EXHIBIT 6
STOCK PURCHASE AGREEMENT
dated as of
March 27, 1996
between
RCN Corporation
and
C-TEC Corporation
TABLE OF CONTENTS(1)
Page
ARTICLE I
DEFINITIONS
Section 1.01. Definitions.................................. 2
ARTICLE II
PURCHASE AND SALE
SECTION 2.01. Purchase and Sale of the UrbanNet Business... 12
SECTION 2.02. Purchase and Sale of the CIT
Businesses................................... 14
SECTION 2.03. Consideration of Other Structures............... 17
SECTION 2.04. Construction of Agreement as it Relates to the
Closings..................................... 17
SECTION 2.05. Elections Under Section 338(h)(10) and Section
197(f)....................................... 18
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
SECTION 3.01. Corporate Organization....................... 18
SECTION 3.02. Capitalization; Title to Shares.............. 18
SECTION 3.03. Authorization; Validity of
Agreement.................................... 19
SECTION 3.04. No Conflict or Violation..................... 20
SECTION 3.05. Consents and Approvals....................... 20
SECTION 3.06. Financial Statements......................... 21
SECTION 3.07. Absence of Certain Changes................... 21
SECTION 3.08. Absence of Undisclosed Liabilities........... 21
SECTION 3.09. Title to Properties; Encumbrances............ 21
SECTION 3.10. Litigation................................... 22
SECTION 3.11. Material Contracts........................... 22
SECTION 3.12. Compliance with Laws; No Defaults............ 23
SECTION 3.13. Finders' Fees................................ 23
SECTION 3.14. Environmental Matters........................ 23
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
SECTION 4.01. Corporate Organization....................... 23
SECTION 4.02. Authorization; Validity of
Agreement.................................... 24
SECTION 4.03. Title to the C-TEC Shares.................... 24
SECTION 4.04. No Conflict or Violation..................... 24
SECTION 4.05. Consents and Approvals....................... 24
SECTION 4.06. Finders' Fees................................ 25
SECTION 4.07. Litigation................................... 25
SECTION 4.08. Investment Intent and Knowledge.............. 25
SECTION 4.09. Balance Sheet................................ 26
SECTION 4.10. Freedom Investment........................... 26
ARTICLE V
COVENANTS OF SELLER
SECTION 5.01. Conduct of the Company....................... 26
SECTION 5.02. Access to Information........................ 26
SECTION 5.03. Notice of Certain Events..................... 27
SECTION 5.04. Noncompetition............................... 27
ARTICLE VI
COVENANTS OF BUYER
SECTION 6.01. Confidentiality.............................. 28
SECTION 6.02. Standstill................................... 28
SECTION 6.03. Change of Name............................... 29
ARTICLE VII
COVENANTS OF BOTH PARTIES
SECTION 7.01. Best Efforts................................. 29
SECTION 7.02. Certain Filings.............................. 30
SECTION 7.03. Public Announcements......................... 30
SECTION 7.04. Books and Records............................ 30
SECTION 7.05. Intercompany Accounts........................ 31
SECTION 7.06. Section 338(h)(10) Elections................. 31
SECTION 7.07. Section 197(f) Election...................... 32
ARTICLE VIII
TAX MATTERS
SECTION 8.01. Tax Definitions.............................. 33
SECTION 8.02. Tax Representations.......................... 34
SECTION 8.03. Covenants.................................... 36
SECTION 8.04. Federal Tax Sharing.......................... 36
SECTION 8.05. Tax Returns.................................. 40
SECTION 8.06. Other Tax Matters............................ 40
SECTION 8.07. Cooperation on Tax Matters................... 40
SECTION 8.08. Tax Indemnification.......................... 41
SECTION 8.09. Survival..................................... 44
ARTICLE IX
EMPLOYEE BENEFITS
SECTION 9.01. Employee Benefit Plans....................... 44
SECTION 9.02. Pension Plan................................. 45
SECTION 9.03. Individual Account Plan...................... 46
SECTION 9.04. Other Employee Plans......................... 47
SECTION 9.05. Insurance Coverage........................... 47
SECTION 9.06. Third Party Beneficiaries.................... 48
ARTICLE X
OTHER AGREEMENTS
SECTION 10.01. Repurchase Option............................ 48
SECTION 10.02. Subsequent Sale of the CLD Business or the
International
Business..................................... 53
SECTION 10.03. Management and Operating Services............ 54
SECTION 10.04. Corporate Opportunity........................ 56
SECTION 10.05. Trademark Assignments and License............ 57
SECTION 10.06. Assignment of UrbanNet Warrant............... 57
SECTION 10.07. Amendment of Interim Budget.................. 58
ARTICLE XI
CONDITIONS TO CLOSING
SECTION 11.01. Conditions to Closing in UrbanNet Business
Transaction.................................. 58
SECTION 11.02. Conditions to Closing in CIT Businesses
Transaction.................................. 62
ARTICLE XII
SURVIVAL; INDEMNIFICATION
SECTION 12.01. Survival..................................... 66
SECTION 12.02. Indemnification.............................. 67
SECTION 12.03. Procedures................................... 67
SECTION 12.04. Gross-Up..................................... 68
ARTICLE XIII
TERMINATION
SECTION 13.01. Termination.................................. 68
SECTION 13.02. Procedure; Effect of Termination............. 69
ARTICLE XIV
MISCELLANEOUS
SECTION 14.01. Successors and Assigns....................... 70
SECTION 14.02. Expenses..................................... 70
SECTION 14.03. Notices...................................... 70
SECTION 14.04. Entire Agreement............................. 71
SECTION 14.05. Waivers and Amendments....................... 72
SECTION 14.06. Severability................................. 72
SECTION 14.07. Titles and Headings.......................... 72
SECTION 14.08. Counterparts................................. 72
SECTION 14.09. Enforcement of the Agreement................. 72
SECTION 14.10. Governing Law................................ 73
SECTION 14.11. Arbitration.................................. 73
Schedule 1.01 Interim Budgets
Schedule 3.02 Capital Stock and Shares Outstanding
Schedule 3.05(a) Governmental Authorizations Required
Schedule 3.05(b) Consents Required
Schedule 3.07 Certain Changes
Schedule 3.10 Litigation
Schedule 3.11 Material Contracts
Schedule 3.12 Compliance with Laws
Schedule 7.05 Intercompany Accounts
Schedule 8.02 Tax Representations
Exhibit A UrbanNet Warrant
Exhibit B Services Agreement
________________
(1)The Table of Contents is not a part of this Agreement.
STOCK PURCHASE AGREEMENT
AGREEMENT dated as of March 27, 1996 between C-TEC Corporation,
a Pennsylvania corporation ("Seller" or "C-TEC"), and RCN Corporation, a
Delaware corporation ("Buyer" or "RCN"),
W I T N E S S E T H :
WHEREAS, Seller owns the CLD Business, the International
Business and the TEC Air Business (each as hereinafter defined, and
collectively, the "CIT Businesses"), and the UrbanNet Business (as hereinafter
defined and, together with the CIT Businesses, the "Developmental
Businesses");
WHEREAS, the Board of Directors of Seller is considering a
C-TEC Restructuring (as hereinafter defined);
WHEREAS, Seller has determined that the Developmental
Businesses will require significant amounts of additional capital for the
foreseeable future;
WHEREAS, Seller has concluded that it would be inappropriate to
provide additional capital to the Developmental Businesses until and unless it
determines not to pursue a C-TEC Restructuring;
WHEREAS, Seller has determined that failing to provide
additional capital to the Developmental Businesses at this time would be
detrimental to those businesses;
WHEREAS, Seller has therefore concluded that it is in Seller's
best interests to dispose of the Developmental Businesses now, in conjunction
with the possible completion of a C-TEC Restructuring;
WHEREAS, Seller owns directly or indirectly 100 shares (the
"Company Shares") of common stock, $1.00 par value (the "Company Common
Stock"), of Commonwealth Long Distance Company, a Pennsylvania corporation
(the "Company" or "CLD"), constituting 100% of the issued and outstanding
capital stock of the Company;
WHEREAS, Seller owns directly or indirectly 100 shares (the
"UrbanNet Shares") of common stock, $1.00 par value (the "UrbanNet Common
Stock"), of Residential Communications Network, Inc., a Delaware corporation
(the "UrbanNet Parent"), constituting 100% of the issued and outstanding
capital stock of the UrbanNet Parent;
WHEREAS, Buyer desires to purchase (directly or through a Buyer
Designee, as defined below) the Developmental Businesses by purchasing (i) the
UrbanNet Shares from Seller after the UrbanNet Business has been reorganized
such that it is owned directly or indirectly by the UrbanNet Parent and (ii)
the Company Shares from Seller after the CIT Businesses have been reorganized
such that they are owned directly or indirectly by the Company, and Seller
desires to sell the Developmental Businesses by selling the Company Shares and
the UrbanNet Shares to Buyer after such reorganizations, all upon the terms
and subject to the conditions hereinafter set forth;
WHEREAS, a Special Committee of the Board of Directors of the
Seller (the "Special Committee") has been established by the Seller to review
the transactions contemplated hereby;
WHEREAS, the financial advisor to the Special Committee has
delivered (i) an opinion as of the date of this Agreement to the effect that
the CIT Purchase Price is fair to the Seller from a financial point of view
(the "CIT Fairness Opinion") and (ii) an opinion as of the date of this
Agreement to the effect that the UrbanNet Purchase Price is fair to the Seller
from a financial point of view (the "UrbanNet Fairness Opinion); and
WHEREAS, in order to provide Seller a continuing equity
interest in the UrbanNet Business, UrbanNet Parent will issue to Seller, prior
to the First Closing, a warrant to purchase an equity interest in UrbanNet
Parent;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Definitions. (a) The following terms, as
used herein, have the following meanings:
"Adjusted LIBOR Rate" applicable to any interest period means
(i) 1%, plus (ii) the offered rate which appears on the Telerate Page 3750 for
U.S. Dollar deposits as of 11:00 a.m., London time, on the first business day
of such interest period for a period of time comparable to such interest
period.
"Affiliate" means, with respect to any Person, any Person
directly or indirectly controlling, controlled by, or under common control
with such other Person; provided that none of the Company, the UrbanNet Parent
or any Subsidiary shall be considered an Affiliate of Buyer prior to the First
or Second Closing, as applicable.
"Aggregate CIT Contribution Amount" means the total of the CLD
Closing Contribution Amount and the TEC Air Closing Contribution Amount.
"Aggregate CIT Distribution Amount" means the total of the CLD
Closing Distribution Amount, the International Closing Distribution Amount and
the TEC Air Closing Distribution Amount.
"Allocable CIT Interest Amount" means, with respect to any
Person, that portion of the CIT Interest Amount, if any, which is fairly
allocable to such Person.
"Balance Sheets" means the balance sheets of (i) CLD, (ii)
International, (iii) TEC Air, (iv) UrbanNet Parent and the UrbanNet
Subsidiaries (other than RCN of Delaware) (on a pro forma consolidated basis)
and (v) RCN of Delaware, respectively, as of December 31, 1995. The Balance
Sheets are part of the Financial Statements referred to in the definition of
"Financial Statements".
"Balance Sheet Date" means December 31, 1995.
"Benefit Arrangement" means any employment, severance or
similar contract, arrangement or policy, or any plan or arrangement (whether
or not written) providing for severance benefits, insurance coverage
(including any self-insured arrangements), workers' compensation, disability
benefits, supplemental unemployment benefits, vacation benefits, retirement
benefits, deferred compensation, profit-sharing, bonuses, stock options, stock
appreciation rights or other forms of incentive compensation or
post-retirement insurance, compensation or benefits that (i) is not an
Employee Plan, (ii) is entered into or maintained, as the case may be, by the
Seller or any of its Affiliates and (iii) covers any employee or former
employee of the Company, the UrbanNet Parent or the Subsidiaries.
"Buyer Designee" means a direct or indirect subsidiary of
Buyer, or any other Person controlled by Buyer, designated by Buyer to
effectuate the transactions contemplated by this Agreement. No such
designation by Buyer shall relieve Buyer of its obligations hereunder. For
purposes of this Agreement, the term "control" means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of such Person through ownership of voting securities (or their
equivalents).
"CLD Business" means the long distance telephone business
operated as of the date hereof primarily through CLD.
"CLD Closing Contribution Amount" means the Contribution Amount
with respect to Contributions made directly or indirectly by Seller to the
capital of CLD subsequent to the date hereof and prior to the Second Closing.
"CLD Closing Distribution Amount" means the Distribution Amount
with respect to Distributions made by CLD directly or indirectly to Seller
subsequent to the date hereof and prior to the Second Closing.
"Code" means the Internal Revenue Code of 1986, as amended.
"Contribution" means, with respect to any Person, an equity
investment in such Person whether by means of a contribution to capital, a
purchase of equity securities, capitalization of intercompany accounts
(including pursuant to Section 2.01(e) hereof) or otherwise, but only includes,
for purposes of Section 2.02, such an equity investment in the Company,
International or TEC Air to the extent such investment exceeds the net
indebtedness on the date hereof of such corporation to Seller and its
Affiliates.
"Contribution Amount" means, with respect to any Person and for
any period, the combined value of all cash, cash equivalent and non-cash
Contributions made to such Person during such period; provided that any such
non-cash Contributions shall be valued at their Fair Market Value at the time
of contribution. For purposes of this definition, transactions will be
accounted for on the basis of their economic substance not their form. For
example a Contribution by CLD to International after the Second Closing would
be treated as (i) a Contribution by Buyer to International and (ii) a
Distribution by CLD to Buyer.
"C-TEC Board Approval" means the approval of the Board of
Directors of C-TEC, including a majority of the independent directors.
"C-TEC Class B Shares" means shares of Class B common stock,
par value $1.00 per share, of Seller.
"C-TEC Common Shares" means shares of common stock, par value
$1.00 per share, of Seller.
"C-TEC Restructuring" means one of the strategic alternatives
being evaluated by the Board of Directors of Seller as of the date hereof
which would involve either (i) a separation of all or substantially all of the
domestic cable television business of Seller, on the one hand, and all or
substantially all of the local telephone business of Seller, on the other
hand, pursuant to a sale, spin-off or similar disposition of one or both such
businesses or (ii) a disposition of all or substantially all of such
businesses together, including in the case of both (i) and (ii) a disposition
by means of a merger or other business combination involving the Seller.
"C-TEC Shares" means, collectively, C-TEC Class B Shares and
C-TEC Common Shares.
"C-TEC Total Voting Power" means the aggregate number of votes
which may be cast by holders of outstanding C-TEC Shares.
"Distribution" means, with respect to any Person, a
distribution by such Person to its shareholders or other owners whether by
means of dividend, extraordinary distribution, return of capital, redemption
of non-debt securities or otherwise, provided that, with respect to each of
the Company, International and TEC Air, the excess, if any, of (i) the net
indebtedness on the date hereof of such corporation to Seller and its
Affiliates over (ii) the net indebtedness of such corporation to Seller and its
Affiliates that is capitalized pursuant to Section 2.01(e), will be treated as
a Distribution by such corporation to Seller for purposes of Section 2.02.
"Distribution Amount" means, with respect to any Person and for
any period, the combined value of all cash, cash equivalent and non-cash
Distributions made by such Person during such period; provided that any such
non-cash Distributions shall be valued at their Fair Market Value at the time
of distribution. For purposes of this definition, transactions will be
accounted for on the basis of their economic substance, not their form. For
example, a Distribution by International to CLD after the Second Closing would
be treated as (i) a Distribution by International to Buyer and (ii) a
Contribution by Buyer to CLD.
"Employee Plan" means any "employee benefit plan", as defined
in Section 3(3) of ERISA, that, (i) is subject to any provision of ERISA, (ii)
is maintained, administered or contributed to by the Seller or any of its
ERISA Affiliates and (iii) covers any employee or any former employee of the
Company, the UrbanNet Parent or any of the Subsidiaries.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Affiliate" of any person means any other person which,
together with such person, would be treated as a single employer under Section
414 of the Code.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Fair Market Value" means the value mutually agreed upon by
Buyer and Seller and which obtains C-TEC Board Approval. If Buyer and Seller
are unable to mutually agree on a value, the matter shall be submitted to an
investment banking firm mutually acceptable to both parties and the
determination of such firm shall be conclusive.
"Financial Statements" means the unaudited balance sheets and
income statements as of and for the year ended December 31, 1995 of (i) CLD,
(ii) International,
(iii) TEC Air, (iv) UrbanNet Parent and the UrbanNet Subsidiaries (other than
RCN of Delaware) (on a pro forma consolidated basis) and (v) RCN of Delaware,
respectively.
"First Closing Date" means the date of the First Closing.
"HSR Act" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements
Act of 1976, as amended.
"Individual Account Plan" means the Common-Wealth Builder
Defined Contribution Plan for C-TEC Corporation.
"Interim Budget" means, with respect to each Developmental
Business, the budget delivered by Seller to the Special Committee on the date
hereof and attached hereto as Schedule 1.01 (as amended, if applicable,
pursuant to Section 10.07), describing among other things all projected
Contributions to, and Distributions from, such Developmental Business through
December 31, 1996. If necessary for purposes of this Agreement, the Interim
Budgets will be revised in a manner mutually acceptable to both parties to
cover calendar year 1997.
"International" means C-TEC International, Inc., a Delaware
corporation.
"International Business" means the business of investing in and
developing the Mexican cable television industry, which business is conducted
as of the date hereof primarily through International and includes (i) the
Megacable Interest and (ii) the ▇▇▇▇▇ Note.
"International Closing Distribution Amount" means the
Distribution Amount with respect to Distributions made directly or indirectly
to Seller by International after the date hereof and prior to Second Closing.
"IRS" means the Internal Revenue Service.
"IT Subsidiaries" means International and TEC Air.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of
such asset.
"Material Adverse Effect" means a material adverse effect on
the business, assets, prospects, condition (financial or otherwise) or results
of operations of (i) UrbanNet Parent and the UrbanNet Subsidiaries taken as a
whole, or (ii) the Company and the IT Subsidiaries taken as whole, as the case
may be.
"▇▇▇▇▇ Note" means the promissory note dated January 25, 1996
pursuant to which ▇▇▇▇▇ Corporativo, S.A. de C.V. has agreed to pay to
International $13,088,000, plus interest thereon, on April 30, 1998.
"Megacable Interest" means the 40% interest in Megacable S.A.
de C.V. owned by International, together with all rights and obligations
relating thereto.
"Multiemployer Plan" means each Employee Plan that is a
multiemployer plan, as defined in Section 3(37) of ERISA.
"Ordinary Course" means, with respect to any Person, the
ordinary course of business of such Person consistent with past practice with
such exceptions as may be substantially consistent with the Interim Budgets.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Pension Plan" means C-TEC Corporation Employees' Retirement
Plan, as amended and restated as of January 1, 1989.
"Person" means an individual, a corporation, a partnership, a
limited liability company, an association, a trust or other entity or
organization, including a government (United States or foreign) or political
subdivision or an agency or instrumentality thereof.
"RCN of Delaware" means Residential Communications Network of
Delaware, Inc., a Delaware corporation (formerly, C-TEC Cable University
Systems, Inc.)
"Second Closing Date" means the date of the Second Closing.
"Section 355 Covenants" means the covenants of Seller contained
in Section 8.03 hereof.
"Subsidiaries" means, collectively, the IT Subsidiaries and the
UrbanNet Subsidiaries.
"TEC Air" means TEC Air, Inc., a Delaware corporation.
"TEC Air Business" means the business of owning and operating a
Falcon 200 jet aircraft conducted as of the date hereof primarily through TEC
Air.
"TEC Air Closing Contribution Amount" means the Contribution
Amount with respect to Contributions made directly or indirectly by Seller to
TEC Air after the date hereof and prior to the Second Closing.
"TEC Air Closing Distribution Amount" means the Distribution
Amount with respect to Distributions made directly or indirectly to Seller by
TEC Air after the date hereof and prior to the Second Closing.
"Title IV Plan" means an Employee Plan, other than any
Multiemployer Plan, subject to Title IV of ERISA.
"UrbanNet Business" means Seller's interest in the alternative
residential cable television, telephone and network business operated as of
the date hereof primarily through the UrbanNet Companies. The UrbanNet
Business is operated as of the date hereof under the name "RCN".
"UrbanNet Closing Contribution Amount" means the excess of the
Contribution Amount with respect to all Contributions made directly or
indirectly by Seller to the UrbanNet Companies prior to the First Closing
(including those made prior to the date hereof) over $6,000,000; provided that
(i) if the First Closing Date is later than 90 days after the date hereof, the
UrbanNet Closing Contribution Amount shall be increased by an amount equal to
the interest that would have accrued on all such excess Contributions made
prior to the date hereof if such Contributions had borne interest at the
Adjusted LIBOR Rate for the period from and including the day which is 91 days
after the date hereof to but excluding the First Closing Date, and (ii) if any
Contribution is made after the date hereof, then the UrbanNet Closing
Contribution Amount will be increased by an amount equal to the interest that
would have accrued on each such Contribution had it borne interest at the
Adjusted LIBOR Rate for the period from and including the date of such
Contribution to but excluding the First Closing Date. For purposes hereof
intercompany transactions among the UrbanNet Companies shall be disregarded.
"UrbanNet Closing Distribution Amount" means the Distribution
Amount with respect to all Distributions made directly or indirectly to Seller
by the UrbanNet Companies prior to the First Closing (including those made
prior to the date hereof). For purposes hereof, intercompany transactions
among the UrbanNet Companies will be disregarded.
"UrbanNet Companies" means UrbanNet Parent and UrbanNet
Subsidiaries.
"UrbanNet Parent" means Residential Communications Network,
Inc., a Delaware corporation.
"UrbanNet Subsidiaries" means RCN Operating Services, Inc., a
New Jersey corporation; Residential Communications Network of Washington,
Inc., a Washington corporation; Residential Communications Network of
Pennsylvania, Inc., a Pennsylvania corporation; Residential Communications
Network of Massachusetts, Inc., a Massachusetts corporation; Residential
Communications Network of Maryland, Inc., a Maryland corporation; Residential
Communications Network of Illinois, Inc., an Illinois corporation; Residential
Communications Network of New York, Inc., a New York corporation; Residential
Communications Network of Michigan, Inc., a Michigan corporation; Residential
Communications Network of California, Inc., a California corporation; and
Residential Communications Network of Delaware, Inc., a Delaware corporation.
(b) Each of the following terms is defined in the Section set
forth opposite such term:
Term Section
____ _______
Accounting Referee 8.04
Action 3.10
Alternative Purchase Structure 2.02
Authorizing Board Resolution 10.01
Base UrbanNet Consideration 2.01
Buyer Preamble
CCI 10.03
Certificate Date 10.01
CIT 8.01
CIT Businesses Preamble
CIT Cash Consideration 2.02
CIT Class B Consideration 2.02
CIT Common Stock Consideration 2.02
CIT Fairness Opinion Preamble
CIT Interest Amount 2.02
CIT Internal Reorganization 2.02
CIT Purchase Price 2.02
CLD Preamble
CLD License Agreement 10.05
Commonwealth Companies 2.02
Company Preamble
Company Common Stock Preamble
Company Shares Preamble
Continuing Businesses 10.04
Contracts 3.11
Covered Business 10.02
Covered Business Sale 10.02
C-TEC Preamble
C-TEC Businesses 10.03
C-TEC Restructuring Closing 10.03
C-TEC Restructuring Termination Date 6.02
C-TEC Services 10.03
Designated Businesses 10.01
Developmental Businesses Preamble
Developmental Business Assets 3.09
Exercise Notice 10.01
Facilities 10.03
Federal Tax 8.01
First Closing 2.01
First Trademark Agreement 10.05
Freedom 10.04
Freedom Interest 10.04
Freedom Investment 10.04
Indemnified Party 12.03
Indemnifying Party 12.03
International Asset Transaction 2.02
IRR Interest Amount 10.01
IT Shares 3.02
Letter Ruling 2.02
Liberty 10.04
Liberty Transaction 10.04
Losses 12.02
MFS 3.02
▇▇▇▇▇ Interest Amount 2.02
Net Investment 10.02
Net Profit 10.02
Operating Services 10.03
Other Transferred Employees 9.02
Outstanding Shares 3.02
Post-Closing Tax Period 8.01
Post-First Closing Tax Period 10.01
Post-Second Closing Tax Period 10.01
Post Restructuring Term 10.03
Pre-Closing Tax Period 8.01
Pre-First Closing Tax Period 10.01
Pre-Second Closing Tax Period 10.01
Pro Forma Return 8.04
Purchased Corporations 10.01
RCN Preamble
RCN Businesses 10.03
RCN Services 10.03
Repurchase Closing 10.01
▇▇▇▇▇▇▇▇▇▇ ▇▇.▇▇
▇▇▇▇▇▇▇▇▇▇ Allocated Price 10.01
Repurchase Option 10.01
Repurchase Option Period 10.01
Repurchase Price 10.01
Repurchase Price Certificate 10.01
Repurchase Price Request 10.01
Returns 8.02
Second Closing 2.02
Section 197(f) Election 2.05
Section 338(h)(10) Elections 2.05
Seller Preamble
Seller Group 8.01
Services 10.03
Services Agreement 10.03
Special Committee Preamble
Spin-off 2.02
Successor Individual Account Plan 9.03
Surviving Covenants 12.01
Surviving Representations 12.01
Tax 8.01
Tax Indemnification Period 8.01
Tax Loss 8.08
Tax Sharing Agreement 8.01
Taxing Authority 8.01
Third Party Agreement 10.01
TMH 10.05
Transferred Employee 9.02
UrbanNet Common Stock Preamble
UrbanNet Fairness Opinion Preamble
UrbanNet Internal Reorganization 2.01
UrbanNet Parent Preamble
UrbanNet Purchase Price 2.01
UrbanNet Shares Preamble
UrbanNet Transferred Employees 9.02
UrbanNet Warrant 2.01
Vesting Date 9.02
ARTICLE II
PURCHASE AND SALE
SECTION 2.01. Purchase and Sale of the UrbanNet Business.
