ASSET PURCHASE AGREEMENT
among
HORIZON CELLULAR TELEPHONE COMPANY OF HAGERSTOWN, L.P.,
CUMBERLAND CELLULAR PARTNERSHIP,
▇▇▇▇▇▇ CELLULAR OF MARYLAND, INC.
and
▇▇▇▇▇▇ COMMUNICATIONS CORPORATION
DATED AS OF NOVEMBER 19, 1996
TABLE OF CONTENTS
Page
----
ARTICLE I PURCHASE AND SALE ............................................ 1
ARTICLE II DESCRIPTION OF ASSETS; EXCLUDED ASSETS ....................... 2
Section 2.01 Assets ....................................................... 2
Section 2.02 Excluded Assets .............................................. 3
ARTICLE III ASSUMPTION OF LIABILITIES .................................... 3
ARTICLE IV INSTRUMENTS OF TRANSFER ...................................... 4
Section 4.01 Transfer Documents ........................................... 4
Section 4.02 Assumption Documents ......................................... 4
ARTICLE V PURCHASE PRICE; ALLOCATION ................................... 4
Section 5.01 Purchase Price ............................................... 4
Section 5.02 Deposit ...................................................... 4
Section 5.03 Payment of Purchase Price .................................... 5
Section 5.04 Allocation of Purchase Price ................................. 5
Section 5.05 Purchase Price Adjustment .................................... 5
ARTICLE VI CLOSING ...................................................... 8
ARTICLE VII SELLERS' REPRESENTATIONS ..................................... 9
Section 7.01 Organization; Qualification .................................. 9
i
Section 7.02 Consents; Authorization; Execution and
Delivery of Agreement ........................................ 9
Section 7.03 Subsidiaries and Interests in Other Companies ................ 9
Section 7.04 Title to Assets; Condition of Assets ........................ 10
Section 7.05 Real Property-Owned ......................................... 10
Section 7.06 Real and Personal Property-Leased ........................... 10
Section 7.07 Existing Contracts .......................................... 10
Section 7.08 Governmental Licenses ....................................... 11
Section 7.09 Compliance with Law ......................................... 11
Section 7.10 No Violation of Existing Agreements ......................... 11
Section 7.11 Litigation and Legal Proceedings ............................ 12
Section 7.12 Environmental Compliance .................................... 12
Section 7.13 Labor Matters ............................................... 13
Section 7.14 Employee Benefits ........................................... 13
Section 7.15 Tax Matters ................................................. 14
Section 7.16 Financial Statements ........................................ 14
Section 7.17 Subscribers; Agents ......................................... 16
Section 7.18 Insurance ................................................... 16
Section 7.19 Brokers ..................................................... 16
Section 7.20 Undisclosed Liabilities ..................................... 16
Section 7.21 Pricing of Services ......................................... 17
Section 7.22 Proprietary Rights .......................................... 17
Section 7.23 Accounts Receivable and Bad Debts ........................... 17
Section 7.24 Product Information ......................................... 17
Section 7.25 Certain Business Relationships with Sellers ................. 17
ARTICLE VIII PURCHASER'S REPRESENTATIONS ................................. 17
Section 8.01 Organization; Qualification ................................. 17
Section 8.02 Consents; Authorization; Execution
and Delivery of Agreement ................................... 18
Section 8.03 Litigation and Legal Proceedings ............................ 18
Section 8.04 Brokers ..................................................... 18
Section 8.05 Compliance with Law ......................................... 18
Section 8.06 FCC Matters ................................................. 18
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Section 8.07 Financial Ability to Close .................................. 18
ARTICLE IX SELLERS', ▇▇▇▇▇▇'▇, AND PURCHASER'S
COVENANTS ................................................... 19
Section 9.01 Financial Statements and Cellular System Information ........ 19
Section 9.02 Governmental Approvals ...................................... 19
Section 9.03 Third Party Consents; Closing Conditions .................... 20
Section 9.04 Audit of Seller's 1996 Financial Statements ................. 21
Section 9.05 Access ...................................................... 22
Section 9.06 Conduct of Business ......................................... 23
Section 9.07 No Shopping ................................................. 25
Section 9.08 Employees; Employee Compensation ............................ 26
Section 9.09 Restrictions on Certain Actions ............................. 26
Section 9.10 Supplemental Disclosure ..................................... 26
Section 9.11 Disclaimer of Other Representations and Warranties .......... 26
Section 9.12 Guaranty by ▇▇▇▇▇▇ of Purchaser's Obligations ............... 27
Section 9.13 Rescission .................................................. 27
ARTICLE X CONDITIONS PRECEDENT TO PURCHASER'S
OBLIGATION TO CLOSE ......................................... 27
Section 10.01 Accuracy of Representations and Warranties; ................. 27
Performance of this Agreement ............................... 27
Section 10.02 Partner Resolutions ......................................... 28
Section 10.03 Incumbency Certificate ...................................... 28
Section 10.04 Third Party Consents; FCC; ▇▇▇▇-▇▇▇▇▇ Act ................... 28
Section 10.05 Due Diligence ............................................... 29
Section 10.06 No Material Adverse Change .................................. 29
Section 10.07 Opinion of Counsel to Sellers ............................... 30
Section 10.08 Opinion of FCC Counsel to Sellers ........................... 30
Section 10.09 Subscribers ................................................. 30
Section 10.10 Operating Cash Flow ......................................... 30
Section 10.11 Escrow Agreement ............................................ 31
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ARTICLE XI CONDITIONS PRECEDENT TO SELLERS'
OBLIGATION TO CLOSE ......................................... 31
Section 11.01 Accuracy of Representations and Warranties;
Performance of this Agreement ............................... 31
Section 11.02 Directors' Resolutions ...................................... 31
Section 11.03 Incumbency Certificate ...................................... 31
Section 11.04 Third Party Consents; FCC; ▇▇▇▇-▇▇▇▇▇ Act ................... 31
Section 11.05 Opinion of Counsel to Purchaser ............................. 32
ARTICLE XII CASUALTY LOSSES ............................................. 32
ARTICLE XIII INDEMNIFICATION ............................................. 32
Section 13.01 Indemnification by Sellers .................................. 32
Section 13.02 Indemnification by Purchaser ................................ 33
Section 13.03 Notice of Claims; Defense of Third Party Claims ............. 33
Section 13.04 Non Recourse to Sellers' Partners ........................... 35
Section 13.05 Limitations ................................................. 35
ARTICLE XIV CONFIDENTIALITY AND PRESS RELEASES .......................... 36
Section 14.01 Confidentiality ............................................. 36
Section 14.02 Press Release ............................................... 36
Section 14.03 Disclosures Required By Law ................................. 36
ARTICLE XV TERMINATION ................................................. 36
Section 15.01 Breaches and Defaults; Opportunity to Cure .................. 36
Section 15.02 Termination ................................................. 37
ARTICLE XVI BROKERS' FEES ............................................... 38
ARTICLE XVII ARBITRATION ................................................. 38
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ARTICLE XVIII MISCELLANEOUS ............................................... 39
Section 18.01 Additional Instruments of Transfer .......................... 39
Section 18.02 Notices ..................................................... 39
Section 18.03 Expenses .................................................... 40
Section 18.04 Transfer Taxes .............................................. 41
Section 18.05 Collection Procedures ....................................... 41
Section 18.06 Specific Performance ........................................ 41
Section 18.07 Governing Law ............................................... 41
Section 18.08 Assignment .................................................. 41
Section 18.09 Successors and Assigns ...................................... 41
Section 18.10 Amendments; Waivers ......................................... 41
Section 18.11 Entire Agreement ............................................ 41
Section 18.12 Counterparts ................................................ 42
Section 18.13 Severability ................................................ 42
Section 18.14 Section Headings ............................................ 42
Section 18.15 Interpretation .............................................. 42
Section 18.16 Further Assurances .......................................... 42
Section 18.17 Third Parties ............................................... 42
Section 18.18 Certain Defined Terms ....................................... 42
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DEFINED TERMS
Term Section Cite
---- ------------
AAA Article XVII
Accountants 7.04(a)
Acquisition Proposal 9.07
Adjustment Date 6.01(a)
Adjustments 5.05(e)
Asserting Party 13.03
Assets 2.01
Assumed Contracts Article III
Assumption Agreement 4.02
Assumed Liabilities Article III
Audit 9.04(b)
Audited Historical Financial Statements 7.16(a)(i)
August Balance Sheet 7.16(a)(iii)
Authorizations 7.08
Balance Sheet Date 7.16(a)(iii)
Base Price 5.01
▇▇▇▇ of Sale 4.01
Breaching Party 15.01
Budget 7.16(a)(iv)
Business Recitals
Capex Adjustment 5.05(c)
CCP Introduction
Cellular Areas Recitals
Cellular Systems Recitals
CERCLA 7.12(b)
Claims Article XII
Closing Article VII
Closing Certificate 5.05(e)
Closing Date Article VII
Closing Statement 6.01(a)
Closing Subscribers 5.05(d)
Code 7.14
vi
Controlled Group Member 7.14
Current Assets 5.05(a)
Current Financial Statements 7.16(a)(ii)
Current Liabilities 5.05(a)
Defending Party 13.03
Defined Benefit Pension Plan 7.14
Deposit 5.02
Deposit Escrow Agent 5.02
Deposit Escrow Agreement 5.02
Dispute Article XVII
Dispute Note 5.02
▇▇▇▇▇▇ Introduction
DOJ 10.04
Employee Benefit Plans 7.14
Environmental Laws 7.12(c)
ERISA 7.14
ERISA Affiliate 7.14
Escrow Agent 5.03
Escrow Agreement 5.03
Escrow Payment 5.03
Excluded Assets 2.02
Existing Contracts 7.07
FCC Recitals
FCC Authorizations 2.01(a)
Final Order 10.04
FTC 10.04
GAAP 5.05(a)
Guaranty 10.07
▇▇▇▇-▇▇▇▇▇ Act 9.02(a)
Hazardous Substances 7.12(a)
HCTC Introduction
Historical Financial Statements 7.16(a)(ii)
Horizon Corporate 10.01
Indemnified Purchase Parties 14.01(a)
Independent Accounts 9.04(a)
vii
Intangible Property 7.24
Interest 9.03
Interim Financial Statements 9.01
KCCGP 7.04
Liquidated Damages Amount 5.02
Liens Article I
Losses 13.01
MSA Recitals
Material Adverse Effect 10.01
Multiemployer Plan 7.14
Necessary Financing 11.07
Nonassumed Liabilities Article III
Non-Breaching Party 15.01
Objection Notice 9.04(c)
OCF Calculation 9.04(c)
Offering Memorandum 9.11
Operating Budget 9.01
Other Applicable Period 10.10
Permitted Liens Article I
Phase I Assessment 9.05(b)
Phase II Assessment 9.05(b)
Purchase Price 5.01
Purchaser Introduction
Purchaser Obligations 9.12
Purchaser's Accountant 9.04(a)
Purchaser's Estimate 5.05(e)
RCLA 7.12(b)
RCRA 7.12(b)
Recipient Party 14.01
Response Period 5.05(e)
RSA Recitals
Sellers Introduction
Sellers' Accountant 9.04(a)
Sellers' Estimate 5.05(e)
Six Month Income Statement 7.16(a)(i)
viii
Special Temporary Authority 10.04
Subscriber 5.05(a)
Subscriber Adjustment 5.05(d)
System Capex 5.05(a)
Target Number of Subscribers 5.05(a)
Tax 7.15
Third Party Claim 13.03
Unaudited Historical Financial Statements 7.16(a)(ii)
Working Capital Adjustment 5.05(b)
ix
SCHEDULES
---------
1 Permitted Liens
2.01(a) Contracts and Licenses
2.01(c) Tangible Asset List
2.01(d) Interests in Real Property
2.01(f) Intangible Personal Property
2.02 Excluded Assets
5.05(a) 1996 Marketing/Promotional Plans
7.01 Sellers' Partners
7.04 Encumbrances
7.08 Governmental Licenses
7.09 Compliance with Laws
7.10 Consents
7.11 Litigation
7.12 Environmental Compliance
7.13 Employees
7.14 Employee Benefits
7.15 Tax Matters
i
7.16(a)(i) Audited Historical Financial Statements
7.16(a)(ii) Unaudited Historical Financial Statements
7.16(a)(iii) Current Financial Statements
7.16(a)(iv) Budget
7.16(c) Certain Transactions Since August 31, 1996
7.17 Subscribers; Agents
7.21 Pricing of Services
7.23 Accounts Receivable Aging
7.24 Product Information
7.25 Certain Business Relationships
9.01 Operating Budget
10.04 Material Consents
EXHIBITS
--------
A. ▇▇▇▇ of Sale
B. Assumption Agreement
C. Deposit Escrow Agreement
D. Escrow Agreement
E Opinion of Counsel for Sellers
ii
F. Opinion of FCC Counsel for Sellers
G. Opinion of Counsel for Purchaser
iii
ASSET PURCHASE AGREEMENT
THIS AGREEMENT is made and entered into as of November 19, 1996 by and
among HORIZON CELLULAR TELEPHONE COMPANY OF HAGERSTOWN, L.P., a Delaware limited
partnership ("HCTC"), CUMBERLAND CELLULAR PARTNERSHIP, a Pennsylvania general
partnership ("CCP"; and together with HCTC, individually "Seller" and
collectively "Sellers"), ▇▇▇▇▇▇ COMMUNICATIONS CORPORATION, an Oklahoma
corporation ("▇▇▇▇▇▇"), and ▇▇▇▇▇▇ CELLULAR OF MARYLAND, INC., an Oklahoma
corporation ("Purchaser").
R E C I T A L S
WHEREAS, Sellers own all right, title and interest in those certain
licenses listed on Schedule 2.01(a) granted by the Federal Communications
Commission ("FCC") to provide cellular radio telephone service in each of
(i) the FCC's rural service area ("RSA") #3 in the State of Maryland, (ii) the
Cumberland, Maryland metropolitan statistical area ("MSA"), (iii) the
Hagerstown, Maryland MSA and (iv) the Pennsylvania 10 West, RSA (collectively,
the "Cellular Areas") and own and operate the non-wireless cellular telephone
systems in the Cellular Areas (individually a "Cellular System" and
collectively the "Cellular Systems"); and
WHEREAS, Purchaser desires to purchase from Sellers, and Sellers desire to
sell to Purchaser, substantially all of the assets and rights of Sellers
relating to the ownership and operation of the cellular radio telephone
businesses in the Cellular Areas (the "Business"), all subject to the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and mutual covenants and
agreements herein set forth and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto hereby
agree as follows:
ARTICLE I
PURCHASE AND SALE
Except as otherwise provided and subject to the terms and conditions set
forth in this Agreement, Sellers agree to sell, convey, assign, transfer and
deliver to Purchaser, and Purchaser agrees to purchase from Sellers at the
Closing, all of Sellers' right, title and interest in and to the
1
Assets (as defined in Section 2.01 hereof), free and clear of all debts,
liabilities, obligations, taxes, security interests, liens, pledges, charges,
rights of third parties and encumbrances of every kind (collectively,
"Liens") other than Permitted Liens. As used herein, the term "Permitted
Liens" means (i) any lien or other encumbrance for taxes and assessments, not
yet past due or otherwise being contested in good faith and for which
appropriate reserves have been established to the extent taken into account
in the Working Capital Adjustment, (ii) any lien or other encumbrance arising
out of deposits made to secure leases or other obligations of a like nature
arising in the ordinary course of business, (iii) any lien or other
encumbrance provided for in any contract listed on the disclosure schedules
hereto and not related to any indebtedness for borrowed money, (iv) any lien
or other encumbrance that does not materially interfere with the use by
Sellers of the property subject thereto or affected thereby (including any
easements, rights of way, restrictions, installations or public utilities,
title imperfections and restrictions, reservations in land patents, zoning
ordinances or other similar liens or other encumbrances) and (v) any lien or
other encumbrance set forth on SCHEDULE 1 attached hereto.
ARTICLE II
DESCRIPTION OF ASSETS; EXCLUDED ASSETS
SECTION 2.01. ASSETS. The assets to be conveyed to Purchaser shall
include all real and personal tangible and intangible assets, properties, rights
and business owned by Sellers of whatever description which relate in any way to
the ownership, use or operation of the Business, except assets excluded pursuant
to Section 2.02 hereof, but including all property and rights acquired or
obtained by Sellers from the date hereof through the date of Closing, to the end
that, except as set forth herein, all of the Sellers' assets, properties, rights
and business owned at the Closing and related in any way to the ownership, use
or operation of the Business, other than the assets excluded pursuant to
Section 2.02 hereof, shall pass to Purchaser (collectively, the "Assets"). Such
Assets shall be free and clear of all Liens other than Permitted Liens as of the
Closing. Such Assets shall include, without limitation:
(a) Sellers' licenses, including the FCC authorizations to operate a
cellular radio telephone system in the Cellular Areas (the "Cellular
Authorizations") and microwave paths used in connection with such cellular
operations (the "Microwave Authorizations" and together with the Cellular
Authorizations, the "FCC Authorizations"), leases, agreements, permits,
consents, revenue sharing agreements, agreements for the reception or
transmission of signals by microwave, easements, appurtenances, rights-of-way
and construction permits, if any are in
2
effect on the Closing Date, all right, title and interest, if any, in and to
all streets, roads and public places, open or proposed, all agreements
between a Seller and any suppliers, cellular telephone service companies and
subscribers (including subscriber deposits), and all other similar rights and
agreements (including so-called roaming agreements), including all
applications therefor, which in any way may relate to or concern the
operation by Sellers of the Business, as more particularly described and
categorized by each Cellular System on SCHEDULE 2.01(a) attached hereto.
