31, 1997
By and among
MJD VENTURES, INC.
ELLENSBURG ACQUISITION CORP.
AND
ELLENSBURG TELEPHONE COMPANY
AGREEMENT AND PLAN OF MERGER
AGREEMENT made as of this 31st day of December, 1997 by and among
ELLENSBURG TELEPHONE COMPANY, a Washington corporation (the "COMPANY"), MJD
VENTURES, INC., a Delaware corporation ("PARENT") and ELLENSBURG ACQUISITION
CORP., a Washington corporation ("ACQUISITION SUB").
WITNESSETH
WHEREAS, the respective Boards of Directors of Parent, Acquisition Sub
and the Company have approved the merger of Acquisition Sub with and into the
Company (the "MERGER"), upon the terms and subject to the conditions set forth
herein and in the articles of merger annexed as EXHIBIT A (the "ARTICLES OF
MERGER"), as a result of which Acquisition Sub will be merged into the Company
and the shareholders of the Company (other than shareholders who perfect
appraisal rights) will be entitled to receive the consideration provided in this
Agreement.
NOW, THEREFORE, in consideration of the mutual benefits to be derived
from this Agreement and of the representations, warranties, covenants and
agreements hereinafter contained, Parent, Acquisition Sub and the Company agree
as follows:
SECTION 1. THE MERGER
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1.1 Surviving Corporation. In accordance with the provisions of
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this Agreement, the Articles of Merger, and the Washington business corporation
act ("WBCA"), at the Effective Date (as defined in Section 1.6), Acquisition Sub
shall be merged with and into the Company, and the Company shall be the
surviving corporation in the Merger (hereinafter sometimes called the "SURVIVING
CORPORATION"). At the Effective Date, the separate existence of Acquisition Sub
shall cease.
1.2 Articles of Incorporation. As of the Effective Date, the
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Articles of Incorporation of the Company immediately prior to the Effective Date
shall be the Articles of Incorporation of the Surviving Corporation, until
thereafter amended as otherwise provided by law or in such Articles of
Incorporation.
1.3 Bylaws. The Bylaws of the Company as in effect at the
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Effective Date shall be the Bylaws of the Surviving Corporation, until
thereafter amended or repealed as provided by law.
1.4 Directors. The directors of Acquisition Sub at the Effective
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Date (whose names are set forth on SCHEDULE 1.4) shall, from and after the
Effective Date, be the directors of the Surviving Corporation and shall hold
office from the Effective Date until their respective successors are duly
elected or appointed and qualified in the manner provided in the Articles of
Incorporation and Bylaws of the Surviving Corporation, or as otherwise provided
by law.
1.5 Officers. The officers of Acquisition Sub at the Effective
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Date (whose names are set forth on SCHEDULE 1.4) shall, from and after the
Effective Date, be the officers of the Surviving Corporation and shall hold
office from the Effective Date until their respective successors are duly
elected or appointed and qualified in the manner provided in the Articles of
Incorporation and Bylaws of the Surviving Corporation, or as otherwise provided
by law.
1.6 Effective Date. The Merger shall become effective at the time
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of filing of the Articles of Merger with the Secretary of State of the State of
Washington in accordance with Section 23B.11.050 of the WBCA. The Articles of
Merger shall be filed with the Secretary of State of the State of Washington on
the Closing Date (as defined in Section 8.1 hereof). The date when the Merger
becomes effective is herein referred to as the "EFFECTIVE DATE".
1.7 Additional Actions. If, at any time after the Effective Date,
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the Surviving Corporation determines that any deeds, bills of sale, assignments,
assurances or any other acts or things are necessary or desirable (a) to vest,
perfect or confirm, of record or otherwise, in the Surviving Corporation, its
right, title or interest in, to or under any of the rights, properties or assets
of the Company or its Subsidiaries acquired or to be acquired by reason of, or
as a result of, the Merger, or (b) otherwise to carry out the purposes of this
Agreement, the Surviving Corporation and its proper officers and directors shall
be authorized to execute and deliver, in the name and on behalf of the Company
and its Subsidiaries, all such deeds, bills of sale, assignments and assurances
and to do, in the name
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and on behalf of the Company and its Subsidiaries, all such other acts and
things necessary or desirable to vest, perfect or confirm any and all right,
title or interest in, to or under such rights, properties or assets in the
Surviving Corporation or otherwise to carry out the purposes of this Agreement.
1.8 Conversion of Company Common Stock.
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(a) Each share of the Company's common stock, par value $10.00
per share (the "COMPANY COMMON STOCK"), actually issued and outstanding at the
Effective Date shall, by virtue of the Merger and without any action on the part
of the holder thereof, be converted into the right to receive from the Parent
consideration, payable (subject to Section 1.12) as set forth on SCHEDULE 1.8
hereto (the "MERGER CONSIDERATION"). The Merger Consideration consists of
$86,250,000 in cash, subject to pre-closing adjustment as provided in Section
1.13(a) and to post-closing adjustment as provided in Section 1.13(b).
(b) Any share of Company Common Stock held by Parent or in the
Company's treasury at the Effective Date shall, by virtue of the Merger, be
canceled without payment of any consideration therefor and without any
conversion thereof.
1.9 Conversion of Acquisition Sub Common Stock. Each share of
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common stock, par value $10.00 per share, of Acquisition Sub (the "ACQUISITION
SUB COMMON STOCK") issued and outstanding at the Effective Date shall, by virtue
of the Merger and without any action on the part of the holder thereof, be
converted into and exchangeable for one fully paid and nonassessable share of
common stock, par value $10.00 per share, of the Surviving Corporation (the
"SURVIVING CORPORATION COMMON STOCK"). From and after the Effective Date, each
outstanding certificate theretofore representing shares of Acquisition Sub
Common Stock shall be deemed for all purposes to evidence ownership of, and to
represent the number of shares of, Surviving Corporation Common Stock into which
such shares of Acquisition Sub Common Stock shall have been converted.
1.10 [Intentionally Omitted].
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1.11 Surrender of Shares.
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(a) Subject to Sections 1.11(b) and 1.12, at the Closing,
Parent shall deliver the Merger Consideration to the Shareholder Representative.
(b) Subject to Section 1.12, upon surrender to Parent of a
certificate representing each of the shares of Company Common Stock (each, a
"CERTIFICATE") or an affidavit of loss stating that the holder of the
Certificate has lost such Certificate, together with an indemnity agreement
providing for indemnification of the Company, Parent and Surviving Corporation
for any loss, damage or other expense resulting from a third party having a
claim to such Certificate or the shares of stock underlying such Certificate
("AFFIDAVIT"), the holder of such Certificate or Affidavit shall be entitled to
receive in exchange for each share of Company Common Stock represented by such
Certificate or subject to the Affidavit, as the case may be, the portion of the
Merger Consideration indicated on SCHEDULE 1.8, and such Certificate shall
forthwith be canceled (if a Certificate is presented) and the records of the
Company shall be modified accordingly upon receipt by the holder of such
Certificate or Affidavit, as the case may be, of the indicated portion of the
Merger Consideration; such surrender of Certificates and Affidavits to Parent
shall be made at Closing by the Shareholder Representative. No interest will be
paid or accrued on any portion of the Merger Consideration payable upon the
surrender of such Certificates or Affidavit.
(c) If payment is to be made to a person other than the person
in whose name the Certificate surrendered in exchange therefor is registered, it
shall be a condition of payment of the Merger Consideration that the Certificate
so surrendered be properly endorsed or accompanied by appropriate stock powers,
in either case signed exactly as the name of the record holder appears on such
Certificate, with signature guaranteed, and is otherwise in proper form for
transfer, and that the Person requesting such payment shall pay any transfer or
other taxes required by law as a result of such payment to a Person other than
the record holder of the Certificate surrendered, or shall establish to Parent's
satisfaction that such tax has been paid or is not applicable.
(d) After the Effective Date, there shall be no further
transfers on the stock transfer books of the Surviving Corporation of the shares
of Company Common Stock,
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which are outstanding at the Effective Date. If, after the Effective Date,
Certificates are presented to the Surviving Corporation for transfer, they shall
be canceled and there shall be issued to the transferee in exchange for each
share of Company Common Stock the portion of the Merger Consideration indicated
on SCHEDULE 1.8.
(e) The consideration payable upon the surrender for exchange
of Certificates in accordance with the terms of this Section 1 shall be deemed
to have been paid in full satisfaction of all rights pertaining to the shares of
Company Common Stock theretofore represented by such Certificates, and there
shall be no further registration of transfers on the stock transfer books of the
Surviving Corporation of the shares of Company Common Stock which were
outstanding immediately prior to the Effective Date. If, after the Effective
Date, Certificates are presented to the Surviving Corporation or the Escrow
Agent for any reason, they shall be canceled and exchanged as provided in this
Section 1.
1.12 Escrow Fund. In order to secure the Company's obligations to
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indemnify Parent and Acquisition Sub under this Agreement and to make any
adjustments to the Merger Consideration in accordance with Section 1.13(b),
Three Million Dollars ($3,000,000) of the Merger Consideration (the "ESCROW
FUND") shall be withheld from the Closing Date Payment and deposited by Parent
with an escrow agent (the "ESCROW AGENT") and shall not be delivered to the
holders of any surrendered Certificate. The Escrow Fund shall be the exclusive
source of funding for such obligations and adjustments. Such Escrow Fund shall
be delivered to the appropriate party in accordance with the terms of an Escrow
Agreement substantially in the form of EXHIBIT B hereto (the "ESCROW
AGREEMENT").
1.13 Adjustments.
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(a) At least ten (10) business days prior to the Closing Date,
the Company shall prepare, in accordance with GAAP, consistently applied, and
deliver to Parent, the most recently available month-end balance sheet of the
Company and its Subsidiaries (the "PRE-CLOSING BALANCE SHEET") (the date of such
balance sheet shall not be more than 60 days prior to the Closing Date). The
Merger Consideration shall be increased or decreased, as the case may be, by the
amount which total current assets (including cash, accounts receivable, prepaid
assets and inventory) are greater or less than total amount current liabilities
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(including accounts payable, customer deposits and excise taxes) (such
difference shall be referred to hereinafter as the "WORKING CAPITAL ADJUSTMENT")
as determined in accordance with GAAP and as reflected on the Pre-Closing
Balance Sheet. The Pre-Closing Balance Sheet shall reflect accrued liabilities
(i) of approximately $1,150,000.00, relating to the brokerage fees and expenses
payable by the Company to ▇▇▇▇▇▇▇▇▇▇ (as defined in Section 2.21) in connection
with the transactions contemplated hereby, (ii) of approximately $200,000.00,
relating to legal fees payable by the Company in connection with the
transactions contemplated hereby, (iii) of approximately $45,000.00, relating to
real estate transfer taxes payable by the Company in connection with the
transactions contemplated hereby and (iv) for the environmental testing and
remediation costs referred to in Section 5.14 hereof. The amount payable by
Parent on the Closing Date shall be equal to $86,250,000, as adjusted by the
Working Capital Adjustment reflected on the Pre-Closing Balance Sheet; such
amount shall be referred to herein as the "CLOSING DATE PAYMENT".
(b) Within ninety (90) days after the Closing Date, Parent
shall prepare, in accordance with GAAP, consistently applied, and deliver to the
Shareholder Representative, a balance sheet of the Company and its Subsidiaries
(the "EFFECTIVE DATE BALANCE SHEET") as of the Effective Date. The parties shall
have the right to dispute the Effective Date Balance Sheet as provided in
Section 1.13(c) hereof. The Merger Consideration shall be increased or
decreased, as the case may be, by the amount of the Working Capital Adjustment
as determined in accordance with GAAP and as reflected on the Effective Date
Balance Sheet. The amount of the Merger Consideration, as adjusted pursuant to
Section 1.13(b) or Section 1.13(c), shall be referred to herein as the "ADJUSTED
PURCHASE PRICE". The Adjusted Purchase Price will not reflect (i) any changes in
net property, plant and equipment or (ii) any changes, including without
limitation, termination, in the status of the Seattle Major Trading Area
Partition Agreement dated July 31, 1995, between GTE Macro Communications
Corporation and Elltel Wireless, Inc. and related agreements, but will reflect
(i) the effect of any National Exchange Carrier Association "true-ups" not
reflected in the working capital of the Company as of the Effective Date, and
(ii) liabilities which shall be reflected in the Working Capital Adjustment to
account for (A) the actual brokerage fees and expenses payable to ▇▇▇▇▇▇▇▇▇▇ in
connection with the transactions contemplated hereby, (B) the actual legal
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fees payable by the Company in connection with the transactions contemplated
hereby, (C) the actual real estate transfer taxes payable by the Company in
connection with the transactions contemplated hereby and (D) the actual
environmental testing and remediation costs payable by the Company in connection
with the transactions contemplated hereby.
(c) The Shareholder Representative shall have until thirty (30)
days after the delivery of the Effective Date Balance Sheet to review such
statement and propose any adjustments thereto. All adjustments proposed by the
Shareholder Representative shall be set out in detail in a written statement
delivered to Parent (an "ADJUSTMENT STATEMENT") and shall be incorporated into
the Effective Date Balance Sheet unless Parent shall object in writing to such
proposed adjustment within fifteen (15) days after delivery by the Shareholder
Representative to Parent of such Adjustment Statement. If Parent does object in
writing within fifteen (15) days to any such proposed adjustment (the proposed
adjustment or adjustments to which Parent objects, hereinafter the "CONTESTED
ADJUSTMENTS" and Parent's objection notice, hereinafter, a "CONTESTED ADJUSTMENT
NOTICE"), then Parent and the Shareholder Representative shall use reasonable
efforts to resolve their dispute regarding the Contested Adjustments, but if a
final resolution thereof is not obtained within forty-five (45) days after
Parent delivers to the Shareholder Representative the relevant Contested
Adjustment Notice, the Shareholder Representative and Parent shall promptly
retain ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & Co. (the "INDEPENDENT ACCOUNTANT") to resolve any
remaining disputes concerning the Contested Adjustments. Within fifteen (15)
days after the Independent Accountant is retained, Parent and the Shareholder
Representative shall each submit to the Independent Accountant in writing their
respective positions with respect to the Contested Adjustments, together with
such supporting documentation as they deem necessary or as the Independent
Accountant requests, and Parent and the Shareholder Representative shall cause
the Independent Accountant to, within forty-five (45) days after the Independent
Accountant is retained, render its decision based on the positions and
supplementary supporting documentation submitted to the Independent Accountant
by Parent and the Shareholder Representative as to the Contested Adjustments,
which decision shall be final and binding on, and nonappealable by, Parent and
the Shareholder Representative. The fees and expenses of the Independent
Accountant incurred in connection with the procedure set forth in this Section
1.13(c) shall be borne
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equally by Parent and the Selling Shareholders, respectively. The decision of
the Independent Accountant shall also include a certificate (the "SETTLEMENT
AMOUNT CERTIFICATE") of the Independent Accountant setting forth the final
amount of the Working Capital Adjustment and the Adjusted Purchase Price as of
the date of the Effective Date Balance Sheet, and the amount, if any, which the
Shareholder Representative shall cause to be paid to Parent or the Parent shall
cause to be paid to the Shareholder Representative, as the case may be, in
respect thereof pursuant to the provisions of this Agreement with respect to the
Effective Date Balance Sheet. The Effective Date Balance Sheet shall be deemed
to include all proposed adjustments not disputed by the Shareholder
Representative and those adjustments accepted or made by the decision of the
Independent Accountant in resolving the Contested Adjustments.
(d) There shall be a "SETTLEMENT DATE" after the calculation
of the Working Capital Adjustment and the Adjusted Purchase Price, as the case
may be, as soon as possible after the Effective Date but in any event within 135
days after the Effective Date, which shall mean the following, as applicable:
(i) If the Shareholder Representative has not timely
delivered an Adjustment Statement to Parent, then forty (40) days after the
day the Shareholder Representative receives the Effective Date Balance
Sheet.