(a) Upon the terms and subject to the conditions of this Agreement, Seller
agrees to sell to Buyer, and Buyer agrees to purchase from Seller, the
UrbanNet Shares at the First Closing. The purchase price for the UrbanNet
Shares (the "UrbanNet Purchase Price") is $6,000,000 (the "Base UrbanNet
Consideration"), (i) increased by the UrbanNet Closing Contribution Amount and
(ii) reduced by the UrbanNet Closing Distribution Amount; provided that if the
First Closing Date is later than 90 days after the date hereof, the UrbanNet
Purchase Price shall be increased by an amount equal to the interest that
would have accrued on the Base UrbanNet Consideration had the Base UrbanNet
Consideration borne interest at the Adjusted LIBOR Rate for the period from
and including the day which is 91 days after the date hereof to but excluding
the First Closing Date. The UrbanNet Purchase Price shall be paid as provided
in Section 2.01(b).
(b) First Closing. The closing (the "First Closing") of the
purchase and sale of the UrbanNet Shares hereunder shall take place at the
offices of Seller, ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ on the fifth
business day after satisfaction or waiver of all conditions set forth in
Section 11.01, or at such other time or place as Buyer and Seller may agree.
At the First Closing,
(i) Buyer shall pay to Seller the UrbanNet Purchase Price by
wire transfer in immediately available funds to an account in the
United States, which account shall be designated by Seller no later
than two business days prior to the First Closing Date.
(ii) Seller shall deliver, or cause to be delivered, to Buyer
certificates for the UrbanNet Shares duly endorsed or accompanied by
stock powers duly endorsed in blank, with any required transfer
stamps affixed thereto. Each certificate representing the UrbanNet
Shares shall bear a legend substantially in the following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
BY THE HOLDER FOR ITS OWN ACCOUNT, FOR INVESTMENT PURPOSES AND
NOT WITH A VIEW TO THE DISTRIBUTION OF SUCH SHARES. THE SHARE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE
"ACT") AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT
OR AN EXEMPTION THEREFROM."
(iii) Seller shall not deliver to Buyer the UrbanNet Warrant
referred to in Section 2.01(d).
(c) Determination of UrbanNet Contribution and Distribution
Amounts. Two business days prior to the First Closing Date, Seller shall
deliver to Buyer a certificate executed by the Chairman, the President or any
Vice President of Seller setting forth the UrbanNet Closing Contribution
Amount and the UrbanNet Closing Distribution Amount, and reasonable detail
regarding the calculation of such amounts. If, after the Seller closes the
books of the UrbanNet Business as of the First Closing Date, either or both of
the actual UrbanNet Closing Contribution Amount and UrbanNet Closing
Distribution Amount are different from those amounts set forth in the
certificate delivered to Buyer prior to the First Closing Date, then
appropriate adjustment payments shall be made promptly by Buyer to Seller or
by Seller to Buyer, as the case may be. If Buyer shall disagree as to any
amount described in this Section, the parties will promptly resolve the
dispute in good faith. Prior to the First Closing, Seller will act in good
faith in connection with any transaction that may be construed as a
Contribution to or a Distribution by any UrbanNet Company.
(d) Internal Reorganization; UrbanNet Warrant. Prior to the
First Closing, Seller will cause all of the UrbanNet Subsidiaries to be direct
or indirect wholly owned subsidiaries of UrbanNet Parent (the "UrbanNet
Internal Reorganization"). Immediately prior to the First Closing, UrbanNet
Parent will issue to Seller a warrant to purchase an equity interest in
UrbanNet Parent, which warrant will be in the form set forth as Exhibit A
hereof (the "UrbanNet Warrant"). The transactions described in this Section
2.01(d) and any Distributions made by UrbanNet Parent or the UrbanNet
Subsidiaries indirectly or directly to Seller subsequent to the date hereof
and prior to the First Closing which are unrelated to the UrbanNet Business
shall be disregarded for purposes of calculating Contribution Amounts and
Distribution Amounts.
(e) Intercompany Amounts. Prior to the First Closing, Seller
will capitalize all intercompany obligations owed to Seller or any of its
Affiliates by the UrbanNet Companies. Prior to the Second Closing, Seller
will capitalize all intercompany obligations owed to Seller or any of its
Affiliates by the Company and the IT Subsidiaries.
SECTION 2.02. Purchase and Sale of the CIT Businesses. (a)
Upon the terms and subject to the conditions of this Agreement, Seller
agrees to sell to Buyer, and Buyer agrees to purchase from Seller, the
Company Shares at the Second Closing. The purchase price for the Company
Shares (the "CIT Purchase Price") is $100,088,000, (i) increased by the sum
of (a) the Aggregate CIT Contribution Amount and (b) the accrued interest
on the ▇▇▇▇▇ Note as of the Second Closing Date (the "▇▇▇▇▇ Interest
Amount"), and (ii) reduced by the Aggregate CIT Distribution Amount.
The CIT Purchase Price may be paid in any combination, as
determined by Buyer in its sole discretion, of (i) cash (the "CIT Cash
Consideration"), (ii) a number of C-TEC Class B Shares (the "CIT Class B
Consideration") and (iii) a number of C-TEC Common Shares (the "CIT Common
Stock Consideration"), where the aggregate value of (i), (ii) and (iii)
equals the CIT Purchase Price; provided that if (x) the Second Closing does
not occur on or prior to the 90th day hereafter and (y) Buyer elects to
pay all or a portion of the CIT Purchase Price in cash, then the CIT
Purchase Price and the CIT Cash Consideration will each be increased by an
amount (the "CIT Interest Amount") equal to the interest that would have
accrued on that portion of the CIT Purchase Price which would have been
paid in cash but for the effect of this proviso if such portion had borne
interest at the Adjusted LIBOR Rate for the period from and including the
day which is 91 days after the date hereof to but excluding the Second
Closing Date. If the CIT Purchase Price includes any amount in respect of
a Contribution made to, or a Distribution made by, one of the CIT
Businesses after the 91st day after the date hereof, the CIT Interest
Amount will be adjusted appropriately. Buyer shall notify Seller not later
than two business days before the Second Closing Date of Buyer's
determination as to the allocation of the consideration it will deliver.
The Purchase Price shall be paid as provided in Section 2.02(b).
For purposes of this Section 2.02, (i) the CIT Class B
Consideration, if any, shall be valued based on the average closing price of
C-TEC Class B Shares on the Nasdaq SmallCap Market for the ten trading days
ending on the earlier of the Second Closing Date and 90 days after the date
hereof; and (ii) the CIT Common Stock Consideration, if any, shall be valued
based on the average closing price of C-TEC Common Shares on the Nasdaq Stock
Market for the ten trading days ending on the earlier of the Second Closing
Date and 90 days after the date hereof.
The parties agree that no Contributions will be made to
International between the date hereof and the Second Closing Date.
(b) Second Closing. The closing (the "Second Closing") of the
purchase and sale of the Company Shares hereunder shall take place at the
offices of Seller, ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ on the fifth
business day after satisfaction or waiver of all conditions set forth in
Section 11.02, or at such other time or place as Buyer and Seller may agree.
At the Second Closing,
(i) Buyer shall deliver to Seller:
(A) the CIT Cash Consideration, if any, by wire transfer in
immediately available funds to an account in the United States, which
account shall be designated by Seller no later than two business days
prior to the Second Closing Date;
(B) certificates for the CIT Class B Consideration, if any,
duly endorsed or accompanied by stock powers duly endorsed in blank,
with any required transfer stamps affixed thereto; and
(C) certificates for the CIT Common Stock Consideration, if
any, duly endorsed or accompanied by stock powers duly endorsed in
blank, with any required transfer stamps affixed thereto.
(ii) Seller shall deliver, or cause to be delivered, to Buyer
certificates for the Company Shares duly endorsed or accompanied by stock
powers duly endorsed in blank, with any required transfer stamps affixed
thereto. Each certificate representing the Company Shares shall bear a legend
substantially in the following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
BY THE HOLDER FOR ITS OWN ACCOUNT, FOR INVESTMENT PURPOSES AND
NOT WITH A VIEW TO THE DISTRIBUTION OF SUCH SHARES. THE SHARE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE
"ACT") AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT
OR AN EXEMPTION THEREFROM."
(c) Determination of CIT Contribution and Distribution
Amounts. Two business days prior to the Second Closing Date, Seller shall
deliver to Buyer a certificate executed by the Chairman, the President or any
Vice President of Seller setting forth the Aggregate CIT Contribution Amount,
the Aggregate CIT Distribution Amount, the ▇▇▇▇▇ Interest Amount and
reasonable detail regarding the calculation of such amounts. If, after the
Seller closes the books of the CIT Businesses as of the Second Closing Date,
any or all of the actual amounts referred to in the preceding sentence are
different from those amounts set forth in the certificate delivered to Buyer
prior to the Second Closing Date, then appropriate adjustment payments shall
be made promptly by Buyer to Seller or by Seller to Buyer, as the case may be.
If Buyer shall disagree as to any amount described in this Section, the
parties will promptly resolve the dispute in good faith. Prior to the Second
Closing, Seller will act in good faith in connection with any transaction that
may be construed as a Contribution to or a Distribution by the Company,
International or TEC Air.
(d) Internal Reorganization. If the Alternative Purchase
Structure (as hereinafter defined) is not elected, then, prior to the Second
Closing, Seller will cause the IT Subsidiaries to be direct or indirect wholly
owned subsidiaries of CLD (the "CIT Internal Reorganization"). Both the
transaction described in this Section 2.02(d) and any Distributions made by
CLD or the IT Subsidiaries directly or indirectly to Seller subsequent to the
date hereof and prior to the Second Closing which are unrelated to the CIT
Businesses (including, without limitation, the distribution by the Company of
its interest in the C-DON Partnership, a Pennsylvania general partnership)
shall be disregarded for purposes of calculating Contribution Amounts and
Distribution Amounts.
(e) Exclusion of CLD. The parties acknowledge that among the
transaction structures being considered in connection with the evaluation by
the Board of Directors of Seller of the C-TEC Restructuring are structures
that would involve the spin-off to C-TEC's shareholders of either (i)
Commonwealth Communications, Inc. and Commonwealth Telephone Company (the
"Commonwealth Companies") or (ii) the domestic cable television business of
Seller (each, a "Spin-off"). If the Seller were to decide to effect a
Spin-off, Seller intends to request from the IRS an advance letter ruling
that, among other things, the Spin-off will qualify as a tax free spin-off
within the meaning of Section 355 of the Code (the "Letter Ruling"), without
the inclusion of CLD as part of the Commonwealth Companies. If the conditions
set forth in Section 11.02(a)(vii) and 11.02(b)(viii) hereof shall not have
been previously satisfied or waived, and if Seller and Buyer, after
consultation with their respective counsel, agree that inclusion of CLD as
part of the Commonwealth Companies in the Spin-off is advisable to obtain the
Letter Ruling, then the transactions contemplated by this Agreement shall be
modified as follows: (i) CLD and the CLD Business shall not be purchased and
sold pursuant hereto, (ii) at the Second Closing, Buyer or Buyer Designee will
purchase (x) the International Business by purchasing the assets of
International (including the Megacable Interest and the ▇▇▇▇▇ Note) and
assuming, or causing a subsidiary to assume, the liabilities of International
(the "International Asset Transaction") and (y) the TEC Air Business by
purchasing the shares of TEC Air, (iii) the CIT Purchase Price shall be
reduced by an amount equal to $20,000,000 and, notwithstanding Section
2.02(a), shall not be adjusted for the CLD Closing Contribution Amount or the
CLD Closing Distribution Amount and (iv) the other provisions of this
Agreement shall be construed in light of the foregoing. Buyer and Seller
agree to act in good faith in all matters concerning the inclusion or
exclusion of CLD as part of the Commonwealth Companies.
(f) Buyer and Seller acknowledge that although this
Agreement contemplates that Buyer will purchase the CIT Businesses through
Buyer's purchase of the Company Shares, Buyer shall have the right, at its
election, to purchase the CIT Businesses by instead purchasing the Company
Shares and the capital stock of TEC Air and by effecting the International
Asset Transaction (the "Alternative Purchase Structure"). If Buyer elects
the Alternative Purchase Structure, the other provisions of this Agreement
shall be construed in light of the revised structure. If Buyer proposes to
purchase International separately then Seller may elect, at its option, to
have the purchase and sale of the International Business effected through
the International Asset Transaction, and in that event the other provisions
of this Agreement shall be construed in light of the alternative structure.
SECTION 2.03. Consideration of Other Structures. The
parties will cooperate with each other in good faith in considering other
structures (both for the purchases provided for in this Article II and for
the repurchases provided for in Section 10.01) that may be preferable from
a legal, business or tax perspective. If either party proposes an
alternative transaction structure, the other party will cooperate in
effecting such alternative structure provided that such second party is not
adversely affected thereby in any material respect and further provided
that any such alternative structure receives C-TEC Board Approval.
SECTION 2.04. Construction of Agreement as it Relates to the
Closings. This Agreement provides for two sets of transactions: (i) the
purchase and sale of the UrbanNet Business and (ii) the purchase and sale of
the CIT Businesses. References in this agreement to the First Closing relate
solely to the purchase and sale of the UrbanNet Business and related matters,
and references in this agreement to the Second Closing relate solely to the
purchase and sale of the CIT Businesses and related matters. References in
this Agreement to a "Closing Date" refer to each of the First Closing Date and
the Second Closing Date, as applicable.
SECTION 2.05. Elections Under Section 338(h)(10) and Section
197(f). (a) With respect to any stock purchase described in Section 2.01 or
Section 2.02 or effected pursuant to Section 2.03 for which an election under
Section 338(h)(10) of the Code may be made, if Buyer elects, in its sole
discretion, Buyer and Seller shall join in making an election under Section
338(h)(10) of the Code and under comparable provisions of state and local tax
law (together, the "Section 338(h)(10) Elections") with respect to such stock
purchase.
(b) If Buyer and Seller join in making a Section 338(h)(10)
Election, Seller shall, if requested by Buyer, make the election under Section
197(f)(9)(B) of the Code (the "Section 197(f) Election").
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
As of the date hereof, the First Closing Date (as applicable)
and the Second Closing Date (as applicable), Seller hereby represents and
warrants as follows:
SECTION 3.01. Corporate Organization. Seller, UrbanNet
Parent, the Company and the Subsidiaries are corporations duly organized,
validly existing and in good standing under the laws of their respective
jurisdictions of incorporation and have all requisite corporate power and
authority to own their properties and assets and to conduct their businesses
as now conducted. Copies of the articles or certificate of incorporation, as
the case may be, and by-laws of Seller, UrbanNet Parent, the Company and the
Subsidiaries, with all amendments thereto to the date hereof, have been
furnished to Buyer or its representatives, and such copies are accurate and
complete as of the date hereof.
SECTION 3.02. Capitalization; Title to Shares. The
authorized capital stock of the UrbanNet Parent, the Company and the
Subsidiaries, and the number of shares of each which are issued and
outstanding (the "Outstanding Shares"), are set forth on Schedule 3.02
hereto. The Outstanding Shares have been duly authorized and validly
issued, and are fully paid and nonassessable and no personal liability
attaches to the ownership thereof. The Outstanding Shares represent all of
the issued and outstanding shares of capital stock of the relevant company,
and, except for (i) the UrbanNet Warrant and (ii) any equity interest
issued by one or more of the UrbanNet Companies to MFS Communications
Company, Inc. or any of its Affiliates ("MFS") on terms approved by Buyer
in its sole discretion (with C-TEC Board Approval), there are no
outstanding options, warrants, agreements, conversion rights, preemptive
rights or other rights to subscribe for, purchase or otherwise acquire the
Outstanding Shares or any unissued or treasury shares of capital stock of
such companies. The Outstanding Shares are owned as of the date hereof
directly or indirectly by Seller free and clear of any Liens. As of the
First Closing Date, Seller will own, directly or indirectly, all of the
UrbanNet Shares, and UrbanNet Parent will own, directly or indirectly, all
of the Outstanding Shares constituting capital stock of UrbanNet
Subsidiaries, free and clear of any Liens. Seller will transfer and
deliver, or cause to be transferred and delivered, to Buyer at the First
Closing valid and marketable title to the UrbanNet Shares, free and clear
of any Lien. As of the Second Closing Date, (x) Seller will own, directly
or indirectly, all of the Company Shares, and all of the Outstanding Shares
constituting capital stock of International and TEC Air (the "IT Shares"),
free and clear of any Liens and (y) unless the Alternative Purchase
Structure is elected, CLD will own the IT Shares free and clear of any
Liens. At the Second Closing, Seller will transfer and deliver, or cause
to be transferred and delivered, to Buyer the Company Shares free and clear
of any Liens (and, if the Alternative Purchase Structure is elected, the
capital stock of TEC Air free and clear of any Liens). If the
International Asset Transaction is effected (whether as a result of Buyer's
election to utilize the Alternative Purchase Structure or otherwise), then
at the Second Closing Seller will transfer and deliver or cause to be
transferred and delivered to Buyer good and marketable title to the assets
of International free and clear of any Liens other than Liens disclosed to
Buyer in writing prior to the date hereof.
SECTION 3.03. Authorization; Validity of Agreement. Seller
has the corporate power and authority to enter into this Agreement and to
carry out its obligations hereunder. The execution, delivery and performance
of this Agreement has been duly authorized and approved by all necessary
corporate action by the Board of Directors of Seller and no other corporate
proceedings on the part of Seller are necessary to authorize and approve such
execution, delivery and performance. This Agreement has been duly executed by
Seller and constitutes the valid and binding obligation of Seller, enforceable
against it in accordance with its terms, except that such enforcement may be
subject to bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights and to general
principles of equity.
SECTION 3.04. No Conflict or Violation. Except for the
matters set forth in Section 3.05, the execution, delivery and performance
by Seller of this Agreement (i) does not and will not violate or conflict
with any provision of the articles or certificate of incorporation, as the
case may be, or by-laws of Seller, UrbanNet Parent, the Company or any
Subsidiary; (ii) does not and will not violate any provision of law, or
any order, judgment or decree of any court or other governmental or
regulatory authority binding upon or applicable to Seller, UrbanNet Parent,
the Company or any Subsidiary; (iii) will not violate any contract, lease,
loan agreement, mortgage, security agreement, trust indenture or other
agreement or instrument to which Seller, the Company, UrbanNet Parent or
any Subsidiary is a party or by which any of them is bound or to which any
of their properties or assets is subject; and (iv) will not result in the
creation or imposition of any Lien of any kind whatsoever upon any of the
properties or assets of Seller, the Company, UrbanNet Parent or any
Subsidiary; subject to such exceptions in the case of clauses (ii), (iii)
and (iv) as would not in the aggregate have a Material Adverse Effect or
interfere in any material respect with the transactions contemplated
hereby.
SECTION 3.05. Consents and Approvals. (a) Subject to such
exceptions as would not in the aggregate have a Material Adverse Effect or
interfere in any material respect with the transactions contemplated hereby
and except as set forth on Schedule 3.05(a), the execution, delivery and
performance by Seller of this Agreement, and the consummation by Seller of
the transactions contemplated hereby do not require the consent, approval
or action of, or any filings with or the giving of any notice to, any
public, governmental or judicial authority, agency or official.
(b) Except as set forth on Schedule 3.05(b), no consent,
approval, waiver or other action by any Person (other than any governmental or
judicial, authority, agency or official referred to in (a) above) under any
contract, agreement, indenture, lease, instrument or other document to which
Seller, the Company, UrbanNet Parent or any Subsidiary is a party or by which
any of them is bound is required or necessary for the execution, delivery and
performance of this Agreement by Seller or the consummation of the
transactions contemplated hereby, subject to such exceptions as would not in
the aggregate have a Material Adverse Effect or interfere in any material
respect with the transactions contemplated hereby.
SECTION 3.06. Financial Statements. The Financial
Statements were prepared on a consistent basis in accordance with generally
accepted accounting principles (except that they do not include footnote
disclosure) and present fairly, in all material respects, the financial
position of (i) CLD, (ii) International, (iii) TEC Air, (iv) UrbanNet Parent
and the UrbanNet Subsidiaries (other than RCN of Delaware) (on a pro forma
consolidated basis) and (v) RCN of Delaware, respectively, as of the Balance
Sheet Date and their respective results of operations for the year ended on
such date.
SECTION 3.07. Absence of Certain Changes. Except as set
forth on Schedule 3.07, since the Balance Sheet Date, the Company, UrbanNet
Parent and each Subsidiary has conducted its business in the Ordinary Course
and there have not been (i) any events or conditions that, in the aggregate,
have had or would reasonably be expected to have a Material Adverse Effect,
(ii) any changes, by the Company, UrbanNet Parent or any Subsidiary in any
method of accounting or accounting practice, (iii) prior to the date hereof,
any Contributions made directly or indirectly by Seller to the Company,
UrbanNet Parent or any Subsidiary or (iv) prior to the date hereof, any
Distributions made directly or indirectly by the Company, UrbanNet Parent or
any Subsidiary to Seller.
SECTION 3.08. Absence of Undisclosed Liabilities. There
are no liabilities of the Company, UrbanNet Parent or any Subsidiary of any
kind (absolute or contingent) other than: (i) liabilities provided for in the
Balance Sheets, (ii) liabilities incurred in the Ordinary Course since the
Balance Sheet Date and (iii) other liabilities which in the aggregate are not
material to the Company, UrbanNet Parent and the Subsidiaries, taken as a
whole.
SECTION 3.09. Title to Properties; Encumbrances.
(a) The assets (tangible and intangible) owned or leased by
the Company, UrbanNet Parent and the Subsidiaries, or which they (i) otherwise
have the right to use or (ii) will own, lease or otherwise have the right to
use as of the applicable Closing Date, constitute all of the assets of Seller
and its subsidiaries held for use or used primarily in connection with the
Developmental Businesses and are generally adequate to conduct such businesses
as currently conducted.
(b) The Company, UrbanNet Parent and the Subsidiaries do not
own any material assets (tangible or intangible) other than those used
primarily in, or held primarily in connection with, the Developmental
Businesses.
(c) The Company, UrbanNet Parent and each Subsidiary has
good and valid title to its respective assets as reflected on the Balance
Sheets (except for assets sold in the Ordinary Course since the Balance
Sheet Date), free and clear of all defects and Liens except: (i) Liens
disclosed to Buyer in writing prior to the date hereof (ii) Liens arising
in the Ordinary Course, or deposits to obtain the release of such Liens;
(iii) Liens for current taxes not yet due and payable; and (iv) Liens or
minor imperfections of title that do not interfere with the use or detract
from the value of such property and in the aggregate do not have a Material
Adverse Effect.