(b) Originals or copies (at Sellers' option) of all of Sellers' files
of correspondence, lists, records and reports concerning (i) customers and
prospective customers of the Business and (ii) all dealings with Federal, state
and local regulatory agencies with respect to the Business, including, but not
limited to, all reports filed by or on behalf of any Seller with the FCC;
(c) All of Sellers' right, title and interest to towers, tower
equipment, antennas, switching and cell site equipment and buildings,
construction in progress, microwave equipment, testing equipment, motor
vehicles, office equipment, furniture and fixtures, supplies, inventory and
other physical assets, if any, used in or relating to the Business, and all
modifications, additions, restorations or replacements of the whole or any part
thereof, substantially all of which tangible assets as of the date hereof are
described and categorized by each Cellular System on SCHEDULE 2.01(c) attached
hereto;
(d) All interests in real property of Sellers used in or relating to
the Business, as described and categorized by each Cellular System on
SCHEDULE 2.01(d) attached hereto;
(e) All of Sellers' right, title and interest to engineering records,
files, data, drawings, blueprints, schematics, maps, reports, lists and plans
and processes intended for use in connection with the Business provided that
Sellers may retain the originals thereof so long as Purchaser is provided with
copies thereof;
(f) All of Sellers' right, title and interest in and to intangible
personal property used in or relating to the Business, including without
limitation, all rights, trademarks, trade names, patents and copyrights used by
Sellers, and all of the rights of Sellers associated therewith (including any
and all applications, registrations, extensions and renewals thereof), and such
rights, trademarks, trade names, patents and copyrights as of the date hereof
are described and categorized by each Cellular System on SCHEDULE 2.01(f)
attached hereto; and
3
(g) Any assets of the type-described above which are acquired after
the date hereof but prior to the Closing.
SECTION 2.02. EXCLUDED ASSETS. (a) The properties and assets described in
SCHEDULE 2.02 attached hereto and in Section 2.02(b) of this Agreement which
relate to the Business shall be retained by Sellers and shall not be sold,
assigned or transferred to Purchaser (the "Excluded Assets").
(b) Anything in this Agreement to the contrary notwithstanding, the
Assets sold to the Purchaser pursuant to the terms of this Agreement shall not
include the Sellers' partnership records, books of account, cash, bank deposits
and cash equivalents at the time of the Closing.
ARTICLE III
ASSUMPTION OF LIABILITIES
Purchaser shall assume and agree to perform and discharge as of the Closing
the following to the extent not previously performed or discharged: (i) all
obligations of Sellers which accrue and are to be performed from and after the
Closing under those permits, authorizations, licenses, leases, rights of way,
easements and other agreements either set forth on SCHEDULES 2.01(a) AND (d)
attached hereto or those agreements of a non-material nature which are not
required to be disclosed on SCHEDULES 2.01(a) AND (d) and (ii) all other
obligations of Sellers entered into during the period from the date hereof to
the Closing by any Seller in the ordinary course of its business in accordance
with the provisions of Section 9.06 below or that were identified to and
consented by Purchaser (all of such permits, authorizations, licenses, leases,
rights of way, easements and other agreements referred to in items (i) and (ii)
being referred to hereinafter as the "Assumed Contracts"); and (iii) all
"Current Liabilities" (as defined in Section 5.05(a) hereof) but only if and to
the extent that Purchaser receives a credit against the Purchase Price at the
Closing (such items (i) through (iii) are collectively referred to herein as the
"Assumed Liabilities"). Purchaser shall not be liable for any liabilities,
debts, contracts, agreements, including without limitation any contracts or
agreements set forth on SCHEDULE 2.02, or other obligations of Sellers of any
nature whatsoever other than the Assumed Liabilities (such other liabilities,
debts, contracts, agreements or obligations of Sellers other than the Assumed
Liabilities being referred to as "the Nonassumed Liabilities").
4
ARTICLE IV
INSTRUMENTS OF TRANSFER
AND ASSUMPTION
SECTION 4.01. TRANSFER DOCUMENTS. At the Closing, Sellers will deliver to
Purchaser (a) one or more Bills of Sale in substantially the form attached
hereto as EXHIBIT A (a "▇▇▇▇ of Sale"), (b) all such other good and sufficient
instruments of sale, transfer and conveyance, including, without limitation,
assignments of leases, in such form and including such matters as Purchaser
shall reasonably request, as shall be effective to vest in Purchaser all of
Sellers' right and title to, and interest in, the Assets; and (c) all contracts
and commitments, instruments, books and records (except as otherwise provided in
Section 2.02 hereof) and other data relating to the Assets, Business and
operations of Sellers.
SECTION 4.02. ASSUMPTION DOCUMENTS. At the Closing, Purchaser and Sellers
will execute and deliver an Assumption Agreement in substantially the form
attached hereto as EXHIBIT B (the "Assumption Agreement") in order to effect the
assumption of the Assumed Liabilities by Purchaser.
ARTICLE V
PURCHASE PRICE; ALLOCATION
SECTION 5.01. PURCHASE PRICE. The total purchase price for the Assets
shall be Seventy-Five Million Dollars ($75,000,000) (the "Base Price"), as
adjusted in accordance with the provisions of Section 5.05 hereof (as adjusted,
the "Purchase Price").
SECTION 5.02. DEPOSIT. Simultaneously with the execution of this
Agreement, Purchaser is depositing as a good faith deposit $3.75 million (the
"Deposit") with CoreStates Bank, N.A. (the "Deposit Escrow Agent"), to be held,
invested and disbursed pursuant to the terms of the Deposit Escrow Agreement
substantially in the form of EXHIBIT C attached hereto (the "Deposit Escrow
Agreement"). If the Closing occurs, then the Deposit and all earnings on the
Deposit shall be paid to Sellers pursuant to the Deposit Escrow Agreement and
the full amount of the Deposit and the earnings thereon shall be credited
against and deducted from the Purchase Price to be paid at the Closing by
Purchaser for the Assets. If Sellers terminate this Agreement in accordance
with the provisions of Section 15.02(d), at the time of such termination Sellers
are not then in breach of any of their representations, warranties, covenants or
agreements to such an extent that
5
Sellers' breaches, in the aggregate, would reasonably be expected to have a
Material Adverse Effect and the conditions set forth in Sections 10.04 (only
FCC and ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act consents), 10.06, (provided that the applicable
period shall be from August 31, 1996 through the date of termination of this
Agreement), 10.09 and 10.10 shall have been satisfied, then Sellers shall be
entitled to (i) $1,500,000 of the Deposit as liquidated damages (the
"Liquidated Damages Amount") without the necessity for proof by Sellers of
actual damages, which Liquidated Damages Amount the parties agree is a fair
and reasonable measure of the damages that Sellers would sustain as a result
of such termination, and (ii) up to an additional $2,250,000 from Purchaser
and ▇▇▇▇▇▇ (in the aggregate) upon proof by Sellers of actual damages greater
than the Liquidated Damages Amount. Notwithstanding anything else set forth
in this Section 5.02, Sellers' sole and exclusive recourse for Purchaser's or
▇▇▇▇▇▇'▇ breach of their representations or obligations under this Agreement
prior to Closing shall only be to receive an amount up to $3.75 million. In
any other case if the Closing does not occur, then, pursuant to the Deposit
Escrow Agreement, the Deposit and all earnings thereon shall be paid to
Purchaser. All determinations of breach and satisfaction of conditions shall
be made, and all payments by the Deposit Escrow Agent shall be made, in
accordance with the procedures and other provisions set forth in the Deposit
Escrow Agreement.
SECTION 5.03. PAYMENT OF PURCHASE PRICE. The Purchase Price, less the
Deposit and all earning thereon and less an amount equal to $3.75 million (the
"Escrow Payment"), shall be payable by wire transfer of immediately available
funds to Sellers at Closing. The Escrow Payment shall be paid by the Purchaser
at Closing to CoreStates Bank, N.A., as escrow agent (the "Escrow Agent") to be
held, invested and disbursed pursuant to the terms of the Escrow Agreement
substantially in the form of EXHIBIT D attached hereto (the "Escrow Agreement').
SECTION 5.04. ALLOCATION OF PURCHASE PRICE. Within thirty (30) days prior
to the Closing, Purchaser and Sellers in good faith shall agree on an allocation
of the Purchase Price in accordance with the respective fair market value of the
Assets being purchased and as provided for under Section 1060 of the Code.
Purchaser and Sellers each further agree to file their income tax returns and
their other tax returns and IRS Form 8594 reflecting the allocation as
determined in this Section 5.04. If no agreement on an allocation of the
Purchase Price with respect to the Assets is reached within such thirty (30) day
period, such allocation of the Purchase Price to the Assets shall be determined
by a nationally recognized appraisal firm mutually agreeable to Sellers and
Purchaser and the costs of such appraisal shall be borne equally by Sellers and
Purchaser.
6
SECTION 5.05. PURCHASE PRICE ADJUSTMENT.
(a) As used in this Section 5.05, the following terms shall have the
meaning set forth below:
"CURRENT ASSETS" means the Cellular Systems' (i) accounts receivable,
including all roaming receivables (without any reserves therefor) and subscriber
receivables (net of reserves for subscriber receivables calculated as follows:
2.5% for subscriber receivables that are current to less than or equal to 30
days past due; 15% for subscriber receivables that are between 31 and 60 days
past due; 50% for subscriber receivables that are between 61 and 90 days past
due; and 100% for subscriber receivables that are more than 90 days past due);
(ii) inventory of cellular telephone handsets and ancillary equipment held for
sale for subscriber and which will reasonably be expected based on past
practices to be consumed in the normal course of business within six months
after the Closing, reflected at net book value (provided that if the
manufacturer's price of an inventory item is 10% below the net book value of
such inventory item, the manufacturer's price shall be used) and (iii) prepaid
items which Purchaser will receive the benefit of after the Closing such as
prepaid rent, insurance, property taxes, utility charges, fees and deposits
paid, all determined as of 12:01 a.m. on the Closing Date in accordance with
GAAP.
"CURRENT LIABILITIES" means the Cellular Systems' (i) subscriber deposits
received, (ii) deferred revenue, (iii) employee vacation expense (whether or not
to be paid or vacation time to be taken by the employee after the Closing),
(iv) salaries, bonuses, fringe benefits and other remuneration payable to
employees to be hired by Purchaser, (v) expenses for goods and services
received in the normal course of business including taxes, utility charges,
special assessments, commissions, fees and (vi) other trade payables and
accrued expenses incurred in the normal course of business, all determined as
of 12:01 a.m. on the Closing Date in accordance with GAAP.
"GAAP" means generally accepted accounting principles consistently applied.
"SUBSCRIBER" means a person or entity subscribing for cellular telephone
service on a Cellular System (i) who pays for service under such Cellular
System's normal rate plan for that category of subscriber, (ii) whose account is
active within the normal practices and procedures of the Cellular System and in
no case is more than 70 days past due from the due date and (iii) who was
obtained as a subscriber in the normal course of business of such Cellular
System consistent with past practice and not as a result of (A) marketing
efforts that are not customary in the cellular telephone industry generally or
which were not utilized by Sellers during 1995 or 1996 on a regular basis or
(B) any
7
other plans for which the Sellers failed to obtain Purchaser's prior written
consent, which consent will not be unreasonably withheld. SCHEDULE 5.05(a)
attached hereto sets forth all marketing and promotional plans Sellers have
used, are using or propose to use during 1996 to acquire subscribers.
"SYSTEM CAPEX" means the dollar amount incurred or paid for by Sellers
between September 1, 1996 and the Closing Date for equipment and other capital
expenditures (determined in accordance with GAAP and which shall include capital
expenditures for which payment has not yet been made by Sellers but for which a
current liability has been established in Sellers' books and records and which
will be taken into account in the Working Capital Adjustment) for the purpose of
developing and building out the Cellular Systems, provided that no such
expenditure shall be considered a System Capex unless (i) those expenditures are
set forth on Schedule 7.16(a)(iv) or (ii) Purchaser shall have given Seller
written approval for the type and purpose of the property or service to be
purchased or obtained and the amount to be expended therefor.
"TARGET NUMBER OF SUBSCRIBERS" means 21,719 subscribers if the Closing
occurs prior to the end of the normal billing cycle of the Cellular Systems for
January, 1997; or if the Closing occurs after the end of the January, 1997
billing cycle, but prior to the end of the February, 1997 billing cycle, 22,119
subscribers; or if the Closing occurs after the end of the February, 1997
billing cycle but prior to the end of the March, 1997 billing cycle, 22,619
subscribers; or if the Closing occurs after the end of the March, 1997, billing
cycle but prior to the end of the April, 1997 billing cycle, 23,219 subscribers.
(b) The Base Price shall be increased (or decreased) by the amount by
which Current Assets exceeds (or is less than) Current Liabilities as of the
Closing Date (the "Working Capital Adjustment").
(c) The Base Price will be increased at the Closing by the dollar amount
of System Capex up to a maximum increase of $3,000,000 (the "Capex Adjustment").
(d) The Base Price shall be decreased (or increased) to the extent that
the aggregate number of subscribers on the Cellular Systems as of the last day
of the billing cycle for the month preceding the Closing Date (the "Closing
Subscribers") are less than 90% of (or exceed 110% of) the Target Number of
Subscribers in an amount equal to such deficiency (or excess) multiplied by
$300.00; it being agreed that there shall be no decrease from (or increase to)
the Base Price under this Section
8
5.05(d) in the event that the Closing Subscribers are between 90%-110% of the
Target Number of Subscribers (such increase or decrease being referred to as
the "Subscriber Adjustment").
(e) Sellers shall prepare and submit to Purchaser, not later than 5
business days prior to the Closing Date, a written good faith estimate of the
amount of the Working Capital Adjustment, Capex Adjustment and Subscriber
Adjustment (collectively, the "Adjustments") in accordance with this
Section 5.05 and Seller's estimate of the Purchase Price resulting from the
Adjustment ("Sellers' Estimate"). Sellers' Estimate shall be accompanied by
detailed supporting documents, work papers, subscriber records and other data
supporting each Adjustment and Sellers' Estimate. The Sellers' Estimate
shall be based upon the books and records of the Cellular Systems. The
Sellers' Estimate shall be accompanied by a certificate signed by a senior
officer of the general partner of each Seller certifying that the Sellers'
Estimate was calculated in good faith and in accordance with the provisions
of this Section 5.05. After the delivery of Sellers' Estimate and prior to
the Closing, Purchaser and Sellers shall attempt to resolve any disputes
between Sellers and Purchaser with respect to Sellers' proposed Adjustments.
In connection therewith, Purchaser shall have full access to all Sellers'
records related to Sellers' proposed Adjustments. Prior to Closing,
Purchaser shall advise Sellers in writing as to any dispute Purchaser has
with Sellers' Estimate and provide Sellers Purchaser's calculation of the
Adjustments and the Purchase Price, accompanied by a certificate signed by a
senior officer of Purchaser certifying that Purchaser's calculation was made
in good faith and supporting documents and information, to the extent the
same is available to Purchaser ("Purchaser's Estimate"). In the event
Purchaser's Estimate of the Purchase Price is less than $25,000 less than
Sellers' Estimate, the Closing shall proceed with the Purchase Price based
upon Sellers' Estimate. In the event the Purchaser's Estimate of the
Purchase Price is more than $25,000 less than Sellers' Estimate, then the
mid-point between Sellers' Estimate and Purchaser's Estimate shall be used as
the Purchase Price for purposes of Closing.
Within 60 days after the Closing Date, Purchaser shall deliver to Sellers a
certificate (the "Closing Certificate") signed by a senior officer of Purchaser
providing a compilation of the Adjustments to be made pursuant to this
Section 5.05 including any changes in the Adjustments used to determine the
Purchase Price at Closing, together with a copy of any supporting documents,
work papers, subscriber records and other data relating to such Closing
Certificate and such other supporting evidence as Sellers may reasonably
request either prior to or after delivery thereof. If Sellers shall conclude
that the Closing Certificate does not accurately reflect the Adjustments to
be made to the Base Price in accordance with this Section 5.05, Sellers
shall, within 40 days after their receipt of the Closing Certificate (such 40
day period being referred to as the "Response Period"),
9
deliver to Purchaser a written statement of any discrepancies believed to
exist. If Sellers fail to so notify Purchaser of any discrepancies, then the
calculation of the Purchase Price set forth in the Purchaser's Closing
Certificate shall be controlling for all purposes hereof and Purchaser or
Sellers, as the case may be, shall on or before the fifth day following the
expiration of the Response Period pay to the other the amount which it is
obligated to pay in accordance with the Closing Certificate. On or before
the fifth day following the earlier to occur of the expiration of the
Response Period and the date Purchaser receives Sellers' statement of
discrepancies, Purchaser or Sellers, as the case may be, shall pay the other
the amount, if any, as to which there is no discrepancy. Purchaser and
Sellers shall use good faith efforts to jointly resolve their discrepancies
within 15 days of Purchaser's receipt of Sellers' written statement of
discrepancies, which resolution, if achieved, shall be binding upon all
parties to this Agreement and not subject to further dispute or review. If
Purchaser and Sellers cannot resolve the discrepancies to their mutual
satisfaction within such 15 day period, then the matter shall be submitted to
the Independent Accountants (as defined in Section 9.04). The Independent
Accountants shall resolve the dispute substantially in accordance with the
procedures set forth in Section 9.04 hereof and the decision of the
Independent Accountants with respect to the Adjustments shall be final and
binding on the parties. Within 5 days of receipt of the Independent
Accountants' decision with respect to such dispute, if Purchaser is
determined to owe an amount to Sellers, Purchaser shall pay such amount
thereof to Sellers, and if Sellers are determined to owe an amount to
Purchaser, Sellers shall pay such amount thereof to Purchaser. All amounts
owed by Purchaser or Sellers to the other in accordance with this
Section 5.05(e) shall be paid by wire transfer of immediately available funds
and shall not bear any interest. Any amount due Purchaser from Sellers under
this Section 5.05 and not paid when due may also be paid from the funds held
pursuant to the Escrow Agreement.
