EXHIBIT 10.2
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
MADISON RIVER TELEPHONE COMPANY, LLC
AND
GULF COAST SERVICES, INC.
May 9, 1999
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER is made and entered into this 9th day of May,
1999 (the "Agreement Date"), by and between MADISON RIVER TELEPHONE COMPANY,
LLC, a Delaware limited liability company ("Buyer"), and GULF COAST SERVICES.
INC., an Alabama corporation ("GCSI"). Buyer and GCSI are hereinafter sometimes
referred to, collectively, as the "Parties".
This Agreement contemplates a transaction in which Buyer will acquire for
cash all of the outstanding capital stock of GCSI through a reverse subsidiary
merger of Transitory Subsidiary (as defined below) with and into GCSI.
NOW, THEREFORE, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties and
covenants herein contained, the Parties agree as follows.
ARTICLE I
DEFINITIONS
"1999 Capital Budget" means GCSI and its Subsidiaries' 1999 Capital Budget
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attached hereto as Exhibit A.
"1999 Operating Budget" means GCSI and its Subsidiaries' 1999 Operating
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Budget attached hereto as Exhibit B.
"Additional Merger Consideration" means the sum of (i) the Capital
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Expenditures of GCSI made after the Agreement Date and on or prior to the
Effective Time not to exceed $10,000,000 and (ii) the Incentive Payment.
"Adjusted Long Term Debt" means Long Term Debt less (i) the Employee Stock
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Ownership Plan loan guarantee, and (ii) cash and cash equivalents of GCSI and
its Subsidiaries in excess of $1,500, 000, determined on a consolidated basis
and in accordance with GAAP, consistently applied, as of the Effective Time.
"Agreement" means this Agreement and Plan of Merger.
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"Agreement Date" has the meaning set forth in the preface above.
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"Alabama Business Corporation Act" means the Alabama Business Corporation
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Act, as codified at ALA. CODE (S) 10-2B- 1.01 et seq. (1994 Repl.).
"Articles of Merger" has the meaning set forth in Section 2.4.
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"Audited Financial Statements" has the meaning set forth in Section 3.5.
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"Benefit Plans" has the meaning set forth in Section 3.20.
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"Business" means all telecommunications related businesses conducted by
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GCSI and its Subsidiaries.
"Buyer" has the meaning set forth in the preface above.
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"Capital Expenditures of GCSI" means amounts paid or disbursed by GCSI or
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any of its Subsidiaries in connection with or for use in fiber projects.
"Closing" has the meaning set forth in Section 2.3.
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"Closing Date" has the meaning set forth in Section 2.3.
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"Code" means the Internal Revenue Code of 1986, as amended.
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"Confidential Information" means any information concerning the Business,
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GCSI or its Subsidiaries that is not already generally available to the public.
"Contracts" has the meaning set forth in Section 3.16.
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"Co-Trustees" 'has the meaning set forth in Sect on 7.2(a).
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"Court Confirmation" has the meaning set forth in Section 7.2(a).
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"DigiPH" the meaning set forth in Article IM The Parties acknowledge that
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DigiPH is not a Subsidiary of GCSI as defined in this Agreement.
"DigiPH" Stock" has the meaning set forth in Article IX.
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"Disclosure Schedules" has the meaning, set forth in Article HI.
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"Dissenting Share" means any GCSI Share with respect to which the GCSI
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Stockholder of record has exercised his or her or its appraisal rights under the
Alabama Business Corporation Act.
"Effective Time" has the meaning set forth in Section 2.5(a).
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"Environmental Law" means any federal, state or local law (including
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statutes, regulations, ordinances, codes, rules, judicial opinions and other
governmental restrictions and requirements) relating to the discharge of air
pollutants, water pollutants, noise or odors, the processing of waste water or
otherwise relating to the environment or hazardous or toxic substances.
"Equipment" has the meaning set forth in Section 3.9.
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"ERISA" means the Employee Retirement Income Security Act of 1974, as
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amended.
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"ESOP" means the Gulf Telephone Company Employee Stock Ownership Plan.
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"ESOP Trustees" has the meaning set forth in Section 7.2(a).
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"Financial Statements" has the meaning set forth in Section 3.5.
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"FCC" means the Federal Communications Commission.
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"Financing Commitments" has the meaning set forth in Section 4.2.