(d) Upon consummation of the transactions contemplated by this
Agreement, (i) Buyer will obtain, through acquisition of the UrbanNet Shares
and the Company Shares (and/or, if applicable, the capital stock of TEC Air
and the assets (and liabilities) of International) and through the services
and arrangements described in Sections 10.03 and 10.04, all of the properties
and assets (tangible and intangible) that are used in and necessary to the
conduct of the Developmental Businesses by Seller (the "Developmental Business
Assets"), and (ii) there will be no significant properties, assets, services
or arrangements used in the operation of the Developmental Business(es)
acquired on such date and owned by any Person that will not be leased or
licensed or provided to Buyer under valid, current leases or license or other
arrangements.
SECTION 3.10. Litigation. (a) Except as set forth on
Schedule 3.10, there is no action, suit, investigation or proceeding (or any
basis therefor) pending against, or to the knowledge of Seller threatened
against or affecting, Seller, the Company, UrbanNet Parent or any Subsidiary
or any of their respective properties before any court or arbitrator or any
governmental body, agency, official or authority (each, an "Action") which, if
determined or resolved adversely to the Seller, Company, UrbanNet Parent or
any Subsidiary in accordance with the plaintiff's demands, would reasonably be
expected to have a Material Adverse Effect.
(b) Except as disclosed to Buyer in writing prior to the date
hereof, there is no Action which in any manner challenges or seeks to prevent,
enjoin, alter or materially delay the transactions contemplated hereby.
SECTION 3.11. Material Contracts. Except for agreements,
contracts, plans, leases, arrangements or commitments ("Contracts") set
forth on Schedule 3.11, or entered into after the date hereof on terms and
conditions reasonably acceptable to Buyer, none of the Company, UrbanNet
Parent or any Subsidiary is a party to or subject to any material Contract.
SECTION 3.12. Compliance with Laws; No Defaults. Except as
set forth on Schedule 3.12, none of the Company, UrbanNet Parent or any
Subsidiary is in violation of any applicable provisions of any laws, statutes,
ordinances or regulations, except for violations, if any, (i) disclosed to
Buyer in writing prior to the date hereof or (ii) that have not had and would
not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect.
SECTION 3.13. Finders' Fees. Except for ▇▇▇▇▇▇▇ ▇▇▇▇▇ &
Co. and ▇▇▇▇▇▇▇▇▇, Lufkin & ▇▇▇▇▇▇▇▇ Securities Corporation, whose fees will
be paid by Seller, there is no investment banker, broker, finder or other
intermediary that has been retained by or is authorized to act on behalf of
Seller, the Company, UrbanNet Parent or any Subsidiary who might be entitled
to any fee or commission from Buyer, the Company or any of their respective
subsidiaries upon consummation of the transactions contemplated by this
Agreement.
SECTION 3.14. Environmental Matters. (a) There are no
liabilities of or relating to the Company, UrbanNet Parent or any Subsidiary,
whether contingent or fixed, actual or potential, known or unknown, which (i)
arise under or relate to matters covered by any environmental laws and (ii)
relate to actions occurring or conditions existing on or prior to the Closing
Date, which in any event, have had or may reasonably be expected to have a
Material Adverse Effect.
(b) There has been no material environmental assessment
investigation, study, audit, test, review or other analysis conducted of which
Seller has knowledge in relation to the current or prior business of the
Company, UrbanNet Parent or any Subsidiary or any property or facility now or
previously leased or owned by the Company, UrbanNet Parent or any Subsidiary
which has not been delivered to Buyer prior to the date hereof.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
As of the date hereof and the Closing Date, Buyer hereby
represents and warrants as follows:
SECTION 4.01. Corporate Organization. Buyer is a
corporation duly organized, validly existing and in good standing under the
laws of the state of Delaware and has all requisite corporate power and
authority to own its properties and assets and to conduct its business as now
conducted. Copies of the articles of incorporation and the by-laws of Buyer,
with all amendments thereto to the date hereof, have been furnished to Seller
or its representatives, and such copies are accurate and complete as of the
date hereof.
SECTION 4.02. Authorization; Validity of Agreement. Buyer
has the corporate power and authority to enter into this Agreement and to
carry out its obligations hereunder. The execution, delivery and performance
of this Agreement has been duly authorized and approved by all necessary
corporate action by the Board of Directors of Buyer and no other corporate
proceedings on the part of Buyer are necessary to authorize such execution,
delivery and performance. This Agreement has been duly executed by Buyer and
constitutes the valid and binding obligation of Buyer enforceable against
Buyer in accordance with its terms, except that such enforcement may be
subject to bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights and to general
principles of equity.
SECTION 4.03. Title to the C-TEC Shares. If Buyer shall
elect to deliver C-TEC Shares as all or part of the consideration for the
Company Shares in accordance with Section 2.02, then at the Closing, Buyer
will be the record and beneficial owner of the C-TEC Shares to be delivered,
free and clear of any Lien whatsoever, and will transfer and deliver to Seller
at the Closing valid title to such C-TEC Shares free and clear of any Lien.
SECTION 4.04. No Conflict or Violation. Except for the
matters set forth in Section 4.05(a), the execution, delivery and performance
by Buyer of this Agreement (i) does not and will not violate or conflict with
any provision of its articles of incorporation or by-laws; (ii) does not and
will not violate any provision of law, or any order, judgment or decree of any
court or other governmental or regulatory authority binding upon or applicable
to Buyer; and (iii) will not violate any contract, lease, loan agreement,
mortgage, security agreement, trust indenture or other agreement or instrument
to which Buyer is a party or by which it is bound or to which any of its
properties or assets is subject, subject to such exceptions in the case of
clauses (ii) and (iii) as would not materially interfere with the transactions
contemplated hereby.
SECTION 4.05. Consents and Approvals. (a) Subject to such
exceptions as would not interfere in any material respect with the
transactions contemplated hereby, the execution and delivery by Buyer of this
Agreement, the performance of Buyer of its obligations hereunder and the
consummation by Buyer of the transactions contemplated hereby do not require
the consent, approval or action of, or filings with or the giving of any
notice to, any public, governmental or judicial authority, agency or official
except as set forth on Schedule 3.05(a).
(b) Subject to such exceptions as would not interfere in any
material respect with the transactions contemplated hereby, no consent,
approval, waiver or other action by any Person (other than any public,
governmental or judicial authority, agency or official referred to in (a)
above) under any contract, agreement, indenture, lease, instrument or other
document to which Buyer is a party or by which it is bound is required or
necessary for the execution, delivery and performance of this Agreement by
Buyer or the consummation of the transactions contemplated hereby.
SECTION 4.06. Finders' Fees. Except for Salomon Brothers
Inc, whose fees will be paid by Buyer, there is no investment banker, broker,
finder or other intermediary which has been retained by or is authorized to
act on behalf of Buyer who might be entitled to any fee or commission from
Seller or any of its Affiliates upon consummation of the transactions
contemplated by this Agreement.
SECTION 4.07. Litigation. Except as disclosed to Seller in
writing prior to the date hereof, there is no action, suit, investigation or
proceeding (or any basis therefor) pending against, or to the knowledge of
Buyer threatened against or affecting, Buyer or any of its properties before
any court or arbitrator or any governmental body, agency, official or
authority which in any manner challenges or seeks to prevent, enjoin, alter or
materially delay the transactions contemplated hereby.
SECTION 4.08. Investment Intent and Knowledge. Buyer is
acquiring the Company Shares, the UrbanNet Shares (and, if applicable, the
capital stock of TEC Air and the assets (and liabilities) of International)
for its own account, for investment purposes and not with a view to the
distribution thereof, nor with any present intent of distributing such shares
or assets. Buyer has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of its
investment in the Company Shares, the UrbanNet Shares (and, if applicable, the
capital stock of TEC Air and the assets (and liabilities) of International) as
contemplated by this Agreement, and is able to bear the economic risk of such
investment for an indefinite period of time. Buyer acknowledges that it is an
affiliate of Seller.
SECTION 4.09. Balance Sheet. The unaudited balance sheet
as of December 31, 1995 for Buyer, in the form delivered by Buyer to Seller,
was prepared in accordance with generally accepted accounting principles
applied on a consistent basis (except that it does not include footnote
disclosure) and presents fairly, in all material respects, the financial
position of Buyer as of such date.
SECTION 4.10. Freedom Investment. The Freedom Investment
referred to in Section 10.04 was $27,000,000 as of March 5, 1996.
ARTICLE V
COVENANTS OF SELLER
Seller agrees that:
SECTION 5.01. Conduct of the Company. From the date hereof
until the First or Second Closing Date (as applicable), Seller shall cause the
Company, UrbanNet Parent and the Subsidiaries to conduct their businesses in
the Ordinary Course and to use their best efforts to preserve intact their
business organizations and relationships with third parties and to keep
available the services of their present officers and employees.
SECTION 5.02. Access to Information. From the date hereof
until the First or Second Closing Date (as applicable), upon reasonable
notice, Seller (a) will give, and will cause the Company, UrbanNet Parent and
each Subsidiary to give, Buyer, its counsel, financial advisors, auditors and
other authorized representatives such access to the offices, properties, books
and records of the Company, UrbanNet Parent and the Subsidiaries and to the
books and records of Seller relating to the Company, UrbanNet Parent and the
Subsidiaries as Buyer may reasonably request, (b) will furnish, and will cause
the Company, UrbanNet Parent and each Subsidiary to furnish, to Buyer, its
counsel, financial advisors, auditors and other authorized representatives
such financial and operating data and other information relating to the
Company, UrbanNet Parent and the Subsidiaries as such Persons may reasonably
request and (c) will instruct the employees, counsel and financial advisors of
Seller, the Company, UrbanNet Parent and the Subsidiaries to cooperate with
Buyer in its investigation of the Company, UrbanNet Parent and the
Subsidiaries.
SECTION 5.03. Notice of Certain Events. Seller shall
promptly notify Buyer of:
(i) any notice or other communication from any Person
alleging that the consent of such Person is or may be required in
connection with the transactions contemplated by this Agreement;
(ii) any notice or other communication from any governmental
or regulatory agency or authority in connection with the transactions
contemplated by this Agreement; and
(iii) any actions, suits, claims, investigations or
proceedings, commenced or, to its knowledge threatened against,
relating to or involving or otherwise affecting Seller, the Company
or any Subsidiary that relate to the consummation of the transactions
contemplated by this Agreement.
SECTION 5.04. Noncompetition. (a) Seller agrees that for
a period of two full years from the First Closing Date, neither Seller nor any
of its subsidiaries shall (i) engage in any business that competes directly
with the UrbanNet Business in any given line of business in any given location
provided that as of the date of this Agreement the UrbanNet Business either
engages, or intends to engage within such two year period, in that specific
line of business in such location or (ii) except as otherwise contemplated
hereby, employ any employee of the UrbanNet Business.
(b) Seller agrees that for a period of two full years from the
Second Closing Date, neither Seller nor any of its subsidiaries shall (i)
engage in any given location in any business that competes directly with the
International Business or the CLD Business (unless CLD is excluded from the
transactions contemplated hereby pursuant to Section 2.02(e)) in a specific
line of business operated by the International Business or the CLD Business
(unless excluded) in such location as of the date hereof or (ii) except as
otherwise contemplated hereby, employ any employee of the International
Business or the CLD Business (unless CLD is excluded from the transactions
contemplated hereby pursuant to Section 2.02(e)).
(c) For purposes of this Agreement, the provision of goods or
services to commercial customers, on the one hand, and non-commercial
customers, on the other hand, will be treated as separate lines of business.
ARTICLE VI
COVENANTS OF BUYER
Buyer agrees that:
SECTION 6.01. Confidentiality. Prior to the First or
Second Closing Date (as applicable) and after any applicable termination of
this Agreement, Buyer and its Affiliates will hold, and will use their
reasonable best efforts to cause their respective officers, directors,
employees, accountants, counsel, consultants, advisors and agents to hold, in
confidence, unless compelled to disclose by judicial or administrative process
or by other requirements of law, all confidential documents and information
concerning the Company, UrbanNet Parent and the Subsidiaries furnished to
Buyer or its Affiliates in connection with the transactions contemplated by
this Agreement, except to the extent that such information can be shown to
have been (i) previously known on a nonconfidential basis by Buyer, (ii) in
the public domain through no fault of Buyer or (iii) later lawfully acquired
by Buyer without any obligation of confidentiality to Seller or its
Affiliates, as applicable; provided that Buyer may disclose such information
to its officers, directors, employees, accountants, counsel, consultants,
advisors and agents in connection with the transaction contemplated by this
Agreement and Buyer will be responsible for any breach of this Section 6.01 by
any such Person. The obligation of Buyer and its Affiliates to hold any such
information in confidence shall be satisfied if they exercise the same care
with respect to such information as they would take to preserve the
confidentiality of their own similar information. If this Agreement is
terminated, Buyer and its Affiliates will, and will use their reasonable best
efforts to cause their respective officers, directors, employees, accountants,
counsel, consultants, advisors and agents to, destroy or deliver to Seller,
upon request, all documents and other materials, and all copies thereof,
obtained by Buyer or its Affiliates or on their behalf from Seller, the
Company, UrbanNet Parent or the Subsidiaries in connection with this Agreement
that are subject to such confidence.
SECTION 6.02. Standstill. During the period beginning on
the date hereof and ending on the first anniversary of the C-TEC
Restructuring Termination Date, subject to Buyer's obligations under that
certain letter to the Special Committee dated December 28, 1995, Buyer will
not sell, pledge, encumber or otherwise transfer, or agree to sell, pledge,
encumber or otherwise transfer, directly or indirectly, any C-TEC Shares
owned by Buyer on the date hereof, if after giving effect thereto, the C-
TEC Shares owned by Buyer and not subject to any Lien would represent less
than 40% of the C-TEC Total Voting Power or 40% of the total number of C-
TEC Shares outstanding on the date hereof; provided, however, that Buyer
may (i) deliver C-TEC Shares in accordance with Article II of this
Agreement, (ii) sell C-TEC Shares pursuant to a tender or exchange offer or
other extraordinary transaction made by C-TEC or recommended by the C-TEC
Board of Directors to C-TEC's stockholders, (iii) convert C-TEC Class B
Shares into C-TEC Common Shares pursuant to the Articles of Incorporation
of Seller and (iv) deliver C-TEC Shares in connection with and pursuant to
a C-TEC Restructuring; provided further, that the obligations of the Buyer
under this Section 6.02 shall terminate immediately if the C-TEC
Restructuring is consummated. As used herein, the term "C-TEC
Restructuring Termination Date" means the date, if any, as of which the
Board of Directors of C-TEC determines that C-TEC should discontinue its
consideration of the C-TEC Restructuring as a possible strategic
alternative or enter into any agreement or take any action that would
render the C-TEC Restructuring infeasible.
SECTION 6.03. Change of Name. Buyer acknowledges that the
name "C-TEC" is, to the extent owned by Seller, the Company, UrbanNet Parent
or any Subsidiary, an asset of Seller and no right to such name is transferred
hereby. Promptly after the Second Closing Date, Buyer shall cause the IT
Subsidiaries to change their names to delete any reference therein to the name
"C-TEC".
ARTICLE VII
COVENANTS OF BOTH PARTIES
The parties hereto agree that:
SECTION 7.01. Best Efforts. Subject to the terms and
conditions of this Agreement, each party will use its reasonable best efforts
to take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary or desirable under applicable laws and regulations to
consummate the transactions contemplated by this Agreement. Seller and Buyer
each agree, and Seller, prior to the First or Second Closing (as applicable),
and Buyer, after the First or Second Closing (as applicable), agree to cause
the Company, UrbanNet Parent and the Subsidiaries (as the case may be), to
execute and deliver such other documents, certificates, agreements and other
writings and to take such other actions as may be necessary or desirable in
order to consummate or implement expeditiously the transactions contemplated
by this Agreement. Seller, after the First or Second Closing (as applicable),
agrees to take such actions as may be necessary or desirable, if any, to
transfer to Buyer any Developmental Business Assets, to the extent such assets
were not transferred by Seller to Buyer at such Closing. Buyer, after the
First or Second Closing (as applicable), agrees to take such actions as may be
necessary or desirable, if any, to transfer back to Seller any properties and
assets which are not Developmental Business Assets, to the extent such
properties and assets were transferred by Seller to Buyer at such Closing.
SECTION 7.02. Certain Filings. Seller and Buyer shall
cooperate with one another (a) in determining whether any action by or in
respect of, or filing with, any governmental body, agency, official or
authority is required, or any actions, consents, approvals or waivers are
required to be obtained from parties to any material Contracts, in connection
with the consummation of the transactions contemplated by this Agreement and
(b) in taking such actions or making any such filings, furnishing information
required in connection therewith and seeking timely to obtain any such actions
consents, approvals or waivers.
SECTION 7.03. Public Announcements. The parties agree to
consult with each other before issuing any press release or making any public
statement with respect to this Agreement or the transactions contemplated
hereby and, except as may be required by applicable law or any listing
agreement with any national securities exchange or automated interdealer
quotation system, will not issue any such press release or make any such
public statement prior to such consultation and without the prior written
approval of the other party, which shall not be unreasonably withheld.
SECTION 7.04. Books and Records. (a) For a period of five
years after the First or Second Closing Date (as applicable), Seller shall
retain all of its books and records relating to the relevant Developmental
Business for periods prior to such Closing Date and Buyer shall have the right
to inspect and copy such books and records during normal business hours, upon
reasonable prior notice, in connection with the preparation of financial
statements, reports and filings and for any other reasonable purpose.
(b) For a period of five years after the First or Second
Closing Date (as applicable), Buyer shall cause the Company, UrbanNet Parent
and the Subsidiaries (as applicable) to retain all of their books and records
relating to the Developmental Business that include the period ending on such
Closing Date, and Seller shall have the right to inspect and copy such books
and records during normal business hours, upon reasonable prior notice, in
connection with the preparation of financial statements, reports and filings
and for any other reasonable purpose.
(c) Each party will hold, and will use its reasonable best
efforts to cause its officers, directors, employees, accountants, counsel,
consultants, advisors and agents to hold, in confidence, unless compelled to
disclose by judicial or administrative process or by other requirements of
law, all confidential documents and information concerning the Company,
UrbanNet Parent and the Subsidiaries provided to it pursuant to this Section
7.04.
SECTION 7.05. Intercompany Accounts. Except as
contemplated by this Agreement and except for the intercompany contracts set
forth in Schedule 7.05 and subject to Section 2.01(e), no intercompany
accounts or contracts between Seller or its Affiliates, on the one hand, and
the Company, UrbanNet Parent or the Subsidiaries, on the other hand, will be
outstanding or in existence as of the Closing.
SECTION 7.06. Section 338(h)(10) Elections. (a) No later
than seven months after the Second Closing Date, Buyer and Seller agree, if
Buyer requests that Section 338(h)(10) Elections be made pursuant to Section
2.05 hereof, to consult with each other in order to determine all calculations
and allocations required by the Treasury Regulations under Section 338 of the
Code and any similar provisions of state or local law. Buyer and Seller agree
to negotiate in good faith and use their best efforts to resolve any dispute
concerning the calculations and allocations.
(b) Buyer shall prepare and deliver to Seller a draft of IRS
Form 8023-A (Corporate Qualified Stock Purchases), which will reflect the
calculations and allocations agreed to by the parties pursuant to Section
7.06(a) or determined by the Accounting Referee pursuant to Section 8.04(f),
and all additional data and materials required to be attached to such form for
Seller's review by the 30th day prior to the date such form is required to be
filed (determined with regard to any extension of time for filing) with the
Internal Revenue Service. Buyer shall timely file IRS Form 8023-A with the
Internal Revenue Service.
(c) Buyer agrees to attach a copy of the Form 8023-A to the
consolidated Federal income Tax Return (and any other applicable Tax Return)
in which Buyer joins for the taxable period that includes the applicable
Closing Date and, if the applicable Closing Date is on the last day of such
taxable period, to the Federal income Tax Return (and any other applicable Tax
Return) filed for the period immediately following the applicable Closing
Date. Seller agrees to attach a copy of the Form 8023-A to the consolidated
Federal income Tax Return (and any other applicable Tax Return) in which
Seller joins for the taxable period that includes the applicable Closing Date.
The parties agree to file such Returns on or before the due dates therefor
(determined with regard to any extension of time for filing).
(d) Each of Buyer and Seller shall bear its own respective
Taxes, liabilities, costs, expenses (including, without limitation, reasonable
expenses of investigation and attorneys' fees and expenses), losses, damages,
assessments, settlements or judgments arising out of or incident to the
imposition, assessment or assertion of any Tax, including those incurred in
the contest in good faith of appropriate proceedings for the imposition,
assessment or assertion of any Tax, that result from the making of any Section
338(h)(10) Election required under Section 2.05(a) hereof.
SECTION 7.07. Section 197(f) Election. (a) Subject to
Section 7.07(b) hereof, Seller shall bear any liabilities, costs, expenses
(including, without limitation, reasonable expenses of investigation and
attorneys' fees and expenses), losses, damages, assessments, settlements or
judgments arising out of or incident to the imposition, assessment or
assertion of any Tax, including those incurred in the contest in good faith
of appropriate proceedings for the imposition, assessment or assertion of any
Tax described in Section 197(f)(9)(B)(ii) of the Code, that result from the
making of any Section 197(f) Election required under Section 2.05(b) hereof.
(b) Notwithstanding anything in Section 2.05(b) or 7.07(a)
hereof to the contrary, Buyer shall indemnify Seller to the extent that the
Taxes incurred by Seller or any Affiliate thereof under Section
197(f)(9)(B)(ii) of the Code as a result of Seller making a Section 197(f)
Election exceed the Taxes that Seller would have incurred in the absence of
such election, but only to the extent that such additional Taxes are
attributable to the nonutilization or foregoing of otherwise-available credits
(including any alternative minimum tax credit), losses (including losses
attributable to the disposition of the Developmental Businesses), loss or
credit carryovers, or similar items that will not be available to Seller in
any other Taxable period.
ARTICLE VIII
TAX MATTERS
SECTION 8.01. Tax Definitions. The following terms, as
used herein, have the following meanings:
"Federal Tax" means any Tax imposed under Subtitle A of the
Code.
"Post-First Closing Tax Period" means any Tax period (or
portion thereof) ending after the close of business on the First Closing Date.
"Post-Second Closing Tax Period" means any Tax period (or
portion thereof) ending after the close of business on the Second Closing
Date.
"Pre-First Closing Tax Period" means any Tax period (or portion
thereof) ending on or before the close of business on the First Closing Date.
"Pre-Second Closing Tax Period" means any Tax period (or
portion thereof) ending on or before the close of business on the Second
Closing Date.
"Seller Group" means, with respect to Federal Taxes, the
affiliated group of corporations (as defined in Section 1504(a) of the Code)
of which Seller is the common parent corporation.
"Tax" means (i) any tax, premium, custom, duty or other like
fee, assessment or charge of any kind whatsoever, however imposed or
collected, together with any interest, penalty, addition to tax or additional
amount imposed by any governmental authority (a "Taxing Authority")
responsible for the imposition of any such tax (domestic or foreign), (ii)
liability of the Company, UrbanNet Parent or any Subsidiary for the payment of
any amounts of the type described in (i) as a result of being a member of an
affiliated, consolidated, combined or unitary group for any period during the
Tax Indemnification Period, other than a liability attributable to the
business or the activities of such Person and (iii) liability of the Company,
UrbanNet Parent or any Subsidiary for the payment of any amounts of the type
described in (i) as a result of any express or implied obligation to indemnify
any other Person.
"Tax Indemnification Period", means (i) with respect to any Tax
described in clause (i) of the definition of "Tax" relating to the UrbanNet
Companies, any period (or portion thereof) ended on or prior to December 31,
1995, and with respect to any Tax described in clause (i) of the definition of
"Tax" relating to the Company, International or TEC Air, any Tax period (or
portion thereof) ending on or prior to the date hereof, except that, with
respect to any interest, penalties, additions to tax or additional amounts
imposed by any Taxing Authority attributable to Seller's failure to file
timely, or to pay or withhold properly or timely, any Return or Tax pursuant
to Section 8.03(b) hereof, any Tax period (or portion thereof) ending on or
before the applicable Closing Date, (ii) with respect to any Tax described in
clause (ii) of the definition of "Tax" (for this purpose without regard to the
period in which it arises), any Pre-First Closing Tax Period of the UrbanNet
Parent or any UrbanNet Subsidiary and any Pre-Second Closing Tax Period of the
Company or any IT Subsidiary and the Taxable period of any member of a group
described in such clause (ii) which includes (but does not end on) the
applicable Closing Date and (iii) with respect to any Tax described in clause
(iii) of the definition of "Tax", the survival period of the indemnification
obligation under the applicable contract.