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ARTICLE VI
CLOSING
Subject to the terms and conditions hereof, the Closing (the "Closing")
shall take place at the offices of ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, on the date (the "Closing Date") which is the
latest of (a) the tenth (10th) day after the date that (i) the FCC granted its
consent to the assignment of the Cellular Authorizations, from Sellers to the
Purchaser by a Final Order (as defined in Section 10.04) or (ii) if applicable,
Sellers receive from Purchaser the Finality Waiver Notice, (b) the fifth (5th)
day after the completion of the Audit (as defined in Section 9.04 hereof),
(c) the fifth (5th) day after the expiration or early termination of the
waiting period under the ▇▇▇▇-▇▇▇▇▇ Act; or (d) the tenth (10th) day after
the date that the FCC granted a Special Temporary Authority (as defined in
Section 10.04) for Purchaser to operate the microwave facilities that are the
subject of the Microwave Authorizations on a temporary basis; provided if
such latest date is not a business date, the Closing Date shall be the next
following business day.
ARTICLE VII
SELLERS' REPRESENTATIONS
Sellers hereby jointly and severally represent, warrant, covenant and
agree, which representations, warranties, covenants and agreements, together
with all other representations, warranties, covenants and agreements of Sellers
in this Agreement, shall survive the execution and delivery of this Agreement
and the payment of the Purchase Price hereunder until June 30, 1998 (PROVIDED,
HOWEVER, that such survival period shall not in any way preclude Purchaser from
seeking indemnification from Sellers for claims related to or arising out of the
Nonassumed Liabilities), that:
SECTION 7.01. ORGANIZATION, QUALIFICATION. (a) Each Seller is a limited
partnership or general partnership (as applicable) duly organized, validly
existing and (with respect to HCTC solely) in good standing under the laws of
the state of its organization and has all necessary power and authority to own
and operate its properties and to carry on its Business as now being conducted
or proposed to be conducted and to carry out the transactions contemplated by
this Agreement. Each Seller has the power and authority to execute and deliver
and, subject to obtaining the FCC's approval to assign the FCC Authorizations
and the other governmental and third-party consents referred to in
Section 10.04, perform its obligations under this Agreement and to
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undertake the transactions contemplated hereby. Each Seller's partners are
as set forth on SCHEDULE 7.01 attached hereto.
SECTION 7.02. CONSENTS, AUTHORIZATION, EXECUTION AND DELIVERY OF
AGREEMENT. All necessary consents and approvals have been obtained by
Sellers for the execution and delivery of this Agreement. The execution,
delivery and performance of this Agreement by Sellers and the transfer of the
Assets to Purchaser have been duly and validly authorized and approved by all
necessary partnership and partner action of each Seller, the general partner
of HCTC and the managing general partner of CCP. This Agreement is a valid
and binding obligation of each Seller, enforceable against it in accordance
with its terms, subject to bankruptcy, insolvency, reorganization, moratorium
or similar laws now or hereafter in effect affecting creditors' rights
generally.
SECTION 7.03. SUBSIDIARIES AND INTERESTS IN OTHER COMPANIES. Neither
Seller has any subsidiaries, and does not own or control any shares or other
securities of, or have any other proprietary interest in, any corporation,
partnership, limited liability company, joint venture, business association or
other person.
SECTION 7.04. TITLE TO ASSETS; CONDITION OF ASSETS. Except as set forth
on SCHEDULE 7.04, Sellers have full power, right and authority to sell and
convey to Purchaser good and marketable title to the Assets, free and clear of
all Liens other than Permitted Liens. All Liens in effect on the date hereof
which are to be discharged at Closing are listed on SCHEDULE 7.04 hereto. The
tangible property included among the Assets as of the date hereof is in good
working order and repair, reasonable wear and tear excepted. The Assets
constitute all of the assets which are necessary, used or useful in the
operation of the Business other than the Microwave Authorizations issued to
KCCGP, L.P., a Delaware limited partnership and affiliate of Sellers ("KCCGP"),
which are identified on SCHEDULE 2.01(a) and that will be included within the
Assets to be transferred to Purchaser and other than the Excluded Assets. No
partner of any Seller except KCCGP with respect to the Microwave Authorizations
or any other individual, partnership, corporation, person or entity (a "Person")
other than the Sellers owns, leases or has any rights in any property, license
or other assets related to the Business other than the Excluded Assets. Except
for factors typically affecting propogation and reception in the cellular
telephone industry generally, the Assets are technically sufficient and capable
of providing cellular telephone service in the Cellular Areas for which Sellers
are licensed in accordance with applicable FCC regulations except as set forth
on SCHEDULE 7.08.
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SECTION 7.05. REAL PROPERTY - OWNED. Sellers own no real property.
SECTION 7.06. REAL AND PERSONAL PROPERTY - LEASED. Set forth on
SCHEDULE 2.01(d) (in the case of real property) and SCHEDULE 2.01(a) (in the
case of personal property), are true and accurate listings of all real and
personal property leases (other than personal property leases with annual
payments of less than $12,000 and which leases, together with the other
contracts and agreements not required to be disclosed on SCHEDULES 2.01(a) AND
(d), in the aggregate have annual payments of less than $150,000 or which are
terminable without penalty on six months or less notice) of Sellers used or
useful in the ownership or operation of the Assets and the Business setting
forth (i) the name of the lessor and (ii) with respect to the real property
leases, a description of the property leased. Except as set forth on
SCHEDULE 2.01(d) (in the case of leased real property) and SCHEDULE 2.01(a) (in
the case of leased personal property), with respect to such leases, the Sellers
hold valid leasehold interests therein, such leases are in full force and
effect, and will be free and clear of all Liens other than Permitted Liens at
the Closing.
SECTION 7.07. EXISTING CONTRACTS. SCHEDULES 2.01(a) AND (d) hereto sets
forth all agreements (other than standard subscriber agreements for cellular
service) in effect on the date hereof with each Seller's subscribers, all leases
(other than personal property leases with annual payments of less than $12,000
and which leases, together with the other contracts and agreements not required
to be disclosed on SCHEDULES 2.01(a) AND (d), in the aggregate have annual
payments of less than $150,000 or which are terminable without penalty on six
months or less notice) to which each Seller is a party and which relate to the
ownership of the Assets or the operation of the Business, and all other
agreements (other than agreements with annual payments of less than $12,000 and
which agreements, together with the other leases and contracts not required to
be disclosed on SCHEDULES 2.01(a) AND (d), in the aggregate have annual payments
of less than $150,000 or which are terminable without penalty on six months or
less notice) or commitments (written or oral) to which each Seller is a party
which relate to the ownership of the Assets or the operation of the Business
(the "Existing Contracts") except for outstanding purchase orders that are
included in the Budgets (the "Purchase Orders"). No partner of any Seller or
any Person (other than Seller) controlling, controlled by or affiliated with any
such partner has any contractual relationship relating to the ownership or
operation of the Business. Sellers have heretofore delivered to Purchaser true
and correct copies of the Existing Contracts. Except as disclosed on
SCHEDULES 2.01(a) AND (d), Sellers have no knowledge of any breach or
anticipated breach by the other parties to any Existing Contracts. The Existing
Contracts are in full force and effect and Sellers are in compliance with the
terms of such Existing Contracts. Except for the Existing
13
Contracts and the Purchase Orders, neither Seller has entered into any other
agreements (other than agreements with annual payments of less than $12,000
and which agreements, together with the other leases and contracts not
required to be disclosed on SCHEDULES 2.01(a) AND (d), in the aggregate have
annual payments of less than $150,000 or which are terminable without penalty
on six months or less notice) relating to the ownership of the Assets and the
operation of the Business, including, but not limited to, rights-of-way,
rights of entry, licenses, easements, leases (real property or equipment), or
guaranty agreements. There are no claims by third parties that either Seller
is required to enter into other agreements to enable it to continue owning
the Assets and the operation of the Business as it is presently being
operated.
SECTION 7.08. GOVERNMENTAL LICENSES. Except as set forth on
SCHEDULE 7.08, Sellers and KCCGP hold all necessary licenses, consents, permits,
approvals and authorizations of public or governmental bodies including, without
limitation, the FCC Authorizations and the state, counties and municipalities
served by the Business, which are required in connection with the ownership of
the Assets (collectively referred to as the "Authorizations"). All
Authorizations are in full force and effect. Each Seller has complied with the
terms of the Authorizations to which it holds and there are no pending
modifications, amendments or revocations of the Authorizations which would
adversely affect the ownership of the Assets and the operation of the Business.
All fees of Sellers due and payable to governmental authorities pursuant to the
Authorizations have been paid. All reports required of Sellers to be filed in
connection with the Authorizations have been timely filed and are accurate and
complete. True and correct copies of the Authorizations, and all amendments
thereto to the date hereof, have been delivered by Sellers to Purchaser and are
identified on SCHEDULE 2.01(a) hereto. The ownership of the Assets and the
operation of the Business by Sellers are not subject to regulation or
supervision by any applicable state public utilities commission or other similar
state governmental instrumentality.
SECTION 7.09. COMPLIANCE WITH LAWS. Except as set forth on SCHEDULE 7.09,
Sellers are currently complying with and have so complied with, and are not in
default under or in violation of, and neither the Business nor any of the Assets
nor the operation or maintenance thereof, contravenes in any respect any
statute, law (including environmental or employment laws), ordinance, decree,
order, rule, regulation of any governmental body applicable to the Assets or the
Business, including, without limitation, rules and regulations of the FCC.
SECTION 7.10. NO VIOLATION OF EXISTING AGREEMENTS. The execution,
delivery and performance of this Agreement by Sellers will not violate any
provisions of law and will not,
14
with or without the giving of notice or the passage of time, or both,
conflict with or result in any breach of any of the terms or conditions of,
or constitute a default under any Existing Contracts. Subject to the consents
for the Existing Contracts identified in SCHEDULE 7.10, the execution,
delivery and performance of this Agreement by Sellers will not result in the
creation of any Lien upon the Assets or the Business other than Permitted
Liens.
SECTION 7.11. LITIGATION AND LEGAL PROCEEDINGS. Except as set forth on
SCHEDULE 7.11, there is no outstanding judgment against Sellers or any partner
of a Seller affecting the Business or the Assets or which question the validity
of any action taken or to be taken pursuant to or in connection with the
provisions of this Agreement and there is no litigation, proceeding or
investigation pending, or, to any Seller's knowledge, threatened, against any
Seller or the partners of any Seller affecting the Business or the Assets or
which questions the validity of any action taken or to be taken pursuant to or
in connection with the provisions of this Agreement. Except as set forth on
SCHEDULE 7.11, there are no proceedings pending to which any Seller or any
partner of a Seller is a party or, to any Seller's knowledge, threatened, nor
any demands by any governmental agency, utility or other party, to terminate,
modify or adversely change the terms and conditions of any Seller's rights with
respect to the Authorizations or Existing Contracts.
SECTION 7.12. ENVIRONMENTAL COMPLIANCE. (a) Except as set forth on
SCHEDULE 7.12 hereto, (i) neither Seller has generated, used, transported,
treated, stored, released or disposed of, or has not suffered or permitted
anyone else to generate, use, transport, treat, store, release or dispose of any
Hazardous Substance (as hereinafter defined) with respect to the Assets or the
Business in violation of any Environmental Laws (as hereinafter defined); (ii)
there has not been any generation, use, transportation, treatment, storage,
release or disposal of any Hazardous Substance in connection with their
ownership of the Assets, the conduct of the Business or the use of any property
or facility which relates to their ownership of the Assets, the Business, or,
any adjacent properties or facilities, which has created or might reasonably be
expected to create any liability under any Environmental Laws or which would
require reporting to or notification of any governmental entity; (iii) no
friable asbestos or polychlorinated biphenyl, and no underground storage tank,
is contained in or located at any facility of a Seller relating to the Business
in violation of any Environmental Laws; and (iv) any Hazardous Substance handled
or dealt with in any way with respect to the Assets or the Business by either
Seller, or during either Seller's ownership of the Assets or the Business has
been and is being handled or dealt with in compliance with any Environmental
Laws.
15
(b) For purposes of this Agreement, the term "Hazardous Substance"
shall mean any substance which, as of the date of this Agreement, is listed as
hazardous or toxic in the regulations implementing the Comprehensive
Environmental Response Compensation and Liability Act of 1980, as amended
("CERCLA"), the Response Compensation and Liability Act ("RCLA"), the Resource
Conservation and Recovery Act of 1976, as amended ("RCRA"), or listed as a
hazardous substance under any applicable state environmental laws, or any
substance which has been determined by regulation, ruling or otherwise by any
agency or court to be a hazardous or toxic substance regulated under federal or
state law.
(c) For purposes of this Agreement, the term "Environmental Laws"
shall mean CERCLA, RCRA, RCLA and any applicable statutes, regulations, rules,
ordinances, codes, licenses, permits, orders, approvals, plans, authorizations,
concessions, franchises and similar items of all governmental authorities and
all applicable judicial, administrative and regulatory decrees, judgments and
orders, any of which relate to the protection of human health or the environment
from the effects of Hazardous Substances, including but not limited to those
pertaining to reporting, licensing, permitting, investigating and remediating
emissions, discharges, releases or threatened releases of Hazardous Substances
into the air, surface water, groundwater or land, or relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Substances.
SECTION 7.13. EMPLOYEES. SCHEDULE 7.13 sets forth a true and complete
list of the names and salaries of all employees of the Sellers involved in the
operation of the Business. Such employees are employees at will. Each Seller
has withheld all amounts required by law or agreement to be withheld by it from
the wages, salaries and other payments to its employees and is not liable for
any arrears of wages or any taxes for failure to comply with any of the
foregoing. There are no collective bargaining agreements covering any of the
employees of any Seller. The Sellers have not breached or otherwise failed to
comply with any provision of any collective bargaining agreement or other labor
union contract applicable to any of its employees. No consent of any union (or
similar group or organization) is required in connection with the consummation
of the transactions contemplated hereby. There are no pending, or, to Sellers'
knowledge threatened or anticipated, and, there is no factual basis for any (a)
employment discrimination (including age, sex, racial or handicap
discrimination) charges or complaints against or involving any Seller, before
any federal, state, or local board, department, commission or agency or (b)
unfair labor practice charges or complaints, disputes or grievances affecting
any Seller. There are no pending, or, to Sellers' knowledge threatened or
anticipated (a) union
16
representation petitions respecting the employees of any Seller, (b) efforts
being made to organize any of the employees of any Seller, or (c) strikes,
slow downs, work stoppages, or lockouts or threats affecting any Seller.
SECTION 7.14. EMPLOYEE BENEFITS. Except as set forth on SCHEDULE 7.14
attached hereto, neither Seller has any Employee Benefit Plans in which any one
or more partners or employees of any Seller, with respect to the Business,
participate or are eligible to participate as of the date hereof and is not a
party to any employment contract. The term "Employee Benefit Plans" means all
employee benefit plans as that term is defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"). Except as set
forth on SCHEDULE 7.14 attached hereto, no partner or employee of any Seller
participates or is eligible to participate in a "defined benefit pension plan"
as defined in Section 3(35) of ERISA, maintained or made available by any
Seller. Except as set forth on SCHEDULE 7.14 attached hereto, neither Seller
nor any Controlled Group Member maintains or contributes to, or ever maintained
or contributed to, a plan under which any employee of any Seller participates or
is eligible to participate subject to Section 412 of the Internal Revenue Code
of 1986, as amended (the "Code"). The term "Controlled Group Member" means any
trade or business (whether or not incorporated) which is, or was at any relevant
time, aggregated with the Seller pursuant to Section 414(b), (c), (m) or (o) of
the Code. Except as set forth on SCHEDULE 7.14 attached hereto, neither Seller
nor any ERISA Affiliate has participated in or made contributions to any
"multiemployer plan" as defined in Section 4001(a)(3) of ERISA. The term "ERISA
Affiliate" means each trade or business (whether or not incorporated) which is,
or was at any relevant time, treated as a single employer any Seller pursuant to
Section 4001(b)(1) of ERISA.