(ii) To the extent that the Shareholder Representative timely
delivers an Adjustment Statement to Parent and if Parent has not timely
delivered a Contested Adjustment Notice, then twenty (20) days after the
day Parent receives the Adjustment Statement.
(iii) If Parent and the Shareholder Representative have any
disputes regarding Contested Adjustments and they resolve those disputes,
then seven (7) days after such resolution.
(iv) Ten (10) days after the Independent Accountant delivers
the Settlement Amount Certificate, if applicable.
(v) Such other day as shall be agreed between Parent and the
Shareholder Representative.
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(e) On the Settlement Date, (i) if the amount of the Closing
Date Payment exceeds the amount of the Adjusted Purchase Price, the Shareholder
Representative shall cause to be paid to Parent the difference between the
Closing Date Payment and the Adjusted Purchase Price (such payment to be made,
at the option of Parent, (A) by wire transfer of immediately available funds
from a source other than the Escrow Fund or (B) by wire transfer of immediately
available funds from the Escrow Fund), (ii) if the amount of the Adjusted
Purchase Price exceeds the amount of the Closing Date Payment, Parent shall
cause to be paid to the Shareholder Representative by wire transfer of
immediately available funds, or such other consideration as may be agreed by
Parent and Shareholder Representative, the difference between the Adjusted
Purchase Price and the Closing Date Payment.
SECTION 2. REPRESENTATIONS AND WARRANTIES
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The Company hereby represents and warrants to Parent and Acquisition
Sub as follows:
2.1 Organization and Corporate Power. Each of the Company and its
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Subsidiaries (a) is a corporation duly organized, validly existing and in good
standing under the laws of its state of incorporation as specified in SCHEDULE
2.1 attached hereto, (b) except as provided in SCHEDULE 2.1, is qualified to do
business as a foreign corporation in each jurisdiction in which such
qualification is required, except where failure to so qualify would not have a
material adverse effect on the Company and its Subsidiaries, taken as a whole,
and (c) has all required corporate power and authority to own its property and
to carry on its business as presently conducted or contemplated. Each of the
Company and its Subsidiaries has all required corporate power and authority to
enter into and perform this Agreement and the Related Documents, and generally
to carry out the transactions contemplated hereby and by the Related Documents.
The copies of the charter and Bylaws of each of the Company and each of its
Subsidiaries, as amended to date, which have been furnished to counsel for
Parent are correct and complete at the date hereof. Except as provided in
SCHEDULE 2.1, neither the Company nor any of its Subsidiaries is in violation of
any term of its charter or Bylaws, or any material agreement, instrument,
judgment, decree, order, statute, rule or government regulation applicable to
it, if such violation could have a material
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adverse effect on the Company and its Subsidiaries, taken as a whole.
2.2 Authorization and No Contravention. Subject to the receipt of
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the approval of the Company's shareholders, the execution and delivery of, and
performance by the Company of its obligations under, this Agreement and the
Related Documents have been duly authorized by all corporate action of the
Company, and except as may otherwise be specifically provided in this Agreement,
and subject to the receipt of the approval of the Company's shareholders, each
of this Agreement and the Related Documents constitutes the legal, valid and
binding obligation of the Company, enforceable in accordance with their terms,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other similar laws
affecting the enforcement of creditors' rights generally, and general principles
of equity and the availability of equitable remedies. The Company's execution
and delivery of this Agreement and the Related Documents, and its respective
performance of the transactions contemplated hereby and thereby, will not: (i)
except as set forth on SCHEDULE 2.2, violate, conflict with or result in a
default under any contract, instrument, agreement, indenture, obligation or
commitment to which the Company or any of its Subsidiaries is a party or by
which it or its assets are bound, or any charter provision or by-law of the
Company or any of its Subsidiaries, or the creation of any lien, charge or
encumbrance of any nature upon any of the properties or assets of the Company or
any of its Subsidiaries, except pursuant to this Agreement and the agreements
contemplated hereby; (ii) violate or result in a violation of, or constitute a
default under, any provision of any law, statute, ordinance, regulation or rule,
or any decree, judgment or order of, or any restriction imposed by, any court or
other federal, state or local governmental agency; or (iii) except as set forth
on SCHEDULE 2.2, require any notice to, filing with, or consent or approval of
any governmental authority or other third party (including, without limitation,
the WUTC).
2.3 Capitalization; Shareholders; Subsidiaries. The authorized and
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issued capital stock of the Company and each of its Subsidiaries is as set forth
in SCHEDULE 2.3. All of the presently issued shares of capital stock of the
Company and each of its Subsidiaries have been duly and validly authorized and
issued in accordance, in all material respects, with all applicable federal and
state securities laws and are fully paid and non-assessable. Neither the
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Company nor any of its Subsidiaries has issued any other shares of its capital
stock and there are no outstanding warrants, options or other rights to purchase
or acquire any of such shares, nor any outstanding securities convertible into
such shares or outstanding warrants, options or other rights to acquire any such
convertible securities. There are no preemptive rights with respect to the
issuance or sale by the Company, or any of its Subsidiaries of the Company's or
such Subsidiary's capital stock. Except as disclosed in SCHEDULE 2.3, there are
no restrictions on the transfer of the Company's capital stock other than those
arising from federal and state securities laws or under this Agreement. The
outstanding shares of capital stock of the Company and its Subsidiaries are held
of record by the persons identified in SCHEDULE 2.3 in the amounts indicated
therein. Except as set forth in SCHEDULE 2.3, the Company has no Subsidiaries
and neither the Company nor any of its Subsidiaries has any investments in, or
loans or advances to, any other corporation, trust, partnership or business
entity and is not a party to any joint venture. All of the outstanding capital
stock of each of the Company's subsidiaries is owned directly or indirectly by
the Company free and clear of all liens of any nature.
2.4 Financial Statements. Attached hereto as SCHEDULE 2.4 are the
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Company's consolidated audited statements of income, cash flows and
Shareholders' equity and the related balance sheets for the fiscal years ended
December 31, 1994, December 31, 1995 and December 31, 1996, consolidated
unaudited statements of income, cash flows and shareholders' equity and the
related balance sheet for the fiscal period ended September 30, 1997 (such
interim balance sheet is herein referred to as the "BASE BALANCE SHEET"). Except
as set forth in SCHEDULE 2.4, neither the Company nor any of its Subsidiaries
has any material contingent obligations, liabilities or material forward or
long-term commitments. There are no amounts outstanding under either (i) the
Revolving Line of Credit Application and Agreement dated March 11, 1996, between
the Company and Rural Telephone Finance Cooperative or (ii) the Loan Commitment
and Letter of Agreement dated September 30, 1996, between the Company and US
Bank of Washington, National Association. The foregoing financial statements
have been prepared (i) to the extent required, in accordance with the rules and
regulations of the WUTC and the FCC and (ii) in accordance with generally
accepted accounting principles applied on a consistent basis, except that the
interim financial statements have, in accordance with generally accepted
accounting principles, been prepared without footnote disclosures and year-end
audit adjustments, which will not,
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in any event, be material to the Company and its Subsidiaries, taken as a whole.
All of such financial statements present fairly in all material respects the
financial condition of the Company and its Subsidiaries as of the date thereof.
No event has occurred since such dates which would cause such financial
statements not to present fairly in all material respects the financial
condition of the Company and its Subsidiaries as of the date thereof.
2.5 Business; Franchises and Regulations. Except as set forth in
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SCHEDULE 2.5, the Company and each of its Subsidiaries has ownership of and/or
the right to use (i) all franchises, permits, licenses (other than FCC Licenses)
required by applicable law or regulation, and (ii) all patent, copyright,
trademark, or other rights and privileges, in the case of both (i) and (ii) used
in or necessary for their respective businesses as presently conducted or
contemplated by the Company or its Subsidiaries to be conducted or required or
necessary to permit it to own its properties and to conduct its business as
presently conducted or contemplated by the Company or its Subsidiaries to be
conducted and neither their present nor contemplated activities infringe any
such patent, copyright, trademark or other proprietary rights of others.
SCHEDULE 2.5 correctly sets forth all of the franchises, authorizations, permits
and licenses (other than FCC Licenses) which are held by the Company and its
Subsidiaries (the "COMPANY FRANCHISES") and correctly sets forth the issuer and
termination date of each Company Franchise. Each Company Franchise was duly and
validly issued by the issuer thereof pursuant to procedures which complied with
all requirements of applicable law. Each Company Franchise or other right held
by the Company or any of its Subsidiaries is in full force and effect, free of
any lien, charge or encumbrance of any nature, and the Company and each of its
Subsidiaries are in compliance with the terms thereof with no known conflict
with the valid rights of others which could affect or impair in any manner the
business, assets or condition, financial or otherwise, of the Company and its
Subsidiaries taken as a whole except as set forth in SCHEDULE 2.5. No event has
occurred which permits, or after notice or lapse of time or both would permit,
the revocation or termination of any Company Franchise so as to adversely affect
in any manner the business or assets or condition, financial or otherwise, of
the Company and its Subsidiaries, taken as a whole, except as set forth in
SCHEDULE 2.5.
Except as described on SCHEDULE 2.10, the Company has timely and
properly made all filings and reports
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required by the WUTC, the FCC and all other regulatory entities having
jurisdiction over the Company.
2.6 Tariffs; FCC Licenses.
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(a) The regulatory tariffs applicable to the Company and its
Subsidiaries stand in full force and effect in accordance with their terms, and
there is no outstanding notice of cancellation or termination or, to the
Company's knowledge, any threatened cancellation or termination in connection
therewith. Except as otherwise disclosed on SCHEDULE 2.6(A), neither the
Company nor any of its Subsidiaries is subject to any restrictions or conditions
applicable to its regulatory tariffs that limit or would limit the operations of
the Company or any of its Subsidiaries (other than restrictions or conditions
generally applicable to tariffs of that type). Each such tariff has been duly
and validly approved by the appropriate regulatory agency. Except as otherwise
disclosed on SCHEDULE 2.6(A), neither the Company nor any of its Subsidiaries is
in material violation under the terms and conditions of any such tariff, and
there is no basis for any claim of material violation by the Company or any of
its Subsidiaries under any such tariff. Except as provided in SCHEDULE 2.6(A),
there are no applications by the Company or any of its Subsidiaries, nor any
complaints or petitions by others, or proceedings pending or threatened, before
the WUTC relating to the Company or any of its Subsidiaries, or their respective
operations or regulatory tariffs. To the knowledge of the Company, there are no
material violations by subscribers or others under any such tariff. A true and
correct copy of each tariff applicable to the Company or any of its Subsidiaries
has been delivered to Parent.
(b) Listed on SCHEDULE 2.6(B) are the FCC Licenses held by the
Company or any of its Subsidiaries. Except as disclosed on SCHEDULE 2.6(B), each
such FCC License is valid and in full force and effect in accordance with its
terms, and there is no outstanding notice of cancellation or termination or, to
the Company's knowledge, any threatened cancellation or termination in
connection therewith nor are any of such FCC Licenses subject to any
restrictions or conditions that limit the operations of the Company or any of
its Subsidiaries (other than restrictions or conditions generally applicable to
licenses of that type).
2.7 Rate Base. Neither the Company nor any of its Subsidiaries has
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any material amount of inventory, plant or equipment that has been disallowed
from rate base or
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excluded from the revenue calculations for any pool, and neither the Company nor
any of its Subsidiaries has received notification that the FCC or any state
regulatory authority or pool administrator proposes to exclude any material
assets from rate base or revenue calculations for the pools.
2.8 Overbillings; Refunds. Except as set forth on SCHEDULE 2.8,
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neither the Company nor any of its Subsidiaries has any liabilities for any
customer overbillings or prospective refunds of overearnings.
2.9 Capital Improvements Required by State Authorities. Except as
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set forth on SCHEDULE 2.9, neither the Company nor any of its Subsidiaries is
required by any state regulatory body to make any changes, upgrades or
enhancements with respect to its physical plant, and neither the Company nor any
of its Subsidiaries has reason to believe that any such changes, upgrades or
enhancements will be so required in the foreseeable future.
2.10 Compliance with Law. Except as set forth in SCHEDULE 2.10,
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neither the Company nor any of its Subsidiaries is in violation of any statute,
law, ordinance, regulation, rule or order of any foreign, federal, state or
local government or any governmental department or agency (including, without
limitation, the WUTC and the FCC), or any judgment, decree or order of any
court, applicable to its business or operations except where any such violation
would not have a material adverse effect on the Company and its Subsidiaries,
taken as a whole; and the conduct of the Company's and each of its Subsidiaries'
respective businesses is in conformity with all federal, state and local energy,
public utility, health, workplace or worker safety and health, including but not
limited to OSHA, and environmental requirements and all other federal, state and
local governmental regulatory requirements (including, without limitation,
requirements of the WUTC and the FCC) except where any such non-conformity
individually or in the aggregate, and taking into account the passage of time
and accumulation of penalties and other obligations, would not have a material
adverse effect on the Company or any of its Subsidiaries. The Company and its
Subsidiaries have all permits, licenses and franchises from, and have made all
necessary filings with, all governmental agencies, including the WUTC and the
FCC, required to conduct their businesses as now being conducted.
2.11 Absence of Undisclosed Liabilities. Except as otherwise
----------------------------------
specifically disclosed in the Base Balance Sheet or as set forth in SCHEDULE
2.4, neither the Company
-14-
nor any of its Subsidiaries has any accrued or contingent liability or
liabilities arising out of any transaction or state of facts existing prior to
the date hereof, accrued, to become due, contingent, or otherwise.
2.12 Absence of Certain Developments. Except as specifically
-------------------------------
disclosed in SCHEDULE 2.12, since December 31, 1996 there has been (i) no
material adverse change in the assets, liabilities, properties, business,
prospects or condition (financial or otherwise) of the Company or any of its
Subsidiaries, (ii) no declaration, setting aside or payment of any dividend or
other distribution with respect to, or any direct or indirect redemption or
acquisition of, any of the capital stock of the Company or any of its
Subsidiaries, (iii) no waiver of any valuable right of the Company or any of its
Subsidiaries or the cancellation of any debt or claim held by the Company or any
of its Subsidiaries, (iv) no loan by the Company or any of its Subsidiaries to
any officer, director, employee or Shareholder of the Company or any of its
Subsidiaries, or any agreement or commitment therefor, (v) other than pursuant
to the current contractual obligations set forth on SCHEDULE 2.12, no increase,
direct or indirect, in the compensation paid or payable to any officer,
director, employee or agent of the Company or any of its Subsidiaries, (vi) no
material loss, destruction or damage to any property of the Company or any of
its Subsidiaries, whether or not insured, (vii) no strikes, work stoppages,
union organizing or recognition efforts involving the Company or any of its
Subsidiaries and no material change in the personnel of the Company or any of
its Subsidiaries or the terms and conditions of any employment contracts to
which any of them are parties, and (viii) no acquisition or disposition of any
assets (or any contract or arrangement therefor) nor any other transaction by
the Company or any of its Subsidiaries otherwise than in the ordinary course of
business.
2.13 Title to Properties.
-------------------
(a) Except as specifically disclosed on SCHEDULE 2.13, the
Company and each of its Subsidiaries has good and marketable title to all of its
properties and assets, free and clear of all mortgages, liens, restrictions or
encumbrances, except in such cases as would not have a material adverse effect
on the use of such properties or assets by the Company. All owned or leased real
estate of the Company and its Subsidiaries is listed on SCHEDULE 2.13. A true
copy of each lease to which the Company or any of its Subsidiaries is a party,
is listed on SCHEDULE 2.13 and has been delivered by the Company to Parent, is
in full force
-15-
and effect and affords the Company or the Subsidiary, as the case may be,
peaceful and undisturbed possession of the subject matter of such lease. No
material default or event of default on the part of the Company or any of its
Subsidiaries or on the part of the lessor, exists under any lease, and neither
the Company nor any of its Subsidiaries has received any notice of default under
any such lease or any indication that the owner of the leased property intends
to terminate such lease. Except as specifically disclosed on SCHEDULE 2.13, the
Company holds all easements, rights-of-way and other rights (collectively,
"EASEMENTS") necessary to own, operate and maintain its physical plant
(including all telephone lines) and the Company is not in breach of, or default
under, any such Easement and there are not any materially burdensome limitations
or obligations on the Company under any such Easement. All Easements held by
the Company are listed on SCHEDULE 2.13, each such Easement is valid, binding
and enforceable in favor of the Company, and neither the Company, nor to the
best knowledge of the Company, any other party to such Easement, is in violation
of such Easement.