"Tax Sharing Agreements" means all existing Tax sharing
agreements or arrangements (whether or not written) binding the Company,
UrbanNet Parent or any Subsidiary and any agreements or arrangements which
afford any other person the benefit of any Tax loss, deduction or credit of
the Company, UrbanNet Parent or any Subsidiary, afford the Company or any
Subsidiary the benefit of any Tax loss, deduction or credit of any other
person or require or permit the transfer or assignment of income, revenues,
receipt, or gains.
SECTION 8.02. Tax Representations. (a) Seller represents
and warrants to Buyer as of the date hereof and as of the Closing Date
that, except to the extent otherwise provided on the Balance Sheet
(including the notes thereto) or on Schedule 8.02, (i) all material Tax
returns, statements, reports and forms (including estimated returns and
reports) required to be filed with any Taxing Authority with respect to any
Pre-Second Closing Tax Period by or on behalf of the Company or any IT
Subsidiary or with respect to any Pre-First Closing Tax Period by or on
behalf of UrbanNet Parent or any UrbanNet Subsidiary (collectively, the
"Returns"), have, to the extent required to be filed on or before the date
hereof, been filed when due in accordance with all applicable laws; (ii)
the Company, UrbanNet Parent and the Subsidiaries have timely paid,
withheld or made proper provision for all Taxes shown as due and payable on
the Returns that have been filed; (iii) the Company and the IT
Subsidiaries have made or will on or before the Second Closing Date make
proper provision for all Taxes payable by the Company and the Subsidiaries
for any Pre-Second Closing Tax Periods ending on or before the date hereof
for which no Return has yet been filed and UrbanNet Parent and the UrbanNet
Subsidiaries have made or will on or before the First Closing Date make
proper provision for all Taxes payable by the UrbanNet Parent and the
UrbanNet Subsidiaries for any Pre-First Closing Tax Periods ending on or
before the date hereof for which no Return has yet been filed; (iv) the
charges, accruals and reserves for Taxes with respect to the Company and
the IT Subsidiaries for any Pre-Second Closing Tax Period and with respect
to UrbanNet Parent and the UrbanNet Subsidiaries for any Pre-First Closing
Tax Period (excluding any provision for deferred income taxes) reflected on
the books of the Company, UrbanNet Parent and the Subsidiaries are adequate
to cover such Taxes; (v) all Seller Group Returns filed with respect to
Taxable years through the Taxable year ended December 31, 1991 have been
examined and closed or are Returns with respect to which the applicable
period for assessment under applicable law, after giving effect to
extensions or waivers, has expired; (vi) none of the Company, UrbanNet
Parent or any Subsidiary is delinquent in the payment of any Tax or has
requested any extension of time within which to file or send any Return,
which Return has not since been filed or sent; (vii) there is no claim,
audit, action, suit, proceeding or investigation now pending or threatened
in writing against or with respect to the Company, UrbanNet Parent or any
Subsidiary in respect of any Tax or assessment; (viii) except as
contemplated in this Agreement, there are no requests for rulings in
respect of any Tax pending between the Company, UrbanNet Parent or any
Subsidiary and any Taxing Authority; (ix) there are no liens for Taxes
upon the assets of the Company, UrbanNet Parent or any Subsidiary except
liens for current Taxes not yet due; (x) none of the Company or any IT
Subsidiary will be required, as a result of a change in method of
accounting for a Pre-Second Closing Tax Period, to include any adjustment
under Section 481(c) of the Code in taxable income for any Post-Second
Closing Tax Period and none of UrbanNet Parent or any UrbanNet Subsidiary
will be required, as a result of a change in method of accounting for a
Pre-First Closing Tax Period, to include any adjustment under Section
481(c) of the Code in taxable income for any Post-First Closing Tax Period;
(xi) none of Seller, the Company or any IT Subsidiary has entered into or
will, on or before the Second Closing Date, enter into any agreement or
consent pursuant to Section 341(f) of the Code and none of UrbanNet Parent
or any UrbanNet Subsidiary has entered into or will, on or before the First
Closing Date, enter into any agreement or consent pursuant to Section
341(f) of the Code; (xii) neither the Company, UrbanNet Parent nor any
Subsidiary has been included in a combined, consolidated or unitary Return
with any Affiliate for state tax purposes; and (xiii) neither the Company,
UrbanNet Parent nor any Subsidiary is currently a party to any Tax Sharing
Agreement.
(b) Schedule 8.02 contains a list of states, territories and
jurisdictions (whether foreign or domestic) to which any Tax is properly
payable by the Company, UrbanNet Parent or any Subsidiary.
SECTION 8.03. Covenants. (a) Without the prior written
consent of Buyer (which shall not be unreasonably withheld), none of Seller,
the Company, UrbanNet Parent, any Subsidiary or any Affiliate of Seller shall
make or change any election, change an annual accounting period, change any
accounting method, file any amended Return, enter into any closing agreement,
settle any Tax claim or assessment relating to the Company, UrbanNet Parent or
any Subsidiary, surrender any right to claim a refund of Taxes, consent to any
extension or waiver of the limitation period applicable to any Tax claim or
assessment relating to the Company, UrbanNet Parent or any Subsidiary, take
any other action or omit to take any action, if such election, change,
amendment, agreement, settlement, surrender, consent or other action or
omission would have the effect of increasing the Tax liability of the Company,
UrbanNet Parent, any Subsidiary, Buyer or any Affiliate of Buyer.
(b) All Returns required to be filed on or before the First
Closing Date with respect to UrbanNet Parent or any UrbanNet Subsidiary, or
the Second Closing Date with respect to the Company or any IT Subsidiary will
be timely filed in accordance with all applicable laws and any Taxes required
to be paid or withheld will be timely paid or withheld and remitted to the
appropriate Taxing Authority.
(c) Seller agrees, in the event Buyer acquires the CIT
Businesses for CIT Class B Consideration or CIT Common Stock Consideration
and characterizes that acquisition as a tax-free split-off of the CIT
Businesses from Seller under Section 355 of the Code, to cooperate with
Buyer in good faith in sustaining that characterization, including (i)
providing any relevant Taxing Authority with documentation evidencing
Seller's business purpose for the disposition of the CIT Businesses, (ii)
not taking any position on a Return or before a Taxing Authority contrary
to such characterization, and (iii) reasonably assisting Buyer in
establishing qualification of the acquisition under Section 355 of the
Code, in each case, at Buyer's cost or expense.
SECTION 8.04. Federal Tax Sharing. (a) Consistent with
the tax sharing arrangement presently in effect between Seller and its
Affiliates (i) Seller shall continue for any Taxable period (or portion
thereof) ending on or prior to the date hereof, to create or credit an
intercompany payable to the Company, UrbanNet Parent or the Subsidiaries,
as the case may be, for the Tax benefit, if any, derived by Seller or the
Seller Group from the use of their losses for such period; provided that
notwithstanding anything herein to the contrary, any deduction attributable
to the exercise or cancellation of any option granted pursuant to the C-TEC
Corporation 1994 Stock Option Plan shall be treated as a deduction of
Seller and not as a deduction or loss of the Company, UrbanNet Parent or
any of the Subsidiaries and (ii) the Company, UrbanNet Parent, or any
Subsidiary, as the case may be, shall continue for any Taxable period (or
portion thereof) ending on or prior to the date hereof to create or credit
an intercompany payable to Seller for the Tax liability, if any, of such
Person for such period; provided that notwithstanding anything herein to
the contrary, any deduction attributable to the exercise or cancellation of
any option granted pursuant to the C-TEC Corporation 1994 Stock Option Plan
shall not be treated as a deduction or loss of the Company, UrbanNet Parent
or any of the Subsidiaries for purposes of calculating such Tax liability.
The Company or UrbanNet Parent, as the case may be, shall pay Seller (or,
if Seller is no longer in existence, C-TEC Properties, Inc.) for the
overall net Tax benefit, if any, derived by the Company or any IT
Subsidiary from the use of any loss attributable to the exercise or
cancellation of any option granted pursuant to the C-TEC Corporation 1994
Stock Option Plan in any Post-Second Closing Tax Period and for the Tax
benefit, if any, derived by UrbanNet Parent or any UrbanNet Subsidiary from
the use of any such loss in any Post-First Closing Tax Period. Within 30
days after the close of the first calendar quarter following the First
Closing Date or the Second Closing Date, as the case may be, Seller shall
deliver to Buyer pro forma Federal Tax returns (each a "Pro Forma Return")
of the Company, UrbanNet Parent and the Subsidiaries (or of such Persons
within the Seller Group prior to such Closing Date) for the period
beginning on the date hereof and ending on the close of business on the
First Closing Date or the Second Closing Date, as the case may be, together
with schedules, statements and supporting documentation, calculated in
accordance with Section 8.04(e) hereof. Unless Buyer timely objects as
specified in Section 8.04(b) hereof, the Pro Forma Returns shall be the
Final Pro Forma Returns, binding on the parties without further adjustment.
(b) Buyer shall have the right at Buyer's expense to review
all work papers and procedures used to prepare the Pro Forma Returns. If
Buyer, within 10 business days after delivery to Buyer of a Pro Forma Return,
notifies Seller in writing that it objects to any items on such Pro Forma
Return, specifying with particularity any such item and stating the specific
factual or legal basis for any such objection, Buyer and Seller shall
negotiate in good faith and use their best efforts to resolve such items. If
Buyer and Seller are unable to reach such agreement within 20 days after
receipt by Seller of such notice, the disputed items shall be resolved
pursuant to Section 8.04(f) hereof. Upon resolution of all such items, the
relevant return shall be adjusted to reflect such resolution, and as so
adjusted shall be the Final Pro Forma Return, binding on the parties without
further adjustment.
(c) Within 10 days after a Pro Forma Return becomes a Final
Pro Forma Return, Buyer shall cause the Company or UrbanNet Parent, as the
case may be, to pay Seller, or Seller shall pay Buyer as appropriate, an
amount reflecting the difference between (i) the sum of the Tax liabilities
shown on the Final Pro Forma Return and (ii) the aggregate of all amounts,
if any, previously paid (whether through actual payment or adjustment of
intercompany accounts) by the Company, UrbanNet Parent or the Subsidiaries
with respect thereto. In the event the Pro Forma Return shows a loss,
Seller shall pay Buyer an amount equal to the anticipated Tax benefit, if
any, to Seller or the Seller Group from the use of such loss, to the extent
not previously paid (whether through actual payment or adjustment of
intercompany accounts) by Seller to the Company, UrbanNet Parent or any
Subsidiary. In the absence of reasonable evidence to the contrary, such
Tax benefit shall be deemed equal to the product of such loss and the
maximum applicable Federal corporate tax rate.
(d) Within 30 days after Seller has filed a Federal Tax Return
with respect to a Tax year including a Closing Date, Seller shall provide
Buyer with a copy of that Return and either (i) a statement that the payment
made under Section 8.04(c) above correctly reflected the separate tax
liability of the Company, UrbanNet Parent and the Subsidiaries (or of such
Persons that were still within the Seller Group) or the Tax benefit to Seller
or the Seller Group from the use of any loss incurred by such Persons, as the
case may be, or (ii) computations showing the correct Tax liability or Tax
benefit. Buyer shall have the right at Buyer's expense to review such Return
and statement or computations. If Buyer does not object to the statement or
computations within 10 days of receipt thereof, the statement or computations
will be final and Buyer or Seller, as appropriate, will pay the other the
difference, if any, between the payment made pursuant to Section 8.04(c) above
and the amount determined under Seller's computations under this Section
8.04(d). If Buyer, within such 10 day period, notifies Seller in writing that
it objects to Seller's statement or computations, the provisions of Section
8.04(b) above shall apply mutatis mutandis with respect to the resolution of
the parties' dispute.
(e) The calculation of the amount of income Tax liability set
forth on the Pro Forma Returns shall be made as if the Company were filing its
own consolidated return including the IT Subsidiaries to the extent possible
(with the Company as the common parent) for the relevant portion of the
Pre-Second Closing Tax Period and UrbanNet Parent were filing its own
consolidated return including the UrbanNet Subsidiaries to the extent possible
(with the UrbanNet Parent as the common parent) for the relevant portion of
the Pre-First Closing Tax Period; provided that (i) income, deductions,
credits and losses shall be computed in a manner consistent with past
practices; (ii) the applicable tax rates shall be the appropriate statutory
rates in effect during the relevant period; and (iii) in the event the Company
is not acquired by Buyer or Buyer and Seller agree to an alternative
acquisition structure inconsistent with the language of this Section 8.04(e),
the calculation of the income tax liability set forth on the Pro Forma Returns
shall be made in a manner consistent with the purposes of this Section 8.04.
(f) Disputes arising under Section 7.06, 8.04 or 8.05 hereof
and not resolved by mutual agreement as stated herein shall be resolved by a
nationally recognized accounting firm with no affiliation or relationship
whatsoever with Buyer, Seller or their Affiliates (the "Accounting Referee")
chosen and mutually acceptable to both Buyer and Seller within five days of
the date on which the need to choose the Accounting Referee arises. The
Accounting Referee shall resolve any disputed items within 30 days of having
the item referred to it pursuant to such procedures as it may require. The
costs, fees and expenses of the Accounting Referee shall be borne equally by
Buyer and Seller.
(g) Any payment required under this Section and not made
when due shall bear interest at the rate per annum determined, from time to
time, under the provisions of Section 6621(a)(2) of the Code for each day
until paid.
(h) In the event a Closing Date does not occur until 1997 or
later, Buyer and Seller will negotiate in good faith to allocate the Tax
liability, if any, and/or to provide for the sharing of the Tax benefit, if
any, attributable to the Person or Persons to which the post-1996 Closing Date
will apply in a manner consistent with the purposes of this Section 8.04.
SECTION 8.05. Tax Returns. (a) All income tax Returns
with respect to periods beginning after December 31, 1995 required to be
filed by or with respect to UrbanNet Parent or any UrbanNet Subsidiary
after the date hereof and before the First Closing Date or by or with
respect to the Company or any IT Subsidiary after the date hereof and
before the Second Closing Date will be subject to Buyer's review and filed
only with Buyer's consent, which shall not be unreasonably withheld.
(b) Buyer shall cause UrbanNet Parent or the UrbanNet
Subsidiaries to prepare and file all Returns with respect to Tax periods
beginning after 1995 (other than the Seller Group's Federal Tax Return)
required to be filed by or with respect to UrbanNet Parent or the UrbanNet
Subsidiaries after the First Closing Date and cause the Company or the IT
Subsidiaries to prepare and file all Returns with respect to Tax periods
beginning after 1995 (other than the Seller Group's Federal Tax Return)
required to be filed by or with respect to the Company or the IT Subsidiaries
after the Second Closing Date and to pay the Taxes shown on such Returns.
SECTION 8.06. Other Tax Matters. (a) All transfer,
documentary, sales, use, stamp, registration and other such Taxes and fees
(including any penalties and interest) incurred in connection with this
Agreement (including any New York State Gains Tax, New York City Transfer Tax
and any similar tax imposed in other states or subdivisions), shall be paid by
Seller when due, and Seller will, at its own expense, file all necessary Tax
returns and other documentation with respect to all such transfer,
documentary, sales, use, stamp, registration and other taxes and fees, and, if
required by applicable law, Buyer will, and will cause its Affiliates to, join
in the execution of any such Tax returns and other documentation. Buyer will,
promptly upon receipt of written request therefor, reimburse Seller for 50% of
all amounts paid, including expenses, pursuant to the preceding sentence.
(b) Seller or Buyer, as the case may be, shall promptly pay
or shall cause prompt payment to be made to the other party of 50% of the
amount of any refund in respect of any amount paid pursuant to Section 8.06(a)
above.
(c) Certification to the effect that Seller is not a "foreign
person" as defined in Section 1445 of the Code shall be signed by Seller and
delivered to Buyer prior to the Closing.
SECTION 8.07. Cooperation on Tax Matters. (a) Buyer and
Seller shall cooperate fully, as and to the extent reasonably requested by
the other party, in connection with any audit, litigation or other
proceeding with respect to Taxes. Such cooperation shall include the
retention and (upon the other party's request) the provision of records and
information which are reasonably relevant to any such audit, litigation or
other proceeding and making employees available on a mutually convenient
basis to provide additional information and explanation of any material
provided hereunder. The Company, UrbanNet Parent and Seller agree (i) to
retain all books and records with respect to Tax matters pertinent to
UrbanNet Parent or any of the UrbanNet Subsidiaries relating to any Pre-
First Closing Taxable Period and any Taxable period that includes, but does
not end on, the First Closing Date or to the Company and the IT
Subsidiaries relating to any Pre-Second Closing Taxable Period and any
Taxable period that includes, but does not end on, the Second Closing Date,
and to abide by all record retention agreements entered into with any
Taxing Authority, and (ii) to give the other party reasonable written
notice prior to transferring, destroying or discarding any such books and
records and, if the other party so requests, the Company, UrbanNet Parent
or Seller, as the case may be, shall allow the other party to take
possession of such books and records.
(b) Buyer and Seller further agree, upon request, to use
their best efforts to obtain any certificate or other document from any
governmental authority or customer of the Company, UrbanNet Parent or any
Subsidiary or any other Person as may be necessary to mitigate, reduce or
eliminate any Tax that could be imposed (including, but not limited to, with
respect to the transactions contemplated hereby).
(c) Buyer and Seller further agree, upon request, to provide
the other party with all information that either party may be required to
report pursuant to Section 6043 of the Code and all Treasury Department
Regulations promulgated thereunder.
(d) Buyer and Seller agree to cooperate fully with respect to
the making of any Section 338(h)(10) Election. Such cooperation shall
include, but not be limited to, the making of any calculations or allocations
required by the Treasury Regulations under Section 338 of the Code or any
similar provisions of state or local law and the preparation and delivery of
documentation required by any applicable Taxing Authority.
SECTION 8.08. Tax Indemnification. (a) Seller hereby
indemnifies Buyer against and agrees to hold it harmless from any (x) Tax
of the Company, UrbanNet Parent or any Subsidiary to the extent in excess
of amounts reserved or provided therefor on the Financial Statements, (y)
Tax to the Buyer resulting from a failure of Section 355 of the Code to
apply to the transaction effected in the Second Closing to the extent such
failure is attributable to any breach of the Section 355 Covenants, and (z)
liabilities, costs, expenses (including, without limitation, reasonable
expenses of investigation and attorneys' fees and expenses), losses,
damages, assessments, settlements or judgments arising out of or incident
to the imposition, assessment or assertion of any amount in clauses (x) and
(y), including those incurred in the contest in good faith of appropriate
proceedings for the imposition, assessment or assertion of such amount, in
each case related to the Tax Indemnification Period and in each case
incurred or suffered by Buyer, any of its Affiliates, UrbanNet Parent, the
Company or any Subsidiary (the sum of (x), (y) and (z) being referred to
herein as a "Tax Loss"), such Tax Loss to be reduced in each case by the
value of any actual or reasonably anticipated reduction in Tax liability to
the receiving party or its Affiliates resulting from the indemnification
payment or the facts giving rise to such payment.
(b) Upon payment by Buyer, any of its Affiliates or the
Company, UrbanNet Parent or any Subsidiary of any Tax Loss, Seller shall
discharge its obligation to indemnify Buyer against such Tax Loss by paying to
Buyer an amount equal to the amount of such Tax Loss reduced by the value of
any actual or reasonably anticipated reduction in Tax liability to Buyer or
its Affiliates resulting from the indemnification payment or the facts giving
rise to such payment.
(c) Any payment pursuant to this Section 8.08 shall be made
not later than 30 days after receipt by Seller of written notice from Buyer
stating that any Tax Loss has been paid by Buyer, any of its Affiliates, the
UrbanNet Parent, the Company or any Subsidiary and the amount thereof and of
the indemnity payment requested. Any payment required under this Section and
not made when due shall bear interest at the rate per annum determined, from
time to time, under the provisions of Section 6621(a)(2) of the Code for each
day until paid.
(d) Buyer agrees to give prompt notice to Seller of the
assertion of any claim, or the commencement of any suit, action or
proceeding in respect of which indemnity may be sought hereunder and of any
Tax Loss, which Buyer deems to be within the ambit of this Section 8.08
(specifying with reasonable particularity the basis therefor) and will give
Seller such information with respect thereto as Seller may reasonably
request. Seller may, at its own expense, (i) participate in and, (ii) upon
notice to Buyer, assume and control the defense of any such suit, action or
proceeding; provided that (x) Seller's counsel is reasonably satisfactory
to Buyer, (y) Seller shall thereafter consult with Buyer upon Buyer's
reasonable request for such consultation from time to time with respect to
such suit, action or proceeding and (z) Seller shall not, without Buyer's
consent, which may not be unreasonably withheld, agree to any settlement
with respect to any Tax if such settlement could reasonably adversely
affect the past, present or future Tax liability of Buyer, any of its
Affiliates or, upon the First Closing, UrbanNet Parent or any UrbanNet
Subsidiary or, upon the Second Closing, the Company or any IT Subsidiary.
If Seller assumes such defense, Buyer shall have the right (but not the
duty) to participate in the defense thereof and to employ counsel, at its
own expense, separate from the counsel employed by Seller. In respect of
any Tax for which Seller is liable hereunder, Seller shall be liable for
the fees and expenses of counsel employed by Buyer for any period during
which Seller has not assumed the defense thereof. Whether or not Seller
chooses to defend or prosecute any claim, all of the parties hereto shall
cooperate in the defense or prosecution thereof.
(e) Seller shall not be liable under this Section with respect
to any Tax resulting from a claim or demand the defense of which it was not
offered the opportunity to participate or assume as provided under Section
8.08(e) hereof to the extent Seller's liability under this Section is
adversely affected as a result thereof. No investigation by Buyer or any of
its Affiliates at or prior to the Closing Date shall relieve Seller of any
liability hereunder.
(f) Seller hereby indemnifies Buyer against and agrees to
hold it harmless from any Taxes, liabilities, costs, expenses (including,
without limitation, reasonable expenses of investigation and attorneys' fees
and expenses), losses, damages, assessments, settlements or judgments arising
out of or incident to the imposition, assessment or assertion of any Tax,
including those incurred in the contest in good faith of appropriate
proceedings for the imposition, assessment or assertion of any Tax, that
result from any failure by Seller to make a Section 197(f) Election required
by Section 2.05(b).
(g) Buyer shall not be liable to Seller or any Affiliate of
Seller, for the payment of any Taxes, liabilities, costs, expenses (including,
without limitation, reasonable expenses of investigation and attorneys' fees
and expenses), losses, damages, assessments, settlements or judgments arising
out of or incident to the imposition, assessment or assertion of any Tax
imposed on Seller or any Affiliate of Seller, including those incurred in the
contest in good faith of appropriate proceedings for the imposition,
assessment or assertion of any Tax, that result from the making of any Section
338(h)(10) Election.
SECTION 8.09. Survival. Notwithstanding anything in this
Agreement to the contrary, the provisions of this Article VIII shall
survive for the full period of all applicable statutes of limitations
(giving effect to any waiver, mitigation or extension thereof).
ARTICLE IX
EMPLOYEE BENEFITS
SECTION 9.01. Employee Benefit Plans. (a) Seller has
furnished or made available to Buyer copies of the Employee Plans (and, if
applicable, related trust agreements) and all amendments thereto and written
interpretations thereof together with the most recent annual report (Form 5500
including, if applicable, Schedule B thereto), the most recent actuarial
valuation report prepared in connection with any Employee Plan and all summary
plan descriptions relating to any Employee Plan. No Employee Plan is a
Multiemployer Plan. Seller has identified to Buyer each Employee Plan that is
a Title IV Plan. No Employee Plan is maintained in connection with any trust
described in Section 501(c)(9) of the Code.
(b) Neither the Seller nor any ERISA Affiliate of Seller has
(i) engaged in or is a successor or parent corporation to an entity that has
engaged in, a transaction described in Section 4069 of ERISA or (ii) incurred,
or reasonably expects to incur prior to the Closing Date, any liability under
Title IV of ERISA arising in connection with the termination of, or complete
or partial withdrawal from, any plan covered or previously covered by Title IV
of ERISA that could become a liability of Buyer or any of its ERISA Affiliates
after the Closing Date.
(c) Each Employee Plan that is intended to be qualified under
Section 401(a) of the Code has been determined to be so qualified; each trust
created under any such Plan has been determined to be exempt from tax under
Section 501(a) of the Code. Seller has provided Buyer with the most recent
determination letter of the IRS relating to each such Employee Plan. Each
Employee Plan has been maintained in substantial compliance with its terms and
with the requirements prescribed by any and all applicable statutes, orders,
rules and regulations, including but not limited to ERISA and the Code.