SECTION 7.15. TAX MATTERS. Except as set forth on SCHEDULE 7.15 attached
hereto, (a) each Seller has timely filed all Tax (as defined below) returns and
statements which it is required to file; (b) all such returns are complete and
accurate and disclose all Taxes required to be paid for the periods covered
thereby; (c) neither Seller has waived any statute of limitations in respect of
Taxes or agreed to an extension of time with respect to a Tax assessment or
deficiency; (d) no assessment of any additional Taxes for periods for which
returns have been filed has been asserted and no basis exists therefor; (e) to
Sellers' knowledge, there are no unresolved questions or claims raised by any
Taxing authority concerning the Tax liability of any Seller and (f) all Taxes
which each Seller is required by law to withhold or to collect for payment have
been duly withheld and collected, and have been paid. Each Seller has paid all
Taxes due prior to the date hereof and will pay when due (or contest in good
faith by appropriate proceedings) all Taxes
17
which may become due on or before the Closing Date. For purposes of this
Section 7.15, the term "Tax" or "Taxes" means all taxes, charges, fees,
levies, inposts and other assessments including all income, sales, use, goods
and services, value added, capital, capital gains, alternative net worth,
transfer, profits, withholding, payroll, employer health, excise, real
property and personal property taxes, and any other taxes, customs duties,
stamp duties, fees, assessments or similar charges in the nature of a tax,
together with any interest, fines and penalties imposed by any governmental
authority (including federal, state, provincial, municipal and foreign
governmental authorities), and whether disputed or not.
SECTION 7.16. FINANCIAL STATEMENTS.
(a) The Purchaser has heretofore been furnished with the following:
(i) true and complete copies of the audited balance sheet of
Horizon Cellular Telephone Company, L.P. ("Horizon") as of
December 31, 1994 and December 31, 1995 and the related audited
statements of income, cash flows and partners' capital for the
years then ended, each of such balance sheets and income
statements being attached hereto as SCHEDULE 7.16(a)(i)
(collectively, the "Audited Historical Financial Statements");
(ii) true and complete copies of the unaudited balance sheet of
each Seller as of December 31, 1994 and December 31, 1995 and the
related unaudited statements of income for the years then ended,
each of such balance sheets and income statements being attached
hereto on Schedule 7.16(a)(ii) (collectively, the "Unaudited
Historical Financial Statements"; and together with the Audited
Historical Financial Statements, the "Historical Financial
Statements;)
(iii) true and complete copies of the unaudited balance
sheet (the "August Balance Sheet") of each Seller at August 31,
l996 (the "Balance Sheet Date") and the related unaudited statement
of income for the eight-month period then ended (the "Eight Month
Income Statement; and together with the August Balance Sheet, the
"Current Financial Statements"), such balance sheet and income
statements being attached hereto as SCHEDULE 7.16(a)(iii);
18
(iv) the Capital Expenditure budget for each Cellular System
providing for expenditure of capital items in each month for the
period from July 1, 1996 through March 31, 1997 and attached
hereto as SCHEDULE 7.16(a)(iv) (the "Budgets").
(b) Each of the Historical and Current Financial Statements delivered
under Section 7.16(a)(i) through (iii) hereof was prepared in accordance with
GAAP applied on a basis consistent with prior periods and past practices except
as otherwise stated therein and, with respect to the Current Financial
Statements and the Unaudited Historical Financial Statements, subject to normal
recurring year-end adjustments and except for the omission of certain footnotes
and other presentation items required by GAAP with respect to audited financial
statements; each of the balance sheets included in such Historical and Current
Financial Statements fairly presents the financial condition of Horizon and each
Seller, as applicable, as at the close of business on the date thereof; and
each of the statements of income included in such Historical and Current
Financial Statements fairly presents the results of operations of Horizon and
each Seller, as applicable, for the fiscal period then ended.
(c) Except as set forth on SCHEDULE 7.16(c) attached hereto, since the
Balance Sheet Date, neither Seller has:
(i) sold, assigned or transferred any of its tangible assets
(except for the Excluded Assets and except pursuant to existing
contracts or commitments disclosed on any Schedule to this
Agreement or inventory in the ordinary course of business
consistent with past practice); or canceled any material debts or
material claims;
(ii) waived any material rights, whether or not in the
ordinary course of business;
(iii) entered into any other transaction, except in the
ordinary course of business, or entered into any transaction with
any of the partners of any Seller, or any affiliate of any such
partner, relating primarily to the Business or the Assets except
in the ordinary course of business in accordance with past
practices;
19
(iv) suffered any material damage, destruction or casualty
loss with respect to the Assets, whether or not covered by
insurance;
(v) made any distribution of any of the Assets to any
partner of any Seller or any affiliate of such partner;
(vi) except as disclosed in writing by Sellers to Purchaser,
obligated itself or the Business to give free or reduced price
service to customers with respect to the Business other than
promotions offered in the ordinary course of business and set
forth on SCHEDULE 5.05(a) or occasionally free and temporary
price reductions, entered into any agreement with any
governmental or regulatory authority granting the authorization
to freeze fees charged to customers of the Business; or
(vii) entered into any agreement or understanding to do any
of the foregoing.
SECTION 7.17. SUBSCRIBERS/AGENTS. SCHEDULE 7.17 attached hereto sets
forth (a) the number of subscribers in service for each Cellular System as of a
date within 5 days prior to the date hereof and (b) a list (categorized by each
Cellular System) of all agents who sell cellular telephone equipment and/or
service on behalf of any Seller as of the date hereof, together with such
agent's address and the number of gross activations produced by each agent from
January 1, 1996 to September 30, 1996.
SECTION 7.18. INSURANCE. Sellers have delivered previously to Purchaser
all policies of title, liability, fire, worker's compensation and other forms of
insurance (including bonds) which insure against risks and liabilities to an
extent and in a manner customary in the cellular industry and which are adequate
to provide coverage against risks of a material nature to which each Seller
would normally be exposed in the operation of the Business. All such insurance
policies and binders are in full force and effect. Sellers have complied in all
material respects with each of such insurance policies and binders and have not
failed to give any notice or present any claim thereunder in a due and timely
manner. There are no outstanding unpaid claims under any of such insurance
policies or binders and Sellers have not received any notice of cancellation or
non-renewal of any such policy or binder. There is no inaccuracy in any
application for such policies or binders which would reasonably be expected to
materially adversely affect coverage
20
thereunder. No insurance carrier has canceled or reduced any insurance
coverage for Sellers or has given any notice or other indication of its
intention to cancel or reduce any such coverage. All premiums due and
payable under any such insurance policies or binders of Sellers have been
duly paid or accrued to the extent taken into account in the Working Capital
Adjustment.
SECTION 7.19. BROKERS. Except for ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated,
neither Seller has engaged any agent, broker or other person acting pursuant to
the express or implied authority of any Seller which is or may be entitled to a
commission or broker or finder's fee in connection with the transactions
contemplated by this Agreement or otherwise with respect to the sale of the
Assets or the Business.
SECTION 7.20. UNDISCLOSED LIABILITIES. Neither Seller has any liabilities
or obligations of any nature, whether absolute, accrued, contingent or
otherwise, which are not reflected or reserved against the August Balance Sheet
except for liabilities and obligations that have arisen in the ordinary and
usual course of business and consistent with past practice (none of which
results from, arises out of, relates to, is in the nature of, or not caused by
any breach of contract, breach of warranty, tort, infringement or violation of
law).
SECTION 7.21. PRICING OF SERVICES. SCHEDULE 7.21 sets forth a description
of all rate plans currently offered to subscribers of each Cellular System.
SECTION 7.22. PROPRIETARY RIGHTS. Sellers lawfully possess, and (except
for rights with respect to the "CellularOne" trademarks and trade names and the
software licenses utilized by Sellers for fraud protection) the Assets will
include, all intellectual property rights that are necessary to the conduct of
the Business.
SECTION 7.23. ACCOUNTS RECEIVABLE AND BAD DEBTS. All notes and accounts
receivable of Sellers shown on the August Balance Sheet or thereafter acquired
were or (to the extent not heretofore collected) are valid and genuine, were
acquired in the ordinary course of business and are subject to no asserted
counterclaims, defenses or setoffs (subject to reserves therefor as will be
taken into account in the determination of Current Assets at Closing in
accordance with Section 5.05). SCHEDULE 7.23 attached hereto sets forth a true,
complete and accurate list as of the end of the most recent normal billing cycle
of each Cellular System listing the total amounts of subscriber receivables and
the aging of such subscriber receivables based on the following Schedule: 0-30
days, 31-60 days, 61-90 days and over 90 days, from the date thereof.
21
SECTION 7.24. PRODUCT INFORMATION. Sellers have not sold and do not have
in their inventory any refurbished telephone handsets. SCHEDULE 7.24 sets forth
a list of manufacturers of telephone handsets presently in Sellers' inventory.
SECTION 7.25. CERTAIN BUSINESS RELATIONSHIPS WITH SELLERS. Except as set
forth in SCHEDULE 7.25 attached hereto, none of the partners of the Sellers and
their affiliates have been involved in any business arrangement or relationship
with any Seller within the past 12 months.
ARTICLE VIII
PURCHASER'S AND ▇▇▇▇▇▇'▇ REPRESENTATIONS
Purchaser and ▇▇▇▇▇▇ hereby jointly and severally represent, warrant,
covenant and agree, which representations, warranties, covenants and agreements,
together with all other representations, warranties, covenants and agreements of
Purchaser and ▇▇▇▇▇▇ in this Agreement, shall survive the execution and delivery
of this Agreement and the payment of the Purchase Price hereunder until June 30,
1998, that:
SECTION 8.01. ORGANIZATION; QUALIFICATION. Each of Purchaser and ▇▇▇▇▇▇
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Oklahoma. Purchaser has all power and authority to (i) own
and operate its properties, (ii) carry on its business as it is now being
conducted, and (iii) carry out the transactions contemplated by this Agreement
and to own and operate the Assets and the Business, subject to obtaining all
necessary consents required for the transfer by Sellers of the Assets.
SECTION 8.02. CONSENTS; AUTHORIZATION; EXECUTION AND DELIVERY OF AGREEMENT.
All necessary consents and approvals have been obtained by ▇▇▇▇▇▇ and Purchaser
for the execution and delivery of this Agreement. The execution and delivery of
this Agreement by each of Purchaser and ▇▇▇▇▇▇ has been duly and validly
authorized and approved by all necessary corporate action. Each of Purchaser and
▇▇▇▇▇▇ has full power and authority to execute and deliver and perform its
obligations under this Agreement. This Agreement is a valid and binding
obligation of Purchaser and ▇▇▇▇▇▇, enforceable against it in accordance with
its terms.
SECTION 8.03. LITIGATION AND LEGAL PROCEEDINGS. There is no outstanding
judgment against Purchaser or ▇▇▇▇▇▇ and there is no litigation, proceeding or
investigation pending, or, to Purchaser's or ▇▇▇▇▇▇'▇ knowledge, threatened,
against Purchaser or ▇▇▇▇▇▇ or their assets
22
which individually or in the aggregate would, if adversely determined, result
in a material adverse change in the business condition (financial or
otherwise), properties, prospects or assets of Purchaser or ▇▇▇▇▇▇ or which
questions the validity of any action taken or to be taken pursuant to or in
connection with the provisions of this Agreement or the consummation of the
transactions contemplated hereby by the Purchaser or ▇▇▇▇▇▇.
SECTION 8.04. BROKERS. Except for ▇▇▇▇▇▇▇ & Associates, neither Purchaser
nor ▇▇▇▇▇▇ has engaged any agent, broker or other person acting pursuant to the
express or implied authority of Purchaser or ▇▇▇▇▇▇ which is or may be entitled
to a commission or broker or finder's fee in connection with the transactions
contemplated by this Agreement or otherwise with respect to the sale of the
Assets or the Business.
SECTION 8.05. COMPLIANCE WITH LAWS. Each of Purchaser and ▇▇▇▇▇▇ is
currently complying with and has so complied with, and is not in default under
or in violation of, and neither of its respective businesses nor any of their
respective assets nor the operation or maintenance thereof, contravenes in any
respect any statute, law (including environmental or employment laws),
ordinance, decree, order, rule, regulation of any governmental body applicable
to its assets or its business, including, without limitation, rules and
regulations of the FCC.
SECTION 8.06. FCC MATTERS. Each of Purchaser and ▇▇▇▇▇▇ is fully
qualified under the Communications Act to be an FCC licensee, and to be approved
as the assignee of the FCC Authorizations. Each of Purchaser and ▇▇▇▇▇▇ knows
of no reason why the FCC will not grant its consent to the assignment of the FCC
Authorizations from Sellers and KCCGP, as applicable, to Purchaser. Neither
Purchaser, ▇▇▇▇▇▇, nor any "real party in interest" (as defined by Section 22.13
of the FCC's rules) (i) has had the FCC deny an application for an
authorization, (ii) has had the FCC revoke an authorization granted to it, or
(iii) has been the subject of an investigation by the FCC.
SECTION 8.07. FINANCIAL ABILITY TO CLOSE. Each of Purchaser and ▇▇▇▇▇▇
specifically represents and warrants to Sellers that ▇▇▇▇▇▇ and Purchaser at
Closing will have the financial ability to perform their respective obligations
under this Agreement. Furthermore, each of Purchaser and ▇▇▇▇▇▇ specifically
agrees with Sellers that the obligation of Purchaser and ▇▇▇▇▇▇ to consummate
the transactions contemplated hereby is not subject to any financing
contingency.
23
ARTICLE IX
SELLERS', ▇▇▇▇▇▇'▇, AND PURCHASER'S COVENANTS
SECTION 9.01. FINANCIAL STATEMENTS AND CELLULAR SYSTEM INFORMATION.
Sellers covenant and agree that during the period after the execution of this
Agreement and prior to the Closing, Sellers shall provide Purchaser, within 21
days of the end of each calendar month, each Seller's unaudited balance sheet
and income statement for such month ("Interim Financial Statements"). The
Interim Financial Statements will be true and correct in all material respects,
will be prepared using the same accounting methods and procedures as used in the
preparation of the Historical Financial Statements except for the absence of
footnotes, subject to normal recurring adjustments, and will present fairly the
financial position of each Seller at the date indicated and the results of such
Seller's operations for such period. Sellers also shall provide Purchaser
within 21 days of the end of each calendar month (i) a comparison of the results
of each Seller's income from operations for such month as reflected in the
Interim Financial Statements to the amount budgeted for such month and the year
to date (as reflected in the Budget delivered to Purchaser, a copy of which is
annexed hereto as SCHEDULE 9.01 (the "Operating Budget"), (ii) the number of
subscribers on each Cellular System at the beginning and end of such month with
a comparison to the Operating Budget, (iii) an accounts receivable aging report
for each Cellular System, (iv) a description of the amount and purpose of the
System Capex for such month with a comparison to the Budget and (v) other
reports generated by the Sellers' billing system as reasonably requested by
Purchaser.
SECTION 9.02. GOVERNMENTAL APPROVALS. (a) Each of ▇▇▇▇▇▇ and Purchaser
covenants and agrees that it will fully cooperate with Sellers, and do all
things reasonably necessary to assist Sellers to obtain all consents and
approvals necessary for assignment to Purchaser of the FCC Authorizations,
including the furnishing of financial and other information specifically with
respect to ▇▇▇▇▇▇ or Purchaser reasonably required by the Person whose consent
or approval is being sought. Sellers shall use all reasonable efforts to
provide adequate prior written notice to Purchaser of any meeting with
governmental authorities the purpose of which is to seek a consent or approval
to the transactions contemplated hereby, and Purchaser shall use all reasonable
efforts to furnish a representative to attend meetings with appropriate
government authorities for the purpose of obtaining such consents or approvals.
Each of Purchaser and Sellers hereby agrees to file the necessary Form(s) 490
and 702 with the FCC transferring or assigning control of the FCC Authorization
for the Business to Purchaser and diligently pursue
24
the processing of the assignment of the FCC Authorization to Purchaser and to
file for all other necessary regulatory approvals for the consummation of the
transactions contemplated by this Agreement within five business days of the
date of execution of this Agreement to the extent any such filings have not
been made prior to the date of execution of this Agreement. Sellers and
Purchaser shall share equally all filing fees in connection with any filings
pursuant to this Section 9.02(a).
(b) Sellers and Purchaser shall each cooperate and use their
reasonable best efforts to prepare and file with the Federal Trade Commission
and the Department of Justice and other regulatory authorities as promptly as
possible all requisite applications and amendments thereto together with related
information, data and exhibits necessary to satisfy the requirements of the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act ("▇▇▇▇-▇▇▇▇▇ Act"). Sellers and
Purchaser shall share equally all filing fees in connection with any filings
pursuant to this Section 9.02(b).
(c)(i) Sellers shall, at their sole expense, undertake to
obtain (or modify, if appropriate) licenses, permits or authorizations for the
microwave facilities listed on SCHEDULE 7.09; (ii) if licenses, permits or
authorizations are obtained (or modified, as appropriate) for the microwave
facilities listed on SCHEDULE 7.09, Purchaser and Sellers shall cooperate in the
preparation and submission of any filings necessary to obtain FCC consent to
assign such licenses, permits or authorizations to Purchaser (including, if
requested by the FCC, any amendments to such filings to have such licenses,
permits or authorizations issued directly in the name of Purchaser); (iii) in
the event that Sellers have not obtained, or the FCC has not granted its consent
to the assignment of, such licenses, permits or authorizations to Purchaser
before Closing, Purchaser and Sellers shall cooperate to obtain a Special
Temporary Authority permitting Purchaser to operate the microwave facilities
listed on SCHEDULE 7.09 on a temporary basis; and (iv) in the event that the
Special Temporary Authority is obtained, Purchaser and Sellers shall cooperate
after the Closing in obtaining FCC consent to the assignment to Purchaser of
such licenses, permits or authorizations on a permanent basis. Sellers shall
not enter into any agreements or understandings with any party relating to the
microwave facilities listed on SCHEDULE 7.09 without the prior written consent
of the Purchaser, which consent shall not be unreasonably withheld.