(b) Neither the Company nor any of its Subsidiaries is in
violation of any zoning, land-use, building or safety law, ordinance, regulation
or requirement or other law or regulation applicable to the operation of its
owned or leased properties, nor has it received any notice of violation with
which it has not complied, in any case in which the consequences of such
violation if asserted by the applicable regulatory authority would be materially
adverse with respect to the Company or such Subsidiary. All real property
occupied pursuant to leases, and substantially all tangible personal property
owned or leased by the Company and its Subsidiaries taken as a whole and
required for the purpose of carrying on its business and operations, is in good
operating condition and repair, reasonable wear and tear excepted, and no
material portion of any such real or personal property has suffered any damage
by fire or other casualty which has not heretofore been completely repaired and
restored to its original condition if and to the extent necessary or useful in
the continued operation of its business.
2.14 Tax Matters.
-----------
(a) Each of the Company and its Subsidiaries has filed all Tax
reports and returns that it was required to file. All such reports and returns
were correct and complete in all respects. All Taxes owed by any of the Company
and its Subsidiaries (whether or not shown on
-16-
any report or return) have been paid. Except as disclosed on SCHEDULE 2.14(A),
none of the Company or its Subsidiaries currently is the beneficiary of any
extension of time within which to file any report or return. Except as disclosed
on SCHEDULE 2.14(A), no claim has ever been made by an authority in a
jurisdiction where any of the Company or its Subsidiaries does not file reports
and returns that it is or may be subject to taxation by that jurisdiction.
There are no security interests on any of the assets of the Company and its
Subsidiaries that arose in connection with any failure (or alleged failure) to
pay any Tax.
(b) Except as disclosed in SCHEDULE 2.14(B), each of the
Company and its Subsidiaries has withheld and paid all Taxes required to have
been withheld and paid in connection with amounts paid or owing to any employee,
creditor, independent contractor, Shareholder or other third party.
(c) There is reasonable basis to believe that no authority will
assess any additional Taxes for any period for which returns have been filed.
Except as disclosed in SCHEDULE 2.14(C), there is no dispute or claim concerning
any Tax liability of any of the Company or its Subsidiaries either (i) claimed
or raised by any authority in writing or (ii) as to which any of the directors
and officers (and employees responsible for Tax matters) of the Company and its
Subsidiaries has knowledge based upon personal contact with any agent of such
authority. All federal, state, local, and foreign income tax returns filed with
respect to the Company and/or any of the Subsidiaries for taxable periods ended
on or after December 31, 1994, December 31, 1995 and December 31, 1996 are set
forth on SCHEDULE 2.14(C), and SCHEDULE 2.14(C) indicates those returns that
have been audited or currently are the subject of an audit. The Company has
delivered to the Parent correct and complete copies of all federal income Tax
returns, examination reports and statements of deficiencies assessed against or
agreed to by any of the Company and its Subsidiaries since December 31, 1994.
(d) None of the Company and its Subsidiaries has waived any
statute of limitations in respect of Taxes or agreed to any extension of time
with respect to a Tax assessment or deficiency. Neither the Company nor any of
its Subsidiaries has entered into a closing agreement pursuant to Section 7121
of the Internal Revenue Code of 1986, as amended (the "CODE").
-17-
(e) The unpaid Taxes of the Company and its Subsidiaries (i)
did not, as of September 30, 1997, exceed the reserve for Tax liability recorded
as a current liability on the face of the Base Balance Sheet and (ii) do not
exceed that reserve as adjusted for the passage of time through the Closing Date
in accordance with the past custom and practice of the Company and its
Subsidiaries in filing their Tax returns.
(f) None of the Company and its Subsidiaries has filed a
consent under Code Section 341(f) concerning collapsible corporations. None of
the Company and its Subsidiaries has made any payments, is obligated to make any
payments, or is a party to any agreement that under certain circumstances could
obligate it to make any payments that will not be deductible under Code Section
280G. None of the Company and its Subsidiaries has been a United States real
property holding corporation within the meaning of Code Section 897(c)(2) during
the applicable period specified in Code Section 897(c)(1)(A)(ii). Each of the
Company and its Subsidiaries has disclosed on its federal income Tax returns all
positions taken therein that could give rise to a substantial understatement of
federal income Tax within the meaning of Code Section 6662. Except as set forth
on SCHEDULE 2.14(F), none of the Company and its Subsidiaries is a party to any
Tax allocation or sharing agreement. None of the Company and its Subsidiaries
(i) has been a member of an Affiliated Group filing a consolidated federal
income Tax return (other than a group the common parent of which was the
Company) or (ii) has any liability for the Taxes of any Person (other than any
of the Company and its Subsidiaries) 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.
(g) SCHEDULE 2.14(G) sets forth the following information with
respect to each of the Company and its Subsidiaries as of the most recent
practicable date: (i) the basis of the Company and its Subsidiaries in their
respective assets; (ii) the amount of any net operating loss, net capital loss,
unused investment or other credit, unused foreign tax, or excess charitable
contribution allocable to the Company or any of its Subsidiaries and (iii) the
amount of any deferred gain or loss allocable to the Company or any of its
Subsidiaries arising out of any Deferred Intercompany Transaction.
2.15 Insurance. The Company has in force all policies of insurance
---------
described in SCHEDULE 2.15, in the amounts and covering the risks described
therein. Neither
-18-
the Company nor any of its Subsidiaries has ever been refused any insurance
coverage for which it has applied.
2.16 Contracts and Commitments. Except as set forth in SCHEDULE
-------------------------
2.16, neither the Company nor any of its Subsidiaries (a) is a party to any
contract, obligation or commitment which involves a potential commitment or
aggregate payments in excess of $25,000, or which is otherwise material and not
entered into in the ordinary course of business, or (b) has any employment
contracts; stock redemption or purchase agreements; financing agreements; or
agreements with officers, directors, employees or shareholders of the Company or
any of its Subsidiaries or persons or organizations related to or affiliated
with any such persons. Except as disclosed in SCHEDULE 2.16, neither the
Company nor any of its Subsidiaries is in default under any contract, obligation
or commitment, and to the best knowledge of the Company, there is no state of
facts which upon notice or lapse of time or both would constitute such a
default, the consequences of which default if asserted by the other contracting
party would be materially adverse with respect to the Company and its
Subsidiaries, taken as a whole. To the best of the Company's knowledge, except
as set forth in SCHEDULE 2.16, neither the Company nor any of its Subsidiaries
is a party to any contract or arrangement which is likely to have a material
adverse effect on the assets, liabilities, properties, business, condition
(financial or otherwise) or prospects of the Company and its Subsidiaries, taken
as a whole. Neither the Company nor any of its Subsidiaries has entered into
any government contracts or subcontracts that remain in full force and effect.
2.17 Litigation. Except as set forth in SCHEDULE 2.17, there is no
----------
investigation, action, suit or proceeding at law or in equity or by or before
any governmental instrumentality or other agency (including, without limitation,
the WUTC or the FCC) now pending or, to the best knowledge of the Company,
threatened against the Company or any of its Subsidiaries, or, to the best
knowledge of the Company, any director, officer or key employee of the Company
or any of its Subsidiaries which has a reasonable possibility of calling into
question the validity, or hindering the enforceability or performance, of this
Agreement or any action taken or to be taken pursuant hereto or any of the other
agreements and transactions contemplated hereby, or which might, if adversely
determined, have a material adverse effect on the Company and its Subsidiaries,
taken as a whole, or their respective business prospects; nor, to the best
knowledge of the
-19-
Company, has there occurred any event or does there exist any condition on the
basis of which any such litigation, proceeding or investigation might properly
be instituted.
2.18 Environmental Matters. Except as set forth in SCHEDULE 2.18:
---------------------
(a) No hazardous wastes, hazardous substances, or hazardous
materials have ever been or are being generated, used, stored, treated, or
otherwise managed on any real property owned or leased by the Company or any of
its Subsidiaries (the "PROPERTIES") by the Company or any of its Subsidiaries,
or to the best knowledge of the Company, any other persons, except in compliance
with applicable law and regulations, and then only in the ordinary course of
business as then conducted and only in such amounts as will not have a material
adverse effect on the business, operations, prospects or assets of the Company
or any of its Subsidiaries. No hazardous wastes, hazardous substances, hazardous
materials, oil, or petroleum products have ever been, are being, are intended to
be, or are threatened to be spilled, released, discharged, disposed, placed, or
otherwise caused to become located in the soil or water in, under, or upon any
of the Properties by the Company or any of its Subsidiaries, or to the best
knowledge of the Company, any other persons. For purposes of this paragraph and
paragraph (b) below, "hazardous wastes", "hazardous substances", "hazardous
materials", "oil", and "petroleum products" shall have the meanings set forth in
the federal Resources Conservation and Recovery Act, the federal Comprehensive
Environmental Response Compensation and Liability Act, the federal Hazardous
Materials Transportation Act, the federal Clean Water Act, and corresponding
state and local laws and ordinances, as such acts, laws, or ordinances may be
amended through the date hereof, or as defined in any federal, state, or local
regulation adopted under such acts, laws, or ordinances.
(b) The Company and its Subsidiaries have no liability
(contingent or otherwise) under, have never violated, and are presently in
compliance in all respects with all federal, state, and local environmental
laws, regulations, ordinances, and other requirements including, but not limited
to, all laws, regulations, ordinances, and other requirements relating to the
spilling, release, discharge, storage, treatment, disposal, management, control,
and reporting of pollutants, contaminants, hazardous wastes, hazardous
materials, hazardous substances, oil, petroleum products, and other materials
which may pose a risk to human health or the environment. The Company and
-20-
each of its Subsidiaries have not disposed or treated, or sent for disposal or
treatment, any solid waste, pollutants, contaminants, hazardous wastes,
hazardous materials, hazardous substances, oil or petroleum products except in
the instances and to the facilities listed on SCHEDULE 2.18(B), and each such
facility possessed a proper permit for the storage and treatment of the material
or waste, and stored or treated such material or waste only in compliance with
all applicable legal requirements.
(c) No circumstances exist to support any, and the Company and
its Subsidiaries have not received, and have no reason to believe they will
receive any: (i) notice of violation of any federal, state, or local
environmental law, regulation, ordinance, or other requirement; or (ii) notice
of any suit, action, claim, liability (contingent or otherwise), or legal,
administrative, or other proceeding concerning environmental conditions or
matters, including but expressly not limited to notice of responsibility under
the federal Comprehensive Environmental Response, Compensation and Liability Act
or any similar state or local law, regulation, or ordinance.
2.19 Investment Company. Neither the Company nor any of its
------------------
Subsidiaries is an "investment company" as such term is defined in the
Investment Company Act of 1940, as amended.
2.20 Employee Benefit Programs.
-------------------------
(a) SCHEDULE 2.20 sets forth a list of every Employee Program
(as defined in Section 2.20(g)(i)) that has been maintained by the Company and
its Subsidiaries at any time during the period ending on the date hereof.
(b) Each Employee Program which has ever been maintained by the
Company or any of its Subsidiaries and which has been intended to qualify under
Section 401(a) or 501(c)(9) of the Code has received a favorable determination
letter from the Internal Revenue Service ("IRS") regarding its qualification
under such section. Each such Employee Program has, in fact, remained qualified
under the applicable section of the Code from the effective date of the
favorable determination letter for such Employee Program through and including
the date hereof (or, if earlier, the date that all of such Employee Program's
assets were distributed). No event or omission has occurred which would cause
any such Employee Program to lose its qualification under the applicable Code
section.
-21-
(c) To the best knowledge of the Company, the Company is in
compliance with any laws applicable with respect to the Employee Programs that
have been maintained by the Company or any of its Subsidiaries within the last
three years. With respect to any Employee Program maintained by the Company
within the last three years, any Subsidiary or any affiliate thereof, there has
been no "prohibited transaction" as defined in Section 406 of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") or Code Section
4975, or material breach of any duty under ERISA or other applicable law or any
agreement which could subject the Company or any of its Subsidiaries thereof to
material liability either directly or indirectly (including, without limitation,
through any obligation of indemnification or contribution) for any damages,
penalties, or taxes, or any other loss or expense. No litigation or governmental
administrative proceeding (or investigation) or other proceeding (other than
those relating to routine claims for benefits) is pending or, to the best
knowledge of the Company, threatened with respect to any such Employee Program.
(d) Neither the Company, any of its Subsidiaries nor any
affiliate thereof has incurred any liability under Title IV of ERISA which has
not been paid in full prior to the date hereof. There is no "accumulated funding
deficiency" (whether or not waived) with respect to any Employee Program
maintained by the Company or any Subsidiary thereof and subject to Code Section
412 or ERISA Section 302. With respect to any Employee Program maintained by the
Company, any of its Subsidiaries or any affiliate thereof and subject to Title
IV of ERISA there (i) has been no "reportable event," within the meaning of
Section 4043 of ERISA (for which the notice requirement is not waived under 29
C.F.R, Part 2615) and (ii) no event or condition which presents a material risk
of plan termination. All payments and/or contributions required to have been
made (under the provisions of any agreements or other governing documents or
applicable law) with respect to all Employee Programs maintained by the Company
or any of its Subsidiaries, for all periods prior to the date hereof, either
have been made or have been accrued (and all such unpaid but accrued amounts are
described on SCHEDULE 2.20). Except as described in SCHEDULE 2.20, no Employee
Program maintained by the Company, any of its Subsidiaries or any affiliate
thereof and subject to title IV of ERISA has ever had any "unfunded benefit
liabilities" within the meaning of Section 4001(a)(18) of ERISA, as of the date
hereof. Except as described in SCHEDULE 2.20 or as set forth in EXHIBIT C, none
of the Employee Programs maintained by the Company or
-22-
any Subsidiary thereof has ever provided or promised health care or non-pension
benefits to former employees (other than as required by Part 6 of subtitle B of
title I of ERISA).
(e) With respect to each Employee Program maintained by the
Company or any of its Subsidiaries within the three years preceding the date
hereof, complete and correct copies of the following documents (if applicable to
such Employee Program) have previously been delivered to Parent: (i) all
documents embodying or governing such Employee Program, as they may have been
amended to the date hereof; (ii) the most recent IRS determination letter with
respect to such Employee Program and any applications for determination
subsequently filed with the IRS; (iii) the three most recently filed IRS Forms
5500, with all applicable schedules attached thereto; (iv) the three most recent
actuarial valuation reports completed with respect to such Employee Program; (v)
the summary plan description for such Employee Program (or other descriptions of
such Employee Program provided to employees) and all modifications thereto; and
(vi) any insurance policy (including any fiduciary liability insurance policy)
related to such Employee Program.
(f) Except as disclosed in SCHEDULE 2.20 hereto, (i) no
collective bargaining agreement or other contract, written or oral, with any
trade or labor union or association or organization of employees however
denominated is in effect as of the date hereof with respect to the Company or
any of its Subsidiaries and any union, or the Company or any of its Subsidiaries
and their employees, and (ii) none of the Company, any of its Subsidiaries nor
any affiliate has ever maintained or participated in any multiemployer plan, as
defined in Section 3(37) of ERISA.
(g) For purposes of this section:
(i) "EMPLOYEE PROGRAM" means (A) all employee benefit plans
within the meaning of Section 3(3) of ERISA (including, but not limited to,
employee benefit plans such as foreign or excess benefit plans which are
not subject to ERISA); and (B) all stock option plans, bonus, incentive
award or profit sharing plans, severance pay policies or agreements,
deferred compensation agreements, supplemental income arrangements, and all
other employee benefit plans, agreements, and arrangements not described in
(A) above.