(d) Seller has furnished or made available to Buyer copies or
descriptions of each Benefit Arrangement (and, if applicable, related trust
agreements) and all amendments thereto and written interpretations thereof.
Each Benefit Arrangement has been maintained in substantial compliance with
its terms and with the requirements prescribed by any and all applicable
statutes, orders, rules and regulations.
(e) There is no contract, agreement, plan or arrangement
covering any employee or former employee of the Company or any of the
Subsidiaries that, individually or collectively, could give rise to the
payment of any amount that would not be deductible pursuant to the terms of
Section 280G of the Code.
SECTION 9.02. Pension Plan. With respect to the Pension
Plan, Seller and its ERISA Affiliates shall retain all liabilities and
obligations in respect of benefits accrued under such Pension Plan by active
employees of the Company, the UrbanNet Parent or the Subsidiaries (including
employees on authorized leave of absence, military service or lay-off with
recall rights) who become employees of Buyer or any of its Affiliates on or
after the First Closing Date (the "UrbanNet Transferred Employees") and the
Second Closing Date (the "Other Transferred Employees", together the
"Transferred Employees"). For purposes of vesting and benefit accrual under
the Pension Plan, the Transferred Employees shall receive credit for service
with the Buyer or any of its subsidiaries for the period beginning on the
First Closing, in the case of the UrbanNet Transferred Employees, and the
Second Closing Date, in the case of the Other Transferred Employees and ending
on the earlier of C-TEC Restructuring Closing or the expiration of the
Repurchase Option Period, (such ending date is hereafter referred to as the
"Vesting Date"). The Company, UrbanNet Parent and the Subsidiaries shall pay
Seller for expenses attributable to the normal cost (using current salaries
rather than projected salaries for the purposes of determining cost) of such
additional benefit based on service with the Buyer or any of its Subsidiaries
from the relevant Closing Date to the Vesting Date regardless of any cash
contribution made by Seller to the Pension Plan; such reimbursement shall not
include any cost or expense associated with vesting such employees in such
benefit. The Transferred Employees shall be fully vested in their accrued
benefits under the Pension Plan as of the Vesting Date and thereafter shall
not accrue any benefits under the Pension Plan. No Pension Plan assets shall
be transferred to Buyer or any of its Affiliates or to any plan of Buyer or
its Affiliates.
SECTION 9.03. Individual Account Plan. (a) As of the
First Closing Date with respect to the UrbanNet Transferred Employees and the
Second Closing Date with respect to the Other Transferred Employees, the
Transferred Employees shall vest in their account balances under the
Individual Account Plan. On the applicable Closing Date or as soon as
practicable thereafter, Seller shall (i) cause the trustee of the Individual
Account Plan to segregate the assets of such Individual Account Plan
representing the full account balances of the Transferred Employees of the
Closing Date, (ii) make any and all filings and submissions to the appropriate
governmental agencies arising in connection with such segregation of assets
and (iii) make all necessary amendments to such Individual Account Plan and
related trust agreements to provide for the vesting of account balances, such
segregation of assets and the transfer of assets as described below. The
manner in which the account balances of the Transferred Employees are invested
under the Individual Account Plans shall not be affected by such segregation
of assets.
(b) On or as soon as practicable after the First Closing
Date, Buyer shall establish or shall designate an individual account plan
for the benefit of the Transferred Employees (the "Successor Individual
Account Plan"), shall take all necessary action, if any, to qualify such
plan under the applicable provisions, including Sections 401(a) and 401(k),
of the Code and shall make any and all filings and submissions to the
appropriate governmental agencies required to be made by it in connection
with the transfer of assets described below. As soon as practicable
following the earlier of (i) the delivery to Seller of a favorable
determination letter from the IRS regarding qualified status of the
Successor Individual Account Plan if Buyer has designated an existing plan
as the Successor Individual Account Plan (as amended to the date of
transfer), or (ii) the issuance of indemnities reasonably satisfactory to
Seller but in no event before the C-TEC Restructuring Closing, Seller shall
cause the trustee of the Individual Account Plan to transfer to the
appropriate trustee, as designated by Buyer under the trust agreement
forming a part of the Successor Individual Account Plan, in cash or in kind
as specified by Seller, the full account balances of the Transferred
Employees under the Individual Account Plan (which account balances will
have been credited with appropriate earnings attributable to the period
from the First Closing Date or the Second Closing Date, as the case may be,
to the date of transfer described herein), reduced by any necessary benefit
or withdrawal payments to, or in respect of, the Transferred Employees
occurring during the period from the applicable Closing Date to the date of
transfer described herein.
(c) In consideration for the transfer of assets described
herein, Buyer shall, effective as of the date of transfer described herein,
assume all of the obligations of Seller and any of its ERISA Affiliates in
respect of the account balances accumulated by the Transferred Employees under
the Individual Account Plan (exclusive of any portion of such account balances
which are paid or otherwise withdrawn prior to the date of transfer described
herein) on or prior to the applicable Closing Date.
SECTION 9.04. Other Employee Plans. Seller shall retain
all obligations and liabilities under the Employee Plans and Benefit
Arrangements in respect of any employee or former employee (including any
beneficiary or dependent thereof) who is not a Transferred Employee. Buyer or
one of its subsidiaries (other than Seller or one of its subsidiaries) shall
assume all liabilities and obligations in respect of the Transferred Employees
arising (i) under the Employee Plans and the Benefit Arrangements (other than
the C-TEC 1994 Stock Option Plan and the Pension Plan) to the extent any such
liability or obligation relates to periods prior to the First Closing Date, in
the case of the UrbanNet Transferred Employees, and the Second Closing Date,
in the case of the Other Transferred Employees, and (ii) under any workers'
compensation arrangement relating to periods prior to either Closing Date,
including liability for any retroactive workers' compensation premiums
attributable to such periods. Notwithstanding the foregoing, with respect to
the Transferred Employees (including any beneficiary or dependent thereof),
Seller shall retain all liabilities and obligations arising under any group
life, accident, medical, dental or disability plan or arrangement to the
extent that any such liability or obligation relates to claims incurred
(whether or not reported), on or prior to the First Closing Date with respect
to the UrbanNet Transferred Employees and the Second Closing Date with respect
to the Other Transferred Employees; provided however, that with respect to
such liability or obligation, the Company, the UrbanNet Parent and the
Subsidiaries shall reimburse Seller in accordance with past practice. For
purposes of the foregoing, medical or dental claims are deemed to be incurred
when the medical or dental service is performed and life, accident or
disability claims are deemed to be incurred on the date the event giving rise
to such claim occurred.
SECTION 9.05. Insurance Coverage. To the extent requested
by Buyer in writing prior to the First Closing Date, and for a period
beginning on the First Closing Date and ending no later than June 30, 1997,
Seller agrees to continue to provide, at the expense of Buyer, insurance
coverage and claims processing services for Transferred Employees under the
Employee Plans and Benefit Arrangements providing for such insurance and
services, to the extent permissible under the applicable plans and
arrangements. Such continuation of coverage and services shall not affect the
allocation of liabilities and obligations set forth in this Article IX.
SECTION 9.06. Third Party Beneficiaries. No provision of
Article IX shall create any third party beneficiary rights in any employee or
former employee of the Company, the UrbanNet Parent and the Subsidiaries
(including any beneficiary or dependent thereof) in respect of continued
employment or resumed employment, and except as provided in Section 9.02, no
provision of Article IX shall create any rights in any such persons in respect
of any benefits that may be provided, directly or indirectly, under any
employee benefit plan or arrangement.
ARTICLE X
OTHER AGREEMENTS
SECTION 10.01. Repurchase Option. (a) If the First
Closing or the Second Closing, as applicable, shall occur, C-TEC shall have
the right to repurchase from RCN one or more of the Developmental
Businesses on the terms and subject to the conditions set forth in this
Section 10.01. During the period (i) beginning on the earliest of (A) the
C-TEC Restructuring Termination Date, (B) if on January 1, 1997 C-TEC is
not a party to a bona fide agreement with an unaffiliated third party
pursuant to which C-TEC is obligated (subject to standard closing
conditions) to consummate a C-TEC Restructuring (a "Third Party Agreement")
or, to the extent that no Third Party Agreement is required to effect a C-
TEC Restructuring, a resolution of the Board of Directors of C-TEC
authorizing the C-TEC Restructuring (an "Authorizing Board Resolution") has
not been adopted, January 1, 1997 and (C) if on January 1, 1997 C-TEC is a
party to a Third Party Agreement or, to the extent that no Third Party
Agreement is required to effect a C-TEC Restructuring, an Authorizing Board
Resolution is in effect, then the first date thereafter on which either C-
TEC is no longer bound by any Third Party Agreement or an Authorizing Board
Resolution is no longer in effect, as the case may be, and (ii) ending 30
days thereafter (the "Repurchase Option Period"), C-TEC shall have the
option (the "Repurchase Option") to repurchase from RCN, at the election of
C-TEC, and subject to C-TEC Board Approval, any or all of the Developmental
Businesses as set forth herein.
If C-TEC wishes to consider the exercise of the Repurchase
Option, C-TEC shall deliver to RCN a request (the "Repurchase Price Request")
for a Repurchase Price Certificate (as defined below) by no later than the
tenth day of the Repurchase Option Period. By no later than the tenth day
after its receipt, if any, of the Repurchase Price Request, RCN shall deliver
to C-TEC a certificate executed by the Chairman of the Board, the President or
any Vice President of RCN (the "Repurchase Price Certificate") setting forth
for each Developmental Business the price at which C-TEC may repurchase such
business pursuant to the Repurchase Option (the "Repurchase Price") as of such
date and reasonable detail regarding the calculation of each such Repurchase
Price. The date upon which the Repurchase Price Certificate is so delivered
is referred to herein as the "Certificate Date". If C-TEC disagrees as to any
calculation in the Repurchase Price Certificate, the parties will resolve the
dispute promptly and in good faith, provided that any such resolution shall be
subject to C-TEC Board Approval. The Repurchase Price for any given
Developmental Business shall be an amount equal to the Repurchase Allocated
Price (as hereinafter defined) with respect to such Developmental Business
adjusted as follows: (i) increased by the Contribution Amount with respect to
all Contributions made directly or indirectly by RCN to such Developmental
Business after the applicable Closing and prior to the Certificate Date, (ii)
reduced by the Distribution Amount with respect to all Distributions made
directly or indirectly to RCN by such Developmental Business after the
applicable Closing and prior to the Certificate Date and (iii) increased by an
amount (the "IRR Interest Amount") necessary to provide RCN with a 7% annual
internal rate of return on its investment (i.e., Repurchase Allocated Price,
plus post-Closing Contributions, less post-Closing Distributions) in such
Developmental Business. The IRR Interest Amount shall be adjusted from the
amount set forth in the Repurchase Price Certificate depending on the date
upon which the Repurchase Closing, if any, takes place. From (w) the
Certificate Date to (x) the date the Repurchase Option expires unexercised or
the Repurchase Closing takes place, as the case may be, RCN shall not make any
Contributions to any Developmental Business subject to the Repurchase Option
or permit any such Developmental Business to make any Distributions, without
the consent of C-TEC, which consent shall not be unreasonably withheld. If
any such Contribution or Distribution is made with the consent of C-TEC, the
relevant Repurchase Price shall be adjusted appropriately. With respect to
each Developmental Business, the parties will cooperate in good faith
regarding its capitalization, management and operations between (y) the first
date of the Repurchase Option Period and (z) the date upon which either the
Repurchase Option with respect thereto expires unexercised or the date upon
which the Repurchase Closing occurs.
The parties acknowledge further that the CIT Purchase Price
referred to in Section 2.02 was calculated on the basis of the value of the
CIT Businesses as a whole, and that no specific allocation was made in
arriving at the CIT Purchase Price. In order to establish the Repurchase
Price for each Developmental Business and for purposes of Section 10.02,
however, the parties have made certain allocations. For purposes hereof, the
"Repurchase Allocated Price" for each Developmental Business is as follows:
(i) in the case of the CLD Business, $20,000,000 increased by the sum of (x)
the CLD Closing Contribution Amount and (y) the Allocable CIT Interest Amount
with respect to CLD, if any, and decreased by the CLD Closing Distribution
Amount, (ii) in the case of the International Business, $77,088,000 increased
by the sum of (x) ▇▇▇▇▇ Interest Amount and (y) the Allocable CIT Interest
Amount with respect to International, if any, and decreased by the
International Closing Distribution Amount, (iii) in the case of the TEC Air
Business, $3,000,000 increased by the sum of (x) the TEC Air Closing
Contribution Amount and (y) the Allocable CIT Interest Amount with respect to
TEC Air, if any, and decreased by the TEC Air Closing Distribution Amount and
(iv) in the case of the UrbanNet Business, the UrbanNet Purchase Price.
(b) During the Repurchase Option Period, C-TEC shall be
permitted to conduct a due diligence investigation of the Developmental
Businesses and RCN shall provide C-TEC with such information and assistance in
connection therewith as C-TEC shall reasonably request.
(c) C-TEC may exercise the Repurchase Option at any time
during the Repurchase Option Period by delivering a written notice (the
"Exercise Notice") to RCN which shall contain an unconditional exercise of the
Repurchase Option and shall list the Developmental Business or Businesses to
be repurchased (the "Designated Businesses"). Upon delivery of the Exercise
Notice, the Repurchase Option and the related rights and obligations of the
parties under this Section 10.01 shall terminate with respect to any
Developmental Business that is not a Designated Business.
If C-TEC delivers an Exercise Notice, the following provisions
shall apply with respect to the repurchase of the Designated Business or
Businesses (the "Repurchase"). The parties agree to use their reasonable best
efforts both to satisfy all applicable regulatory requirements, including
obtaining all regulatory approvals, and to obtain all third party approvals
necessary to consummate the Repurchase as promptly as practicable. The
Repurchase shall be consummated as promptly as possible, but in any event no
later than five business days after the receipt of all necessary regulatory
and third party approvals. The Repurchase shall be consummated at a closing
at the offices of C-TEC (the "Repurchase Closing"). The Repurchase shall be
effected through the purchase and sale of the same securities (or, if
applicable with respect to International, the assets and liabilities of
International) as the original purchases and sales pursuant to Article II
hereof; provided, however, that if RCN purchases the CIT Businesses by
purchasing the Company Shares pursuant to Section 2.02 hereof, and if C-TEC
desires to repurchase one or both of International and TEC Air but not CLD,
C-TEC shall purchase the stock of one or both of International and TEC Air, as
the case may be, rather than the stock of CLD. The corporation or
corporations whose stock is to be purchased in accordance with this paragraph
are referred to herein as the "Purchased Corporations".
The Repurchase Price shall be paid as follows: (i) to the
extent that the Repurchase Price of a Developmental Business is equal to or
less than the Repurchase Allocated Price of such Developmental Business, then
(x) in the case of the UrbanNet Business and the Freedom Interest, in cash,
and (y) in the case of any of the CIT Businesses, in cash, C-TEC Class B
Shares and C-TEC Common Shares in the same proportion as Seller received from
Buyer pursuant to Section 2.02, (ii) with respect to any excess of the
Repurchase Price of a Developmental Business other than the UrbanNet Business
or the Freedom Interest, over the Repurchase Allocated Price of such
Developmental Business, in any combination, as determined by C-TEC in its sole
discretion, of cash, C-TEC Class B Shares and C-TEC Common Shares, and (iii)
with respect to any excess of the Repurchase Price of the UrbanNet Business
or the Freedom Interest over the Repurchase Allocated Price of such
Developmental Business, in cash. For purposes of clause (i) of the preceding
sentence, any C-TEC Class B Shares and C-TEC Common Shares delivered shall be
valued in accordance with the third paragraph of Section 2.02(a), and for
purposes of clause (ii) of the preceding sentence, (1) any C-TEC Class B
Shares delivered shall be valued based on the average closing price of C-TEC
Class B Shares on the Nasdaq SmallCap Market for the ten trading days ending
two business days prior to the date of the Repurchase Closing and (2) any
C-TEC Common Shares, if any, delivered shall be valued based on the average
closing price of C-TEC Common Shares on the Nasdaq Stock Market for the ten
trading days ending two business days prior to the date of the Repurchase
Closing. Any C-TEC Common Shares or C-TEC Class B Shares delivered by Seller
as consideration shall be fully paid and nonassessable and Seller shall
transfer and deliver such shares free and clear of any Liens.
At the Repurchase Closing,
(i) C-TEC shall deliver to RCN:
(A) any cash consideration by wire transfer in immediately
available funds to an account in the United States, which account
shall be designated by RCN no later than two business days prior to
the date of the Repurchase Closing;
(B) certificates for any consideration to be delivered in the
form of C-TEC Class B Shares duly endorsed or accompanied by stock
powers duly endorsed in blank, with any required transfer stamps
affixed thereto; and
(C) certificates for any consideration to be delivered in the
form of C-TEC Common Shares duly endorsed or accompanied by stock
powers duly endorsed in blank, with any required transfer stamps
affixed thereto.
(ii) RCN shall deliver or cause to be delivered to C-TEC good
and valid title to all of the capital stock (or, if applicable with
respect to International, the assets and liabilities of
International) of the Purchased Corporations owned directly or
indirectly by RCN free and clear of any Lien.
(d) If C-TEC does not deliver an Exercise Notice by the
last day of the Repurchase Option Period, the Repurchase Option shall
expire and the rights and obligations of the parties under this Section
10.01 shall terminate. If the Repurchase Closing has not previously
occurred, and regardless of whether C-TEC has previously delivered an
Exercise Notice, all rights of C-TEC under this Section 10.01 shall
terminate immediately if a C-TEC Restructuring is consummated.
(e) With respect to each Developmental Business, between the
First or Second Closing, as applicable, and the termination of C-TEC's right
to repurchase such Developmental Business under this Section 10.01, RCN agrees
(i) to operate such Developmental Business using the corporate structure
existing at the First or Second Closing, as applicable, except with respect to
any "arm's length" arrangements with MFS or its Affiliates and as contemplated
in the Liberty Transaction (as hereinafter defined) and except to the extent
any changes thereto would not materially adversely affect C-TEC's rights
hereunder; (ii) to act in good faith in connection with any transaction that
may be construed as Contribution to, or a Distribution from, such
Developmental Business; (iii) not to sell, lease, transfer, pledge or
otherwise encumber its interest in such Developmental Business other than to a
Buyer Designee, provided that (x) UrbanNet Parent may form a Person,
controlled by UrbanNet Parent, to which it may transfer shares of capital
stock of any of the UrbanNet Subsidiaries, (y) UrbanNet Parent may cause any
Person controlled by UrbanNet Parent to enter into an "arm's-length" agreement
or arrangement with MFS pursuant to which MFS acquires any of the capital
stock (or its equivalent) or any security convertible or exchangeable into
such capital stock (or its equivalent), of such Person, and (z) UrbanNet
Parent may cause the conversion of any of the UrbanNet Subsidiaries into
another form of Person; and (iv) to use reasonable efforts to operate such
Developmental Business in the Ordinary Course and in such a manner that the
representations and warranties given by Seller in this Agreement would not be
untrue in any material respect.
(f) In the event C-TEC elects to exercise the Repurchase
Option, it agrees to cooperate with RCN and to use its best efforts in
structuring the Repurchase and in determining the type of consideration to be
used in paying the Repurchase Price to minimize the Tax cost to RCN from the
Repurchase, provided that C-TEC will be under no obligation to take a course
of action that would be economically detrimental to C-TEC or contrary to its
overall business objectives.
SECTION 10.02. Subsequent Sale of the CLD Business or the
International Business. If RCN consummates a Covered Business Sale at any
time during the two year period beginning on the Second Closing Date, RCN
shall within two business days after such transaction is consummated
deliver to C-TEC in cash a portion of the Net Profit from such transaction
as follows: (i) if the Covered Business Sale occurs on or before the first
anniversary of the Second Closing Date, 20% of the Net Profit and (ii) if
the Covered Business Sale occurs after such first anniversary, 10% of the
Net Profit. As used herein, the following terms have the following
meanings: The term "Covered Business Sale" means a direct or indirect sale
or other disposition by RCN to an unaffiliated third party of all or
substantially all of the business or assets of any Covered Business,
whether by means of a sale, merger, consolidation or otherwise. The term
"Covered Business" means each of the CLD Business and the International
Business. The term "Net Profit" means the excess if any of (x) the Fair
Market Value of all consideration received directly or indirectly by RCN in
the Covered Business Sale (net of any reasonable out-of-pocket expenses)
over (y) the Net Investment in the Covered Business or Businesses sold.
The term "Net Investment" means, with respect to any Covered Business, the
Repurchase Allocated Price for such Covered Business increased by the
Contribution Amount with respect to all Contributions made directly or
indirectly by RCN to such Covered Business after the Second Closing and
decreased by the Distribution Amount with respect to all Distributions made
by such Covered Business directly or indirectly to RCN after the Second
Closing. During the two year period beginning on the Second Closing Date,
RCN will act in good faith in connection with any transaction that may be
construed as a Contribution to, or a Distribution by, a Covered Business.
If a Covered Business Sale involves a sale or other disposition of only a
portion of a Covered Business, or if a Covered Business Sale involves the
sale or other disposition of assets in addition to one or both of the
Covered Businesses, appropriate allocations and adjustments shall be made
in calculating the Net Profit therefrom. In the event of a dispute between
the parties as to whether a Covered Business Sale has occurred or as to the
amount of Net Profit therefrom, the parties shall negotiate in good faith
to resolve such dispute, provided that any such resolution shall be subject
to C-TEC Board Approval. If the parties are unable to resolve the dispute
within ten business days, the matter shall be submitted to an investment
banking firm mutually acceptable to both parties. Such firm shall render
its determination of such dispute within 60 days, and such determination of
such firm shall be conclusive.
SECTION 10.03. Management and Operating Services. (a)
From the date hereof until the earlier of (x) the consummation of the C-TEC
Restructuring (the "C-TEC Restructuring Closing"), if any, and (y) June
30, 1997, C-TEC shall cause its subsidiary, C-TEC Services, Inc. ("C-TEC
Services") to provide to RCN Corporate Services, Inc. ("RCN Services"), a
subsidiary of RCN, (i) such management and support services and technical
assistance ("Services"), and (ii) such office space, equipment, furniture
and other items ("Facilities"), as RCN may reasonably request in connection
with the ownership and operation by RCN and its subsidiaries of the Freedom
Interest and such of the Developmental Businesses as RCN may purchase
pursuant hereto (together with the Freedom Interest, the "RCN Businesses").
(b) As of the date hereof, (i) C-TEC Services intends, and
will be permitted but not required, to hire or offer to hire (either directly
or through an affiliate), (x) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ of UrbanNet Parent effective as
of the First Closing, if any, and (y) ▇▇▇▇▇ ▇'▇▇▇▇ of CLD effective as of the
Second Closing, if any, provided that CLD is purchased by RCN at such Second
Closing, and (ii) RCN intends, and will be permitted but not required, to hire
or offer to hire (or to do so through RCN Services or other affiliates or
subsidiaries of RCN) effective as of the C-TEC Restructuring Closing, if any,
(x) all or substantially all of the employees of C-TEC Services, as well as
▇▇▇▇▇▇▇ ▇▇▇▇▇ of Commonwealth Communications, Inc. ("CCI"), and (y) up to 20
of those employees of CCI all or substantially all of whose time is spent on
matters related to the RCN Businesses.
(c) Following the C-TEC Restructuring Closing, if any, (the
"Post Restructuring Term") (i) RCN shall cause RCN Services to provide such
Services to C-TEC Services as may reasonably be requested by C-TEC Services in
connection the ownership and operation by C-TEC and its Subsidiaries of such
businesses as they may own from time to time (the "C-TEC Businesses") and (ii)
C-TEC shall continue to provide to RCN Services such Facilities as may
reasonably be requested by RCN Services in connection with the ownership and
operation by RCN and its subsidiaries of the RCN Businesses.