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"GAAP" means United States generally accepted accounting principles as in
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effect from time to time, subject to adjustments customary for the
telecommunications industry and, with respect to Interim Financial Statements,
year end and other consolidating adjustments.
"GCSI" has the meaning set forth in the preface above.
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"GCSI Share" means a share of the issued and outstanding common stock,
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$1.00 par value per share, of GCSI.
"GCSI Stockholder" means any Person who or which is the holder of record of
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any GCSI Shares.
"Governmental Entity" means any government or subdivision thereof, whether
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domestic or foreign, or any administrative, governmental or regulatory
authority, agency, department, division, commission, court, tribunal or body,
whether domestic, foreign or multinational.
"▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act" means the ▇▇▇▇- ▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements
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Act of 1976, as amended.
"Hazardous Substance" means any toxic or hazardous, substance that is
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regulated by or under the authority of any Environmental Law, including any
petroleum products, asbestos or polychlorinated biphenyls.
"Incentive Plan" means a sum of up to $5,000,000 computed according to the
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following schedule:
Lighted Sheath Miles Amount of Incentive
at the Effective Time Payment
0-900 -$0
901-1033 $3,500,000
1034-1149 $4,000,000
1150-1278 $4,500,000
1279 and above $5,000,000
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For the purpose of this definition of Incentive Payment, a Lighted Sheath
Mile shall mean a mile of fiber optic cable owned by, or subject to an IRU in
the name of, GCSI or one of its Subsidiaries with respect to which all of the
components listed on Exhibit C have been installed with respect to two or more
strands and said strands are capable of transmitting and receiving data or other
information at an OC 48 rate.
"Insurance Policies" has the meaning set forth in Section 3.26.
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"Intellectual Property" has the meaning set forth in Section 3.12(a)-
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"Interim Financial Statements" has the meaning set forth in Section 3.5.
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"Inventory" has the meaning set forth in Section 3-11.
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"Knowledge of Buyer" means the actual knowledge, without independent
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investigation, of the officers of Buyer listed on Exhibit D.
"Knowledge of GCSI" means the actual knowledge, without independent
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investigation, of the officers of GCSI listed on Exhibit E.
"Leases" has the meaning forth in Section 3.15.
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"Liens" mean mortgages, deeds of trust, pledges, liens, encumbrances,
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charges or other security interests, other than (i) purchase money Liens and
Liens securing rental payments under capital lease arrangements and CH) other
Liens arising in the Ordinary Course of Business and not incurred in connection
with the borrowing of money.
"Long Term Debt" means Long Term Debt and Capital Lease Obligations,
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including the current portion, as reflected on the books and records of GCSI and
its Subsidiaries, determined on a consolidated basis and in accordance with
GAAP, consistently applied, as of the Effective Time; provided that Long Term
Debt shall include the outstanding principal balance owed pursuant to lines of
credit however reflected on said books, and records.
"Material Adverse Effect" means, with respect to Buyer or Transitory
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Subsidiary or GCSI, as the case may be, a material adverse effect on (i) the
business, results of operations or financial condition of such party and its
Subsidiaries taken as a whole, other than any such effect attributable to or
resulting from (A) any change in law or any change in the rules or regulations
of or interpretations of law by the FCC, state public utility commissions or
other Governmental Entities, (B) any change in GAAP or regulatory accounting
principles, (C) any action or omission of GCSI or Buyer or any Subsidiary of
either of them taken with the express prior written consent of the other party
hereto, or (D) any expenses incurred by such party where such expenses are
contemplated by or reasonably incurred in connection with this Agreement or the
transactions contemplated hereby, or (ii) the ability of such party and its
Subsidiaries to consummate the transactions contemplated hereby.
"Merger" has the meaning set forth in Section 2.2.
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"Merger Consideration" means the sum of (i) $310,000,000 reduced by (A)
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Adjusted Long Term Debt as of the Closing Date and (B) unexpended and unincurred
capital budgeted items for fiber projects described in the 1999 Capital Budget
as of the Closing Date, (ii) the sales price of the Non-Business Real Estate as
provided in Section 6.10, and (iii) the sales price of the DigiPH Stock as
provided in Article IX.
"Millry" has the meaning set forth in Article IX
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"Non-Business Real Estate" has the meaning set forth in Section 6. 10.
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"Ordinary Course of Business" means the ordinary course of business
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consistent with past custom and practice (including with respect to quantity and
frequency).