-23-
(ii) An entity "MAINTAINS" an Employee Program if such entity
sponsors, contributes to, or provides benefits under such Employee Program,
or has any obligation (by agreement or under applicable law) to contribute
to or provide benefits under such Employee Program, or if such Employee
Program provides benefits to or otherwise covers employees of such entity
(or their spouses, dependents, or beneficiaries).
(iii) An entity is an "AFFILIATE" of the Company or any of its
Subsidiaries if it would have ever been considered a single employer with
the Company or such Subsidiary under Section 4001(b) of ERISA or part of
the same "controlled group" as the Company or such Subsidiary for purposes
of 302(d)(8)(C) of ERISA.
2.21 Brokers or Finders. Other than ▇▇▇▇▇▇▇▇▇▇ Capital Corporation
------------------
("▇▇▇▇▇▇▇▇▇▇"), none of the Company or any Subsidiary thereof has engaged the
services of any brokers or finders in connection with the execution of this
Agreement. All amounts owed to ▇▇▇▇▇▇▇▇▇▇ shall be paid by the Company.
2.22 Corporate Records. (a) The minute books of the Company and its
-----------------
Subsidiaries contain true and complete records in all material respects of all
meetings of, or written consents in lieu of meetings executed by, their
respective boards of directors (and all committees thereof) and shareholders;
(b) all material actions and transactions taken or entered into by the Company
or any of its Subsidiaries, or otherwise requiring action by their respective
boards of directors or shareholders, have been duly authorized or ratified as
necessary and are evidenced in such minute books; (c) except as set forth on
SCHEDULE 2.22(C), the stock certificate books and stock records of the Company
and its Subsidiaries are true and complete in all material respects; and (d) the
signatures appearing in such minute books, stock certificate books and stock
records are the genuine signatures of the persons purporting to have signed
them.
2.23 Books of Account. The books of account of the Company and its
----------------
Subsidiaries have been maintained in accordance with normal business practices,
and accurately and fairly reflect all of the properties, assets, liabilities,
transactions and appropriate accruals of the Company and each of its
Subsidiaries.
-24-
2.24 Certain Employment Matters.
--------------------------
(a) SCHEDULE 2.24(A) contains a true and complete list of
names and current hourly wage, monthly salary or other compensation of all
directors, officers, management employees, consultants or managers of the
Company, with a summary of existing bonus programs and arrangements, additional
compensation and other benefits (whether current or deferred), if any, paid or
payable to each such person for services rendered in the fiscal year ended
December 31, 1996, or, determined as of the date hereof, to be rendered in the
fiscal year ended December 31, 1997. SCHEDULE 2.24(A) contains a true and
complete listing and summary description of all employment, deferred
compensation, non-competition, confidential information and consulting
agreements between the Company or any Subsidiary thereof and its directors,
officers, management employees, consultants and managers.
(b) Except as set forth in SCHEDULE 2.24(B), the Company and
its Subsidiaries have complied in all material respects with all applicable laws
relating to the payment and withholding of taxes, including income and social
security taxes, and has withheld (and paid over to the appropriate authorities)
all amounts required by local, state or federal law or by other agreement to be
withheld from the wages or salaries of its employees. Neither the Company nor
any Subsidiary thereof has any liability or obligation for any arrears of wages
or benefits or any taxes or penalties for failure to comply with any of the
foregoing.
(c) Except as set forth on SCHEDULE 2.24(C), the Company and
its Subsidiaries are not parties to any contract with any labor organization,
nor have they agreed to recognize any union or other collective bargaining unit,
nor has any union or other collective bargaining unit been certified as
representing any of their respective employees. Neither the Company nor any
Subsidiary thereof has knowledge of any union organizing drive, union election
or demand for recognition with respect to their respective employees. Except as
set forth on SCHEDULE 2.24(C), neither the Company nor any Subsidiary thereof
has, within the last three years, experienced any strike, work stoppage,
grievance proceeding, claim of unfair labor practices or other significant labor
difficulty of any nature, nor are any material claims pending or, to the best
knowledge of the Company, threatened between the Company or its Subsidiaries and
any of their respective employees.
-25-
(d) Except as set forth on SCHEDULE 2.24(D), neither the Company
nor any Subsidiary thereof has received notification that any of its current
management employees presently plan to terminate employment, whether by reason
of the transactions contemplated hereby or otherwise. Except as set forth on
SCHEDULE 2.24(D), the employment of all persons presently employed or retained
by the Company is terminable at will, and neither the Company nor any of its
Subsidiaries will be, pursuant to any current contract, arrangement or
understanding, applicable law, or otherwise, obligated to pay any severance pay
or other benefit by reason of the voluntary or involuntary termination of
employment of any present or former employee, consultant, agent or manager,
prior to, on or after the Effective Date.
2.25 Voting Agreements. Each director of the Company and each holder
-----------------
of 5% or more (other than the Trustee of the Amended and Restated
Ellensburg Telephone Company Thrift Plan) of the Company Common Stock have
executed voting agreements, in form and substance reasonably satisfactory to
Parent, providing that such director or holder will, among other things, vote in
favor of the Merger at the Special Meeting (as defined herein), not dispose of
such director's or holder's shares of Company Common Stock except pursuant to
the Merger and not take any actions inconsistent with the Closing (as defined
herein).
2.26 No Material Misstatement or Omission. No statement of fact made
------------------------------------
by or on behalf of the Company or any of its Subsidiaries in this Agreement
or in any certificate, schedule or exhibit furnished to Parent pursuant hereto,
or otherwise delivered by the Company or any of its Subsidiaries to Parent
contains any untrue statement of a material fact or omits to state any material
fact necessary to make the statements contained therein or herein not
misleading. There is no fact relating to the Company or any of its
Subsidiaries, or the business, property operations, or condition (financial or
otherwise) of the Company or any of its Subsidiaries, presently known to the
Company which has not been disclosed to the Parent and which materially
adversely affects or in the future is reasonably likely to materially adversely
affect the assets, liabilities, property, business, operations, condition
(financial or otherwise) or prospects of the Company and its Subsidiaries, taken
as a whole.
2.27 1998 Budgets. SCHEDULE 2.27 hereto contains true and correct
------------
copies of the 1998 capital and operating budgets of the Company.
-26-
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PARENT
----------------------------------------
Parent hereby represents and warrants to the Company as follows:
3.1 Organization and Corporate Power. Parent and each of its
--------------------------------
Subsidiaries (a) is a corporation duly organized, validly existing and in good
standing under the laws of its state of incorporation, (b) is qualified to do
business as a foreign corporation in each jurisdiction in which such
qualification is required, except where failure to so qualify would not have a
material adverse effect on the Parent or its Subsidiaries and (c) has all
required corporate power and authority to own its property and to carry on its
business as presently conducted or contemplated. Parent has all required
corporate power and authority to enter into and perform this Agreement and the
Related Documents and generally to carry out the transactions contemplated
hereby and by the Related Documents.
3.2 Authorization and No Contravention. The execution and delivery
----------------------------------
of, and performance by the Parent of its obligations under, this Agreement and
the Related Documents and the delivery of the Merger Consideration have been
duly authorized by all requisite corporate, director and shareholder action of
Parent, and except as otherwise may be specifically provided in this Agreement,
each of this Agreement and the Related Documents constitutes the legal, valid
and binding obligation of Parent, enforceable in accordance with their terms,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other similar laws
affecting the enforcement of creditors' rights generally, and general principles
of equity and the availability of equitable remedies. Parent's execution and
delivery of this Agreement and the Related Documents, and its performance of the
transactions contemplated hereby and thereby, will not: (i) violate, conflict
with or result in a default under any contract, instrument, agreement,
indenture, obligation or commitment to which Parent is a party or by which it or
its assets are bound, or any charter provision or by-law of Parent, or the
creation of any lien, charge or encumbrance of any nature upon any of the
properties or assets of Parent; (ii) violate or result in a violation of, or
constitute a default under, any provision of any law, statute, ordinance,
regulation or rule, or any decree, judgment or order of, or any restriction
imposed by, any court or other federal, state or local governmental agency; or
(iii) except as set forth on SCHEDULE 3.2, require any
-27-
notice to, filing with, or consent or approval of any governmental authority or
other third party which will not, prior to the Closing, have been duly and
properly given, made or obtained.
3.3 Brokers or Finders. Neither Parent or any of its Subsidiaries
------------------
has engaged in the services of any brokers or finders in connection with the
execution of this Agreement.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF ACQUISITION SUB
-------------------------------------------------
Acquisition Sub hereby represents and warrants to the Company as
follows:
4.1 Organization and Corporate Power. Acquisition Sub (a) is a
--------------------------------
corporation duly organized, validly existing and in good standing under the laws
of its state of incorporation, (b) is qualified to do business as a foreign
corporation in each jurisdiction in which such qualification is required, except
where failure to so qualify would not have a material adverse effect on
Acquisition Sub and (c) has all required corporate power and authority to own
its property and to carry on its business as presently conducted or
contemplated. Acquisition Sub has all required corporate power and authority to
enter into and perform this Agreement and the Related Documents and to generally
carry out the transactions contemplated hereby and by the Related Documents.
4.2 Authorization and No Contravention. The execution and delivery
----------------------------------
of, and performance by Acquisition Sub of its obligations under, this Agreement
and the Related Documents have been duly authorized by all requisite corporate
action of Acquisition Sub, and except as may otherwise be specifically provided
in this Agreement, each of this Agreement and the Related Documents constitutes
the legal, valid and binding obligation of Acquisition Sub, enforceable in
accordance with their terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
other similar laws affecting the enforcement of creditors' rights generally, and
general principles of equity and the availability of equitable remedies.
Acquisition Sub's execution and delivery of this Agreement and the Related
Documents, and its performance of the transactions contemplated hereby and
thereby, will not: (i) violate, conflict with or result in a default under any
contract,
-28-
instrument, agreement, indenture, obligation or commitment to which Acquisition
Sub is a party or by which it or its assets are bound, or any charter provision
or by-law of Acquisition Sub or the creation of any lien, charge or encumbrance
of any nature upon any of the properties or assets of Acquisition Sub, except
pursuant to this Agreement and the agreements contemplated hereby; (ii) violate
or result in a violation of, or constitute a default under, any provision of any
law, statute, ordinance, regulation or rule, or any decree, judgment or order
of, or any restriction imposed by, any court or other federal, state or local
governmental agency; or (iii) except as set forth on SCHEDULE 4.2, require any
notice to, filing with, or consent or approval of any governmental authority or
other third party which will not, prior to the Closing, have been duly and
properly given, made or obtained.
4.3 Capitalization. The authorized and issued capital stock of
--------------
Acquisition Sub is as set forth on SCHEDULE 4.3.
4.4 Brokers or Finders. Acquisition Sub has not engaged in the
------------------
services of any brokers or finders in connection with the execution of this
Agreement.
SECTION 5. PARENT'S AND ACQUISITION SUB'S CONDITIONS OF MERGER
---------------------------------------------------
Parent's and Acquisition Sub's obligations hereunder shall be subject
to compliance by the Company with its agreements herein contained and to the
fulfillment to the Parent's and Acquisition Sub's satisfaction on or before and
at the Closing Date of the following conditions:
5.1 Certificate. The representations and warranties of the Company
-----------
contained in this Agreement, including but not limited to the representations
and warranties made in Section 2 shall be true and correct in all material
respects with the same force and effect as though such representations and
warranties had been made on and as of the Closing Date; each of the conditions
hereafter specified in this Section shall have been satisfied in all material
respects; and on the Closing Date one or more certificates to such effect
executed by the President and the Chief Financial Officer of the Company shall
be delivered to Parent.
5.2 Delivery of Documents. The Company shall have executed and
---------------------
delivered to Parent (or shall have caused
-29-
to be executed and delivered to Parent by the appropriate persons) the
following:
(a) Certified copies of resolutions of the Board of Directors and the
Shareholders of the Company and its Subsidiaries authorizing the execution and
delivery of this Agreement and the Related Documents;
(b) A copy of the Company's and each of its Subsidiaries' corporate
charter certified as of a recent date by the appropriate Secretary of State;
(c) A copy of the Bylaws of each of the Company and each of its
Subsidiaries certified, in each case, by the secretary of the pertinent
corporation;
(d) A certificate issued as of a recent date by the appropriate
Secretary of State of the state of incorporation of the Company and each of its
Subsidiaries certifying that the Company or such Subsidiary, as the case may be,
is in good standing in such state;
(e) True and correct copies of all consents, instruments and other
documents specified in SCHEDULE 2.2 attached hereto which have not otherwise
been made available for review by Parent;
(f) All other certificates and other documents reasonably requested by
Parent. The form and substance of all such certificates and other documents
hereunder shall be reasonably satisfactory in all respects to Parent and its
counsel;
(g) The Escrow Agreement; and
(h) A certificate of the President of the Company certifying
the appointment of the Shareholder Representative.
5.3 Opinion of Company's Counsel. Parent shall have received the
----------------------------
favorable written opinion of counsel for the Company dated the Closing Date, in
form and substance reasonably acceptable to Parent.
5.4 Opinion of Special WUTC Counsel. To the extent required by any
-------------------------------
lender, Parent shall have received the favorable written opinion of special
communications counsel for the Company, dated the Closing Date, with respect to
WUTC and related matters.
-30-
5.5 Opinion of Special FCC Counsel. Parent shall have received the
------------------------------
favorable written opinion of special FCC counsel for the Company, dated the
Closing Date, with respect to FCC and related matters.
5.6 Compliance with Agreements. The Company shall have performed
--------------------------
and complied with all agreements, covenants and conditions contained herein, in
any other document contemplated hereby and all other Related Documents which are
required to be performed or complied with by the Company on or before the
Closing Date.
5.7 All Proceedings Satisfactory. All corporate and other
----------------------------
proceedings taken prior to or at the Closing in connection with the transactions
contemplated by this Agreement, and all documents and evidences incident
thereto, shall be reasonably satisfactory in form and substance to Parent, and
Parent shall receive such copies thereof and other materials (certified, if
requested) as they may reasonably request in connection therewith.
5.8 Directors and Officers. Parent shall have received duly and
----------------------
validly obtained resignations of all directors and officers of the Company and
each of its Subsidiaries whose resignation is requested by Parent, to be
effective as of the Effective Date.
5.9 Regulatory Matters.
------------------
(a) All required waiting periods under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Antitrust Improvements Act of 1976, as amended, shall have expired or been
terminated and the Company shall have paid 50% of (i) any filing fee imposed
under such Act in connection with the transactions contemplated by this
Agreement and the Related Documents, and (ii) any fees and expenses incurred in
connection with obtaining WUTC and FCC approval of the transactions contemplated
by this Agreement and the Related Documents.
(b) The WUTC and the FCC shall, to the extent required by law,
have approved the consummation of the transactions contemplated hereby
(including the transfer of any cable system franchises) and such approvals
shall: (i) be free of any terms, conditions or restrictions that are reasonably
unacceptable to Parent and (ii) have become Final Orders.
(c) The approval of any other governmental entity required for
the consummation of the transactions contemplated hereby shall have been
obtained including,
-31-
without limitation, the approval of any local or municipal governmental entity
necessary or appropriate in connection with the transfer of control of the
Company Franchises.
5.10 Litigation. There shall be no investigation, action, suit or
----------
proceeding at law or in equity or by or before any governmental instrumentality
or other agency pending or threatened against the Company or any of its
Subsidiaries, or, to the best knowledge of the Company, any director, officer or
key employee of the Company or any of its Subsidiaries which would have a
reasonable possibility of calling into question the validity, or hinder the
consummation, enforceability or performance, as the case may be, of the Closing,
this Agreement, any action taken or to be taken pursuant hereto or any of the
other agreements and transactions contemplated hereby.