SECTION 9.03. THIRD PARTY CONSENTS; CLOSING CONDITIONS. (a) Purchaser and
▇▇▇▇▇▇ and Sellers covenant and agree that each of them will reasonably
cooperate with each other, and Purchaser and ▇▇▇▇▇▇ will do all things
reasonably necessary to assist Seller, to obtain all
25
consents and approvals necessary for the transfer or assignment to Purchaser
of the Assumed Contracts, including the furnishing of financial and other
information specifically with respect to ▇▇▇▇▇▇, Purchaser, their affiliates,
or Sellers, as the case may be, reasonably required by the Person whose
consent or approval is being sought. Notwithstanding the foregoing, to the
extent that any Assumed Contracts listed on SCHEDULE 2.01(a) to be sold,
assigned, transferred or conveyed to Purchaser, or any claim, right or
benefit arising thereunder or resulting therefrom (individually, an
"Interest" and collectively, the "Interests"), is not capable of being sold,
assigned, transferred or conveyed without the approval, consent or waiver of
the issuer thereof or the other party thereto, or any third Person (including
a government or governmental unit), and such approval, consent or waiver has
not been obtained, or if such sale, assignment, transfer or conveyance or
attempted assignment, transfer or conveyance would constitute a breach
thereof, and such approval, consent or waiver has not been obtained, this
Agreement shall not constitute a sale, assignment, transfer or conveyance
thereof, or an attempted assignment, transfer or conveyance thereof; provided
Sellers shall use their reasonable best efforts to provide Purchaser the
benefits of any such Interest as provided in Section 18.01(b). Purchaser and
Sellers shall use all reasonable efforts to consummate the transactions
contemplated hereby.
(b) Purchaser and Sellers hereby covenant and agree to use all
reasonable efforts to satisfy, or assist the other party in satisfying, the
closing conditions applicable to the Purchaser in Article X hereof and the
Sellers in Article XI hereof prior to the Closing Date.
SECTION 9.04. AUDIT OF SELLERS' 1996 FINANCIAL STATEMENTS.
Purchaser and Sellers covenant and agree as follows:
(a) As soon as reasonably practical after December 31, 1996, Ernst & Young
LLP ("Sellers' Accountants") shall conduct an audit (the "Audit") of the
financial statements of each Seller in accordance with GAAP and generally
accepted auditing standards for the 12 month period ending December 31, 1996,
including a balance sheet, a statement of income and cash flow, and consistent
with past practices.
(b) As soon as possible after December 31, 1996 Sellers' Accountants shall
deliver to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP ("Purchaser's Accountant"), Purchaser and Sellers
(i) the Audit and, based upon such Audit, a calculation of the Cellular Systems
combined Operating Cash Flow (as defined in Section 10.10) for the calendar year
1996 certifying the accuracy thereof (the "OCF Calculation").
26
Purchaser's Accountant shall be given reasonable access to the work papers,
notes and other data compiled by Sellers' Accountant in connection with the
Audit. If the Closing has not occurred by March 31, 1997, Sellers'
Accountants shall bring forth the Audit to cover the Other Applicable Period
following the same procedures set forth in subparagraphs (a) and (b) above
and shall revise the OCF Calculation accordingly for the Other Applicable
Period. If either party objects to the OCF Calculation, such party shall
within ten (10) calendar days after receipt of the delivery of the OCF
Calculation notify the other party in writing of its objection and shall
specify the basis for such objection (the "Objection Notice"). Sellers and
Purchaser shall attempt to resolve their differences within the ten (10) day
period following either party's receipt of any Objection Notice. In the
event Purchaser and Sellers are unable to resolve their differences within
such ten (10) day period, then, either party may request that the matter be
resolved by Price Waterhouse (the "Independent Accountants").
(c) In submitting a dispute to the Independent Accountant, each of the
parties shall furnish, at its own expense, the Independent Accountants and the
other party with such documents and information as the Independent Accountants
may reasonably request. Each party may also furnish to the Independent
Accountants such other information and documents as it deems relevant with the
appropriate copies and notification being given to the other party. The
Independent Accountants may conduct a conference concerning the disagreements
between Sellers and Purchaser at which conference each party shall have the
right to present additional documents, materials and other evidence and to have
present its or their advisors, accountants or counsel. The Independent
Accountants shall promptly render a decision on the issues presented, and such
decision shall be final and binding on the parties. The Audit shall not be
considered completed for purposes of the Closing until all disputes have been
finally resolved by the parties or the Independent Accountants.
(d) Fees and expenses of the Audit shall be split evenly between Purchaser
and Sellers, and the fees and expenses of the Independent Accountants relating
to the matters provided for in this Agreement shall be split evenly between
Sellers and Purchaser.
(e) In the event Purchaser requires additional audits (other than the
Audit) of Sellers' financial statements or any financial services in connection
with its financing arrangements, Purchaser shall bear all fees and expenses of
such additional audits and financial services.
SECTION 9.05. ACCESS. (a) Purchaser shall have the right, itself or
through its representatives, during normal business hours, after reasonable
notice (which may be oral) to
27
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ or ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, and without undue disruption to Sellers'
normal business activities, to inspect the Assets and properties of Sellers
and to inspect and make abstracts and reproductions of all books and records
of Sellers including, without limitation, applications and reports to the
FCC, all financial information relevant to the determination of Operating
Cash Flow, employee records, and engineering and environmental reports and
Sellers shall furnish Purchaser with such information respecting the Assets
and Business and financial records as Purchaser may, from time to time,
reasonably request. Purchaser agrees to provide either ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ or
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ with prompt written notice if Purchaser determines that,
based upon information provided to Purchaser or through its own
investigation, any of the Sellers is in breach of any representation,
warranty or covenant of Sellers set forth in this Agreement.
(b) Sellers acknowledge and agree, subject to any restrictions placed
thereon by an owner or lessor of any real property involved, that Purchaser may
commission, at Purchaser's cost and expense, a so-called "Phase I" site
assessment of the Assets (the "Phase I Assessment"). If the Phase I Assessment
indicates that a so-called "Phase II" assessment (the "Phase II Assessment") or
other additional testing or analysis of the Assets is advisable, the Purchaser
may elect to cause its agents to conduct such testing and analysis. Any such
additional testing and analysis Purchaser elects to conduct will be diligently
pursued and completed. Sellers will comply with any reasonable request for
information made by Purchaser or its agents in connection with any such
investigation. Sellers covenant that any response to any such request for
information will be complete and correct in all material respects. Sellers will
afford Purchaser and its agents access to all operations of the Sellers at all
reasonable times after reasonable notice to ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ or ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
and in a reasonable manner in connection with any such investigation subject to
any required approval of Sellers' landlords, which approval Sellers will use
reasonable best efforts to obtain. Should Purchaser commission such an
investigation, such investigation will have no effect upon the representations
and warranties made by Sellers to Purchaser under this Agreement except that if
any Phase I or Phase II uncovers an environmental condition which then comprises
a breach of Sellers' representations or warranties herein, Sellers shall not
have breached such representation or warranty if Sellers cure such breach in
accordance with the provisions of this Agreement. Notwithstanding the foregoing
to the contrary, if the aggregate estimated remediation costs for matters
disclosed in the Phase I or Phase II assessments exceed $1,000,000, then either
Sellers or Purchaser may elect to terminate this Agreement; PROVIDED, however,
that if Sellers elect to terminate this Agreement pursuant to this Section
9.05(b), Sellers shall pay Purchaser the Purchaser's allocable share of out-of-
pocket costs and expenses resulting from termination of this Agreement,
including, without limitation,
28
reasonable attorney's and accountant's fees and expenses and expenses
incurred by Purchaser in obtaining financing commitments necessary to pay the
Purchase Price. Purchaser will provide Sellers a copy of the Phase I
Assessment (and, if conducted, the Phase II Assessment) and any other reports
related to such investigation as soon as they are available to Purchaser.
(c) Sellers shall allow Purchaser the opportunity to conduct an
engineering review of the Assets to confirm that the Assets comply with the FCC
Authorizations and the regulations of the FCC and are otherwise in good
condition and repair, reasonable wear and tear excepted.
SECTION 9.06. CONDUCT OF BUSINESS. From and after the date hereof, each
Seller shall:
(a) operate the Cellular Systems in accordance with the FCC
Authorizations, and comply in all material respect with all laws,
rules and regulations applicable to them, including the
regulations of the FCC;
(b) except as disclosed on SCHEDULE 2.03(c), and except for inventory
sold in the ordinary course of business, refrain from making any
sale, lease, transfer or other disposition of any of the Assets
other than in connection with replacements with assets of like
use and value, or with the prior written approval of Purchaser,
which approval will not be unreasonably withheld;
(c) refrain from modifying, amending or altering in any
material respect, or terminating any of the Assumed Contracts,
and from waiving or canceling any default or breach or
modifying, altering or terminating any right or asset relating
to or included in the Assets without Purchaser's prior written
approval, which approval will not be unreasonably withheld;
(d) maintain insurance on the Assets comparable to that
maintained prior to the date hereof, and use the proceeds of
any claims for loss under such policies, together with such
other funds as may be required, to repair, replace, or restore
to their former condition any Assets which may be damaged by fire
or other casualty, all as soon as reasonably possible;
(e) maintain its books and records in accordance with prior
practice; maintain all of its property and assets in their
present condition, ordinary wear and tear excepted; maintain
29
supplies of inventory and spare parts consistent with past
practice; and otherwise operate its business in the ordinary course
in accordance with past practices;
(f) refrain from changing each Cellular System's agents'
commission rate, sales practices (including the quality of the
credit of subscribers contracting for cellular telephone service)
or marketing practices without Purchaser's approval, which approval
will not be unreasonably withheld;
(g) except for annual increases in compensation (not to exceed
5% in the aggregate), refrain from increasing the compensation
payable or to become payable to any employee or agent without
Purchaser's approval, which approval will not be unreasonably
withheld;
(h) refrain from entering into any contract or renewal of any
existing contract for the employment of any employee or agent of
such Seller other than "at-will" employees and agents;
(i) use all reasonable efforts to (x) keep its business
organization intact, (y) retain the services of the key employees
of the Cellular Systems, and (z) maintain good relationships with
its employees, suppliers, advertisers, subscribers, agents and
others having business relations with it, in each case in
accordance with past practices;
(j) refrain from changing its partnership agreement in any way
which would materially adversely affect its power or authority to
enter into and perform this Agreement, or which would otherwise
materially adversely affect its performance of this Agreement;
(k) continue to advertise, promote and market the Cellular
Systems and their services in a manner consistent with past
practice, and in any event from the date hereof through the
Closing, spend on advertising, marketing and promotion, on an
aggregate basis from the date hereof to the Closing, the amounts
set forth in the Operating Budget.
(l) refrain from subjecting any of the Assets to any new Lien
other than Permitted Liens;
(m) refrain from doing or omitting to do any act which will
cause a material breach of, or material default under, or termination of
(except in accordance with its terms), any contract, agreement,
30
lease, commitment, or obligation to which a Seller is a
party or by which it is bound and which is to be assumed by
Purchaser hereunder;
(n) provide to the Purchaser, concurrently with filing
thereof, copies of all reports to and other filings with the FCC;
(o) not permit any of the FCC Authorizations to expire or to
be surrendered or voluntarily modified in a matter adverse to the
Business, or take any action which would reasonably be expected to
cause the FCC Authorizations or any other governmental authority to
institute proceedings for the suspension, revocation or limitation
of rights under any of the FCC Authorizations; or fail to prosecute
with due diligence any pending applications to any governmental
authority;
(p) notify Purchaser in writing promptly after learning of the
institution or threat of any material action against such Seller in
any court, or any action against such Seller before the FCC or any
other governmental agency, and notify Purchaser in writing promptly
upon receipt of any administrative or court order relating to the
Assets or the Business;
(q) if Sellers deem it to be prudent promptly replace any
employee who leaves the employ of any of the Cellular Systems;
notify Purchaser of the hiring of any new employees, any material
change in job function, and termination of any employees;
(r) pay or cause to be paid or provide for all Taxes of or
relating to such Seller, the Assets and the employees required to
be paid to city, county, state, Federal and other governmental
units up to the Closing Date;
(s) refrain from taking any action not in such Seller's
usual course of business regarding the Cellular Systems or the
Assets without Purchaser's prior approval, which approval shall not
be unreasonably withheld; and
(t) subject to the provisions of Section 9.08 cooperate with
Purchaser in connection with Purchaser's efforts to identify the
current employees of such Seller that Purchaser would like to hire
following the Closing consistent with all applicable federal, state
and/or local employment laws, rules and regulations.
31
SECTION 9.07. NO SHOPPING. Prior to November 21, 1996 none of Sellers nor
any of their affiliates, advisors or representatives shall, directly or
indirectly, solicit, encourage or initiate any contact with, negotiate with, or
provide any information to, endorse or enter into any agreement with respect to,
or take any other action to facilitate any person or group, other than Purchaser
and its representatives, concerning any inquiries or the making of any proposals
concerning any merger, sale of all or substantially all of the Assets,
acquisition of a substantial equity interest in either Seller or any similar
transaction involving either Seller (collectively an "Acquisition Proposal").
SECTION 9.08. EMPLOYEES; EMPLOYEE COMPENSATION. At least thirty (30) days
prior to the Closing Date, Purchaser shall provide written notice to Sellers
identifying any employees of Sellers listed on Schedule 7.13 to whom Purchaser
does not intend to extend offers of employment. Nothing contained in this
Agreement shall confer upon any such employee any right with respect to
continued employment by Sellers or Purchaser. No provision of this Agreement
shall create any third-party rights in any such employee, or any beneficiary or
dependent thereof, with respect to the compensation, terms and conditions of
employment and benefits that may be provided to such employee by Purchaser or
under any benefit plan that Purchaser may maintain.
SECTION 9.09. RESTRICTIONS ON CERTAIN ACTIONS. From the date hereof until
the earlier to occur of the Closing Date or the termination of this Agreement,
each of Purchaser and ▇▇▇▇▇▇ will not, and each of Purchaser and ▇▇▇▇▇▇ will use
its best efforts to ensure that all persons whose actions or ownership interests
would be attributable to Purchaser or ▇▇▇▇▇▇ under the Communications Act will
not, in any manner, directly or indirectly, solicit, initiate, encourage or
participate in applications, bids, purchases or negotiations with respect to the
acquisition of any interest in an FCC license, permit, approval or authorization
that, if consummated, would have the effect under the Communications Act of
preventing or delaying Purchaser or ▇▇▇▇▇▇ from consummating the acquisition of
the Purchased Assets as contemplated by this Agreement.
SECTION 9.10. SUPPLEMENTAL DISCLOSURE. Sellers shall have the right from
time to time prior to the Closing Date to supplement in writing the Schedules
hereto with respect to any matter hereafter arising that, if existing or known
as of the date of this Agreement, would have been required to be set forth or
described in the Schedules hereto; provided, however, that no such supplemental
disclosure shall be deemed to cure any breach of any representation or warranty
of
32
Sellers made in this Agreement unless Purchaser fails to object in writing to
Sellers to any such supplemental disclosure within ten (10) business days after
Purchaser's receipt thereof.
SECTION 9.11. DISCLAIMER OF OTHER REPRESENTATIONS AND WARRANTIES. Each of
Purchaser and ▇▇▇▇▇▇ acknowledges and agrees that Sellers do not make, and have
not made, any representations or warranties relating to Sellers, the Business or
the Assets other than the representations and warranties of Sellers expressly
set forth in this Agreement. Without limiting the generality of the disclaimer
set forth in the preceding sentence, Sellers do not make, and Sellers, their
officers, employees and agents have not made, and shall not be deemed to have
made any representations or warranties in the Confidential Offering Memorandum
dated September 1995, and any supplements or addenda thereto (collectively, the
"Offering Memorandum"), any presentation relating to Sellers, the Business or
the Assets given in connection with the transactions contemplated by this
Agreement, in any filing made by or on behalf of Sellers with any governmental
agency or in any other information provided to or made available to Purchaser or
▇▇▇▇▇▇, and no statement contained in the Offering Memorandum, made in any such
presentation, made in any such filing or contained in any such other information
shall be deemed to be a representation or warranty of Sellers hereunder or
otherwise. No person has been authorized by Sellers to make any representation
or warranty in respect of Sellers, the Business or the Assets in connection with
the transactions contemplated by this Agreement that is inconsistent with or in
addition to the representations and warranties of Sellers expressly set forth in
this Agreement.