(d) The Services and Facilities referred to in subsections
(a) and (c) and the employee transfers referred to in subsection (b) will be
provided or effected on the terms and conditions set forth in the Services
Agreement between RCN Services and C-TEC Services dated as of the date hereof
(the "Services Agreement"). The form of the Services Agreement is set forth
as Exhibit B hereto. The obligation of either party to the Services Agreement
to provide Services or Facilities shall be subject to the availability to such
party of such Services or Facilities at the relevant time. Prior to the C-TEC
Restructuring Closing, if any, (and in the case of Facilities, during the
first year of the Post Restructuring Term, if any) C-TEC Services will not be
obligated to provide services to RCN Services to the extent that the provision
of such services would leave C-TEC Services with inadequate resources to
support the C-TEC Businesses in the ordinary course. If, during the first
year of the Post Restructuring Term, if any, RCN Services shall have
inadequate resources to support in the ordinary course both the RCN Businesses
and the C-TEC Businesses, the C-TEC Businesses will be given priority.
(e) If the C-TEC Restructuring Closing, if any, shall occur
on or before June 30, 1997, the initial term of the Services Agreement shall
end on the first anniversary of the C-TEC Restructuring Closing, but shall
automatically renew for successive periods of one year unless one of the
parties shall give written notice to the other party not less than 30 days
prior to the end of the then-current term that the Services Agreement shall
terminate at the end of the then-current term. If no C-TEC Restructuring
Closing has taken place by June 30, 1997, the Services Agreement shall
automatically terminate on such date, and C-TEC and RCN shall enter into
Services, Facilities and employment arrangements designed to accomplish the
purposes set forth in the Services Agreement, and the parties shall negotiate
in good faith regarding such arrangements.
SECTION 10.04. Corporate Opportunity. Seller acknowledges
that (i) for purposes of the corporate opportunity doctrine under Pennsylvania
law, activities and opportunities relating to the Developmental Businesses
could, under certain circumstances, be construed as corporate opportunities of
Seller, (ii) Seller is receiving valuable consideration from Buyer for the
Developmental Businesses and (iii) Buyer is purchasing the Developmental
Businesses with a view to expansion of those businesses. To induce Buyer to
enter into this Agreement, Seller agrees that the doctrine of corporate
opportunity shall not apply to Buyer in connection with its ownership and
operation of the Developmental Businesses provided that for a period of two
years from the first to occur of the First Closing Date and the Second Closing
Date, neither Buyer nor any of its subsidiaries shall (i) engage in any
business that in any given location competes directly with the domestic cable
television business of Seller, the CLD Business (only if CLD is excluded from
the transactions contemplated hereby pursuant to Section 2.02(e)), or the
local telephone business of Seller (collectively, the "Continuing Businesses")
in a specific line of business operated by one of the Continuing Businesses in
such location as of the date hereof or (ii) except as otherwise contemplated
hereby, employ any employee currently employed by the Seller or any of its
subsidiaries. Subject to the foregoing proviso, Seller agrees that neither
Buyer nor any of its Affiliates shall have any obligation not to (i) engage in
the same or similar activities or lines of business as Seller or its
subsidiaries or develop or market any products or services that compete,
directly or indirectly, with those of Seller or its subsidiaries, (ii) invest
or own any interest publicly or privately in, or develop a business
relationship with, any Person engaged in the same or similar activities or
lines of business as, or otherwise in competition with, Seller or any of its
subsidiaries, (iii) do business with any client or customer of Seller or its
subsidiaries, or (iv) employ or otherwise engage a former officer or employee
of Seller or its subsidiaries. In furtherance of the foregoing, Seller
acknowledges that Buyer, through Buyer's subsidiary Freedom New York, L.L.C.
("Freedom"), has purchased certain assets and assumed certain liabilities of
or relating to Liberty Cable Company, Inc. ("Liberty") on the terms set forth
in an Asset Purchase Agreement dated as of February 20, 1996, among Freedom,
Liberty, Liberty Cable Television, Inc., Liberty Cable Newport, Inc., ▇▇▇▇▇▇▇▇
Communications, Inc., Battery Place Cable Corp. and Liberty Interactive Video
Enterprises, Inc., and the related agreements contemplated thereby (the
"Liberty Transaction"), and Seller agrees that such transaction shall not be
construed as a corporate opportunity of Seller. During the Repurchase Option
Period, if any, C-TEC shall have the option to purchase RCN's interest in
Freedom and all related assets and liabilities (collectively, the "Freedom
Interest") from RCN, subject to the following conditions: (i) the Freedom
Interest will be deemed a Developmental Business subject to purchase by C-TEC
for cash pursuant to Section 10.01, (ii) if the First Closing shall occur,
C-TEC shall not be permitted to purchase either the Freedom Interest or the
UrbanNet Business unless it repurchases both, (iii) the Repurchase Allocated
Price with respect to the Freedom Interest shall be an amount equal to Buyer's
total investment therein (the "Freedom Investment"), (iv) any IRR Interest
Amount with respect to the Freedom Interest shall be calculated on the basis
of the date or dates of Buyer's investment therein, and (v) references to the
"First Closing", "Second Closing" or "applicable Closing" in Section 10.01
shall mean, with respect to the Freedom Interest, March 5, 1996. If C-TEC
purchases the Freedom Interest from RCN, RCN will assign to C-TEC, and C-TEC
will assume, all related rights and obligations of RCN.
SECTION 10.05. Trademark Assignments and License. Seller
will cause TMH Inc., a Delaware corporation and a wholly owned subsidiary of
Seller ("TMH"), to enter into a customary trademark assignment agreement with
Buyer or one of its wholly-owned subsidiaries on or before the First Closing
(the "First Trademark Agreement"), with mutually acceptable terms pursuant to
which TMH will transfer to Buyer all trademarks, service marks and trade names
which are owned by TMH and used or held for use primarily in the UrbanNet
Business. Seller will, on or before the Second Closing, cause TMH to enter
into a customary, royalty-free license agreement granting to CLD a license
allowing CLD to use the trade name and service marks "COMMONWEALTH LONG
DISTANCE COMPANY" and "CLD" in connection with its long distance telephone
business (the "CLD License Agreement"). The CLD License Agreement will not be
entered into if CLD is excluded pursuant to Section 2.02(e).
SECTION 10.06. Assignment of UrbanNet Warrant. If Seller
decides to effect a Spin-off of the Commonwealth Companies, or the
Commonwealth Telephone Company otherwise ceases to be a subsidiary of Seller,
pursuant to a C-TEC Restructuring, Seller shall, prior to the time that
Commonwealth Telephone Company ceases to be a subsidiary of Seller, assign the
UrbanNet Warrant to (i) the Commonwealth Telephone Company, (ii) any entity
that directly or indirectly owns all or substantially all of the capital stock
of Commonwealth Telephone Company or (iii) any wholly owned subsidiary of any
entity referred to in clause (ii) above; provided, however, that the UrbanNet
Warrant may be retained by Seller if Seller shall continue as a publicly owned
company following a C-TEC Restructuring.
SECTION 10.07. Amendment of Interim Budgets. The party that
owns any given Developmental Business is permitted to amend in good faith the
Interim Budget with respect to such Developmental Business, provided that any
amended Interim Budget will be delivered promptly to the Special Committee, or
if the Special Committee is not then in existence, to the Board of Directors
of C-TEC.
ARTICLE XI
CONDITIONS TO CLOSING
SECTION 11.01. Conditions to Closing in UrbanNet Business
Transaction. (a) Conditions to Obligations of Buyer. The obligations of
Buyer to consummate the purchase of the UrbanNet Business contemplated by
Section 2.01 of this Agreement are subject to the fulfillment, at or before
the First Closing Date, of the following conditions, any one or more of which
may be waived by Buyer in its sole discretion:
(i) All representations and warranties made by Seller in this
Agreement relating to the UrbanNet Business and the transactions
contemplated hereby relating to the UrbanNet Business shall be true
and correct in all material respects on and as of the First Closing
Date as if again made by Seller on and as of such date and Buyer
shall have received a certificate dated the First Closing Date and
signed by the Chairman, the President or any Vice President of Seller
to that effect.
(ii) Seller shall have performed in all material respects all
obligations relating to the UrbanNet Business required under this
Agreement to be performed by it on or before the First Closing Date,
and Buyer shall have received a certificate dated the First Closing
Date and signed by the Chairman, the President or any Vice President
of Seller to that effect.
(iii) Neither any preliminary or permanent injunction or other
order issued by any court or governmental or regulatory authority,
domestic or foreign, nor any statute, rule, regulation, decree or
executive order promulgated or enacted by any government or
governmental or regulatory authority, domestic or foreign, which
declares this Agreement invalid or unenforceable in any respect or
which prevents the consummation of the transactions contemplated
hereby, shall be in effect; and no action or proceeding before any
court or governmental or regulatory authority, domestic or foreign,
shall have been instituted or threatened by any government or
governmental or regulatory authority, domestic or foreign, or by any
other Person, (A) which seeks to prevent or delay the consummation of
the transactions relating to the UrbanNet Business contemplated by
this Agreement, (B) which challenges the validity or enforceability
of this Agreement as it relates to the UrbanNet Business or (C) which
both relates to this Agreement and may cause an adverse effect on
Buyer or its Affiliates.
(iv) Buyer shall have received such other duly executed
certificates, instruments and documents in confirmation of the
representations and warranties of Seller relating to the UrbanNet
Business and the transactions contemplated hereby relating to the
UrbanNet Business or in furtherance of the transactions relating to
the UrbanNet Business contemplated by this Agreement as Buyer or its
counsel may reasonably request and as are normal and customary in
transactions similar to those contemplated hereby.
(v) All certificates, instruments and other documents required
to be executed or delivered by or on behalf of Seller under the
provisions of this Agreement, in connection with the transactions
relating to the UrbanNet Business, and all other actions and
proceedings required to be taken by or on behalf of Seller in
furtherance of the transactions relating to the UrbanNet Business
contemplated hereby, shall be reasonably satisfactory in form and
substance to counsel for Buyer.
(vi) Any applicable waiting period under the HSR Act relating
to the transactions relating to the UrbanNet Business contemplated
hereby shall have expired or been terminated.
(vii) Seller shall have received, in connection with the
transactions relating to the UrbanNet Business, all required
consents, authorizations, or approvals from governmental agencies and
third parties, in each case in form and substance reasonably
satisfactory to Buyer, and no such consent, authorization or approval
shall have been revoked.
(viii) If the First Closing Date does not occur on or prior to
the 90th day following the date hereof, the financial advisor to the
Special Committee shall not have withdrawn the UrbanNet Fairness
Opinion.
(ix) The parties thereto shall have entered into the First
Trademark Agreement.
(b) Conditions to Obligations of Seller. The obligations of
Seller to consummate the sale of the UrbanNet Business contemplated by Section
2.01 of this Agreement are subject to the fulfillment, at or before the First
Closing Date, of the following conditions, any one or more of which may be
waived by Seller in its sole discretion:
(i) All representations and warranties made by Buyer in this
Agreement relating to the UrbanNet Business and the transactions
contemplated hereby relating to the UrbanNet Business shall be true
and correct in all material respects on and as of the First Closing
Date as if again made by Buyer on and as of such date, and C-TEC
shall have received a certificate dated the First Closing Date and
signed by the Chairman, the President or any Vice President of Buyer
to that effect.
(ii) Buyer shall have performed in all material respects all
obligations relating to the UrbanNet Business required under this
Agreement to be performed by it on or before the First Closing Date,
and Seller shall have received a certificate dated the First Closing
Date and signed by the Chairman, the President or any Vice President
of Buyer to that effect.
(iii) Neither any preliminary or permanent injunction or other
order issued by any court or governmental or regulatory authority,
domestic or foreign, nor any statute, rule, regulation, decree or
executive order promulgated or enacted by any government or
governmental or regulatory authority, domestic or foreign, that
declares this Agreement invalid or unenforceable in any respect or
which prevents the consummation of the transactions contemplated
hereby shall be in effect; and no action or proceeding before any
court or governmental or regulatory authority, domestic or foreign,
shall have been instituted or threatened by any government or
governmental or regulatory authority, domestic or foreign, or by any
other Person, (A) which seeks to prevent or delay the consummation of
the transactions relating to the UrbanNet Business contemplated by
this Agreement, (B) which challenges the validity or enforceability
of this Agreement as it relates to the UrbanNet Business or (C) which
both relates to this Agreement and may cause an adverse effect on
Seller or its Affiliates.
(iv) Seller shall have received such other duly executed
certificates, instruments and documents in confirmation of the
representations and warranties of Buyer relating to the UrbanNet
Business and the transactions contemplated hereby relating to the
UrbanNet Business or in furtherance of the transactions relating to
the UrbanNet Business contemplated by this Agreement as Seller or its
counsel may reasonably request and as are normal and customary in
transactions similar to those contemplated hereby.
(v) All certificates, instruments and other documents required
to be executed or delivered by or on behalf of Buyer under the
provisions of this Agreement, in connection with the transactions
relating to the UrbanNet Business, and all other actions and
proceedings required to be taken by or on behalf of Buyer in
furtherance of the transactions relating to the UrbanNet Business,
contemplated hereby, shall be reasonably satisfactory in form and
substance to counsel for Seller.
(vi) Any applicable waiting period under the HSR Act relating
to the transactions relating to the UrbanNet Business, contemplated
hereby shall have expired or been terminated.
(vii) Buyer shall have received, in connection with the
transactions relating to the UrbanNet Business, all required
consents, authorizations, or approvals from governmental agencies and
third parties, in each case in form and substance reasonably
satisfactory to Buyer, and no such consent, authorization or approval
shall have been revoked.
(viii) If the First Closing Date does not occur on or prior to
the 90th day following the date hereof, the financial advisor to the
Special Committee shall not have withdrawn the UrbanNet Fairness
Opinion.
(ix) The parties thereto shall have entered into the First
Trademark Agreement.
SECTION 11.02. Conditions to Closing in CIT Businesses
Transaction. (a) Conditions to Obligations of Buyer. The obligations of
Buyer to consummate the purchase of the CIT Businesses contemplated by Section
2.02 of this Agreement are subject to the fulfillment, at or before the Second
Closing Date, of the following conditions, any one or more of which may be
waived by Buyer in its sole discretion:
(i) All representations and warranties made by Seller in this
Agreement relating to the CIT Businesses and the transactions
contemplated hereby relating to the CIT Businesses shall be true and
correct in all material respects on and as of the Second Closing Date
as if again made by Seller on and as of such date and Buyer shall
have received a certificate dated the Second Closing Date and signed
by the Chairman, the President or any Vice President of Seller to
that effect.
(ii) Seller shall have performed in all material respects all
obligations relating to the CIT Businesses required under this
Agreement to be performed by it on or before the Second Closing Date,
and Buyer shall have received a certificate dated the Second Closing
Date and signed by the Chairman, the President or any Vice President
of Seller to that effect.
(iii) Neither any preliminary or permanent injunction or other
order issued by any court or governmental or regulatory authority,
domestic or foreign, nor any statute, rule, regulation, decree or
executive order promulgated or enacted by any government or
governmental or regulatory authority, domestic or foreign, which
declares this Agreement invalid or unenforceable in any respect or
which prevents the consummation of the transactions contemplated
hereby, shall be in effect; and no action or proceeding before any
court or governmental or regulatory authority, domestic or foreign,
shall have been instituted or threatened by any government or
governmental or regulatory authority, domestic or foreign, or by any
other Person, (A) which seeks to prevent or delay the consummation of
the transactions relating to the CIT Businesses contemplated by this
Agreement, (B) which challenges the validity or enforceability of
this Agreement as it relates to the CIT Businesses or (C) which both
relates to this Agreement and may cause an adverse effect on Buyer or
its Affiliates.
(iv) Buyer shall have received such other duly executed
certificates, instruments and documents in confirmation of the
representations and warranties of Seller relating to the CIT
Businesses and the transactions contemplated hereby relating to the
CIT Businesses or in furtherance of the transactions relating to the
CIT Businesses contemplated by this Agreement as Buyer or its counsel
may reasonably request and as are normal and customary in
transactions similar to those contemplated hereby.
(v) All certificates, instruments and other documents required
to be executed or delivered by or on behalf of Seller under the
provisions of this Agreement, in connection with the transactions
relating to the CIT Businesses, and all other actions and proceedings
required to be taken by or on behalf of Seller in furtherance of the
transactions relating to the CIT Businesses contemplated hereby,
shall be reasonably satisfactory in form and substance to counsel for
Buyer.
(vi) Any applicable waiting period under the HSR Act relating
to the transactions relating to the CIT Businesses contemplated
hereby shall have expired or been terminated.
(vii) The earliest of the following shall have occurred (A)
the date upon which the Board of Directors of Seller approves a C-TEC
Restructuring that does not involve a tax-free Spin-off or otherwise
determines that it will not pursue a tax-free Spin-off, (B) the date
upon which Seller shall have received from the IRS the Letter Ruling,
without the inclusion of CLD as part of the Commonwealth Companies,
(C) the date upon which Seller and Buyer, after consultation with
their respective counsel, agree that inclusion of CLD as part of the
Commonwealth Companies in a Spin-off is advisable to obtain the
Letter Ruling, (D) the date upon which Seller and Buyer, after
consultation with their respective counsel, agree that the IRS will
not issue the Letter Ruling regardless of whether CLD is included as
part of the Commonwealth Companies and (E) December 31, 1996.
(viii) Seller shall have received, in connection with the
transactions relating to the CIT Businesses, all required
consents, authorizations, or approvals from governmental agencies
and third parties, in each case in form and substance reasonably
satisfactory to Buyer, and no such consent, authorization or
approval shall have been revoked.
(ix) If the CIT Purchase Price is paid with CIT Class B
Consideration and/or CIT Common Stock Consideration, C-TEC shall have
restructured the holding of its business such that it satisfies the
requirements of Section 355(b) of the Code.
(x) The parties thereto shall have entered into the CLD
License Agreement, unless CLD is excluded pursuant to Section
2.02(e).
(xi) The financial advisor to the Special Committee shall not
have withdrawn the CIT Fairness Opinion.
(b) Conditions to Obligations of Seller. The obligations of
Seller to consummate the sale of the CIT Businesses contemplated by Section
2.02 of this Agreement are subject to the fulfillment, at or before the Second
Closing Date, of the following conditions, any one or more of which may be
waived by Seller in its sole discretion:
(i) All representations and warranties made by Buyer in this
Agreement relating to the CIT Businesses and the transactions
contemplated hereby relating to the CIT Businesses shall be true and
correct in all material respects on and as of the Second Closing Date
as if again made by Buyer on and as of such date, and C-TEC shall
have received a certificate dated the Second Closing Date and signed
by the Chairman, the President or any Vice President of Buyer to that
effect.
(ii) Buyer shall have performed in all material respects all
obligations relating to the CIT Businesses required under this
Agreement to be performed by it on or before the Second Closing Date,
and Seller shall have received a certificate dated the Second Closing
Date and signed by the Chairman, the President or any Vice President
of Buyer to that effect.
(iii) Neither any preliminary or permanent injunction or
other order issued by any court or governmental or regulatory
authority, domestic or foreign, nor any statute, rule, regulation,
decree or executive order promulgated or enacted by any government
or governmental or regulatory authority, domestic or foreign, that
declares this Agreement invalid or unenforceable in any respect or
which prevents the consummation of the transactions contemplated
hereby shall be in effect; and no action or proceeding before any
court or governmental or regulatory authority, domestic or
foreign, shall have been instituted or threatened by any
government or governmental or regulatory authority, domestic or
foreign, or by any other Person, (A) which seeks to prevent or
delay the consummation of the transactions relating to the CIT
Businesses contemplated by this Agreement, (B) which challenges
the validity or enforceability of this Agreement as it relates to
the CIT Businesses, (C) which both relates to this Agreement and
may cause an adverse effect on Seller or its Affiliates.
(iv) Seller shall have received such other duly executed
certificates, instruments and documents in confirmation of the
representations and warranties of Buyer relating to the CIT
Businesses and the transactions contemplated hereby relating to the
CIT Businesses or in furtherance of the transactions relating to the
CIT Businesses contemplated by this Agreement as Seller or its
counsel may reasonably request and as are normal and customary in
transactions similar to those contemplated hereby.
(v) All certificates, instruments and other documents required
to be executed or delivered by or on behalf of Buyer under the
provisions of this Agreement, in connection with the transactions
relating to the CIT Businesses, and all other actions and proceedings
required to be taken by or on behalf of Buyer in furtherance of the
transactions relating to the CIT Businesses contemplated hereby,
shall be reasonably satisfactory in form and substance to counsel for
Seller.
(vi) Any applicable waiting period under the HSR Act relating
to transactions relating to the CIT Businesses contemplated hereby
shall have expired or been terminated.
(vii) Buyer shall have received, in connection with the
transactions relating to the CIT Businesses, all required
consents, authorizations, or approvals from governmental agencies
and third parties, in each case in form and substance reasonably
satisfactory to Buyer, and no such consent, authorization or
approval shall have been revoked.
(viii) The earliest of the following shall have occurred: (A)
the date upon which the Board of Directors of Seller approves a C-TEC
Restructuring that does not involve a tax-free Spin-off or otherwise
determines that it will not pursue a tax-free Spin-off, (B) the date
upon which Seller shall have received from the IRS the Letter Ruling,
without the inclusion of CLD as part of the Commonwealth Companies,
(C) the date upon which Seller and Buyer, after consultation with
their respective counsel, agree that inclusion of CLD as part of the
Commonwealth Companies in a Spin-off is advisable to obtain the
Letter Ruling, (D) the date upon which Seller and Buyer, after
consultation with their respective counsel, agree that the IRS will
not issue the Letter Ruling regardless of whether CLD is included in
as part of the Commonwealth Companies and (E) December 31, 1996.
(ix) The parties thereto shall have entered into the CLD
License Agreement, unless CLD is excluded pursuant to Section
2.02(e).
(x) The financial advisor to the Special committee shall not
have withdrawn the CIT Fairness Opinion.
ARTICLE XII
SURVIVAL; INDEMNIFICATION
SECTION 12.01. Survival. The covenants, agreements,
representations and warranties of the parties hereto contained in this
Agreement or in any certificate or other writing delivered pursuant hereto or
in connection herewith shall not survive the First or Second Closing (as
applicable); provided, however, that the representations and warranties of
Seller in Sections 3.01, 3.02, 3.03, 3.04, 3.05, 3.09, 3.10(b) (solely as of
the date of this Agreement) and 3.13, and all representations and warranties
of Buyer set forth in Article IV (provided that for this purpose the
representation and warranty in Section 4.07 is solely as of the date of this
Agreement), (collectively the "Surviving Representations") shall survive for
two years from the First or Second Closing Date (as applicable), the
provisions of Article VIII shall survive as provided in Section 8.09, and
provided further that this Section 12.01 shall not limit any covenant or
agreement of the parties hereto which by its terms requires performance after
the First or Second Closing Date (as applicable) (the "Surviving Covenants").
Notwithstanding the preceding sentence, any Surviving Representation in
respect of which indemnity may be sought under Section 12.02 shall survive the
time at which it would otherwise terminate pursuant to the preceding sentence,
if notice of the inaccuracy or breach thereof giving rise to such right to
indemnity shall have been given to the party against whom such indemnity may
be sought prior to such time.
SECTION 12.02. Indemnification. (a) Notwithstanding the
Closing, Seller hereby indemnifies and agrees to fully defend, save and hold
Buyer and any of its officers, directors, employees, stockholders, advisors,
representatives, agents and affiliates harmless if any indemnified party shall
at any time or from time to time suffer any damage, liability (absolute or
contingent), obligation, loss, cost, expense (including all reasonable
attorneys' fees), claim or cause of action (collectively "Losses") arising out
of any breach by Seller of any Surviving Representation or Surviving Covenant;
provided, however, that this provision shall not apply with respect to any of
the matters covered by Section 8.08 of this Agreement.
(b) Notwithstanding the First or Second Closing (as
applicable), Buyer indemnifies and agrees to fully defend, save and hold
Seller and any of its officers, directors, employees, stockholders, advisors,
representatives, agents and affiliates harmless if any such party shall at any
time or from time to time suffer any Loss arising out of any breach by Buyer
of any Surviving Representation or Surviving Covenant.