5.11 Adverse Changes. From the date hereof, through and including
---------------
the Effective Date, and without regard to matters related to approvals required
by Section 5.9 hereof or actions undertaken pursuant to this Agreement, there
shall have been (i) no material adverse change in the assets and properties of
the Company, the business operations, liabilities, profits or financial
condition of the Company; (ii) no material damage to the assets and properties
of the Company caused by fire, flood, casualty, act of God or the public enemy
or other cause, the loss of any of which is not adequately covered by insurance;
or(iii) no further Federal or state regulation or deregulation, or changes in
laws applicable to Federal or state deregulation of the Company which have, or
are reasonably expected to have, a material adverse effect on the assets and
properties, the business operations, liabilities, profits or financial condition
of the Company.
5.12 Dissenting Shareholders. Dissenters' rights shall not have
-----------------------
been exercised pursuant to the WBCA with respect to any of the shares of Company
Common Stock issued and outstanding as of the date hereof.
5.13 Special Meeting. The Company shall have called and held the
---------------
Special Meetings (as defined herein), at which at least 66-2/3% of the voting
power of the Company shall have been cast in favor of the Merger.
5.14 Environmental Matters. The Company shall have taken, or shall
---------------------
have caused its Subsidiaries to take, the following steps, in each instance in
compliance with all applicable laws and regulations:
-32-
(a) UST Compliance-Storage Building at ▇▇▇ ▇. ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇.
(i) The Company shall have engaged a qualified consultant
(who shall be reasonably accetable to Parent) to undertake a ground penetrating
radar test to determine whether there is an underground storage tank ("UST") at
this location.
(ii) In the event a UST exists at this location, the
Company shall have engaged a technically qualified consultant (who shall be
reasonably acceptable to Parent) to conduct soil and groundwater sampling and
analysis, and shall have, or shall have caused its Subsidiaries to remove the
UST. In the event contamination is present at this site, the Company shall have
engaged a technically qualified consultant to remediate the contamination to the
extent necessary to be in compliance with all applicable laws and regulations
and shall have either completed and paid for such testing and remediation or
accrued the expense expected to be incurred in effecting such testing and
remediation (such accrual to be approved by Parent, such approval not to be
unreasonably withheld).
(b) Remediation at Ellensburg Service Center/Pole Yard located
at ▇▇▇ ▇. ▇/▇▇/ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇.
(i) The Company shall have removed, or have caused its
Subsidiaries to remove, the hydraulic lift located at this site, and shall have
engaged a technically qualified consultant (who shall be reasonably acceptable
to Parent) to conduct such testing and remediation of soil and groundwater in
the vicinity of the hydraulic lift as required by all applicable laws and
regulations.
(ii) The Company shall have engaged a technically qualified
consultant (who shall be reasonably acceptable to Parent) to conduct soil
sampling and analysis at the Ellensburg Pole Yard for TPH, PAH and phenols, to
determine that no contamination currently is in place as a result of the visible
stains in the Pole Yard that would require remediation be conducted to comply
with applicable laws and regulations. In the event contamination is present, the
Company shall have engaged a technically qualified consultant to remediate the
contamination to the extent necessary to be in compliance with all applicable
laws and regulations and shall have either completed and paid for such testing
and remediation or accrued the expense expected to be incurred in effecting such
testing and remediation
-33-
(such accrual to be approved by Parent, such approval not to be unreasonably
withheld).
(iii) The Company shall have engaged a technically qualified
consultant (who shall be reasonably acceptable to Parent) to conduct soil and
groundwater sampling and analysis as close as possible to the adjacent
properties (but on the Company's property) to the east of the Company's property
where there was found to be former repair operations and service stations, to
determine that no contamination currently is in place on the Company's property
as a result of the use of the adjacent properties that would require remediation
to be conducted by the Company to comply with applicable laws and regulations.
In the event contamination is present, the Company shall have engaged a
technically qualified consultant to remediate the contamination on the Company's
property to the extent necessary to be in compliance with all applicable laws
and regulations and shall have either completed and paid for such testing and
remediation or accrued the expense expected to be incurred in effecting such
testing and remediation (such accrual to be approved by Parent, such approval
not to be unreasonably withheld). In addition, in the event contamination is
present, the Company shall make all notifications required by law to the owners
of the adjacent properties and/or the appropriate governmental authorities and
shall use commercially reasonable efforts to obtain from such governmental
authority documentation reasonably satisfactory to Parent that no further action
is required with respect to such properties or that any required action is the
responsibility of the owners of the adjacent properties.
(c) Remediation at the Kittitas Switch Exchange located at ▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇.
(i) The Company shall have engaged, or shall have caused
its Subsidiaries to engage a technically qualified consultant (who shall be
reasonably acceptable to Parent) to conduct soil and groundwater sampling and
analysis as close as possible (but on the Company's property) to the site
adjacent to the Kittitas Switch Exchange currently being utilized as a auto
parts/farm equipment facility to determine that no contamination currently is in
place on the Company's property that would require remediation be conducted by
the Company to comply with applicable laws and regulations, as a result of the
visible soil staining on the property adjacent to the Company's property. In the
event contamination is present, the Company shall have engaged a technically
-34-
qualified consultant to remediate the contamination on the Company's property to
the extent necessary to be in compliance with all applicable laws and
regulations and shall have either completed and paid for such testing and
remediation or accrued the expense expected to be incurred in effecting such
testing and remediation (such accrual to be approved by Parent, such approval
not to be unreasonably withheld). In addition, in the event contamination is
present, the Company shall make all notifications required by law to the owners
of the adjacent properties and/or the appropriate governmental authorities and
shall use commercially reasonable efforts to obtain from such governmental
authority documentation reasonably satisfactory to Parent that no further action
is required with respect to such properties or that any required action is the
responsibility of the owners of the adjacent properties.
(d) Remediation at the Kittitas Pole Yard located at ▇▇▇ ▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇.
(i) The Company shall have engaged a technically qualified
consultant (who shall be reasonably acceptable to Parent) to conduct soil
sampling and analysis at the Kittitas Pole Yard for TPH, PAH and phenols, to
determine that no contamination currently is in place as a result of the visible
soil staining at this location that would require remediation be conducted to
comply with applicable laws and regulations. In the event contamination is
present, the Company shall have engaged a technically qualified consultant to
remediate the contamination to the extent necessary to be in compliance with all
applicable laws and regulations and shall have either completed and paid for
such testing and remediation or accrued the expense expected to be incurred in
effecting such testing and remediation (such accrual to be approved by Parent,
such approval not to be unreasonably withheld).
(e) Remediation at the Selah Pole Yard located at East Naches &
RR, Selah.
(i) The Company shall have engaged a technically qualified
consultant (who shall be reasonably acceptable to Parent) to conduct soil
sampling and analysis at the Selah Pole Yard for TPH, PAH and phenols, to
determine that no contamination currently is in place as a result of the visible
soil staining on this property that would require remediation be conducted to
comply with applicable laws and regulations. In the event contamination is
present, the Company shall have engaged a technically
-35-
qualified consultant to remediate the contamination to the extent necessary to
be compliance with all applicable laws and regulations and shall have either
completed and paid for such testing and remediation or accrued the expense
expected to be incurred in effecting such testing and remediation (such accrual
to be approved by Parent, such approval not to be unreasonably withheld).
(f) Asbestos Surveys at the Storage Building located at 304
North Pine and the Leased Retail Building located at 306 North Pine.
(i) The Company shall have engaged a licensed inspector
(reasonably acceptable to Parent) and the licensed inspector shall have
conducted asbestos surveys at the above properties to determine whether there
are ACMs on the properties that would require remediation be conducted to comply
with applicable laws and regulations. In the event ACMs are present, the Company
shall have engaged a licensed asbestos contractor to ▇▇▇▇▇ the asbestos to the
extent necessary to be in compliance with all applicable laws and regulations
and shall have either completed and paid for such testing and remediation or
accrued the expense expected to be incurred in effecting such testing and
remediation (such accrual to be approved by Parent, such approval not to be
unreasonably withheld).
(g) The Company shall have provided copies of all analytic
data, reports, correspondence, or other documents hereunder to Parent and shall
have provided evidence reasonably satisfactory to Parent that the conditions set
forth in this Section 5.14 have been satisfied.
5.15 Stock Certificates. The Company shall have cancelled stock
------------------
certificate number 5995 and shall have issued a stock certificate in replacement
of stock certificate number 5278, as more fully described on SCHEDULE 2.22(C).
SECTION 6. COMPANY'S CONDITIONS OF MERGER
------------------------------
The Company's obligation hereunder shall be subject to compliance by
the Parent and Acquisition Sub with their agreements herein contained and to the
fulfillment to the Company's satisfaction on or before and at the Closing Date
of the following conditions:
-36-
6.1 Certificate. The representations and warranties of the Parent
-----------
and Acquisition Sub contained in this Agreement, including but not limited to
the representations and warranties made in Sections 3 and 4 shall be true and
correct in all material respects with the same force and effect as though such
representations and warranties had been made on and as of the Closing Date; each
of the conditions hereafter specified in this Section 6 shall have been
satisfied; and on the Closing Date one or more certificates to such effect
executed by the Senior Vice President and the Chief Financial Officer of the
Parent and Acquisition Sub shall be delivered to the Company.
6.2 Compliance with Agreements. Parent and Acquisition Sub shall
--------------------------
have performed and complied with all agreements, covenants and conditions
contained herein, in any other document contemplated hereby and all other
Related Documents which are required to be performed or complied with by Parent
and Acquisition Sub on or before the Closing Date.
6.3 All Proceedings Satisfactory. All corporate and other proceedings
----------------------------
taken prior to or at the Closing in connection with the transactions
contemplated by this Agreement, and all documents and evidences incident
thereto, shall be reasonably satisfactory in form and substance to the Company
and Company shall receive such copies thereof and other materials (certified, if
requested) as they may reasonably request in connection therewith.
6.4 Regulatory Matters.
------------------
(a) All required waiting periods under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Antitrust Improvements Act of 1976, as amended, shall have expired or been
terminated and Parent shall have paid 50% of (i) any filing fee imposed under
such Act in connection with the transactions contemplated by this Agreement and
the Related Documents, and (ii) any fees and expenses incurred in connection
with obtaining WUTC approval of the transactions contemplated by this Agreement
and the Related Documents.
(b) The WUTC and the FCC shall to the extent required by law,
have approved, the consummation of the transactions contemplated hereby and such
approvals shall: (i) be free of any terms, conditions or restrictions that are
reasonably unacceptable to the Company and (ii) have become Final Orders.
-37-
6.5 Litigation. There shall be no investigation, action, suit or
----------
proceeding at law or in equity or by or before any governmental instrumentality
or other agency pending or threatened against Parent or Acquisition Sub, or, to
the best knowledge of Parent and Acquisition Sub, any director, officer or key
employee of Parent or Acquisition Sub, which would have a reasonable possibility
of calling into question the validity, or hinder the consummation,
enforceability or performance, as the case may be, of the Closing, this
Agreement, any action taken or to be taken pursuant hereto or any of the other
agreements and transactions contemplated hereby.
6.6 Delivery of Documents. Parent and Acquisition Sub shall have
---------------------
executed and delivered to the Company (or shall have caused to be executed and
delivered to the Company by the appropriate persons) the following:
(a) Certified copies of resolutions of the Board of Directors of
each of Parent and Acquisition Sub and the sole shareholder of Acquisition Sub,
authorizing the execution and delivery of this Agreement and the Related
Documents;
(b) A certificate issued as of a recent date by the appropriate
Secretary of State of the state of incorporation of each of Parent and
Acquisition Sub certifying that each of Parent and Acquisition Sub is in good
standing in such states;
(c) True and correct copies of all consents, instruments and
other documents specified in SCHEDULES 3.2 and 4.2 attached hereto that have not
otherwise been made available for review by the Company;
(d) A copy of each of Parent's and Acquisition Sub's corporate
charter certified as of a recent date by the appropriate Secretary of State;
(e) A copy of the Bylaws of each of Parent and Acquisition Sub
certified, in each case, by the secretary of the pertinent corporation;
(f) All other certificates and other documents reasonably
requested by the Company. The form and substance of all such certificates and
other documents hereunder shall be reasonably satisfactory in all respects to
the Company and its counsel; and
-38-
(g) The Escrow Agreement.
6.7 Opinion of Parent's Counsel. The Company shall have received
---------------------------
the favorable written opinion of counsel for Parent dated the Closing Date, in
form and substance reasonably acceptable to the Company.
SECTION 7. COVENANTS
---------
Until the Closing Date (unless provided otherwise herein), each of the
Parent, Acquisition Sub and the Company agree that they shall act, or refrain
from acting where so required, to comply with the following:
7.1 Regular Course of Business.
--------------------------
(a) Generally. The Company shall operate its business 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 laws, regulations and orders of Governmental Authorities and all Company
Franchises applicable to the Company and the conduct of its business. Except as
set forth on SCHEDULE 7.1(A), the Company shall comply, without modification,
with all contracts and commitments relating to capital expenditures as set forth
on SCHEDULE 2.9. The Company shall maintain its financial and accounting
records in a manner consistent with that employed at December 31, 1996.
(b) Compensation. Without the prior written consent of the
------------
Parent and except as may be reasonably necessary to carry out the 1998 Budgets,
the Company shall not hire or fire any employee (except in a manner consistent
with past practice) and shall not grant any increase in the compensation of any
board member, officer or employee holding a position as senior or more senior
than department manager, except as required by prior agreement or with the prior
written consent of Parent.
(c) Insurance. The Company shall maintain in full force and
---------
effect its insurance policies with the coverage and in the amounts set forth on
SCHEDULE 2.13.
-39-
(d) Claims. The Company shall promptly notify the Parent of any
------
actions, claims, complaints, lawsuits or investigations that may be commenced
against it.
(e) Supplement. From time to time prior to the Closing Date, the
----------
Company shall promptly notify the Parent 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;
provided that such notification shall not constitute an amendment to this
--------
Agreement or any of such Schedules unless expressly agreed in writing by Parent.
7.2 Amendments; Sales and Acquisitions. No change or amendment shall
----------------------------------
be made to the charter or Bylaws of the Company. The Company shall not merge
into or consolidate with any other Person, sell or acquire any assets (except in
the ordinary course of business) or acquire or make any investment in any
Person, or otherwise change the character of its business.
7.3 Capital Changes. The Company shall not issue, sell, purchase,
---------------
acquire or redeem any shares of its capital stock of any class or any of its
debt 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.
7.4 Dividends. The Company shall not declare, pay or set aside for
---------
payment any dividend or other distribution in respect of its capital stock,
other than regular quarterly dividends, which dividends may not exceed an
aggregate amount of $500,000 for any fiscal quarter.
7.5 Capital Expenditures. Except to the extent provided for in the
--------------------
1998 Budgets, without the prior written consent of Parent, the Company shall not
make any capital expenditures in excess of $25,000 in the aggregate, or
commitments with respect thereto, except as provided in SCHEDULE 2.9. The
Company shall not make or accept any loan or advance to or from any of its
Affiliates.
7.6 Borrowing. Except to the extent provided for in the 1998
---------
Budgets, without the prior written consent of the Parent, the Company shall not
incur, assume or guarantee any indebtedness or obligation not reflected on
-40-
the Base Balance Sheet, except for amounts not to exceed twenty-five thousand
dollars ($25,000) in the ordinary course of business.
7.7 Property. The Company shall not sell, transfer, or dispose of
--------
any of its assets and properties, or allow any of its assets and properties to
become subject to a Lien, except in the ordinary course of business.
7.8 Other Commitments. Except as set forth in this Agreement or
-----------------
permitted in writing by the Parent, the Company shall not enter into any
transaction, make any commitment or incur any obligation other than in the
ordinary course of business.
7.9 Interim Financial Information. The Company shall supply the
-----------------------------
Parent with a copy of its internal unaudited monthly financial statements within
thirty (30) days after the end of each month.
7.10 Consents and Authorizations.
---------------------------
(a) The Parent and the Company shall, promptly after the date
hereof, cooperatively commence to obtain, and shall use their best efforts to
obtain prior to the Closing Date, WUTC and FCC approval of the transaction
contemplated hereby with respect to the authorizations listed in SCHEDULE
2.6(B). The Parent and the Company shall also, promptly after the date hereof,
cooperatively commence to obtain, and shall use their best efforts to obtain
prior to the Closing Date, the consents, waivers and authorizations listed in
SCHEDULE 2.2, and any other consents, waivers and authorizations required to
complete the transactions contemplated hereby.