SECTION 9.12. GUARANTY BY ▇▇▇▇▇▇ OF PURCHASER'S OBLIGATIONS. Subject to
Section 5.02 hereof, ▇▇▇▇▇▇ agrees to take all action necessary or appropriate
to cause and enable Purchaser to perform all of its covenants, obligations and
agreements under this Agreement. In addition, subject to the cap in Section
5.02 on amounts which Sellers may recover from Purchaser and ▇▇▇▇▇▇ for breaches
of their obligations under this Agreement, ▇▇▇▇▇▇ hereby irrevocably, absolutely
and unconditionally guarantees as surety the prompt and full discharge by
Purchaser of all of Purchaser's covenants, obligations and agreements under this
Agreement, including the due and punctual payment of all amounts that are or may
become due and payable by Purchaser hereunder when and as the same become due
and payable (collectively, "Purchaser Obligations"), in accordance with the
terms hereof. ▇▇▇▇▇▇ acknowledges and agrees that, with respect to all
Purchaser Obligations to pay money, such guaranty shall be a guaranty of payment
and performance and not of collection and shall not be conditioned or contingent
upon the pursuit of any remedies against Purchaser. Notwithstanding anything to
the contrary set forth in
33
this Section 9.12, ▇▇▇▇▇▇ shall in no event be liable for Purchaser
Obligations in an amount in excess of $3.75 million (i.e. the amount in the
Deposit Escrow) except as otherwise set forth in Section 13.05(b).
SECTION 9.13. RESCISSION. If (i) Purchaser waives the Final Order
condition set forth in Section 10.04, (ii) the transactions contemplated hereby
are consummated prior to the receipt of such Final Order, (iii) the FCC's
consent to the assignment of the Cellular Authorizations is subsequently
withdrawn and (iv) the parties are legally obligated to rescind the
transactions, then the parties shall rescind the transactions in a manner that
puts each party in the position it would have been as of the Closing Date had
the transactions contemplated hereby not been consummated. Purchaser further
covenants that in such event it will transfer, assign and deliver the Assets to
Sellers in substantially the same condition (normal wear and tear excepted) as
the Assets existed on the Closing Date, and Purchaser will replace any Assets
that were sold, disposed of, lost or destroyed prior to such Recision.
ARTICLE X
CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATION TO CLOSE
The obligation of Purchaser under this Agreement with respect to the
purchase and sale of the Assets shall be subject to the fulfillment on or prior
to the Closing of each of the following conditions, any of which may be waived
in writing by Purchaser (provided that if any condition shall not have been
satisfied due primarily to the actions or inaction of Purchaser or ▇▇▇▇▇▇ or any
of their affiliates that constitutes a breach of this Agreement, such condition
shall be deemed to have been satisfied or waived by Purchaser):
SECTION 10.01. ACCURACY OF REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF
THIS AGREEMENT. All of the representations and warranties made by Sellers in
this Agreement shall be true and correct at and as of the Closing except for
such breaches which, in the aggregate, have not and would not reasonably be
expected to have a Material Adverse Effect (as defined below). Sellers shall
have complied with and performed all of the agreements and covenants required by
this Agreement to be performed or complied with by it on or prior to the Closing
except for such noncompliances which, in the aggregate, have not and would not
reasonably be expected to have a Material Adverse Effect. Purchaser shall have
been furnished with a certificate or certificates of Horizon G.P., Inc., a
Delaware corporation ("Horizon Corporate"), dated as of the Closing,
34
certifying to the fulfillment of the foregoing conditions. As used in this
Agreement, the term "Material Adverse Effect" means a material adverse effect
on the Business taken as a whole; provided, however, that neither (i) the
effects of any events, circumstances or conditions resulting solely from
changes, developments or circumstances in worldwide or national conditions
(political, economic, or regulatory) that adversely affect generally the
markets where the Cellular Systems are operated or affect generally
industries engaged in the telecommunications business (including proposed
legislation or regulation by any governmental or regulatory body or the
introduction of any technological changes in the telecommunications
industry), or adversely affect a broad group of industries generally, nor
(ii) any effects of competition resulting from the offering of Personal
Communication Services will constitute a Material Adverse Effect.
SECTION 10.02. PARTNER RESOLUTIONS. Each Seller shall deliver to
Purchaser copies of the resolutions of the board of directors of Horizon
Corporate authorizing the execution, delivery and performance of this Agreement
by such Seller and all instruments and documents to be delivered in connection
herewith and the transactions contemplated hereby, duly certified by an officer
of Horizon Corporate.
SECTION 10.03. INCUMBENCY CERTIFICATE. Purchaser shall have received a
certificate or certificates of an officer of Horizon Corporate, certifying as to
the genuineness of the signatures of officers of Horizon Corporate authorized to
take certain actions or execute any certificate, document, instrument or
agreement to be delivered pursuant to this Agreement, which incumbency
certificate shall include the true signatures of such officers.
SECTION 10.04. THIRD PARTY CONSENT; FCC; ▇▇▇▇-▇▇▇▇▇ ACT. Sellers shall
have delivered to Purchaser such instruments, material consents and approvals of
third parties (the form and substance of which shall be reasonably satisfactory
to Purchaser) as are necessary to assign to Purchaser without modification
thereof, as of the Closing, the Assets and the Assumed Contracts (such material
consents being set forth on SCHEDULE 10.04) and Purchaser shall have obtained
all FCC Authorizations necessary for the consummation of the transactions
contemplated by this Agreement. Prior to assignment, the FCC shall have issued
(i) a Final Order granting the FCC's consent to the assignment of the Cellular
Authorizations to Purchaser and (ii) a Special Temporary Authority granting
FCC's consent to Purchaser to operate the microwave facilities that are the
subject of the Microwave Authorizations, including authorizations for those
facilities listed in SCHEDULE 7.09, each without any material conditions,
excepting conditions applied on an
35
industry-wide basis, which the Purchaser reasonably deems to be adverse.
Anything herein to the contrary notwithstanding, but subject to the
provisions of Section 9.13, the Purchaser shall have the right (in its sole
discretion) to waive the requirement set forth in the preceding sentence by
delivery to Sellers of a written notice to such effect (the "Finality Waiver
Notice"). In addition, all applicable waiting periods under the ▇▇▇▇-▇▇▇▇▇
Act (if applicable to the transactions contemplated by this Agreement) shall
have expired or been terminated and no objection shall have been made by the
Federal Trade Commission ("FTC") or the United States Department of Justice
("DOJ"). For the purposes of this Agreement, the term "Final Order" shall
mean action by the FCC as to which (i) no request for stay by the FCC, as
applicable, of the action is pending, no such stay is in effect, and, if any
deadline for filing any such request is designated by statute or regulation,
such deadline has passed; (ii) no petition for rehearing or reconsideration
of the action is pending before the FCC, and the time for filing any such
petition has passed; (iii) the FCC, does not have the action under
reconsideration on its own motion and the time for such reconsideration has
passed; and (iv) no appeal to a court, or request for stay by a court, of the
FCC's action, as applicable, is pending or in effect, and, if any deadline
for filing any such appeal or request is designated by statute or rule, it
has passed. For purposes of this Agreement, the term "Special Temporary
Authority" shall mean the applications assigning the Microwave Authorizations
to Purchaser have been filed, the public notice period for comments has
expired, no petitions to deny the assignment of the Microwave Authorizations
to Purchaser are on file and the FCC has either granted such applications or
the FCC has granted a special temporary authority permitting the Purchaser to
operate the microwave facilities that are the subject of the Microwave
Authorizations on a temporary basis.
SECTION 10.05. DUE DILIGENCE. Purchaser and its agents and representative
shall have conducted a satisfactory legal, regulatory and business due diligence
review of the Assets, the Business and the Cellular Systems including, without
limitation, the Cellular Systems' properties, cellsites, subscriber base and
revenue potential, the results of which shall be satisfactory to the Purchaser.
Without limiting the generality of the foregoing, Purchaser shall be satisfied
that the Assets constitute all assets, licenses and property necessary to the
operation of the Cellular Systems as contemplated to be conducted by Purchaser,
PROVIDED, HOWEVER, that if Purchaser has not advised Seller in writing prior to
the close of business on November 19, 1996 that the results of such due
diligence review are not satisfactory, the conditions set forth in this
Section 10.05 shall no longer apply and shall have been satisfied.
36
SECTION 10.06. NO MATERIAL ADVERSE CHANGE. There shall not have been any
material adverse change in the financial condition, assets, business or
properties of the Cellular Systems or Assets, from August 31, 1996 to the
Closing provided, however, that neither (i) the effects of any events,
circumstances or conditions resulting solely from changes, developments or
circumstances in worldwide or national conditions (political, economic, or
regulatory) that adversely affect generally the markets where the Cellular
Systems are operated or affect generally industries engaged in the
telecommunications business (including proposed legislation or regulations by
any governmental or regulatory body or the introduction of any technological
changes in the telecommunications industry), or adversely affect a broad group
of industries generally, nor (ii) any effects of competition resulting from the
offering of Personal Communications Services shall be deemed to give rise to a
material adverse change.
SECTION 10.07. OPINION OF COUNSEL TO SELLERS. Purchaser shall have been
furnished with an opinion of ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇, counsel to Sellers,
dated as of the Closing and addressed to Purchaser, and to any institution
designated by Purchaser which has provided financing in connection with the
transactions contemplated by this Agreement in substantially the form of
EXHIBIT E hereto.
SECTION 10.08. OPINIONS OF FCC COUNSEL TO SELLERS. Purchaser shall have
been furnished with opinions of ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, FCC counsel for Sellers, dated
as of the Closing and addressed to Purchaser, and to any financial institution
designated by Purchaser which has provided the financing in connection with the
transactions contemplated by this Agreement, in substantially the form of
EXHIBIT F attached hereto.
SECTION 10.09. SUBSCRIBERS. The aggregate number of "subscribers" (as
defined in Section 5.05(a)) on Sellers' Cellular Systems as of December 31, 1996
shall be at least 19,000.
SECTION 10.10. OPERATING CASH FLOW. The combined "Operating Cash Flow" of
the Cellular Systems as of December 31, 1996 shall be at least $5 million or if
the Closing occurs after March 31, 1997 and before July 1, 1997, the combined
Operating Cash Flow of the Cellular Systems for the 12 month period ending March
31, 1997 shall be at least $5.2 million or if the Closing occurs after June 30,
1997 and before October 1, 1997, the combined Operating Cash Flow of the
Cellular Systems for the 12 month period ending June 30, 1997 shall be at least
5.6 million (such twelve month period other then the twelve month period ending
December 31, 1996 being referred to as the "Other Applicable Period"). For
purposes of this Section 10.09 the term "Operating Cash Flow"
37
means (i) the total operating revenue of the Cellular Systems less (ii) all
expenses (other than interest expense, income taxes, depreciation and
amortization) related to the ownership and operation of the Cellular System
for the calendar year ending December 31, 1996 or the Other Applicable
Period, as the case may be, determined in accordance with GAAP, provided,
however, notwithstanding anything in this Agreement or GAAP to the contrary
(A) if the Cellular Systems' gross advertising, marketing and promotional
expenses are less than $2,195,676 for the applicable calculation period, the
Operating Cash Flow for such period shall be reduced by the dollar amount of
such shortfall, (B) employee bonuses related to performance in 1996 shall be
accrued in 1996 notwithstanding that they maybe payable in 1997, (C) employee
vacation pay shall be accrued in accordance with GAAP during the period
earned notwithstanding that vacation pay is paid or vacation days are taken
in a subsequent period, (D) the cost and expense needed to cause the Assets
to be in good working order and repair consistent with past practices at
December 31, 1996 or the Other Applicable Period, as the case may be, shall
be accrued as an expense even if such expenditure is deferred (other than the
Northern Telecom maintenance agreement which expenses will be amortized over
the life of the maintenance agreement), (E) all subscriber acquisition costs,
subscriber handset costs and marketing costs shall be accrued as an expense
in the period incurred (but in no case later than 90 days) and not
capitalized, (F) any reciprocal trade expenses, such as the provision of
cellular service in exchange for advertising shall be accrued as an expense,
(G) an accrual for the normal accounting fees consistent with past practices,
(H) any expenses related to the normal operations of a cellular system
(including insurance, legal, accounting, payroll and fringe benefits) borne
by any affiliate of Sellers and related to the operation of the Cellular
Systems shall be accrued as an expense and (ix) all accounting practices used
by Sellers (except as modified by clauses (i-viii) above) shall be consistent
with the practices used in preparing the financial statements of the Cellular
Systems referred to in Section 7.16 hereof. The Operating Cash Flow of the
Cellular Systems shall be determined pursuant to the Audit as provided for in
Section 9.04 hereof.
SECTION 10.11. ESCROW AGREEMENT. Sellers shall have executed and
delivered the Escrow Agreement to Purchaser.
38
ARTICLE XI
CONDITIONS PRECEDENT TO
SELLERS' OBLIGATION TO CLOSE.
The obligations of Sellers under this Agreement with respect to the sale of
the Assets shall be subject to the fulfillment on or prior to the Closing of
each of the following conditions, any of which may be waived in writing by
Sellers (provided that if any condition shall not have been satisfied due
primarily to the actions or inaction of either Seller or any of their affiliates
that constitutes a breach of this Agreement, such condition shall be deemed to
have been satisfied or waived by Sellers):
SECTION 11.01. ACCURACY OF REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF
THIS AGREEMENT. All of the representations and warranties by ▇▇▇▇▇▇ and
Purchaser contained in this Agreement shall be true and correct in all material
respects at and as of the Closing. ▇▇▇▇▇▇ and Purchaser shall have complied
with and performed in all material respects all of the agreements and covenants
required by this Agreement to be performed and complied with by it on or prior
to the Closing. Sellers shall have been furnished with a certificate of an
officer of ▇▇▇▇▇▇ and Purchaser, dated as of the Closing, certifying to the
fulfillment of the foregoing conditions.
SECTION 11.02. DIRECTORS' RESOLUTIONS. ▇▇▇▇▇▇ and Purchaser shall deliver
to Sellers copies of the resolutions of its Board of Directors authorizing the
execution, delivery and performance of this Agreement and all instruments and
documents to be delivered in connection herewith and the transactions
contemplated hereby, duly certified by an authorized officer of ▇▇▇▇▇▇ and
Purchaser.
SECTION 11.03. INCUMBENCY CERTIFICATE. Sellers shall have received a
certificate of a secretary of ▇▇▇▇▇▇ and Purchaser, certifying as to the
genuineness of the signatures of representatives of ▇▇▇▇▇▇ and Purchaser
authorized to take certain actions or execute any certificate, document,
instrument or agreement to be delivered pursuant to this Agreement, which
incumbency certificate shall include the true signatures of such
representatives.
SECTION 11.04. FCC; ▇▇▇▇-▇▇▇▇▇ ACT. The FCC shall have issued an order
granting the FCC's consent to the assignment of the Cellular Authorizations to
Purchaser and (ii) a Special Temporary Authority granting the FCC's consent to
the operation by Purchaser of the microwave facilities that are the subject of
the Microwave Authorizations, including authorizations for those facilities
listed in SCHEDULE 7.09. In addition, all applicable waiting periods under the
▇▇▇▇-▇▇▇▇▇
39
Act (if applicable to the transactions contemplated by this Agreement) shall
have expired or been terminated and no objection shall have been made by the
FTC or DOJ.
SECTION 11.05. OPINION OF COUNSEL TO ▇▇▇▇▇▇ AND PURCHASER. Sellers shall
have been furnished with an opinion of ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, counsel to ▇▇▇▇▇▇ and
Purchaser, dated as of the Closing and addressed to Sellers in substantially the
form of EXHIBIT G hereto.
ARTICLE XII
CASUALTY LOSSES
In the event that there shall have been suffered between the date hereof
and the Closing any casualty loss relating to the Assets or the Business Sellers
will promptly notify Purchaser of such event. Sellers shall, at their option,
(i) repair, rebuild or replace the portion of the Assets damaged, destroyed or
lost prior to the Closing Date, or (ii) assign to Purchaser at Closing all
claims to insurance proceeds or other rights of Sellers against third parties
arising from such casualty loss (the "Claims"); PROVIDED, HOWEVER that if such
insurance proceeds do not cover the entire casualty loss, then the Sellers shall
pay the difference. To the extent any Claim is not assignable, such claim may
be pursued by Purchaser, for its own account and benefit, in the name of
Sellers.
ARTICLE XIII
INDEMNIFICATION
SECTION 13.01. INDEMNIFICATION BY SELLERS. (a) Notwithstanding the
Closing, and regardless of any investigation made at any time by or on behalf of
Purchaser or any information Purchaser may have, but subject to the terms of
this Article XIII, Sellers, jointly and severally, agree to indemnify and to
hold Purchaser, its shareholders, officers, directors, and employees (the
"Indemnified Purchaser Parties") harmless from and against and in respect of any
losses (including lost revenues), damages, costs, expenses (including costs of
investigations and reasonable attorney fees), suits, demands, judgments and
diminutions in value suffered or incurred (collectively, "Losses") by Purchaser
arising from or related to:
(i) Any Nonassumed Liability, whether or not
known or asserted at or prior to Closing, relating to or arising
from the ownership, operation, control or sale of the Assets of the
Cellular Systems or the
40
Business other than the Assumed Liabilities, or any other state of
facts which existed at or prior to Closing, including fines or
forfeitures imposed or threatened to be imposed by the FCC for the
operation, at or prior to Closing, of the Cellular Systems or the
Business other than the Assumed Liabilities;
(ii) Any misrepresentation, breach of warranty, or
nonfulfillment of any agreement or covenant on the part of
Sellers under this Agreement, the exhibits hereto, the Escrow
Agreement, the Deposit Escrow Agreement, the ▇▇▇▇ of Sale, the
Assumption Agreement or in any closing certificate delivered by
Sellers to Purchaser pursuant to Article X hereof; and
(iii) All costs and expenses (including reasonable
attorneys' fees) incurred by Purchaser in connection with
any action, suit, proceeding, demand, assessment or
judgment incident to any of the matters Purchaser is
indemnified against by Sellers in this Agreement.