SECTION 12.03. Procedures. If the party or parties entitled
to receive the benefits of the indemnification provisions hereunder (the
"Indemnified Party") asserts that the party from whom indemnification has been
sought (the "Indemnifying Party") has become obligated to the Indemnified
Party pursuant to Section 12.02 hereof, or if any suit, action, investigation,
claim or proceeding is begun, made or instituted as a result of which the
Indemnifying Party may become obligated to the Indemnified Party hereunder,
the Indemnified Party shall give written notice to the Indemnifying Party,
provided that any failure to so notify shall not relieve the Indemnifying
Party of its indemnification obligations hereunder except to the extent that
the omission results in a failure of actual notice to the Indemnifying Party
and to the extent such Indemnifying Party is damaged as a result of such lack
of notice. The Indemnifying Party agrees to defend, contest or otherwise
protect the Indemnified Party against any such suit, action, investigation, or
proceeding by counsel of the Indemnifying Party's choice at its sole cost and
expense, provided that such counsel shall be reasonably satisfactory to the
Indemnified Party. The Indemnified Party shall have the right, but not the
obligation, to participate at its own expense in the defense thereof by
counsel of the Indemnified Party's choice and shall in any event cooperate
with and assist the Indemnifying Party to the extent reasonably possible. The
Indemnifying Party, in the defense of any such claim, shall not, except with
the consent of the Indemnified Party, consent to entry of any judgment or
enter into any settlement that does not include as an unconditional term
thereof the giving by the claimant to the Indemnified Party of a release from
all liability with respect to such claim. If the Indemnifying Party fails
timely to defend, contest or otherwise protect against such suit, action,
investigation, claim or proceeding, the Indemnified Party shall have the right
to do so, including, without limitation, the right to make any compromise or
settlement thereof, and the Indemnified Party shall be entitled to recover the
entire cost thereof from the Indemnifying Party, including, without
limitation, reasonable attorneys' fees, disbursements and amounts paid as the
result of such suit, action, investigation, claim or proceeding.
SECTION 12.04. Gross-Up. If any indemnification payment
under this Article XII (including, without limitation, this Section 12.04) or
Article VIII hereof is determined to be taxable to the party receiving such
payment by any Taxing Authority, the paying party shall also indemnify the
party receiving such payment for any Taxes incurred by reason of the receipt
of such payment (taking into account the value of any actual or reasonably
anticipated reduction in Tax liability to the receiving party resulting from
the indemnity payments or the facts giving rise to such payments) and any
related costs incurred by the party receiving such payment in connection with
such Taxes (or any asserted deficiency, claim, demand, action, suit,
proceeding, judgment or assessment, including the defense or settlement
thereof, relating to such Taxes).
ARTICLE XIII
TERMINATION
SECTION 13.01. Termination. This Agreement may be
terminated at any time prior to First or Second Closing (as applicable):
(a) By the mutual written consent of Seller and Buyer;
(b) Provided that it is not in breach of this Agreement in
any material respect and such breach is continuing, by Buyer immediately upon
written notice to Seller if the First or Second Closing (as applicable) has
not occurred on or prior to December 31, 1996;
(c) Provided that it is not in breach of this Agreement in
any material respect and such breach is continuing, by Seller immediately upon
written notice to Buyer if the First or Second Closing (as applicable) has not
occurred on or prior to December 31, 1996;
(d) By Buyer if any of the conditions specified in Section
11.01(a) or 11.02(a) (as applicable) hereof have not been met or waived at
such time as such condition is no longer capable of satisfaction;
(e) By Seller if any of the conditions specified in Section
11.01(b) or 11.02(b) (as applicable) hereof have not been met or waived at
such time as such condition is no longer capable of satisfaction;
(f) By Seller or Buyer if a court of competent jurisdiction
or governmental, regulatory or administrative agency or commission shall
have issued an order, decree or ruling or taken any other action (which
order, decree or ruling the parties hereto shall have first used their
reasonable best efforts to lift), which permanently restrains, enjoins or
otherwise prohibits the transactions contemplated by this Agreement as they
relate to the UrbanNet Business or the CIT Businesses (as applicable); or
(g) By Seller if the First or Second Closing (as applicable)
has not occurred before the C-TEC Restructuring Termination Date, if any.
SECTION 13.02. Procedure; Effect of Termination. In the
event of termination of this Agreement pursuant to Section 13.01, written
notice thereof shall forthwith be given to the other party and this Agreement
shall terminate and the transactions contemplated hereby shall be abandoned,
without further action by Seller or Buyer. This Agreement may be terminated
as to the transactions relating to the UrbanNet Business, the transactions
relating to the CIT Businesses, or both. If the Agreement is terminated as
to only one of the two sets of transactions, the provisions of this Agreement
not relating specifically to that set of transactions shall continue in full
force and effect unless otherwise subsequently terminated in accordance
herewith. If this Agreement is terminated as provided herein, no party to
this Agreement shall have any liability or further obligation to any other
party to this Agreement except as provided in Sections 6.01 and 14.02 hereof;
provided, however, that no termination of this Agreement pursuant to this
Article XIII shall relieve any party of liability for a willful breach of any
provision of this Agreement occurring before such termination.
ARTICLE XIV
MISCELLANEOUS
SECTION 14.01. Successors and Assigns. This Agreement shall
inure to the benefit of, and be binding upon, the parties hereto and their
respective successors and assigns. Neither party shall assign or delegate any
of the obligations created under this Agreement without the prior written
consent of the other party, provided that (i) Buyer may assign its rights and
obligations under this Agreement to any Affiliate of Buyer provided that no
such assignment shall relieve Buyer from liabilities hereunder and (ii)
following, or in connection with, the C-TEC Restructuring, Seller may assign
its rights and obligations (including, but not limited to, its rights and
obligations pursuant to Sections 5.04 and 10.04 hereof) under this Agreement
to any Person that owns all or substantially all of the local telephone
business operated by Seller as of the date hereof and, upon such assignment,
the obligations of C-TEC hereunder shall terminate. Nothing in this Agreement
shall confer upon any person or entity not a party to this Agreement, or the
legal representatives of such person or entity, any rights or remedies of any
nature or kind whatsoever under or by reason of this Agreement.
SECTION 14.02. Expenses. All costs and expenses incurred in
connection with this Agreement shall be paid by the party incurring such cost
or expense.
SECTION 14.03. Notices. All notices, requests and other
communications to either party hereunder shall be in writing and shall be
delivered personally or be mailed by overnight courier or be sent by
registered or certified mail (postage prepaid, return receipt requested) to the
parties at the following addresses:
(a) If to Buyer, to: RCN Corporation
c/o ▇▇▇▇▇ ▇▇▇▇▇▇ Sons', Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
with a copy to: ▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
One Citicorp Center
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇'▇▇▇▇▇▇▇▇, Esq.
(b) If to Seller, to: C-TEC Corporation
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
with a copy to: ▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
(c) If to the Special Committee of Seller, to:
▇▇▇▇▇▇ ▇▇▇▇, Esq.
Rosenn, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, L.L.P.
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
with a copy to: ▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, P.C.
and to Seller as set forth above,
or to such other persons or at such other addresses as shall be furnished by
either party by like notice to the other. Any notice so addressed shall be
deemed to be given: if delivered by hand, on the date of such delivery; if
sent by overnight delivery, on the first business day following the date of
such mailing; and if mailed by registered or certified mail, on the third
business day after the date of such mailing. No change in any of such
addresses shall be effective insofar as notices under this Section 14.03 are
concerned unless such changed address is located in the United States of
America and notice of such change shall have been given to such other party
hereto as provided in this Section 14.03.
SECTION 14.04. Entire Agreement. This Agreement, together
with the schedules and exhibits hereto, represents the entire agreement and
understanding of the parties with reference to the transactions set forth
herein and no representations or warranties have been made in connection with
this Agreement other than those expressly set forth herein or in the
schedules, exhibits, certificates and other documents delivered in accordance
herewith. This Agreement supersedes all prior negotiations, discussions,
correspondence, communications, understandings and agreements between the
parties relating to the subject matter of this Agreement and all prior drafts
of this Agreement, all of which are merged into this Agreement. No prior
drafts of this Agreement and no words or phrases from any such prior drafts
shall be admissible into evidence in any action or suit involving this
Agreement.
SECTION 14.05. Waivers and Amendments. Seller or Buyer may
by written notice to the other (a) extend the time for the performance of any
of the obligations or other actions of the other; (b) waive any inaccuracies
in the representations or warranties of the other contained in this Agreement;
(c) waive compliance with any of the covenants of the other contained in this
Agreement; (d) waive performance of any of the obligations of the other
created under this Agreement; or (e) waive fulfillment of any of the
conditions to its own obligations under this Agreement. The waiver by any
party hereto of a breach of any provision of this Agreement shall not operate
or be construed as a waiver of any subsequent breach, whether or not similar,
unless such waiver specifically states that it is to be construed as a
continuing waiver. This Agreement may be amended, modified or supplemented
only by a written instrument executed by the parties hereto. Any such
amendment or any waiver by Seller shall require the consent of the Special
Committee if then existing and, if not existing, any material amendment or
material waiver will require C-TEC Board Approval.
SECTION 14.06. Severability. This Agreement shall be deemed
severable, and the invalidity or unenforceability of any term or provision
hereof shall not affect the validity or enforceability of this Agreement or
of any other term or provision hereof. Furthermore, in lieu of any such
invalid or unenforceable term or provision, the parties hereto intend that
there shall be added as a part of this Agreement a provision as similar in
terms to such invalid or unenforceable provision as may be possible and be
valid and enforceable.
SECTION 14.07. Titles and Headings. The Article and Section
headings and the Table of Contents contained in this Agreement are solely for
convenience of reference and shall not affect the meaning or interpretation of
this Agreement or of any term or provision hereof.
SECTION 14.08. Counterparts. This Agreement may be executed
in two or more counterparts, each of which shall be deemed an original and all
of which together shall be considered one and the same agreement.
SECTION 14.09. Enforcement of the Agreement. The parties
hereto agree that irreparable damage would occur if any of the provisions of
this Agreement were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions hereto, this being in
addition to any other remedy to which they are entitled at law or in equity.
SECTION 14.10. Governing Law. This Agreement shall be
governed by and interpreted and enforced in accordance with the laws of the
State of New York and without giving effect to the choice-of-law provisions
thereof.
SECTION 14.11. Arbitration. Except as otherwise
specifically provided herein or in the relevant agreement, any disputes or
differences arising out of or in connection with this Agreement (including any
disputes or differences arising out of or in connection with any agreement
which is entered into in connection herewith) shall be finally and exclusively
resolved by arbitration under the rules of the American Arbitration
Association, which award shall be final and binding on the parties. Except as
otherwise agreed by the parties, arbitration shall be by three arbitrators
appointed in accordance with said rules. The arbitrators shall be required to
submit a written statement of their findings and conclusions. The arbitration
shall take place at a time noticed by the American Arbitration Association
regardless of whether one of the parties fails or refuses to participate.
Exclusive venue of arbitration shall be New York, New York.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized officers as of
the day and year first above written.
RCN CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
_____________________________
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President
C-TEC CORPORATION
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
_____________________________
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chairman and Chief
Executive Officer
FORM OF WARRANT
THIS WARRANT AND THE SECURITIES ISSUABLE UPON ITS EXERCISE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY
NOT BE TRANSFERRED EXCEPT IN ACCORDANCE WITH THE TRANSFER RESTRICTIONS SET
FORTH HEREIN, AND PURSUANT TO AN EFFECTIVE REGISTRATION UNDER THE ACT OR IN A
TRANSACTION WHICH, IN THE OPINION OF COUNSEL REASONABLY SATISFACTORY TO
RESIDENTIAL COMMUNICATIONS NETWORK, INC., QUALIFIES AS AN EXEMPT TRANSACTION
UNDER THE ACT AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER.
RESIDENTIAL COMMUNICATIONS NETWORK, INC.
Common Stock Purchase Warrant
Residential Communications Network, Inc., a Delaware
corporation (the "Company"), hereby certifies that, for value received, C-
TEC Corporation, a Pennsylvania corporation (the "Holder"), or assigns, is
entitled, subject to the terms set forth below, to purchase from the
Company, at any time and from time to time during the period beginning on
________, 1996 [date of issuance] and ending on _______, 2001 [five years
after date of issuance] in whole or in part, an aggregate of
________________ (___________) [number of shares equal to 6% of outstanding
Common Stock at the First Closing] fully paid and non-assessable shares of
the Common Stock of the Company at a purchase price of $____ per share (the
"Purchase Price") [the per share purchase price paid by RCN for the Common
Stock at the First Closing]. The Purchase Price and the number and
character of such shares are subject to adjustment as provided below, and
the term "Common Stock" shall mean, unless the context otherwise requires,
the stock or other securities or property of the Company at the time
deliverable upon the exercise of this Warrant.
1. EXERCISE OF WARRANT. The purchase rights evidenced by this
Warrant shall be exercised by the holder surrendering this Warrant, with the
form of subscription at the end hereof duly executed by such holder, to the
Company at its office in __, ___________, accompanied by payment, in cash, by
wire transfer of an amount equal to the Purchase Price multiplied by the
number of shares being purchased pursuant to such exercise of this Warrant.
The holder of this Warrant shall give the Company at least fifteen (15) days
prior written notice of such exercise.
1.1. Partial Exercise. This Warrant may be exercised for less
than the full number of shares of Common Stock in which case the number of
shares receivable upon the exercise of this Warrant as a whole shall be
proportionately reduced. Upon any such partial exercise, the Company at its
expense will forthwith issue to the holder hereof a new Warrant or Warrants of
like tenor calling for the number of shares of Common Stock as to which rights
have not been exercised, such Warrant or Warrants to be issued in the name of
the holder hereof.
2, DELIVERY OF STOCK CERTIFICATES ON EXERCISE. As soon as
practicable after the exercise of this Warrant and payment of the Purchase
Price, and in any event within ten (10) days thereafter, the Company, at its
expense, will cause to be issued in the name of and delivered to the holder
hereof a certificate or certificates for the number of fully paid and
non-assessable shares or other securities or property to which such holder
shall be entitled upon such exercise, plus, in lieu of any fractional share
to which such holder would otherwise be entitled, cash in an amount determined
in accordance with Paragraph 3.8 hereof. The Company agrees that the shares
so purchased shall be deemed to be issued to the holder hereof as the record
owner of such shares as of the close of business on the date on which this
Warrant shall have been surrendered and payment made for such shares as
aforesaid. The certificate or certificates shall bear a legend substantially
in the following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR
AN EXEMPTION THEREFROM. THE SHARES REPRESENTED BY THIS WARRANT
ARE SUBJECT TO RESTRICTIONS ON TRANSFER AND CAN BE TRANSFERRED
ONLY PURSUANT TO THE TERMS OF A WARRANT ISSUED BY RESIDENTIAL
COMMUNICATIONS NETWORK, INC. (THE "COMPANY") TO C-TEC CORPORATION
AS OF MARCH __, 1996. A COPY OF THE WARRANT WILL BE FURNISHED
WITHOUT CHARGE BY THE COMPANY TO THE HOLDER HEREOF UPON WRITTEN
REQUEST."
3. ANTI-DILUTION PROVISIONS AND OTHER ADJUSTMENTS. In order to
prevent dilution of the right granted hereunder, the Purchase Price shall be
subject to adjustment from time to time in accordance with this Paragraph 3.
For purposes of this Paragraph 3, any reference to RCN (as defined below)
includes its successors and assigns and any acquiror of any shares of Common
Stock previously owned by RCN, but, in the case of such an acquiror, only with
respect to the shares of Common Stock previously owned by RCN and shares of
Common Stock issued (or deemed issued) pro-rata in respect of those shares.
3.1. Adjustment to Purchase Price. Except as provided in
Paragraph 3.3, 3.4 or 3.5 below, if and whenever on or after the date of
issuance hereof the Company shall issue or sell, or shall in accordance with
subparagraphs 3.1(1) to (7), inclusive, be deemed to have issued or sold, any
shares of its Common Stock to RCN Corporation, a Delaware corporation ("RCN"),
or its affiliates, then forthwith upon such issue or sale (the "Triggering
Transaction"), the Purchase Price shall, subject to subparagraphs (1) to (7)
of this Paragraph 3.1, be adjusted to the Purchase Price (calculated to the
nearest tenth of a cent) determined by dividing:
(i) an amount equal to the sum of (x) the product derived by
multiplying the Number of Common Shares Deemed Outstanding and held by
RCN and its affiliates immediately prior to such Triggering Transaction
by the Purchase Price then in effect, plus (y) the consideration, if
any, received (or deemed to be received in accordance with Section
3.1(1) to (7)) by the Company from RCN and its affiliates upon
consummation of such Triggering Transaction, by
(ii) an amount equal to the sum of (x) the Number of Common
Shares Deemed Outstanding and held by RCN and its affiliates immediately
prior to such Triggering Transaction plus (y) the number of shares of
Common Stock issued (or deemed to be issued in accordance with
subparagraphs 3.1(1) to (7)) to RCN and its affiliates in connection
with the Triggering Transaction.
For purposes of this Paragraph 3, the term "Number of Common
Shares Deemed Outstanding" at any given time shall mean the sum of (i) the
number of shares of the Common Stock outstanding at such time, and (ii) the
number of shares of the Common Stock deemed to be outstanding under
subparagraphs 3.1(1) to (7), inclusive, at such time.
For purposes of determining the adjusted Purchase Price under this
Paragraph 3.1, the following subsections (1) to (7), inclusive, shall be
applicable:
(1) In case the Company at any time shall in any manner grant
(whether directly or by assumption in a merger or otherwise) any
rights to subscribe for or to purchase, or any options for the
purchase of, Common Stock or any stock or other securities
convertible into or exchangeable for Common Stock (such rights or
options being herein called "Options" and such convertible or
exchangeable stock or securities being herein called "Convertible
Securities"), whether or not such Options or the right to convert or
exchange any such Convertible Securities are immediately exercisable,
then the total maximum amount of Common Stock issuable upon the
exercise of such Options, or, in the case of Options for Convertible
Securities, upon the conversion or exchange of such Convertible
Securities, shall (as of the date of granting of such Options) be
deemed to be outstanding and to have been issued and sold by the
Company for the price per share for which the Common Stock is
issuable upon such exercise, conversion or exchange (determined by
dividing (x) the total amount, if any, received or receivable by the
Company as consideration for the granting of such Options, plus the
minimum aggregate amount of additional consideration payable to the
Company upon the exercise of all such Options, plus, in the case of
such Options which relate to Convertible Securities, the minimum
aggregate amount of additional consideration, if any, payable upon
the issue or sale of such Convertible Securities and upon the
conversion or exchange thereof, by (y) the total maximum number of
shares of Common Stock issuable upon the exercise of such Options or
the conversion or exchange of such Convertible Securities). No
adjustment of the Purchase Price shall be made upon the actual issue
of such shares of Common Stock or such Convertible Securities upon
the exercise of such Options, except as otherwise provided in
subparagraph (3) below.
(2) In case the Company at any time shall in any manner issue
(whether directly or by assumption in a merger or otherwise) or sell any
Convertible Securities, whether or not the rights to exchange or convert
thereunder are immediately exercisable, then the total maximum number of
shares of Common Stock issuable upon conversion or exchange of all such
Convertible Securities shall (as of the date of the issue or sale of
such Convertible Securities) be deemed to be outstanding and to have
been issued and sold by the Company for the price per share for which
Common Stock is issuable upon such conversion or exchange (determined by
dividing (x) the total amount received or receivable by the Company as
consideration for the issue or sale of such Convertible Securities, plus
the minimum aggregate amount of additional consideration, if any,
payable to the Company upon the conversion or exchange thereof, by (y)
the total maximum number of shares of Common Stock issuable upon the
conversion or exchange of all such Convertible Securities). No
adjustment of the Purchase Price shall be made upon the actual issue of
such Common Stock upon exercise of the rights to exchange or convert
under such Convertible Securities, except as otherwise provided in
subparagraph (3) below.
(3) If (a) the purchase price provided for in any Options
referred to in subparagraph (1), (b) the additional consideration, if
any, payable upon the conversion or exchange of any Convertible
Securities referred to in subparagraphs (1) or (2), or (c) the rate
at which any Convertible Securities referred to in subparagraph (1)
or (2) are convertible into or exchangeable for Common Stock shall
change at any time (other than under or by reason of provisions
designed to protect against dilution of the type set forth in
Paragraph 3.1 through 3.5), the Purchase Price in effect at the time
of such change shall forthwith be readjusted to the Purchase Price
which would have been in effect at such time had such Options or
Convertible Securities still outstanding provided for such changed
purchase price, additional consideration or conversion rate, as the
case may be, at the time initially granted, issued or sold.
(4) On the expiration of any Option or the termination of any
right to convert or exchange any Convertible Securities, the Purchase
Price then in effect hereunder shall forthwith be adjusted to the
Purchase Price which would have been in effect at the time of such
expiration or termination had such Option or Convertible Securities, to
the extent outstanding immediately prior to such expiration or
termination, never been issued.
(5) In case any Options shall be issued in connection with the
issue or sale of other securities of the Company, together comprising
one integral transaction in which no specific consideration is allocated
to such Options by the parties thereto, such Options shall be deemed to
have been issued for such amount of consideration as shall be determined
in good faith by the Board of Directors of the Company.
(6) In case any shares of Common Stock, Options or Convertible
Securities shall be issued or sold or deemed to have been issued or
sold for cash, the consideration received therefor shall be deemed to
be the amount received by the Company therefor. In case any shares
of Common Stock, Options or Convertible Securities shall be issued or
sold for a consideration other than cash, the amount of the
consideration other than cash received by the Company shall be the
fair value of such consideration as determined in good faith by the
Board of Directors of the Company. In case any shares of Common
Stock, Options or Convertible Securities shall be issued in
connection with any merger in which the Company is the surviving
corporation, the amount of consideration therefor shall be deemed to
be the fair value of such portion of the net assets and business of
the non-surviving corporation as shall be attributed by the Board of
Directors of the Company in good faith to such Common Stock, Options
of Convertible Securities, as the case may be.
(7) The number of shares of Common Stock outstanding at any given
time shall not include shares owned or held by or for the account of the
Company, and the disposition of any shares so owned or held shall be
considered an issue or sale of Common Stock for the purpose of this
Paragraph 3.1.
3.2. Dividends Not Paid Out of Earnings or Earned Surplus.
Except as provided in Paragraph 3.1, in the event the Company shall declare a
dividend upon the Common Stock (other than a dividend payable in Common Stock
covered by Paragraph 3.3) payable otherwise than out of earnings or earned
surplus, determined in accordance with generally accepted accounting
principles, including the making of appropriate deductions for minority
interests, if any, in subsidiaries (herein referred to as "Liquidating
Dividends"), then, as soon as possible after the exercise of this Warrant, the
Company shall pay to the person exercising such Warrant an amount equal to the
aggregate value at the time of such exercise of all Liquidating Dividends
(including but not limited to the Common Stock which would have been issued at
the time of such earlier exercise and all other securities which would have
been issued with respect to such Common Stock by reason of stock splits, stock
dividends, mergers or reorganizations, or for any other reason) which the
person exercising such Warrant could have acquired if it had held the number
of shares of Common Stock acquirable upon exercise of the Warrant immediately
before such dividend. For the purposes of this Paragraph 3.2, a dividend
other than in cash shall be considered payable out of earnings or earned
surplus only to the extent that such earnings or earned surplus are charged an
amount equal to the fair value of such dividend as determined in good faith by
the Board of Directors of the Company.
3.3. Subdivisions and Combinations. In case the Company shall
at any time declare a dividend or make any other distribution upon the
Common Stock payable in Common Stock or subdivide its outstanding shares of
Common Stock into a greater number of shares, the Purchase Price in effect
immediately prior to such subdivision shall be proportionately reduced,
and, conversely, in case the outstanding shares of Common Stock of the
Company shall be combined into a smaller number of shares, the Purchase
Price in effect immediately prior to such combination shall be
proportionately increased.
3.4. Reorganization, Reclassification, Consolidation, Merger or
Sale of Assets. If any capital reorganization or reclassification of the
capital stock of the Company, or consolidation or merger of the Company with
another corporation, or the sale of all or substantially all of its assets to
another corporation or other entity shall be effected in such a way that
holders of Common Stock shall be entitled to receive stock, securities, cash
or other property with respect to or in exchange for Common Stock, then, as a
condition of such reorganization, reclassification, consolidation, merger or
sale, lawful and adequate provision shall be made whereby the holder of this
Warrant shall have the right to acquire and receive upon exercise of this
Warrant such shares of stock, securities, cash or other property issuable or
payable (as part of the reorganization, reclassification, consolidation,
merger or sale) with respect to or in exchange for such number of outstanding
shares of Common Stock as would have been received upon exercise of this
Warrant at the Purchase Price then in effect. The Company will not effect any
such consolidation, merger or sale, unless prior to the consummation thereof
the successor corporation or other entity (if other than the Company)
resulting from such consolidation or merger or the corporation or other entity
purchasing such assets shall assume by written instrument mailed or delivered
to the holder of this Warrant at the last address of such holder appearing on
the books of the Company, the obligation to deliver to such holder such shares
of stock, securities or assets as, in accordance with the foregoing
provisions, such holder may be entitled to purchase.