(b) The Company shall, promptly after the date hereof commence
to obtain, and shall use reasonable efforts to obtain within 60 working days of
the date hereof, the approval of its shareholders of the transaction
contemplated hereby.
7.11 Access. The Company shall afford to the Parent and its counsel,
------
accountants, agents and other authorized representatives and to any financing
sources specified by the Parent reasonable access during business hours to the
Company's personnel, plants, properties, books and records in order that the
Parent and such other Persons may have full opportunity to make such reasonable
investigations as it shall desire to make of the affairs of
-41-
the Company. The Company shall cause its officers, employees and auditors to
furnish such additional financial and operating data and other information as
the Parent shall from time to time reasonably request.
7.12 Notice of Transfer. Each of the Parent and the Company shall
------------------
cooperate in providing any required notices to the appropriate Governmental
Authority regarding any issues of ownership or control or change thereof
(including, without limitation, any such issues relating to the Company
Franchises).
7.13 Payment of Tax. All transfer (including any real estate transfer
--------------
or gains tax), documentary (other than stock transfer), sales, use, registration
and other such Taxes and fees (including any penalties and interest) incurred in
connection with this Agreement shall be borne by the Company when due, and it
will file on a timely basis all necessary Tax returns and other documentation
with respect to all such transfer, documentary, sales, use, 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.
7.14 Agreement to Defend. In the event any claim of the nature
-------------------
specified in Section 5.10 hereof is commenced, whether before or after the
Closing Date, the parties hereto agree to cooperate and use all reasonable
efforts to defend against and respond thereto.
7.15 1998 Budgets. The Company shall promptly advise Parent of any
------------
event or circumstance which would render the 1998 Budgets or the assumptions
underlying the same no longer reasonable.
7.16 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 actions, 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
-42-
authorizations as are required to be obtained under any regulations or in
connection with any Company Franchises, (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.
7.17 Consents. Without limiting the generality of Section 7.16,
--------
each of the parties hereto shall use reasonable efforts to obtain all waivers,
Company Franchises, authorizations, consents and approvals of all Persons and
Governmental Authorities necessary, proper or advisable in connection with the
consummation of the transactions contemplated by this Agreement prior to the
Closing Date.
7.18 No Solicitation or Negotiation.
------------------------------
(a) Unless and until this Agreement is terminated, the Company shall
not, and shall use its best efforts to cause its Affiliates, and the directors,
officers, employees, representatives, agents, advisors, accountants,
shareholders and attorneys of each of them, not to (i) encourage, 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 merger, acquisition,
reorganization, consolidation, business combination, recapitalization,
liquidation, dissolution, sale of all or any significant portion of assets, sale
of shares of capital stock (including without limitation by way of tender offer
or exchange offer) or similar transactions involving the Company or any
Subsidiary other than the transactions contemplated hereby (any of the
foregoing, inquiries or proposals being referred to herein as an "ACQUISITION
PROPOSAL"), or otherwise facilitate any effort or attempt to do or seek to do
any of the foregoing and shall immediately cease and cause to be terminated any
existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any of the foregoing, (ii) engage in negotiations or
discussions concerning, or provide any nonpublic information or assistance to
any person in connection with any Acquisition Proposal, or (iii) agree to,
approve or recommend any
-43-
Acquisition Proposal. Nothing contained in this Section 7.18 shall prevent the
Board of Directors of the Company from considering, negotiating, discussing,
approving and recommending to the shareholders of the Company a bona fide
Acquisition Proposal not solicited in violation of this Section 7.18, provided
--------
that the Board of Directors of the Company determines in good faith (after
consultation with and based upon the advice of outside counsel) that it is
required to do so in order to discharge properly its fiduciary duties to the
Company's shareholders; and provided, further, that the Company shall keep MJD
-------- -------
informed, on a reasonably current basis, as to the status and details of any
such consideration, negotiations or discussions, including prompt delivery to
Parent of any written inquiries, proposals, agreements or Acquisition Proposal.
(b) The Company shall immediately notify Parent after receipt of any
Acquisition Proposal or any modification of or amendment to any Acquisition
Proposal, or any request for nonpublic information relating to the Company or
any of its Subsidiaries in connection with an Acquisition Proposal or for access
to the properties, books or records of the Company or any Subsidiary by any
person or entity that informs the Board of Directors of the Company or such
Subsidiary that it is considering making, or has made, an Acquisition Proposal.
Such notice to Parent shall be made orally and in writing, shall indicate
whether the Company is providing or intends to provide the person making the
Acquisition Proposal with access to information concerning the Company as
provided in Section 7.18(c) and, if reasonably practicable, shall be made prior
to furnishing any such information to, or entering into negotiations or
discussions with, such person.
(c) If the Board of Directors of the Company receives a request for
material nonpublic information by a person who makes, or indicates that it is
considering making, a bona fide Acquisition Proposal, and the Board of Directors
determines in good faith and upon the advice of outside counsel that is required
to cause the Company to act as provided in this Section 7.18(c) in order to
discharge properly the directors' fiduciary duties to the Company's
stockholders, then, provided that such person has executed a confidentiality
agreement substantially similar to the one then in effect among the Company and
Parent the Company may provide such person with access to information regarding
the Company.
-44-
(d) The Company shall immediately cease and cause to be terminated
any existing discussions or negotiations with any persons (other than Parent)
conducted heretofore with respect to any of the foregoing. The Company agrees
not to release any third party from the confidentiality provisions of any
confidentiality agreement to which the Company is a party.
(e) The Company shall ensure that the officers, directors and
employees of the Company and its Subsidiaries and any investment banker or other
advisor or representative retained by the Company are aware of the restrictions
described in this Section 7.18.
(f) The Company shall not accept any Acquisition Proposal unless, at
least five days prior to such acceptance, the Company shall have delivered to
Acquisition Sub written notice of such Acquisition Proposal together with a copy
of any and all agreements to be entered into in connection with such Acquisition
Proposal.
7.19 Public Announcements. Prior to the Closing Date, no party hereto
--------------------
nor any Affiliate, representative or shareholder of such party, shall disclose
any of the terms of this Agreement to any third party, except as required by
applicable law (including pursuant to the Proxy Statement (as defined herein))
or as required to obtain the consents, waivers and authorizations listed in
SCHEDULES 2.2, 2.6, 3.2 and 4.2 and in connection with the Parent's financing of
the transactions contemplated hereby, without the other parties' prior written
consent (not to be unreasonably withheld). 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 the Company and Parent,
which approval shall not be unreasonably withheld. Prior to the Closing Date,
subject to the requirements of applicable law, no press releases, public
announcements or publicity statements shall be released by either party without
such prior mutual agreement. Notwithstanding the foregoing, no party hereto will
disclose the Merger Consideration or the manner in which the Merger
Consideration is calculated, without the prior written consent of the other
parties hereto, other than in connection with seeking consents required by
Section 7.17 or in connection with the Proxy Statement.
-45-
7.20 Environmental Inspections. The Company agrees to cooperate
-------------------------
with any reasonable request of Parent for a site assessment or review concerning
any environmental matter, including the making available of such personnel,
documents, records or other information of the Company as Parent may reasonably
request.
7.21 Regulatory Matters. The Company will not change local rates
------------------
charged to telephone customers and will not apply for any change in the intra-
state or interstate pooling mechanism, without the written consent of Parent.
7.22 Indemnification and Insurance. Parent and the Surviving
-----------------------------
Corporation agree to indemnify and hold harmless the Company's officers and
directors against any costs or expenses (including reasonable attorneys' fees),
judgments, fines, losses, claims, damages or liabilities incurred in connection
with any claim, action, suit, proceeding or investigation, whether civil,
criminal, administrative or investigative arising out of or pertaining to
matters existing or occurring at or prior to the Effective Date, to the fullest
extent permitted under the WBCA. The Surviving Corporation will maintain
director and officer liability insurance for acts and omissions occurring prior
to the Closing Date with coverage in amount and scope at least as favorable as
the Company's existing director and officer liability insurance for a period of
six years after the Closing Date; provided, however, if the existing director
-------- -------
and officer liability insurance expires, is terminated or canceled during such
six year period, the Surviving Corporation will use its best efforts to obtain
director and officer liability insurance in an amount and scope as great as can
be obtained for the remainder of such period for a premium not in excess of 140%
of the premium paid by the Company as of the Closing Date.
7.23 Employees; Other Benefits.
-------------------------
(a) Parent agrees that it will not terminate, except for cause (as
defined by the Company consistent with past practice), any non-temporary
employees (including part-time employees) for a period of 24 months (or in the
case of individuals in the Operator Service group, 12 months) after the Closing
Date. The Company's non-temporary employees (including part-time employees) and
the individuals in the Operator Services group are listed in SCHEDULE 7.23.
(b) Parent agrees to maintain health insurance on terms at least as
favorable as currently provided by the
-46-
Company to existing early retirees and any employees age 55 or older who elect
early retirement on or after the Closing Date. Parent further agrees that all
employees will receive full credit for years of service for purposes of all
benefit plans offered by Parent and for computation of vacation and sick leave
benefits. All current employees and retirees of the Company will receive free
telephone service as set forth on EXHIBIT C.
(c) Parent agrees that the Shareholder Representative may enforce
the covenants contained in this Section 7.23.
7.24 Payment of Regulatory Fees. Each of the Company and Parent shall
--------------------------
pay 50% of (i) any filing fee imposed under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of 1976, as amended, in connection with the transactions
contemplated by this Agreement and the Related Documents and (ii) any fees and
expenses incurred in connection with obtaining WUTC and FCC approval of the
transactions contemplated by this Agreement and the Related Documents.
7.25 Shareholder Approval. Within sixty (60) days of the date of
--------------------
this Agreement, the Company shall call a special meeting of common stockholders
of the Company to be held for the purpose of voting on the Merger (the "SPECIAL
MEETING") at which at least 66 2/3% of the voting power of the Company shall
have been cast in favor of the Merger and the transactions anticipated by this
Agreement. The proxy statement to be delivered to the Company's shareholders in
connection with the Special Meeting (the "PROXY STATEMENT") shall state, inter
-----
alia, (i) that the Board of Directors of the Company has unanimously approved
----
the Merger and recommends that the shareholders vote in favor of the Merger (ii)
that all of the Board members intend to vote in favor of the Merger, and (iii)
that all of the Company's shareholders who vote or intend to vote in favor of
the Merger should deliver their shares and appointment documents to the
Shareholder Representatives free and clear of all liens and encumbrances.
7.26 Financing. Parent will have financing available on the Closing
---------
Date sufficient in amount to pay the Closing Date Payment.
SECTION 8. CLOSING
-------
8.1 Time and Place.
--------------
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(a) The closing (the "CLOSING") of the transactions contemplated
hereby shall take place at the offices of ▇▇▇▇▇,& Gates P.L.L.C., Two Union
Square, Suite 5100, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, or such
other place as agreed to by the parties, at 9:30 a.m., local time, as soon as
possible following the satisfaction or waiver of the conditions set forth in
Section 5 and 6 hereof; provided, however, that, unless otherwise agreed by the
-------- -------
parties, in no event shall the Closing occur later than the date five months
after the date hereof unless the only conditions to Closing not satisfied as of
such date are those set forth in Sections 5.9 and 6.4, in which case the Closing
shall occur no later than eight months after the date hereof (the "CLOSING
DATE").
(b) On the Closing Date, Parent, Acquisition Sub and the Company
shall cause the Articles of Merger to be filed in accordance with the provisions
of the WBCA and shall take any and all other lawful actions and do any and all
other lawful things necessary to effect the Merger and to cause the Merger to
become effective.
SECTION 9. INDEMNIFICATION OF PARENT AND ACQUISITION SUB
---------------------------------------------
9.1 Survival. The covenants, agreements, representations and
--------
warranties of the Company contained herein or in any certificate or other
document delivered pursuant hereto shall survive any examination made by or on
behalf of Parent and Acquisition Sub, the execution and delivery of this
Agreement, the Effective Date and the consummation of the transactions called
for by this Agreement until one hundred twenty (120) days after the date of the
Surviving Corporation's first fiscal year end after the Effective Date (the
"RELEASE DATE") except that (i) all covenants and agreements set forth in this
Section 9 shall continue until all obligations hereunder have been performed and
satisfied and (ii) any covenants and agreements which are to be performed after
the Effective Date, including without limitation, the covenants of Parent set
forth in Section 7.23, shall continue until all such obligations have been fully
performed and satisfied. No claim under this Section 9 may be brought with
respect thereto after the Release Date; provided that if, prior to such date,
--------
Parent or Acquisition Sub has notified the Escrow Agent of a claim for indemnity
under this Section 9 (whether or not formal legal action shall have been
commenced based upon such
-48-
claim), such claim shall continue to be subject to indemnification until finally
resolved.
9.2 Indemnification. The Company shall indemnify and hold harmless
---------------
Parent and Acquisition Sub, and each of their respective officers, directors,
affiliates, shareholders and representatives (each, an "INDEMNITEE") in the
manner set forth in and subject to Section 9.4, at all times from and after the
Effective Date against and in respect of any and all damages, claims, losses,
deficiencies, liabilities and expenses, including, without limitation,
reasonable legal, accounting, and other fees and other expenses (collectively,
"DAMAGES"), incurred or suffered by any such Indemnitee as a result, or that may
arise out of, any breach by the Company of any of the representations and
warranties made by the Company in this Agreement or pursuant hereto, or for any
other breach or violation of any covenant, agreement, term or condition of this
Agreement by the Company; provided, however, that the Company shall not have an
-------- -------
obligation to indemnify any Indemnitee pursuant to this Section 9 unless a claim
shall have been asserted on or prior to the Release Date.
9.3 Notice of Claims. Upon obtaining knowledge thereof, the
----------------
Indemnitee shall promptly notify the Escrow Agent and the Shareholder
Representative in writing of any Damages (including but not limited to any
Damages arising from Third-Party Claims (as defined in Section 9.5(a) hereof))
which the Indemnitee has determined has given or could give rise to a claim
under Section 9.2 (such written notice being referred to as a "NOTICE OF
CLAIM"); provided, however, that no such notice shall be required with respect
-------- -------
to actions or claims identified in any of the Schedules hereto. A Notice of
Claim shall specify in reasonable detail the nature and estimated amount of any
such claim giving rise to a right of indemnification. Any payment of Damages
set forth in such Notice of Claim shall be governed by the terms of the Escrow
Agreement.
9.4 Method of Indemnification. In the event that an Indemnitee
-------------------------
shall seek indemnification pursuant to Section 9.2, such Indemnitee may seek
recovery in an amount equal to the aggregate Damages incurred or suffered by
such Indemnitee with respect to which such Indemnitee is entitled to
indemnification pursuant to Section 9.2. Except as provided in the last two
sentences of this Section 9.4, any obligation to indemnify an Indemnitee shall
be satisfied solely from the Escrow Fund, in accordance with the terms of
withdrawal specified in the Escrow Agreement. Except as
-49-
provided in the last two sentences of this Section 9.4, no indemnification
payment for Damages suffered or incurred by an Indemnitee shall be made to such
Indemnitee, until the amount which all Indemnitees under this Agreement would
otherwise be entitled to receive as indemnification under this Agreement
aggregates in excess of the sum of $300,000 (such sum, hereinafter, the
"THRESHOLD"), at which time each Indemnitee shall be entitled to recover from
the Escrow Fund any and all amounts for which a claim or claims for indemnity
has theretofore been made in excess of the Threshold. Upon payment of the Merger
Consideration to the Shareholder Representative by Parent or from the Escrow
Fund, none of Parent, Acquisition Sub or the Surviving Corporation shall have
any liability to the Selling Shareholders for any portion of the Merger
Consideration paid to the Shareholder Representative by Parent or deposited to
the Escrow Fund. The Shareholder Representative, on behalf of all of the Selling
Shareholders, shall indemnify and hold harmless each of Parent, Acquisition Sub
and the Surviving Corporation, without regard to the Threshold or any provision
herein relating to the Escrow Fund being the sole source of funds for
indemnification payment, for any Damages incurred by any of Parent, Acquisition
Sub or the Surviving Corporation as a result of a claim by any Selling
Shareholder for payment of any portion of the Merger Consideration previously
remitted to the Shareholder Representative by Parent or deposited to the Escrow
Fund.