(b) In addition and subject to the terms of this Article XIII,
Sellers shall indemnify Purchaser against and hold it harmless from
any and all Losses which Purchaser may incur by reason of the
failure (if any) of Sellers to comply with the Bulk Transfers
Article of the Uniform Commercial Code of any state.
SECTION 13.02. INDEMNIFICATION BY ▇▇▇▇▇▇ AND PURCHASER. Notwithstanding
the Closing, and regardless of any investigation made at any time by or on
behalf of Sellers or any information Sellers may have, but subject to the terms
of this Article XIII each of ▇▇▇▇▇▇ and Purchaser agrees to indemnify and to
hold Sellers, and their respective partners and their affiliates, directors,
officers, stockholders, employees, representatives and agents harmless from and
against and in respect of any Losses incurred by Sellers from:
(i) All liabilities and obligations of ▇▇▇▇▇▇
or Purchaser, and all claims and demands made in respect thereof
relating to or arising from, ▇▇▇▇▇▇'▇ or Purchaser's ownership,
operation or control of the Assets or the Business after the
Closing, including on account of the Assumed Liabilities; and;
41
(ii) Any misrepresentation, breach of warranty, or
nonfulfillment of any agreement or covenant on the part of
▇▇▇▇▇▇ or Purchaser under this Agreement, the exhibits
hereto, including the Escrow Agreement, the Deposit Escrow
Agreement, the Assumption Agreement or in any closing
certificate delivered by ▇▇▇▇▇▇ or Purchaser to Sellers
pursuant to Article XI hereof; and
(iii) All reasonable costs and expenses (including
reasonable attorneys' fees) incurred by Sellers in connection with
any action, suit, proceeding, demand, assessment or judgment
incident to any of the matters Sellers are indemnified against by
Purchaser in this Agreement.
SECTION 13.03. NOTICE OF CLAIMS; DEFENSE OF THIRD PARTY. Except for
claims for indemnification by Purchaser resulting from claims and actions
involving a Nonassumed Liability, a party claiming indemnification under this
Article XIII (the "Asserting Party") must promptly notify (in writing and in
reasonable detail) the party from which indemnification is sought (the
"Defending Party") of the nature and basis of such claim for indemnification not
later than June 30, 1998. If such claim relates to a claim, suit, litigation or
other action by a third party against the Asserting Party or any fixed or
contingent liability to a third party (a "Third Party Claim"), the Defending
Party may elect to assume and control the defense of the Third Party Claim at
its own expense with counsel selected by the Defending Party from and after such
time as the Defending Party unconditionally agrees in writing to accept, as
against the Asserting Party, all liabilities on account of such Third Party
Claim. Assumption of such liability, as against the Asserting Party, shall not
be deemed an admission of liability as against any such third party.
Notwithstanding the foregoing, the Defending Party may not assume or control the
defense if the named parties to the Third Party Claim (including any impleaded
parties) include both the Defending Party and the Asserting Party and
representation of both parties by the same counsel (in such counsel's reasonable
determination) would be inappropriate due to actual or potential differing
interests between them, in which case the Asserting Party shall have the right
to defend the Third Party Claim and to employ counsel reasonably approved by the
Defending Party, and to the extent the matter is determined to be subject to
indemnification hereunder, the Defending Party shall reimburse the Asserting
Party for the reasonable costs of its counsel. If the Defending Party assumes
liability for the Third Party Claim as against the Asserting Party and assumes
the defense and control of the Third Party Claim pursuant to this Section 13.03,
the Defending Party shall not be liable for any fees and expenses of counsel for
the Asserting Party
42
incurred thereafter in connection with the Third Party Claim (except in the
case of actual or potential differing interests, as provided in the preceding
sentence), but shall not agree to any settlement of such Third Party Claim
which does not include an unconditional release of the Asserting Party by the
third party claimant on account thereof, PROVIDED that such requirement shall
be deemed waived to the extent that the Asserting Party does not undertake to
provide and promptly execute and, concurrently with the delivery of any such
release, deliver a corresponding release of the third party claimant with
respect to such Third Party Claim. If the Defending Party does not assume
liability for and the defense of the Third Party Claim pursuant to this
Section 13.03, the Asserting Party shall have the right (i) to control the
defense thereof and (ii), if the Asserting Party shall have notified the
Defending Party of the Asserting Party's intention to negotiate a settlement
of the Third Party Claim (at the Defending Party's expense to the extent the
matter is determined to be subject to indemnification hereunder), which
notice shall include the material terms of any proposed settlement in
reasonable detail, to settle the Third Party Claim (at the Defending Party's
expense to the extent the matter is determined to be subject to
indemnification hereunder) on terms not materially inconsistent with those
set forth in such notice, unless the Defending Party shall have notified the
Asserting Party in writing of the Defending Party's election to assume
liability for and the defense of the Third Party Claim pursuant to this
Section 13.03 within ten days after receipt of such notice, and the Defending
Party promptly thereafter shall have taken appropriate action to implement
such defense. The Asserting Party shall not be entitled to settle any such
Third Party Claim pursuant to the preceding sentence unless such settlement
includes an unconditional release of the Defending Party by the Third party
claimant on account thereof, PROVIDED that such requirement shall be deemed
waived to the extent that the Defending Party does not undertake to provide
and promptly execute and, concurrently with delivery of any such release,
deliver a corresponding release of the third party claimant with respect to
such Third Party Claim. The Asserting Party and the Defending Party shall
use all reasonable efforts to cooperate fully with respect to the defense and
settlement of any Third Party Claim covered by this Article XIII.
SECTION 13.04. NON RECOURSE TO SELLERS' PARTNERS. The obligations of
Sellers to Purchaser under this Agreement and any related agreements,
instruments, documents or certificates are non recourse to Sellers' partners and
if Sellers are in default hereof or under such other agreements, instruments,
documents or certificates, Purchaser shall not have any recourse to the personal
assets of any partner of Sellers, and Purchaser's recourse shall be limited
solely (i) prior to Closing, as provided in Section 18.06, and (ii) following
Closing, to the Escrow Payment.
43
SECTION 13.05. LIMITATIONS. The Defending Party's obligations to
indemnify the Asserting Party pursuant to this Article XIII shall be subject to
the following limitations:
(a) No Indemnification shall be required to be made by the
Defending Party until the aggregate amount of the Asserting Party's Losses
exceeds $500,000 (the "Deductible") and then indemnification shall only be
required to be made by the Defending Party to the extent of such Losses that
exceed the Deductible; provided, however, the Deductible shall not be
applicable to (i) Sellers' obligation to indemnify Purchaser for Non-Assumed
Liabilities, (ii) Purchaser's and ▇▇▇▇▇▇'▇ obligation to indemnify Sellers for
Assumed Liabilities or (iii) adjustments to the Purchase Price provided for in
Section 5.05.
(b) No indemnification shall be required to be made by the
Defending Party of the amount of the Asserting Party's Losses that is in excess
of $3,750,000 except for (i) Sellers' obligation to indemnify Purchaser for
Non-Assumed Liabilities and (ii) Purchaser's and ▇▇▇▇▇▇'▇ obligation to
indemnify Sellers for Assumed Liabilities, as to which there is no limitation.
(c) The indemnification obligation of a Defending Party shall be
reduced so as to give effect to any net reduction in federal, state, local or
foreign income or franchise tax liability realized at any time by the Asserting
Party in connection with the satisfaction by the Defending Party of a claim with
respect to which indemnification is sought hereunder. The indemnification
obligation of a Defending Party shall also be reduced to the extent of any
available insurance proceeds; provided, however that such reduction shall not be
effective until the Asserting Party has realized the benefit of any such tax
reduction or has received any such insurance proceeds. The Defending Party
shall pay its indemnification obligations as and when required by this Article
XIII and the Asserting Party shall refund to the Defending Party any such
amounts determined to be in excess of the Defending Party's obligations due to
reductions pursuant to this Section 13.05(c). Additionally, the Asserting Party
shall refund promptly to the Defending Party any amount of the Asserting Party's
Losses that are subsequently recovered by the Asserting Party pursuant to a
settlement or otherwise.
(d) From and after the Closing Date, the indemnification rights
contained in this Article XIII shall constitute the sole and exclusive remedies
of the parties hereunder an shall supersede and displace all other rights that
either party may have under statute or common law.
44
ARTICLE XIV
CONFIDENTIALITY AND PRESS RELEASES
SECTION 14.01. CONFIDENTIALITY. Each party (in such capacity, a
"Recipient Party") shall hold in strict confidence all documents and information
concerning the other (in such capacity, a "Disclosing Party") and its business
and properties and, if the transaction contemplated hereby should not be
consummated, such confidence shall be maintained, and all such documents and
information (in written form) shall immediately thereafter be returned to the
Disclosing Party. In furtherance of the foregoing, without the express prior
written consent of the Disclosing Party, the Recipient Party shall not, directly
or indirectly, disclose, disseminate, publish, reproduce, retain, use (for its
benefit or for the benefit of others) or otherwise make available in any manner
whatsoever, any such documents or information to anyone except as provided in
Section 14.03. If the Recipient Party breaches, or threatens to commit a breach
of, any of the provisions of this Article XIV, the Disclosing Party shall have
the right (in addition to any other rights and remedies available at law or in
equity) to equitable relief (including injunctions) against such breach or
threatened breach, it being acknowledged and agreed that any such breach or
threatened breach will cause irreparable harm to the Disclosing Party and that
money damages would not be an adequate remedy.
SECTION 14.02. PRESS RELEASES. No press release or public disclosure,
either written or oral, of the existence or terms of this Agreement shall be
made by either Purchaser or Sellers without the consent of the other subject to
the provisions of Section 14.03, and Purchaser and Sellers shall each furnish to
the other advance copies of any release which it proposes to make public
concerning this Agreement or the transactions contemplated hereby and the date
upon which Purchaser or Sellers, as the case may be, proposes to make such press
release.
SECTION 14.03. DISCLOSURES REQUIRED BY LAW. This Article XIV shall not,
however, be construed to prohibit any party from making any disclosures to any
governmental authority that it is required to make by law or from filing this
Agreement with, or disclosing the terms of this Agreement to, any institutional
lender to such party, or prohibit Sellers, Purchaser or any of their affiliates
from disclosing to its investors, partners, accountants, auditors, attorneys,
parent company and broker/dealers such terms of this transaction as are
customarily disclosed to them in connection with the sale or acquisition of a
cellular telephone system; PROVIDED, HOWEVER, that any such party shall be
informed of the confidential nature of such information and shall agree to keep
such information confidential; and PROVIDED, HOWEVER, that each party shall
provide to the
45
other reasonable advance copies of any public release except where the provision
of such advance notice is not permissible.
ARTICLE XV
TERMINATION
SECTION 15.01. BREACHES AND DEFAULTS; OPPORTUNITY TO CURE. Prior to the
exercise by a party of any termination rights afforded under this Agreement, if
either party (the "Non-Breaching Party") believes the other (the "Breaching
Party") to be in breach hereunder, the Non-Breaching Party shall provide the
Breaching Party with written notice specifying in reasonable detail the nature
of such breach, whereupon the Breaching Party shall have [thirty (30)] days from
the receipt of such notice to cure such breach to the reasonable satisfaction of
the Non-Breaching Party; PROVIDED, HOWEVER, that if such breach is curable but
is not capable of being cured within such period and if the Breaching Party
shall have commenced action to cure such breach within such period and is
diligently attempting to cure such breach, then the Breaching Party shall be
afforded an additional sixty(60) days to cure such breach, PROVIDED, HOWEVER,
Purchaser shall have no opportunity to cure the breach of its obligations to
deliver any required portion of the Purchase Price to be delivered to Sellers at
Closing; and PROVIDED, FURTHER, HOWEVER, that the cure period for a breach shall
in no event extend beyond the Outside Date. If the breach is not cured within
such time period, then the Breaching Party shall be in default hereunder and the
Non-Breaching Party shall be entitled to terminate this Agreement (as provided
in Section 15.02). This right of termination shall be in addition to, and not
in lieu of, any legal or equitable remedies available to the Non-Breaching
Party.
SECTION 15.02. TERMINATION. This Agreement may be terminated and the
transactions contemplated herein may be abandoned, by written notice given to
the other party hereto, at any time prior to the Closing:
(a) by mutual written consent of Sellers and Purchaser;
(b) by either Purchaser or Sellers, if any court of competent
jurisdiction in the United States or other United States governmental body shall
have issued an order, decree or ruling or taken any other action permanently
restraining, enjoining or otherwise permanently prohibiting the sale of the
Assets to Purchaser (which Sellers and Purchaser shall have used all
46
reasonable efforts to have lifted or reversed) and such order, decree, ruling or
other action shall have become final and nonappealable;
(c) subject to Section 15.01, by Purchaser, if Sellers shall
have breached any of their representations herein and such breaches would
reasonably be expected to have a Material Adverse Effect or if Sellers shall
have materially breached any of their covenants;
(d) subject to Section 15.01, by Sellers, if Purchaser or ▇▇▇▇▇▇
shall have materially breached any of their representations or covenants herein;
(e) by either Sellers or Purchaser if the Closing shall not have
occurred on or before November 18, 1997 (the "Outside Date"), unless the failure
to have the Closing shall be due to the failure of the party seeking to
terminate this Agreement to perform in any material respect its obligations
under this Agreement required to be performed by it at or prior to the Closing;
or
(f) by either party in accordance with the provisions of Section
9.5(b).
ARTICLE XVI
BROKERS' FEES
Each party represents and warrants to the other that it shall be solely
responsible for the payment of any fee or commission due to any broker or finder
it has engaged with respect to this transaction and the other party hereto shall
be indemnified for any liability with respect thereto pursuant to Article XIII
hereof.
47
ARTICLE XVII
ARBITRATION
Any controversy, dispute or claim (collectively, a "Dispute") between the
parties arising out of or relating to this Agreement, or the breach, termination
or validity thereof, shall be finally settled by arbitration in accordance with
the commercial arbitration rules of the American Arbitration Association ("AAA")
then obtaining. However, in all events, these arbitration provisions shall
govern over any conflicting rules that may now or hereafter be contained in the
AAA rules. The arbitration shall be held in Baltimore, Maryland unless the
parties mutually agree to have the arbitration held elsewhere, and judgment upon
the award made therein may be entered by any court having jurisdiction in
Baltimore, Maryland; provided however, that nothing contained in this Article
XVII shall be construed to limit or preclude a party from bringing any action in
any court of competent jurisdiction for injunctive or other provisional relief
to compel another party to comply with its obligations under this Agreement
during the pendency of the arbitration proceedings. Any judgment upon the award
rendered by the arbitrators may be entered in any court having jurisdiction over
the subject matter hereof. The arbitrator shall have the authority to grant any
equitable and legal remedies that would be available in any judicial proceeding
instituted to resolve any claim hereunder.
Any such arbitration will be conducted before three (3) arbitrators, one of
which shall be chosen by Sellers, one of which shall be chosen by Purchaser, and
the third chosen by the other two arbitrators. The decision of a majority of
the arbitrators will be the decision of the arbitrators. The arbitrators shall
permit such discovery as they shall determine is appropriate in the
circumstances, taking into account the needs of the parties and the desirability
of making discovery expeditious and cost-effective. Any such discovery shall be
limited to information directly related to the controversy or claim in
arbitration and shall be concluded within sixty (60) days after appointment of
the third arbitrator.
The prevailing party in any arbitration hereunder shall be entitled to an
award of its reasonable costs incurred in connection therewith, including
attorneys' fees.
For any Dispute submitted to arbitration, the burden of proof will be as it
would be if the claim were litigated in a judicial proceeding.
48
Upon the conclusion of any arbitration proceedings hereunder, the
arbitrators will render findings of fact and conclusions of law and a written
opinion setting forth the basis and reasons for any decision reached and will
deliver such documents to each party to this Agreement along with a signed copy
of the award.
The arbitrators chosen in accordance with these provisions will not have
the power to alter, amend or otherwise affect the terms of these arbitration
provisions or the provisions of this Agreement.
ARTICLE XVIII
MISCELLANEOUS
SECTION 18.01. ADDITIONAL INSTRUMENTS OF TRANSFER. (a) From time to time
after the Closing, each party shall, if requested by another party, make,
execute and deliver such additional assignments, bills of sale, deeds and other
instruments, as may be reasonably necessary or proper to carry out the specific
provisions of this Agreement, including transfer to Purchaser all of Sellers'
right, title and interest in and to the Assets. Such efforts and assistance
shall be at the cost of the requesting party.
(b) Anything in this Agreement to the contrary notwithstanding,
Sellers are not obligated to sell, assign, transfer or convey to Purchaser any
of their rights and obligations in and to any Interest without first obtaining
all necessary approvals, consents or waivers. To the extent any of the
approvals, consents or waivers listed on SCHEDULE 10.04 have not been obtained
by Sellers as of the Closing and Purchaser elects to proceed with the Closing,
Sellers shall, for a period equal to the shorter of twelve months after the
Closing, or the remaining term of such Interest, use all reasonable efforts to
(i) obtain the consent of any such third party; (ii) cooperate with Purchaser in
any reasonable and lawful arrangements designed to provide the benefits
(including, without limitation, the payment to Purchaser of any monies received
by Sellers in connection therewith) of such Interest to Purchaser so long as
Purchaser performs all obligations with respect to the Interest (and the payment
of all expenses in connection therewith); and (iii) enforce, at the request of
Purchaser and at the expense and for the account of Purchaser, any rights of
Sellers arising from such Interest against such issuer thereof or the other
party or parties thereto (including the right to elect to terminate any such
Interest in accordance with the terms thereof upon the request of Purchaser);
provided, however, that none of Purchaser or Sellers shall be obligated to pay
any consideration or other sums therefor (except for filing fees and other
49
ordinary administrative charges and except as set forth above) to the third
party from whom such approval, consent or waiver is requested.