3.5. No Adjustment for Exercise of Certain Options, Warrants,
Etc. The provisions of this Section 3 shall not apply to any Common Stock
issued, issuable or deemed outstanding under subparagraphs 3.1(1) to (7)
inclusive to any person pursuant to any stock option, stock purchase or
similar plan or arrangement for the benefit of employees, consultants or
directors of the Company or its subsidiaries.
3.6. Notices of Record Date, Etc. In the event that:
(1) the Company shall declare any cash dividend upon its Common
Stock, or
(2) the Company shall declare any dividend upon its Common Stock
payable in stock or make any special dividend or other distribution to
the holders of its Common Stock, or
(3) the Company shall offer for subscription pro rata to the
holders of its Common Stock any additional shares of stock of any class
or other rights, or
(4) there shall be any capital reorganization or
reclassification of the capital stock of the Company, including any
subdivision or combination of its outstanding shares of Common Stock,
or consolidation or merger of the Company with, or sale of all or
substantially all of its assets to, another corporation or other
entity, or
(5) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, in connection with such event, the Company shall give to the holder of
this Warrant:
(i) at least forty-five (45) days' prior written notice of the
date on which the books of the Company shall close or a record shall be
taken for such dividend, distribution or subscription rights or for
determining rights to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation
or winding up; and
(ii) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up, at
least forty-five (45) days' prior written notice of the date when the
same shall take place.
Such notice in accordance with the foregoing clause (i) shall also
specify, in the case of any such dividend, distribution or subscription
rights, the date on which the holders of Common Stock shall be entitled
thereto, and such notice in accordance with the foregoing clause (ii) shall
also specify the date on which the holders of Common Stock shall be entitled
to exchange their Common Stock for securities or other property deliverable
upon such reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation or winding up, as the case may be. Each such written
notice shall be given by first class mail, postage prepaid, addressed to the
holder of this Warrant at the address of such holder as shown on the books of
the Company.
3.7. Issuance of Replacement Warrant. If at any time or from
time to time on or after the date of issuance hereof, the Company shall grant,
issue or sell any shares of Common Stock or any Options or Convertible
Securities to RCN or its affiliates, then the holder of this Warrant shall be
issued a new warrant (the "Replacement Warrant") to replace this Warrant
entitling the Holder to purchase from the Company such number of shares of
Common Stock equal to the sum of (a) [the number of shares then subject to
purchase under this Warrant], plus (b) the number of shares equal to six (6)
percent of the number of shares of Common Stock granted, issued or sold or the
number of shares of Common Stock underlying the Options or Convertible
Securities granted, issued or sold (or deemed issued or sold under Paragraph
3.1), in each case at the Purchase Price as adjusted in accordance with the
provisions hereof. Upon the happening of an event described in this Paragraph
3.7, this Warrant shall cease to be outstanding, shall be canceled and shall
cease to exist. The holder of this Warrant shall thereafter surrender this
Warrant to the Company in exchange for the Replacement Warrant, the terms of
which (other than the terms described above) shall be substantially similar in
form and substance to this Warrant.
3.8. Fractional Shares. The Company shall not issue fractions of
shares of Common Stock upon exercise of this Warrant or scrip in lieu thereof.
If any fraction of a share of Common Stock would, except for the provisions of
this Paragraph 3.8, be issuable upon exercise of this Warrant, the Company
shall in lieu thereof pay to the person entitled thereto an amount in cash
equal to the current value of such fraction, calculated to the nearest
one-hundredth (1/100) of a share, to be computed (i) if the Common Stock is
listed on any national securities exchange on the basis of the last sales
price of the Common Stock on such exchange (or the quoted closing bid price if
there shall have been no sales) on the date of exercise, or (ii) if the Common
Stock shall not be listed, on the basis of the mean between the closing bid
and asked prices for the Common Stock on the date of exercise as reported by
the principal trading market, and if there are no such closing bid and asked
prices, on the basis of the fair market value per share as determined by the
Board of Directors of the Company.
3.9. Officers' Statement as to Adjustments. Whenever the
Purchase Price shall be adjusted as provided in Section 3 hereof, the Company
shall forthwith file at each office designated for the exercise of this
Warrant, a statement, signed by the Chairman of the Board, the President, any
Vice President or Treasurer of the Company, showing in reasonable detail the
facts requiring such adjustment and the Purchase Price that will be effective
after such adjustment. The Company shall also cause a notice setting forth
any such adjustments to be sent by mail, first class, postage prepaid, to the
record holder of this Warrant at his or its address appearing on the stock
register. If such notice relates to an adjustment resulting from an event
referred to in Paragraph 3.6, such notice shall be included as part of the
notice required to be mailed and published under the provisions of Paragraph
3.6 hereof.
3.10. Good Faith. (1) The granting of any rights to
subscribe for or to purchase, the issuance of or the sale of Common Stock,
Options, Convertible Securities or other capital stock by the Company or
its subsidiaries or (2) the creation of any stock option, stock purchase or
similar plan or arrangement for the benefit of employees, consultants or
directors of the Company or its subsidiaries shall be authorized or created
by the Board of Directors of the Company only upon a good faith
determination that such authorization or creation is in the best interests
of the Company.
4. NO DILUTION OR IMPAIRMENT. The Company will not increase
the par value of any shares of stock receivable upon the exercise of this
Warrant above the amount payable therefor upon such exercise, and at all times
will take all such action as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and non-assessable stock upon
the exercise of this Warrant.
5. RESERVATION OF STOCK, ETC., ISSUABLE ON EXERCISE OF
WARRANTS. The Company shall at all times reserve and keep available out of
its authorized but unissued stock, solely for the issuance and delivery upon
the exercise of this Warrant and other similar Warrants, such number of its
duly authorized shares of Common Stock as from time to time shall be issuable
upon the exercise of this Warrant and all other similar Warrants at the time
outstanding.
6. REPLACEMENT OF WARRANT. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and (in the case of loss, theft or destruction) upon delivery of
an indemnity agreement (with surety if reasonably required) in an amount
reasonably satisfactory to it, or (in the case of mutilation) upon surrender
and cancellation thereof, the Company will issue, in lieu thereof, a new
Warrant of like tenor.
7. REMEDIES. The Company stipulates that the remedies at law
of the holder of this Warrant in the event of any default by the Company in
the performance of or compliance with any of the terms of this Warrant are not
and will not be adequate, and that the same may be specifically enforced.
8. NEGOTIABILITY, ETC. This Warrant is issued upon the
following terms, to all of which each taker or owner hereof consents and
agrees:
(a) This Warrant shall only be transferred or assigned to (i)
Commonwealth Telephone Company, a Pennsylvania corporation, (ii) any
entity that directly or indirectly owns all or substantially all of the
capital stock of Commonwealth Telephone Company, or (iii) any wholly
owned subsidiary of any entity referred to in clause (ii) above.
(b) Subject to clause (a) above, title to this Warrant may be
transferred by endorsement (by the holder hereof executing the form of
assignment at the end hereof including guaranty of signature) and
delivery in the same manner as in the case of a negotiable instrument
transferable by endorsement and delivery.
(c) Until this Warrant is transferred on the books of the
Company, the Company may treat the registered holder of this Warrant as
the absolute owner hereof for all purposes without being affected by any
notice to the contrary.
(d) Prior to the exercise of this Warrant, the holder hereof
shall not be entitled to any rights of a shareholder of the Company with
respect to shares for which this Warrant shall be exercisable,
including, without limitation, the right to vote, to receive dividends
or other distributions or to exercise any preemptive rights, and shall
not be entitled to receive any notice of any proceedings of the Company,
except as provided herein.
(e) Subject to clause (a) above, the Company shall not be
required to pay any Federal or state transfer tax or charge that may be
payable in respect of any transfer involved in the transfer or delivery
of this Warrant or the issuance or conversion or delivery of
certificates for Common Stock in a name other than that of the
registered holder of this Warrant or to issue or deliver any
certificates for Common Stock upon the exercise of this Warrant until
any and all such taxes and charges shall have been paid by the holder of
this Warrant or until it has been established to the Company's
satisfaction that no such tax or charge is due.
(f) The holder of any shares of Common Stock issued upon the
exercise of this Warrant, in whole or in part, hereby agrees that, until
five (5) years following the date of the most recent exercise of this
Warrant, prior to an effective registration by the Company under the
Securities Act of 1933, as amended, or the Securities Exchange Act of
1934, as amended, it will not transfer or assign such shares of Common
Stock without the prior written consent of the Company, which consent
shall not be unreasonably withheld. Each taker or owner hereof agrees
and acknowledges that the Company will be acting reasonably if it
withholds such consent based upon a determination in good faith that (i)
such transfer or assignment may cause the Company to be required to
register the class of Common Stock under the Securities Exchange Act of
1934, as amended, or (ii) that the transferee or assignee of such shares
is a competitor, or an affiliate of a competitor, of the Company.
9. ACCESS TO INFORMATION. Upon reasonable request by the
holder of this Warrant, the Company shall afford the holder of this Warrant
reasonable access at reasonable times to any balance sheets or statements
of income (as of the close of any quarterly period or fiscal year) that the
Company has prepared during the two (2) years prior to such request. This
Paragraph 9 does not create any obligation on the part of the Company to
prepare any financial information in any manner whatsoever. The holder of
this Warrant agrees that it shall, and shall cause its representatives to,
hold in strict confidence all information obtained by them from the Company
(unless such information is or becomes publicly available without the fault
of any such representatives or public disclosure of such information is
required by law) and shall ensure that its representatives do not disclose
such information to others without the prior written consent of the
Company.
10. MAILING OF NOTICES, ETC. All notices and other
communications from the Company to the holder of this Warrant shall be mailed
by first-class certified mail, postage prepaid, to the address furnished to
the Company in writing by the last holder of this Warrant who shall have
furnished an address to the Company in writing.
11. HEADINGS, ETC. The headings in this Warrant are for
purposes of reference only, and shall not limit or otherwise affect the
meaning hereof.
12. CHANGE, WAIVER, ETC. Neither this Warrant nor any term
hereof may be changed, waived, discharged or terminated orally but only by an
instrument in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought.
13. GOVERNING LAW. THIS WARRANT SHALL BE CONSTRUED AND ENFORCED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE.
RESIDENTIAL COMMUNICATIONS
ETWORK, INC.
By__________________________
Name:
Title:
Dated: ________, 1996
[To be signed only upon exercise of Warrant]
To Residential Communications Network, Inc.:
The undersigned, the holder of the within Warrant, hereby
irrevocably elects to exercise the purchase right represented by such Warrant
for, and to purchase thereunder, ______ shares of Common Stock of Residential
Communications Network, Inc. and herewith makes payment of $______ therefor,
and requests that the certificates for such shares be issued in the name of,
and be delivered to ___________, whose address is ______________.
Dated:
____________________
_____________________________
(Signature must conform in all
respects to name of Holder as
specified on the face of the
Warrant)
_____________________________
Address
[To be signed only upon transfer of Warrant]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto ________________________________ the right represented by the
within Warrant to purchase the _________ shares of the Common Stock of
Residential Communications Network, Inc. to which the within Warrant relates,
and appoints __________ attorney to transfer said right on the books of
Residential Communications Network, Inc. with full power of substitution in
the premises.
Dated:
____________________
___________________________
(Signature must conform in all
respects to name of Holder as
specified on the face of the
Warrant)
____________________________
Address
In the presence of
______________________
SERVICES AGREEMENT
THIS SERVICES AGREEMENT ("Agreement") is made and entered into
as of March 27, 1996, by and between C-TEC SERVICES, INC., a Pennsylvania
corporation, having its principal offices located at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ("C-TEC Services"), and RCN CORPORATE SERVICES,
INC., a New Jersey corporation ("RCN Services"), having its principal offices
located at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇.
WHEREAS, C-TEC Corporation ("C-TEC"), the parent company of
C-TEC Services, has agreed to sell certain of its businesses to RCN
Corporation ("RCN"), parent company of RCN Services, (the "Developmental
Businesses Transaction") as more specifically set forth in that certain
Stock Purchase Agreement dated March 27, 1996 (the "Stock Purchase
Agreement"); and
WHEREAS, RCN has, through a subsidiary, purchased certain
assets and assumed certain liabilities of Liberty Cable Company, Inc.; and
WHEREAS, both C-TEC and RCN agree that due to the
Developmental Businesses Transaction and the Liberty Transaction (as
defined in the Stock Purchase Agreement) as well as other strategic
alternatives being considered by C-TEC at this time, including the C-TEC
Restructuring (as defined in the Stock Purchase Agreement), it is in the
best interests of C-TEC and RCN for C-TEC Services and RCN Services to
enter into this Agreement under the terms and conditions as set forth
herein; and
WHEREAS, C-TEC Services, through its own personnel, is engaged
in and is known to have expertise and success in providing management,
administrative, technical and support services to certain companies; and
WHEREAS, RCN Services desires to engage the services of C-TEC
Services prior to the C-TEC Restructuring Closing (as defined below) to obtain
the benefit of C-TEC Services' experience and assistance with respect to the
management, administrative, technical and support services of its operations;
and
WHEREAS, as of the date hereof, RCN intends to hire or offer to
hire (or to do so through RCN Services or other affiliates or subsidiaries of
RCN) all or substantially all of the employees of C-TEC Services, as well as
▇▇▇▇▇▇▇ ▇▇▇▇▇ of Commonwealth Communications, Inc. ("CCI"), effective as of
the consummation (the "C-TEC Restructuring Closing") of the C-TEC
Restructuring, if any, and may wish to hire or offer to hire certain other
employees of CCI effective as of such time; and
WHEREAS, C-TEC Services desires to engage the services of RCN
Services after the C-TEC Restructuring Closing, if any;
NOW, THEREFORE, in consideration of the premises and the
representations, warranties and mutual covenants herein contained, the parties
hereby agree as follows:
1. Definitions:
Unless otherwise specifically defined herein, each capitalized term
used herein which is defined in the Stock Purchase Agreement shall
have the meaning assigned to such term in the Stock Purchase
Agreement.
2. Duties Prior to the C-TEC Restructuring Closing:
From the date hereof until the earlier of (x) the date of the C-TEC
Restructuring Closing, if any, and (y) June 30, 1997 (the
"Pre-Restructuring Term"), C-TEC Services shall provide to RCN
Services (i) through C-TEC Services' (or its affiliates' or
subsidiaries') officers, employees, agents and other personnel, such
management and support services and technical assistance, as RCN
Services may reasonably request in connection with the ownership and
operation by RCN and its subsidiaries of the Liberty Interest and
such of the Developmental Businesses as RCN may purchase pursuant to
the Stock Purchase Agreement (together with the Liberty Interest, the
"RCN Businesses"), including, but not be limited to, executive and
managerial services, insurance support services, engineering, human
resources, legal, financial, accounting, and other support services
("Services"), and (ii) such office space, equipment, furniture and
other equipment and facilities ("Facilities"), as RCN may reasonably
request in connection with the ownership and operation by RCN and its
subsidiaries of the RCN Businesses.
3. Employee Transfer:
RCN Services and C-TEC Services acknowledge and agree that (x) as of
the date hereof, C-TEC Services intends, and will be permitted but
not required, to hire or offer to hire (either directly or through an
affiliate) (i) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ of UrbanNet Parent effective as of the
First Closing, if any, and (ii) ▇▇▇▇▇ ▇'▇▇▇▇ of CLD effective as of
the Second Closing, if any, provided that CLD is purchased by RCN at
such Second Closing, and (y) as of the date hereof, RCN intends, and
will be permitted but not required, to hire or offer to hire (or to
do so through RCN Services or other affiliates or subsidiaries of
RCN) effective as of the C-TEC Restructuring Closing, if any, (i) all
or substantially all of the employees of C-TEC Services, as well as
▇▇▇▇▇▇▇ ▇▇▇▇▇ of CCI and (ii) up to 20 of those employees of CCI all
or substantially all of whose time is spent on matters related to the
RCN Businesses.
4. Duties After the C-TEC Restructuring Closing:
After the C-TEC Restructuring Closing (the "Post-Restructuring
Term"), if any, (i) RCN shall cause RCN Services to provide such
Services to C-TEC Services as may reasonably be requested by C-TEC
Services in connection with the ownership and operation by C-TEC and
its subsidiaries of such businesses as they may own from time to time
(the "C-TEC Businesses") and (ii) C-TEC shall continue to provide to
RCN Services such Facilities as may reasonably be requested by RCN
Services in connection with the ownership and operation by RCN and
its subsidiaries of the RCN Businesses.
5. Fees and Expenses:
The party providing Services or Facilities hereunder is referred
to as "Provider" and the party receiving Services or Facilities is
referred to herein as "Recipient". During the Pre-Restructuring
Term and Post-Restructuring Term, as applicable, Recipient shall
pay Provider for those Services provided hereunder (and related
expenses) as follows:
(a) Services will be billed according to the loaded labor
rate of the personnel providing such services based on
actual time spent by such personnel; in addition,
Recipient will reimburse Provider for outside consultant
services incurred and outside legal, accounting and other
services relative to Provider's performance of this
Agreement ("Services Fees"); and
(b) reasonable travel, meal, lodging and other expenses will
be billed at cost based on detailed expense statements
("Expenses").
During the term of this Agreement, Facilities will be billed at their
actual cost to C-TEC Services as prorated for actual usage by
personnel of RCN Services and its affiliates plus reasonable general
and administrative expenses ("Facilities Fees").
Promptly after the end of each calendar month, Provider shall
supply to Recipient an invoice setting forth the above-mentioned
Services Fees, Facilities Fees and Expenses, and Recipient shall
pay Provider for said Services Fees, Facilities Fees and Expenses
within thirty (30) days after receipt of such invoice. Provider
will require personnel providing Services to maintain accurate
records of their time spent in performing Services. Provider will
permit Recipient reasonable access to the books and records of
Provider to permit Recipient to verify the fees and expenses being
charged hereunder. In the event of a dispute as to the fees or
expenses being charged hereunder, the matter will be submitted to
an independent accounting firm mutually acceptable to both parties
and the determination of such firm shall be binding and final.
The fees and expenses of any such accountant will be paid by the
losing party.
6. Limit on Obligation to Provide Services:
The obligation of either party to this Agreement to provide
Services or Facilities shall be subject to the availability to
such party of such Services or Facilities at the relevant time.
Prior to the C-TEC Restructuring Closing, if any, (and in the case
of Facilities, during the first year of the Post-Restructuring
Term (the "Initial Post-Restructuring Term"), if any) C-TEC
Services will not be obligated to provide Services or Facilities
to RCN Services to the extent that the provision of such Services
or Facilities would leave C-TEC Services with inadequate resources
to support the C-TEC Businesses in the ordinary course. If,
during the Initial Post-Restructuring Term, if any, RCN Services
shall have inadequate resources to support in the ordinary course
both the RCN Businesses and the C-TEC Businesses, the C-TEC
Businesses will be given priority.
7. Term and Termination:
The Agreement shall commence on the date hereof. If the C-TEC
Restructuring Closing, if any, shall occur on or before June 30,
1997, the initial term of this Agreement shall end on the first
anniversary of the C-TEC Restructuring Closing, but shall
automatically renew for successive periods of one year unless one of
the parties shall give written notice to the other party not less
than 30 days prior to the end of the then-current term that the
Agreement shall terminate at the end of the then-current term. If no
C-TEC Restructuring Closing has taken place by June 30, 1997, this
Agreement shall automatically terminate on such date, and C-TEC
Services and RCN Services shall enter into Services, Facilities and
employment arrangements designed to accomplish the purposes set forth
herein (specifically, to provide both parties adequate Services,
Facilities and employees to conduct their businesses) and the parties
shall negotiate in good faith regarding such arrangements. Upon
termination, all documents, working papers and other pertinent
information relating to the services being performed hereunder in
Provider's possession, or under Provider's control, shall be
forwarded to the Recipient, and Recipient shall make payment, in
accordance with paragraph 5 hereof, for all Services and Facilities
actually received or utilized by the Recipient, and Expenses, up to
the date of termination. The Provider will use all reasonable
efforts to assist the Recipient during the transition period.
8. Independent Contractor:
In the performance of its duties and responsibilities under this
Agreement, each party hereto, as Provider, shall be and shall act
solely as an independent contractor, and nothing contained in this
Agreement or in the relationship of Provider and Recipient hereunder
shall constitute, be construed to be or create a partnership or joint
venture between Recipient and Provider.
9. Indemnification:
Recipient shall indemnify and keep Provider fully indemnified from
and against any loss, claim or damage incurred by Provider as a
result of any action or claim brought against it by any third
party in respect of the provision by Provider of the Services or
Facilities stipulated under this Agreement, unless said loss,
claim or damage is a direct result of Provider's gross negligence
or willful misconduct, and absent gross negligence or willful
misconduct on the part of Provider, Provider shall have no
liability hereunder.
10. Confidentiality:
Each party acknowledges that, in connection with the Services and
Facilities to be provided hereunder, it may receive confidential and
proprietary information of a business, financial, technical or other
type, from the other party or from an affiliate of the other party.
Each party agrees that any such information that it receives is to be
used by it only relative to the terms and conditions of this
Agreement. Each party agrees that any such information that it
receives will be used only for the performance of its obligations
hereunder. Without limiting the generality of the foregoing, neither
party shall commercially exploit any confidential proprietary
information for purposes other than those contemplated by this
Agreement. Each party shall use its best efforts to keep
confidential all information of a proprietary nature that it receives
in connection with this Agreement; provided, however, that the
parties' respective obligations under this clause shall not relate to
any matter falling within the public domain otherwise than by reason
of a breach of this Agreement by the party that has received the
information. The provisions of this clause shall be binding upon the
affiliates, partners, officers, directors, shareholders, employees
and agents of the parties, and shall survive the termination of this
Agreement.
11. Representations and Warranties:
Provider represents and warrants as follows:
a. All Services to be performed under the terms of this
Agreement will be performed in a thorough and
professional manner in conformance with industry
standards;
b. That it is (or will be) experienced in the type of
Services which it is engaged to provide hereunder; and
c. Provider will use all reasonable efforts to maintain the
Facilities provided hereunder in good repair.
12. Notices:
Each notice, demand or other communication given or made under this
Agreement shall be in writing and delivered or sent to the relevant
party at its address or telex number or fax number set out below (or
such other address or telex number or fax number as the addressee has
by five (5) days' prior written notice specified to the other
parties):
To C-TEC Services: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
President and Chief Operating Officer
C-TEC Services, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
With a copy to: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Executive Vice President
General Counsel and Secretary
C-TEC Services, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
To RCN Services: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Executive Vice President and
Chief Financial Officer
RCN Corporate Services, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
With a copy to: ▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
Vice President and Secretary
RCN Corporate Services, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
13. Binding Effect; Assignability:
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and shall be assignable or delegable by either party
only with the written consent of the other party, which said consent
shall not be unreasonably withheld.
14. Waiver:
Failure on the part of either party to insist upon strict compliance
by the other with any of the terms, covenants or conditions hereof
shall not be deemed a waiver of such term, covenant or condition nor
shall such be construed as a waiver of any subsequent breach.
15. Severability:
The invalidity or unenforceability of any provision hereof, or the
application of any provision hereof to any circumstances, shall in no
way affect the validity or enforceability of any other provision or
the application of such provision to any other circumstances.
16. Governing Law:
This Agreement shall be governed by and construed in accordance with
the laws of the State of New Jersey.
17. Survival:
The provisions of any section of this Agreement which, by their sense
and context, appear to be intended to survive the termination or
expiration of this Agreement shall so survive. Provider agrees to
comply, and do all things necessary for the Recipient to comply, with
all applicable Federal, state and local laws, regulations and
ordinances in respect of the Services and Facilities to be provided
hereunder.
18. Counterparts:
This Agreement may be executed in counterparts, each of which
shall be deemed an original, but all of which shall constitute the
same instrument.
19. Entire Agreement:
This Agreement constitutes the entire understanding of the parties
relating to the subject matter herein, and cannot be changed or
modified unless such change or modification is made in writing and
signed by a duly authorized representative of each party. This
Agreement supersedes all previous oral, written or other
communication between them concerning the subject matter.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and have hereunto set their hand and seal, all as of the day and year
first above written.
RCN CORPORATE SERVICES, INC.
By: /s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
___________________________
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President
C-TEC SERVICES, INC.
By: /s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
___________________________
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President and Chief
Operating Officer