9.5 Defense of Third-Party Claims.
-----------------------------
(a) If any claim or liability is asserted by a third party after
the Closing for which Parent believes indemnification may be sought under the
terms of this Section 9 (a "THIRD-PARTY CLAIM"), then Parent shall promptly
notify the Shareholder Representative in writing of such Third-Party Claim (said
notification being referred to as a "THIRD-PARTY CLAIM NOTICE"). Any Third-Party
Claim Notice shall state with reasonable specificity, in light of the then
current circumstances, the basis of the Third-Party Claim.
(b) Parent shall have fifteen (15) days after receipt by the
Shareholder Representative of such Third-Party Claim Notice to elect to
undertake, conduct and control, through counsel of its own choosing, the
settlement or defense thereof, and the Shareholder Representative shall
cooperate with Parent in connection therewith. Parent shall have the right to
contest, settle or compromise the Third-
-50-
Party Claim in the exercise of its reasonable discretion; provided, that Parent
--------
shall notify the Shareholder Representative of any proposed compromise or
settlement of any such Third-Party Claim and shall not effect such compromise or
settlement without the prior written consent (not to be unreasonably withheld or
delayed) of the Shareholder Representative; provided, further, that Parent shall
-------- -------
not, in the defense of such claim, consent to entry of any judgment unless the
judgment provides only for the payment of monetary damages or unless Parent
obtains the written consent of the Shareholder Representative, or (if the
Company is a party to such proceeding) consent to entry of any judgment or enter
into any settlement (except with the written consent of the Shareholder
Representative) which does not include as an unconditional term thereof the
giving by the claimant to the Company of a release from all liability in respect
of such claim.
(c) If Parent elects not to undertake the defense of the Third-
Party Claim, then the Shareholder Representative may undertake, conduct and
control, through counsel approved by Parent (such approval not to be
unreasonably withheld or delayed), and at its own expense, the settlement or
defense thereof; provided, that the Shareholder Representative shall not
--------
compromise or settle any Third-Party Claim without Parent's prior written
consent (not to be unreasonably withheld or delayed); provided, further, that
-------- -------
the Shareholder Representative shall not, in the defense of such claim, consent
to entry of any judgment unless the judgment provides only for the payment of
monetary damages or unless the Shareholder Representative obtains the written
consent of Parent, or consent to entry of any judgment or enter into any
settlement (except with the written consent of Parent) which does not include as
an unconditional term thereof the giving by the claimant to the Indemnitees of a
release from all liability in respect of such claim.
SECTION 10. DEFINITIONS
-----------
Unless the context specifically requires otherwise, capitalized terms
used in this Agreement shall have the meaning specified below:
"AFFILIATED GROUP" means any affiliated group within the meaning of
Code Section 1504(a), or similar group defined under a similar provision of
state, local or foreign law.
-51-
"DEFINED INTERCOMPANY TRANSACTION" shall have the meaning set forth in
Treasury Regulation Section 1.1502-13.
"FCC" means the Federal Communications Commission (or any successor
agency, commission, bureau, department or other political subdivision of the
United States of America).
"FCC LICENSE" means any license, permit, approval or authorization
granted or issued by the FCC.
"FINAL ORDER" means an action by the FCC or the WUTC as to which: (a)
no request for stay of the action by the FCC or the WUTC, as the case may be, is
pending, no such stay is in effect, and if any time period is permitted by
statute or regulation for filing any request for such a stay, such time period
has passed; (b) no petition for rehearing or reconsideration, or application for
review, of the action is pending before the FCC or the WUTC, as the case may be,
and the time permitted for filing any such petition or application has passed;
(c) the FCC or the WUTC, as the case may be, does not have the action under
reconsideration on its own motion and the time in which such reconsideration is
permitted has passed; and (d) no appeal to a court, or request for stay by a
court, of the FCC's or WUTC's action, as the case may be, is pending or in
effect, and the deadline for filing any such appeal or request has passed.
"GAAP" means generally accepted accounting principles in effect from
time to time.
"GOVERNMENTAL AUTHORITY" means any governmental agency, body or
instrumentality (whether federal, state, local or foreign).
"LIEN" means any interest in property securing an obligation owed to,
or claim by, a Person other than the owner of the property, whether such
interest is based on the common law, statute or contract, and including but not
limited to the security interest lien arising from a mortgage, encumbrance,
pledge, conditional sale or trust receipt or a lease, consignment or bailment
for security purposes. The term "Lien" includes reservations, exceptions,
encroachments, easements, rights-of-way, covenants, conditions, restrictions,
leases and other title exceptions and encumbrances (including, with respect to
stock, shareholder agreements, voting trust agreements, buy-back agreements and
all similar arrangements) affecting
-52-
property. For the purposes of this Agreement the Company or a Subsidiary shall
be deemed to be the owner of any property which it has acquired or holds subject
to a conditional sale agreement, financing lease or other arrangement pursuant
to which title to the property has been retained by or vested in some other
Person for security purposes and such retention or vesting shall be deemed to be
a "Lien".
"OSHA" means the Occupational Safety and Health Act of 1978, as
amended from time to time.
"PERSON" means any individual, corporation, partnership, joint
venture, trust or unincorporated organization or any government or any agency or
political subdivision thereof.
"RELATED DOCUMENTS" means the Articles of Merger and any and all other
instruments and documents related to this Agreement.
"SELLING SHAREHOLDERS" shall have the meaning ascribed to it in the
Escrow Agreement.
"SHAREHOLDER REPRESENTATIVE" means ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ III or another
person appointed by the shareholders of the Company.
"SHAREHOLDER REPRESENTATIVE APPOINTMENT" means the appointment and
power of attorney to be executed by each of the shareholders of the Company
naming ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, III as Shareholder Representative and empowering him
or his successor to carry out the duties and responsibilities of the Shareholder
Representative.
"SUBSIDIARY" of any Person means any corporation or other entity of
which more than 50% of the outstanding voting securities are at the time owned,
directly or indirectly, by such Person.
"TAX" means any federal, state, local, or foreign income, gross
receipts, capital stock, franchise, profits, withholding, social security,
unemployment, disability, real property, personal property, stamp, excise,
occupation, sales, use, transfer, value added, alternative minimum, estimated or
other tax, including any interest, penalty or addition thereto, whether disputed
or not.
"TAXING AUTHORITY" means any domestic, foreign, federal, national,
state, provincial, county or municipal or
-53-
other local government, any subdivision, agency, commission or authority
thereof, or any quasi-governmental body exercising any taxing authority or any
other authority exercising any Tax regulatory authority.
"WUTC" means the Washington Utilities and Transportation Commission.
The following terms shall have the meanings assigned to them in the
provisions of this Agreement referred to below:
Acquisition Proposal - Section 7.18(a)
Acquisition Sub Common Stock - Section 1.9
Acquisition Sub - Preamble
Adjusted Purchase Price - Section 1.13(b)
Adjustment Statement - Section 1.13(c)
Affidavit - Section 1.11(b)
Affiliate - Section 2.20(g)(iii)
Alternative Transaction - Section 11.1(a)(vii)
Articles of Merger - Preamble
Base Balance Sheet - Section 2.4
Certificate - Section 1.11(b)
Closing - Section 8.1
Closing Date - Section 8.1
Code - Section 2.14(d)
Company Common Stock - Section 1.8(a)
Company - Preamble
Company Franchises - Section 2.5
Contested Adjustments - Section 1.13(c)
Contested Adjustment Notice - Section 1.13(c)
CPR - Section 11.16
Damages - Section 9.2
Easements - Section 2.13(a)
Effective Date - Section 1.6
Effective Date Balance Sheet - Section 1.13(b)
Employee Program - Section 2.20(g)(i)
Escrow Agent - Section 1.12
Escrow Agreement - Section 1.12
Escrow Fund - Section 1.12
ERISA - Section 2.20(c)
▇▇▇▇▇▇▇▇▇▇ - Section 2.21
Indemnitee - Section 9.2
Independent Accountant - Section 1.13(c)
IRS - Section 2.22(b)
maintains - Section 2.20(g)(ii)
Merger - Recitals
Merger Consideration - Section 1.8(a)
Notice of Claim - Section 9.3
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Parent - Preamble
Pre-Closing Balance Sheet - Section 1.13(a)
Properties - Section 2.18(a)
Proxy Statement - Section 7.25
Release Date - Section 9.1
Special Meeting - Section 7.25
Surviving Corporation - Section 1.1
Surviving Corporation Common Stock - Section 1.9
Settlement Amount Certificate - Section 1.13(c)
Settlement Date - Section 1.13(d)
Threshold - Section 9.4
Third-Party Claim - Section 9.5(a)
Third-Party Claim Notice - Section 9.5(a)
Third Party - Section 11.1(a)(vii)
WBCA - Section 1.1
Working Capital Adjustment - Section 1.13(a)
SECTION 11. GENERAL
-------
11.1 Termination.
-----------
(a) This Agreement may be terminated at any time prior to the
Closing:
(i) by mutual written consent of the parties hereto;
(ii) by written notice by either the Company, on the one
hand, or the Parent and Acquisition Sub, on the other hand, if there has been a
material misrepresentation or breach of warranty or breach of covenant on the
part of the other parties in the representations and warranties or covenants set
forth in this Agreement;
(iii) by written notice by either the Company or Parent if
the Closing has not occurred by the date five months after the date hereof or,
if the only conditions to Closing not satisfied as of such date are those set
forth in Sections 5.9 and 6.4, by the date eight months after the date hereof;
provided that neither the Company nor Parent will be entitled to terminate this
--------
Agreement pursuant to this subsection if its willful breach of this Agreement
has prevented the consummation of the transactions contemplated hereby; or
(iv) by Parent or the Company, if: (A) the Board of
Directors of the Company shall have recommended
-55-
to the shareholders of the Company an Alternative Transaction (as defined
below); (B) a tender offer or exchange offer for 15% or more of the outstanding
shares of the Company Common Stock is commenced (other than by Parent) and the
Board of Directors of the Company recommends that the shareholders of the
Company tender their shares in such tender or exchange offer; provided that the
--------
Company shall not be entitled to exercise any termination rights under clause
(A) or (B) of this Section 11.1(a)(iv) unless (x) any action of the Board of
Directors of the Company referred to in either such clause is required to be
taken by the Board of Directors in order to properly discharge its fiduciary
duties to its shareholders and (y) the Company has complied with its obligations
in Section 7.18;
(v) by Parent, if the Board of Directors of the Company
shall withdraw, modify or change its approval or recommendation of this
Agreement or if within fifteen days of the Company receiving an Acquisition
Proposal, the Company shall not have (A) rejected such Acquisition Proposal and
(B) ceased and caused to be terminated any discussions or negotiations with any
persons (other than Parent) theretofore conducted with respect to such
Acquisition Proposal;
(vi) by either the Company or Parent, if there has been a
material breach of any representation, warranty, covenant or agreement on the
part of the other set forth in this Agreement, which breach has not been cured
within 30 days following receipt by the breaching party of written notice of
such breach, in any case such that the conditions set forth in Sections 5 and 6,
as the case may be, would be incapable of being satisfied by the date eight
months after the date hereof (provided that the right to terminate this
--------
Agreement under this Section 11.1(a)(vi) shall not be available to any party who
is itself in material breach of any of its representations, warranties,
covenants or agreements set forth in this Agreement, such that the conditions
set forth in Sections 5 or 6, as the case may be, would be incapable of being
satisfied by the date eight months after the date hereof; or
(vii) by the Company or Parent if at the Special Meeting at
least 66-2/3% of the voting power of the Company shall not have been cast in
favor of the Merger and the transactions contemplated by this Agreement.
As used herein, "ALTERNATIVE TRANSACTION" means (i) any transaction or
series of transactions pursuant to
-56-
which any person (or group of persons) other than Parent or its Subsidiaries (a
"THIRD PARTY") acquires or would acquire more than 15% of the outstanding
shares, whether from the Company or pursuant to a tender offer or exchange offer
or otherwise, (ii) any acquisition or proposed acquisition of the Company or any
of its Subsidiaries by a merger, consolidation or other business combination
(including any so-called "merger of equals" and whether or not the Company or
any of its Subsidiaries is the entity surviving any such merger or business
combination), (iii) any reorganization, recapitalization, liquidation or
dissolution of the Company or any of its Subsidiaries (other than the
liquidation or dissolution of a wholly-owned subsidiary of the Company or any of
its Subsidiaries) or (iv) any other transaction pursuant to which any Third
Party acquires or would acquire control of assets (including for this purpose
the outstanding equity securities of Subsidiaries of the Company and any entity
surviving any merger or business combination with any Subsidiaries having a fair
market value equal to more than 15% of the fair market value of all the assets
of the Company and its Subsidiaries, taken as a whole, immediately prior to such
transaction.
11.2 Effect of Termination.
---------------------
(a) Except as provided in Section 9.1, in the event of the
termination of this Agreement pursuant to Section 11.1, this Agreement shall
forthwith become void and there shall be no liability on the part of any party
hereto or any of its affiliates, directors, officers or stockholders, subject to
the provisions of Section 11.2(b) or Section 11.2(d), and nothing herein shall
relieve any party from liability for any breach hereof occurring prior to
termination.
(b) Notwithstanding anything to the contrary contained in this
Agreement, in the event that this Agreement is terminated by (i) Parent pursuant
to (A) Section 11.1(a)(iv), (B) Section 11.1(a)(v), or (C) Section 11.1(a)(vi)
as a result of a material breach of a covenant or agreement by the Company, or
(ii) pursuant to Section 11.1(a)(vii), the Company shall pay to Parent, an
amount equal to $2,500,000 plus all documented fees and expenses incurred by
Parent in connection with or related to the authorization, preparation,
regulation, execution and performance of this Agreement and the transactions
contemplated hereby (including, without limitation, all fees and expenses of
counsel, accountants, experts, consultants, banks and other financial
institutions).
-57-
(c) Any payment required to be made pursuant to Section 11.2(b)
shall be made to Parent or its designee not later than two business days after
delivery by Parent or its designee to the Company of notice of demand for
payment and shall be made by wire transfer of immediately available funds to an
account designated by Parent or its designee in the notice of demand for payment
delivered pursuant to this Section 11.2.
(d) The indemnification provisions set forth in Section 9 and
the remedies provided in this Section 11.2 are the sole and exclusive remedies
available to Parent and Acquisition Sub hereunder or in connection with the
Merger. Neither Section 9 nor this Section 11.2, however, affects or eliminates
any statutory, contract or common law remedy the Company or the Selling
Shareholders may have for misrepresentation, breach of warranty or breach of
covenant by Parent or Acquisition Sub before or after the Closing or if the
Closing does not occur. The amount of any damages recoverable by the Company or
the Selling Shareholders pursuant to this Section 11.2(d) shall not exceed
$3,000,000.
11.3 AMENDMENTS, WAIVERS AND CONSENTS. FOR THE PURPOSES OF THE
--------------------------------
AGREEMENT AND ALL AGREEMENTS, DOCUMENTS, AND INSTRUMENTS EXECUTED PURSUANT
HERETO, EXCEPT AS OTHERWISE SPECIFICALLY SET FORTH HEREIN OR THEREIN, NO COURSE
OF DEALING BETWEEN THE COMPANY, THE PARENT AND ACQUISITION SUB AND NO DELAY ON
THE PART OF ANY PARTY HERETO IN EXERCISING ANY RIGHTS HEREUNDER OR THEREUNDER
SHALL OPERATE AS A WAIVER OF THE RIGHTS HEREOF AND THEREOF. NO COVENANT OR
OTHER PROVISION HEREOF OR THEREOF MAY BE WAIVED OTHERWISE THAN BY A WRITTEN
INSTRUMENT SIGNED BY THE PARTY SO WAIVING SUCH COVENANT OR OTHER PROVISION.