SECTION 18.02. NOTICES. All notices and other communications required or
permitted to be given hereunder shall be in writing and shall be deemed to have
been duly given if delivered, sent by telecopier, recognized overnight delivery
service or registered or certified mail, return receipt requested, postage
prepaid, to the following addresses:
(i) If to Purchaser:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a required copy to:
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
(ii) If to Sellers:
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
with a required copy to:
Kleinbard, ▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esquire
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
Notices delivered personally shall be effective upon delivery against
receipt. Notices transmitted by telecopy shall be effective when received,
provided that the burden of proving notice when notice is transmitted by
telecopy shall be the responsibility of the party providing such notice .
Notices delivered by overnight mail shall be effective when received. Notices
delivered by registered or certified mail shall be effective on the date set
forth on the receipt of registered or certified mail, or 72 hours after mailing,
whichever is earlier.
SECTION 18.03. EXPENSES. Each party shall bear its own expenses and
costs, including the fees of any corporate, FCC attorney retained by it,
incurred in connection with the preparation of this Agreement and the
consummation of the transactions contemplated hereby; provided that Sellers and
Purchaser shall bear equally FCC, ▇▇▇▇-▇▇▇▇▇ Act and other governmental filing
fees.
SECTION 18.04. TRANSFER TAXES. Sellers and Purchaser shall bear equally
all use, sales and transfer taxes, if any, imposed in connection with the sale
and delivery of the Assets acquired by Purchaser under this Agreement.
Notwithstanding anything else to the contrary set forth in this Section 18.04,
Purchaser shall in no event be responsible in any manner for the payment of any
Taxes on any income or gain which Sellers may realize as a result of the sale of
the Assets or otherwise related to the transactions contemplated by this
Agreement.
SECTION 18.05. COLLECTION PROCEDURES. From and after the Closing,
Purchaser shall have the right and authority, at its expense, to collect for its
account all items to which it is entitled as provided in this Agreement and to
endorse with the name of the Sellers any checks or drafts received on account of
any such items.
SECTION 18.06. SPECIFIC PERFORMANCE. The parties recognize and
acknowledge that in the event Sellers shall fail to perform their obligations
under the terms of this Agreement, money damages alone will not be adequate to
compensate the Purchaser. The parties, therefore, agree and acknowledge that in
the event the Sellers fail to perform their obligations under this Agreement
prior to Closing, the Purchaser shall be entitled, in addition to any action for
monetary damages, in addition to any other rights and remedies on account of
such failure, to
51
specific performance of the terms of this Agreement and of the covenants and
obligations hereunder.
SECTION 18.07. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Pennsylvania
(without application of principles of conflicts of law).
SECTION 18.08. ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto without the prior written consent of the other parties, which consent
will not be unreasonably withheld.
SECTION 18.09. SUCCESSORS AND ASSIGNS. All agreements made and entered
into in connection with this transaction shall be binding upon and inure to the
benefit of the parties hereto, their successors and permitted assigns.
SECTION 18.10. AMENDMENTS; WAIVERS. No alteration, modification or change
of this Agreement shall be valid except by an agreement in writing executed by
the parties hereto. No failure or delay by any party hereto in exercising any
right, power or privilege hereunder (and no course of dealing between or among
any of the parties) shall operate as a waiver of any such right, power or
privilege. No waiver of any default on any one occasion shall constitute a
waiver of any subsequent or other default. No single or partial exercise of any
such right, power or privilege shall preclude the further or full exercise
thereof.
SECTION 18.11. ENTIRE AGREEMENT. This Agreement merges all previous
negotiations and agreements between the parties hereto, either verbal or
written, and constitutes the entire agreement and understanding between the
parties with respect to the subject matter of this Agreement.
SECTION 18.12. COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which when so executed shall be an original, but all
of which together shall constitute one agreement. Facsimile signatures shall be
deemed original signatures.
SECTION 18.13. SEVERABILITY. If any provision of this Agreement or the
application thereof to any person or circumstance shall be invalid or
unenforceable to any extent, the remainder of this Agreement and the application
of such provision to other persons or circumstances shall not be
52
affected thereby and shall be enforced to the greatest extent permitted by law,
but only as long as the continued validity, legality and enforceability of such
provision or application does not materially (a) alter the terms of this
Agreement, (b) diminish the benefits of this Agreement or (c) increase the
burdens of this Agreement, for any person.
SECTION 18.14. SECTION HEADINGS. The section headings contained in this
Agreement are solely for the purpose of reference, are not part of the agreement
of the parties and shall not in any way affect the meaning or interpretation of
this Agreement.
SECTION 18.15. INTERPRETATION. As both parties have participated in the
drafting of this Agreement, any ambiguity shall not be construed against either
party as the drafter.
SECTION 18.16. FURTHER ASSURANCES. For a period of twelve (12) months
after Closing, Sellers agree to provide to Purchaser from time to time any
information that Sellers possess with respect to the operation of the Business
and Assets prior to the Closing which the Purchaser reasonably requests in the
future in connection with the Purchaser's financing efforts now or in the future
or in connection with any FCC or other regulatory filing.
SECTION 18.17. THIRD PARTIES. Nothing herein, expressed or implied, is
intended to or shall confer on any person other than the parties hereto any
rights, remedies, obligations or liabilities under or by reason of this
Agreement.
SECTION 18.18 CERTAIN DEFINED TERMS. As used in this Agreement the term
(a) "to Sellers' knowledge" or any similar phrase means the actual knowledge of
one of the Executive Officers or ▇.▇. ▇▇▇▇▇▇▇▇, the general manager of the
Cellular Systems and (b) "Executive Officers" shall mean Messrs. ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇.
53
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed by its duly authorized representative as of the day and year first
above written.
SELLERS:
HORIZON CELLULAR TELEPHONE COMPANY
OF HAGERSTOWN, L.P.
By: KCCGP, L.P., its general partner
By: Horizon G.P., Inc., its general partner
By: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
------------------------------
Title: President
CUMBERLAND CELLULAR PARTNERSHIP
By: Horizon Cellular Telephone Company of
Cumberland, L.P., its managing
general partner
By: KCCGP, L.P., its general partner
By: Horizon G.P., Inc., its general partner
By: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
------------------------------
Title: President
PURCHASER:
▇▇▇▇▇▇ CELLULAR OF MARYLAND, INC.
By: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
President
GUARANTOR:
▇▇▇▇▇▇ COMMUNICATIONS CORPORATION
By: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
President
2
AMENDMENT NO. 1 TO ASSET PURCHASE AGREEMENT
This AMENDMENT NO. 1 TO ASSET PURCHASE AGREEMENT ("Amendment") is dated as
of January 17, 1997 among Horizon Cellular Telephone Company of Hagerstown,
L.P., a Delaware limited partnership ("HCTC"), Cumberland Cellular Partnership,
a Pennsylvania general partnership ("CCP" and together with HCTC, "Sellers"),
▇▇▇▇▇▇ Communications Corporaiton, an Oklahoma Corporation ("▇▇▇▇▇▇"), and
▇▇▇▇▇▇ Cellular of Maryland, Inc., an Oklahoma corporation and wholly-owned
subsidiary of ▇▇▇▇▇▇ ("Purchaser").
BACKGROUND. Sellers, ▇▇▇▇▇▇ and Purchaser are parties to that certain
Asset Purchase Agreement dated as of November 19, 1996 (the "Purchase
Agreement"). The parties desire to amend the Purchase Agreement as provided
herein. Capitalized terms used but not defined herein shall have the meanings
given to such terms in the Purchase Agreement.
NOW, THEREFORE, in consideration of the foregoing Background, the mutual
promises and agreements made herein and inn the Purchase Agreement and other
good and valuable consideration, the receipt of which is hereby acknowledged,
the parties, intending to be legally bound hereby, agree as follows:
1. CUMBERLAND PHASE II AUCTIONS. CCP was the winning bidder at certain
auctions conducted by the FCC relating to certain unserved areas near
Cumberland, MD (the "Cumberland Phase II Auction Area"). CCP agrees to transfer
to Purchaser at closing all of CCP's right, title and interest (including any
FCC Authorizations) with respect thereto (which, subject to the provisions
contained herein, shall constitute Assets as provided in the Purchase
Agreement). In consideration therefor, Purchaser shall pay to Seller at Closing
the amount of $12,000 in connection with such auctions, and Purchaser shall
assume all liabilities and obligations of CCP with respect thereto (which shall
constitute Assumed Liabilities as provided in the Purchase Agreement), including
the payment of any deposits or other payments required after the Closing Date.
Notwithstanding anything to the contrary contained herein or in the Purchase
Agreement, (i) CCP's conveyance of its right, title and interest in and to the
Cumberland Phase II Auction Area to Purchaser shall be made on an "AS-IS" basis
without any representations or warranties by Sellers of any kind or nature, (ii)
CCP's failure to acquire any rights with respect to the Cumberland Phase II
Auction Area shall not constitute a failure of any condition precedent to
Purchaser's obligation to close as set forth in ARTICLE X of the Purchase
Agreement, and (iii)
no FCC authorization granted in connection with such auctions shall be required
to have been granted by Final Order as required by SECTION 10.04 of the
Purchase Agreement.
2. INDEMNITY. Purchaser and ▇▇▇▇▇▇ agree to indemnify Seller, in
accordance with the terms of ARTICLE XIII of the Purchase Agreement, for any
Losses incurred by Sellers in connection with CCP's participation in the
auctions.
3. MISCELLANEOUS. Except for the modifications stated above, all other
terms and conditions of the Purchase Agreement and the Deposit Escrow Agreement
shall remain the same and continue in full force and effect and shall constitute
the legally valid and binding obligations of the parties thereto enforceable in
accordance with their terms.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date
first above written.
HORIZON CELLULAR TELEPHONE COMPANY OF
HAGERSTOWN, L.P.
By: KCCGP, L.P., its general partner
By: HORIZON G.P., INC., its general partner
By: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Vice President
CUMBERLAND CELLULAR PARTNERSHIP
By: HORIZON CELLULAR TELEPHONE COMPANY
OF ▇▇▇▇▇▇ LAND, L.P., its managing general partner
By: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Vice President
4
▇▇▇▇▇▇ CELLULAR OF MARYLAND, INC.
By: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chairman
▇▇▇▇▇▇ COMMUNICATIONS CORPORATION
By: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
AMENDMENT NO. 2 TO ASSET PURCHASE AGREEMENT
This AMENDMENT NO. 2 TO ASSET PURCHASE AGREEMENT ("Amendment") is dated as
of February 6, 1997 among Horizon Cellular Telephone Company of Hagerstown,
L.P., a Delaware limited partnership ("HCTC"), Cumberland Cellular Partnership,
a Pennsylvania general partnership ("CCP" and together with HCTC, "Sellers"),
▇▇▇▇▇▇ Communications Corporation, an Oklahoma corporation ("▇▇▇▇▇▇"), and
▇▇▇▇▇▇ Cellular of Maryland, Inc., an Oklahoma corporation and wholly-owned
subsidiary of ▇▇▇▇▇▇ ("Purchaser").
BACKGROUND. Sellers, ▇▇▇▇▇▇ and Purchaser are parties to that certain
Asset Purchase Agreement dated as of November 19, 1996, as amended by that
certain Amendment No. 1 to Asset Purchase Agreement dated as of January 17, 1997
(as so amended, the "Purchase Agreement") and the related Deposit Escrow
Agreement. The parties desire to further amend the Purchase Agreement and to
amend the Deposit Escrow Agreement as provided herein. Capitalized terms used
but not defined herein shall have the meanings given to such terms in the
Purchase Agreement.
NOW, THEREFORE, in consideration of the foregoing Background, the mutual
promises and agreements made herein and in the Purchase Agreement and other good
and valuable consideration, the receipt of which is hereby acknowledged, the
parties, intending to be legally bound hereby, agree as follows:
4. CLOSING DATE. The parties covenant that the Closing (as defined in
ARTICLE VI of the Purchase Agreement) shall occur on February 28, 1997 and that
such date shall be deemed to be the Closing Date for all purposes under the
Purchase Agreement.
5. AMENDMENTS REGARDING DEPOSIT.
2.1. The parties have agreed to increase the amount of the Deposit by
$1.25 million from $3.75 million to $5 million and to consider such aggregate
amount as liquidated damages in the event of certain breaches by ▇▇▇▇▇▇ or
Purchaser of the Purchase Agreement on the terms provided herein. Therefore, on
the date hereof, Purchaser is depositing with the Deposit Escrow Agreement the
additional amount of $1.25 million to be held, invested and disbursed pursuant
to the terms of the Deposit Escrow Agreement (as amended hereby).
6
2.2 SECTION 5.02 of the Purchase Agreement is hereby deleted in its
entirety and replaced with the following:
"SECTION 5.02. DEPOSIT. Purchaser has deposited as a good faith
deposit $5 million (the "Deposit") with CoreStates Bank, N.A. (the "Deposit
Escrow Agent"), to be held, invested and disbursed pursuant to the terms of
the Deposit Escrow Agreement substantially in the form of EXHIBIT C
attached hereto (the "Deposit Escrow Agreement"). If the Closing occurs,
then the Deposit and all earnings on the deposit shall be paid to Sellers
pursuant to the Deposit Escrow Agreement and the full amount of the Deposit
and the earnings thereon shall be credited against and deducted from the
Purchase Price to be paid at the closing by Purchaser for the Assets. If
Sellers terminate this Agreement in accordance with the provisions of
Section 15.02(d), and provided at the time of such termination Sellers are
not then in breach of any of their representations, warranties, covenants
or agrements to such an extent the Sellers' breaches, in the aggregate,
would reasonably be expected to have a Material Adverse Effect and the
conditions set forth in Sections 10.04 (only FCC and ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act
consents), 10.06 (provided that the applicable period shall be from August
31, 1996 through the date of termination of this Agreement), 10.09 and
10.10 shall have been satisfied, then Sellers shall be entitled to the
Deposit as liquidated damages (the "Liquidated Damages Amount") without the
necessity for proof by Sellers of actual damages, which damages that
Sellers would sustain as a result of such termination. Notwithstanding
anything else set forth in this Section 5.02, Sellers' sole and exclusive
recourse for Purchaser's or ▇▇▇▇▇▇'▇ breach of their representations or
obligations under this Agreement prior to Closing shall only be to receive
an amount of $5 million. In any other case if the Closing does not occur,
then, pursuant to the Deposit Escrow Agreement, the Deposit and all
earnings thereon shall be paid to Purchaser. All determinations of breach
and satisfaction of conditions shall be made, and all payments by the
Deposit Escrow Agent shall be made, in accordance with the procedures and
other provisions set forth in the Deposit Escrow Agreement."
2.3 SECTION 1(a) of the Deposit Escrow Agreement is hereby deleted in
its entirety and replaced with the following:
"SECTION 1. ESCROW DEPOSIT. (a) The Escrow Agent acknowledges receipt
of $5,000,000 (the "Deposit") from the Purchaser."
2.4 SECTION 4(b) of the Deposit Escrow Agreement is hereby deleted in
its entirety and replaced with the following:
"(b) If Escrow Agent receives written notice that the Acquisition
Agreement has been terminated by Sellers under Section 15.02(d), and
provided at the time of such termination, Sellers are not then in
breach of any of their representations, warranties, covenants or
agreements to such an extent the Sellers' breaches, in the aggregate,
would reasonably be expected to have a Material Adverse effect (as
defined in the Acquisition Agreement) and the conditions set forth in
Sections 10.04 (only FCC and ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act consents), 10.06
(provided that the applicable period shall be from August 31, 1996
through the date of termination of this Agreement), 10.09 and 10.10 of
the Acquisition Agreement shall have been satisfied, then upon such
claim for payment made by the Sellers and subject to Section 4(d)
hereof, the Escrow Agent shall pay to Sellers out of the Escrowed
Funds the amount of $5 million. All claims and payments under this
Section 4(b) shall be made in accordance with the procedures set forth
in Section 4(d) below."
6. MISCELLANEOUS. Except for the modifications stated above, all
otherterms and conditions of the Purchase Agreement and the Deposit Escrow
Agreement shall remain the same and continue in full force and effect and shall
constitute the legally valid and binding obligations of the parties thereto
enforceable in accordance with their terms.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first above written.
HORIZON CELLULAR TELEPHONE COMPANY OF
HAGERSTOWN, L.P.
By: KCCGP, L.P., its general partner
By: HORIZON G.P., INC., its general partner
By: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
----------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Vice President
CUMBERLAND CELLULAR PARTNERSHIP
8
By: HORIZON CELLULAR TELEPHONE COMPANY
OF ▇▇▇▇▇▇ LAND, L.P., its managing general partner
By: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Vice President
▇▇▇▇▇▇ CELLULAR OF MARYLAND, INC.
By: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chairman
▇▇▇▇▇▇ COMMUNICATIONS CORPORATION
By: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President