11.4 GOVERNING LAW; CONSENT TO JURISDICTION. THIS AGREEMENT SHALL BE
--------------------------------------
DEEMED TO BE A CONTRACT MADE UNDER, AND SHALL BE CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF WASHINGTON.
11.5 Section Headings. The descriptive headings in this Agreement have
----------------
been inserted for convenience only and shall not be deemed to limit or otherwise
affect the construction of any provision thereof or hereof.
11.6 Notices and Demands. Any notice or demand which, by any provision
-------------------
of this Agreement or any agreement, document or instrument executed pursuant
hereto or thereto, except as otherwise provided therein, is required or
-58-
provided to be given shall be deemed to have been sufficiently given or served
and received for all purposes three days after being sent by certified or
registered mail, postage and charges prepaid, return receipt requested, by
express delivery providing receipt of delivery, or by facsimile, to the
following addresses:
If to Parent to:
MJD Ventures, Inc.
▇▇▇▇▇▇▇▇ Place
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
Paul, Hastings, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Company to:
Ellensburg Telephone Company
▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ III
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇ & Gates P.L.L.C.
Two Union Square
Suite 5100
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
or at any other address designated by any party to this Agreement to each of the
other parties in writing.
-59-
11.7 Counterparts. This Agreement may be executed simultaneously in
------------
any number of counterparts, each of which when so executed and delivered shall
be taken to be an original; but such counterparts shall together constitute but
one and the same document.
11.8 Severability; Complete Agreement. Whenever possible, each
--------------------------------
provision of this Agreement shall be interpreted in such a manner as to be
effective and valid under applicable law, but if any provision of this Agreement
shall be deemed prohibited if or invalid under such applicable law, such
provision shall be ineffective to the extent of such prohibition or invalidity,
and such prohibition or invalidity shall not invalidate the remainder of such
provision or the other provisions or this Agreement
THIS AGREEMENT AND THE RELATED DOCUMENTS ARE INTENDED BY THE PARTIES
HERETO TO BE A COMPLETE AND FINAL EXPRESSION OF THEIR AGREEMENT AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF ANY PRIOR OR CONTEMPORANEOUS ORAL AGREEMENT. THE
PARTIES ACKNOWLEDGE AND AGREE THAT NO UNWRITTEN ORAL AGREEMENT EXISTS BETWEEN
THEM WITH RESPECT TO THE SUBJECT MATTER OF THIS AGREEMENT.
11.9 Expenses.
--------
(a) Unless otherwise provided for in this Agreement, each of
the Parent, the Company and Acquisition Sub shall pay all costs and expenses
that it incurs with respect to the negotiation, execution, delivery and
performance of this Agreement.
(b) Any expenses payable by the shareholders of the Company in
connection with the transactions contemplated hereby with respect to periods
immediately prior to or on the Effective Date shall be paid by the Surviving
Corporation to the extent of accruals made therefor on the Pre-Closing Balance
Sheet and, if such funds are insufficient, from the Escrow Fund upon request by
the Shareholder Representative or demand by the Parent.
11.10 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, either in whole or in part, without the prior written
consent of the other parties hereto; provided that Parent may assign this
-60-
Agreement or any of the rights, interests or obligations hereunder to an
affiliate without the prior written consent of the Company.
11.11 Accounting Terms. All accounting terms used herein which are
----------------
not expressly defined in this Agreement shall have the meanings given to them in
accordance with GAAP.
11.12 Parties. Nothing in this Agreement is intended to confer any
-------
rights or remedies under or by reason of this Agreement on any persons or
entities other than the parties hereto and their respective successors and
permitted assigns. Without limiting the foregoing, no third Person shall be a
beneficiary of any provision of this Agreement.
11.13 Liability of the Shareholder Representative. The Shareholder
-------------------------------------------
Representative shall not be personally liable to Parent, Acquisition Sub or the
Company, for or in respect of any loss, claim, damage, liability or expense
resulting from or arising out of any act or failure to act by the Shareholder
Representative in connection with this Agreement, other than for any loss,
claim, damage, liability or expense which shall be finally adjudicated to be the
result of gross negligence or willful bad faith on the part of the Shareholder
Representative.
11.14 JURY WAIVER. EACH OF THE PARENT, COMPANY, AND ACQUISITION SUB
-----------
HEREBY WAIVE TRIAL BY JURY IN ANY ACTION, PROCEEDING, SUIT, OR COUNTERCLAIM ON
ANY MATTER WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS AGREEMENT
AND THE RELATED DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY.
11.15 Schedules. The Parties hereto acknowledge and agree that the
---------
restatement or partial restatement in the schedules attached hereto of any
representation, warranty or other portion of this Agreement shall not in any way
be deemed to limit or eliminate the requirement for full disclosure on the
schedule relating to such representation, warranty or other portion of this
Agreement.
11.16 Dispute Resolution. Any controversy or claim arising out of or
------------------
relating to this Agreement not resolved by mutual agreement of Parent and the
Company prior to the Closing or of Surviving Corporation and Shareholder
Representative after the Closing, shall in the first instance be referred to
mediation in Seattle, Washington under the presently effective Center for Public
Resources
-61-
("CPR") Model Procedure for Mediation of Business Disputes. The party desiring
mediation shall give written notice to the other party. Thereupon, the parties
shall select a mediator from the CPR Panel of Neutrals within ten (10) days. If
the parties cannot agree, they will at the end of such ten (10) day period
request that CPR select a mediator within five (5) days. Upon the selection of a
mediator, either by the parties or by CPR, the parties will within ten (10)
days, commence mediation, and the mediator will attempt with the parties to
resolve the dispute within an additional twenty (20) days. If any dispute
submitted by the parties to mediation is not resolved through mediation within
60 days of the initiation of mediation, or if a party refuses to submit the
dispute to mediation within 15 days of a request for mediation by the other
party, the dispute shall, upon demand by either party, be finally settled by
arbitration conducted expeditiously in accordance with the CPR Rules for Non-
Administered Arbitration of Business Disputes by a sole arbitrator selected from
the CPR Panel of Neutrals. The arbitration shall be governed by the United
States Arbitration Act, 9 U.S.C. (S) 1-16, and judgment upon the award rendered
by the arbitrator may be entered in any court having jurisdiction thereof. The
place of arbitration shall be Seattle, Washington. The arbitrator is not
empowered to award damages in excess of compensatory damages, and each party
hereby waives any damages in excess of compensatory damages. The arbitrator
shall be empowered to impose the costs (including, but not limited to, the fees
of the arbitrator and the fees and expenses of counsel) upon the non-prevailing
party or as the arbitrator may otherwise determine.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as a
sealed instrument as of the day and year first above written.
ELLENSBURG TELEPHONE COMPANY
By:_______________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ III
President and Chairman
MJD VENTURES, INC.
By:_______________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Senior Vice-President
ELLENSBURG ACQUISITION CORP.
By:______________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Senior Vice President
FOR PURPOSES OF SECTION 9.4 ONLY:
_________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ III
Shareholder Representative
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EXHIBIT A
ARTICLES OF MERGER
OF
ELLENSBURG ACQUISITION CORP.
INTO
ELLENSBURG TELEPHONE COMPANY
PURSUANT TO SECTION 23B.11.050 OF
THE WASHINGTON BUSINESS CORPORATION ACT
************************************************************
THE UNDERSIGNED CORPORATION, organized and existing under and by
virtue of the Washington business corporation act does hereby certify that:
1. The name, state of incorporation and date of filing of the
articles of incorporation of each of the constituent corporations of the merger
are as follows:
Date
Articles Filed
State of with the
Name Incorporation State
---- ------------- -----
Ellensburg Washington _________, ____
Acquisition Corp.
Ellensburg Telephone Washington _________, ____
Company
2. An Agreement and Plan of Merger has been approved, adopted,
certified, executed and acknowledged by unanimous written consent of the
respective Board of Directors of each of the aforesaid constituent corporations
in accordance with the requirements of Section 23B.11.030 of the Washington
business corporation act.
3. The name of the surviving corporation of the merger is Ellensburg
Telephone Company, which will continue its existence as said surviving
corporation under its present name upon the effective date of said merger
pursuant to the provisions of the Washington business corporation act.
4. The executed Agreement and Plan of Merger between the aforesaid
constituent corporations is attached hereto as Exhibit 1.
5. The Agreement and Plan of Merger was duly approved by the
shareholders of each of the constituent corporations in accordance with Section
11.030 of the Washington business corporation act.
6. A copy of the Agreement and Plan of Merger will be furnished by
the surviving corporation, on request and without cost, to any Shareholder of
any constituent corporation.
-2-
IN WITNESS WHEREOF, the undersigned has subscribed this certificate on
the date set forth below and hereby affirms that the statements contained herein
are true and correct.
________________, 199_
ELLENSBURG TELEPHONE
COMPANY
By:___________________________
Name: _______________________
Title: _______________________
ATTESTED TO:
By:___________________________
Name: _______________________
Title: _______________________
-3-
EXHIBIT B
ESCROW AGREEMENT
EXHIBIT C
LETTER RE: TELEPHONE BENEFITS
TABLE OF CONTENTS
-----------------
Page
----
SECTION 1. THE MERGER.......................................................................... 1
1.1 Surviving Corporation............................................................... 1
1.2 Articles of Incorporation........................................................... 1
1.3 Bylaws.............................................................................. 2
1.4 Directors........................................................................... 2
1.5 Officers............................................................................ 2
1.6 Effective Date...................................................................... 2
1.7 Additional Actions.................................................................. 2
1.8 Conversion of Company Common Stock.................................................. 3
1.9 Conversion of Acquisition Sub Common Stock.......................................... 3
1.10 [Intentionally Omitted.............................................................. 3
1.11 Surrender of Shares................................................................. 4
1.12 Escrow Fund......................................................................... 5
1.13 Adjustments......................................................................... 5
SECTION 2. REPRESENTATIONS AND WARRANTIES...................................................... 9
2.1 Organization and Corporate Power.................................................... 9
2.2 Authorization and No Contravention.................................................. 10
2.3 Capitalization; Shareholders; Subsidiaries.......................................... 10
2.4 Financial Statements................................................................ 11
2.5 Business; Franchises and Regulations................................................ 12
2.6 Tariffs; FCC Licenses............................................................... 13
2.7 Rate Base........................................................................... 13
2.8 Overbillings; Refunds............................................................... 14
2.9 Capital Improvements Required by State
Authorities......................................................................... 14
2.10 Compliance with Law................................................................. 14
2.11 Absence of Undisclosed Liabilities.................................................. 14
2.12 Absence of Certain Developments..................................................... 15
2.13 Title to Properties................................................................. 15
2.14 Tax Matters......................................................................... 16
2.15 Insurance........................................................................... 18
2.16 Contracts and Commitments........................................................... 19
2.17 Litigation.......................................................................... 19
2.18 Environmental Matters............................................................... 20
2.19 Investment Company.................................................................. 21
2.20 Employee Benefit Programs........................................................... 21
2.21 Brokers or Finders.................................................................. 24
2.22 Corporate Records................................................................... 24
2.23 Books of Account.................................................................... 25
2.24 Certain Employment Matters.......................................................... 25
2.25 Voting Agreements................................................................... 26
2.26 No Material Misstatement or Omission................................................ 26
2.27 1998 Budgets........................................................................ 27
Page
----
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PARENT........................................... 27
3.1 Organization and Corporate Power................................................... 27
3.2 Authorization and No Contravention................................................. 27
3.3 Brokers or Finders................................................................. 28
SECTION 4. REPRESENTATIONS AND WARRANTIES OF ACQUISITION
SUB................................................................................ 28
4.1 Organization and Corporate Power................................................... 28
4.2 Authorization and No Contravention................................................. 29
4.3 Capitalization..................................................................... 29
4.4 Brokers or Finders................................................................. 29
SECTION 5. PARENT'S AND ACQUISITION SUB'S CONDITIONS OF
MERGER............................................................................. 30
5.1 Certificate........................................................................ 30
5.2 Delivery of Documents.............................................................. 30
5.3 Opinion of Company's Counsel....................................................... 31
5.4 Opinion of Special WUTC Counsel.................................................... 31
5.5 Opinion of Special FCC Counsel..................................................... 31
5.6 Compliance with Agreements......................................................... 31
5.7 All Proceedings Satisfactory....................................................... 31
5.8 Directors and Officers............................................................. 31
5.9 Regulatory Matters................................................................. 32
5.10 Litigation......................................................................... 32
5.11 Adverse Changes.................................................................... 32
5.12 Dissenting Shareholders............................................................ 33
5.13 Special Meeting.................................................................... 33
5.15 Stock Certificates................................................................. 37
SECTION 6. COMPANY'S CONDITIONS OF MERGER..................................................... 37
6.1 Certificate........................................................................ 37
6.2 Compliance with Agreements......................................................... 37
6.3 All Proceedings Satisfactory....................................................... 37
6.4 Regulatory Matters................................................................. 38
6.5 Litigation......................................................................... 38
6.6 Delivery of Documents.............................................................. 38
6.7 Opinion of Parent's Counsel........................................................ 39
SECTION 7. COVENANTS.......................................................................... 39
7.1 Regular Course of Business......................................................... 39
7.2 Amendments; Sales and Acquisitions................................................. 40
7.3 Capital Changes.................................................................... 40
7.4 Dividends.......................................................................... 41
7.5 Capital Expenditures............................................................... 41
7.6 Borrowing.......................................................................... 41
7.7 Property........................................................................... 41
7.8 Other Commitments.................................................................. 41
ii
Page
----
7.9 Interim Financial Information....................................................... 41
7.10 Consents and Authorizations......................................................... 41
7.11 Access.............................................................................. 42
7.12 Notice of Transfer.................................................................. 42
7.13 Payment of Tax...................................................................... 42
7.14 Agreement to Defend................................................................. 42
7.15 1998 Budgets........................................................................ 43
7.16 Further Assurances.................................................................. 43
7.17 Consents............................................................................ 43
7.18 No Solicitation or Negotiation...................................................... 43
7.19 Public Announcements................................................................ 45
7.20 Environmental Inspections........................................................... 46
7.21 Regulatory Matters.................................................................. 46
7.22 Indemnification and Insurance....................................................... 46
7.23 Employees; Other Benefits........................................................... 47
7.24 Payment of Regulatory Fees.......................................................... 47
7.25 Shareholder Approval................................................................ 47
7.26 Financing........................................................................... 48
SECTION 8. CLOSING............................................................................. 48
8.1 Time and Place...................................................................... 48
SECTION 9. INDEMNIFICATION OF PARENT AND ACQUISITION SUB....................................... 49
9.1 Survival............................................................................ 49
9.2 Indemnification..................................................................... 49
9.3 Notice of Claims.................................................................... 50
9.4 Method of Indemnification........................................................... 50
9.5 Defense of Third-Party Claims....................................................... 51
SECTION 10. DEFINITIONS......................................................................... 52
SECTION 11. GENERAL............................................................................. 56
11.1 Termination......................................................................... 56
11.2 Effect of Termination............................................................... 58
11.3 AMENDMENTS, WAIVERS AND CONSENTS.................................................... 59
11.4 GOVERNING LAW; CONSENT TO JURISDICTION.............................................. 59
11.5 Section Headings.................................................................... 59
11.6 Notices and Demands................................................................. 59
11.7 Counterparts........................................................................ 60
11.8 Severability; Complete Agreement.................................................... 60
11.9 Expenses............................................................................ 61
11.10 Assignment.......................................................................... 61
11.11 Accounting Terms.................................................................... 61
11.12 Parties............................................................................. 61
11.13 Liability of the Shareholder Representative......................................... 62
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Page
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11.14 JURY WAIVER......................................................................... 62
11.15 Schedules........................................................................... 62
11.16 Dispute Resolution.................................................................. 62
-iv-