"Party" has the meaning set forth in the preface above.
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"Paving Agent" has the meaning set forth in Section 2.6(a).
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"Payment Fund" has the meaning set forth in Section 2.6(b).
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"Permits" has the meaning set forth in Section 3.23.
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"Permitted Liens," means (i) Liens for taxes, assessments or other
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governmental charges or levies not yet due, (ii) statutory Liens of landlords
and Liens of carriers, warehousemen, mechanics, materialsmen and other liens
imposed by law and created in the Ordinary Course of Business, (iii) Liens
(other than any Lien imposed by ERISA) incurred or deposits made in the Ordinary
Course of Business in connection with worker's compensation, unemployment
insurance or other types of social security, (iv) minor defects of title,
easements, rights-of-way, restrictions and other similar charges or encumbrances
not materially detracting from the value of the Real Property or interfering
with the ordinary conduct of the Business, (v) Liens arising out of liabilities
reflected on the Financial Statements, and (vi) those Liens, if any, listed on
Schedule 3.8.
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"Person" means an individual, partnership, corporation, limited liability
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company, association, joint stock company, trust, joint venture, unincorporated
organization or Governmental Entity.
"Real Property" means any interest of whatever nature or kind, in real
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property owned by GCSI or its Subsidiaries or leased by GCSI or its Subsidiaries
as lessee, other than the Non-Business Real Estate.
"Requisite Stockholder Approval" means the affirmative vote of the holders
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of two-thirds (2/3) of the GCSI Shares in favor of this Agreement and the
Merger.
"SEC" means the Securities and Exchange Commission.
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"Securities Act" means the Securities Act of 1933, as amended.
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"Securities Exchange Act" means the Securities Exchange Act of 1934, as
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amended.
"Software" means all material computer software used by GCSI or its
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Subsidiaries in the conduct of the Business.
"Official Meeting" has the meaning set forth in Section 6.3(a).
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"Stockholder Materials" has the meaning set forth in Section 6.3 (a).
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"Subsidiary" means any corporation, partnership, limited liability company
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or other business entity with respect to which a specified Person (or a
Subsidiary thereof) owns a majority of the ownership interests therein or has
the power to vote or direct the voting of sufficient securities thereof to elect
a majority of its directors or other persons performing similar functions.
"Surviving Corporation" has the meaning set forth in Section 2.2.
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"Surviving Obligations" has the meaning set forth in Section 8.4.
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"Third-Party Consideration" has the meaning set forth in Section 6.8.
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"Topping Fee" the meaning set forth in Section 6.8.
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"Trademarks" has the meaning set forth in Section .3.12(a).
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"Transitory Subsidiary" mean an Alabama corporation to be formed by Buyer
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as provided in Section 2.1 which shall be merged with and into GCSI on and
subject to the terms and conditions of this Agreement.
ARTICLE II
PLAN OF MERGER
2.1 Formation of Transitory Subsidiary. Buyer shall organize a wholly
owned subsidiary corporation under the Alabama Business Corporation Act
"Transitory Subsidiary") to be merged with and into GCSI as set forth in
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Section 2.2. Transitory Subsidiary will be formed solely to facilitate solely
the Merger and will conduct no business or activity it other than in connection
with the Merger.
2.2 Merger. On and subject to the terms and conditions of this Agreement,
Transitory Subsidiary will merge with and into GCSI (the "Merger") at the
Effective Time. GCSI shall be the corporation surviving the Merger (the
"Surviving Corporation").
2.3 Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the Magnolia Hotel, Foley,
Alabama, or such other place as the
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Parties may mutually determine, commencing at 9:00 a.m. local time on such day
as shall be mutually agreed to by the Parties following the satisfaction or
waiver of all conditions to the obligations of the Parties to consummate the
transactions contemplated hereby (other than conditions with respect to actions
the respective Parties will take at the Closing itself (the "Closing Date");
provided, however, that the Closing Date shall be no later than September 30,
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1999.
2.4 Actions at Closing. At the Closing, (i) GCSI will deliver to Buyer the
various certificates, instruments and documents referred to in Section 7.1, (ii)
Buyer will deliver to GCSI the various certificates, instruments and documents
referred to in Section 7.2, (iii) Buyer will cause Transitory Subsidiary to
transfer the fun6 identified in clause (i)(A) of Section 2.6(b) to Paying Agent,
(iv) GCSI shall transfer the funds identified in clause (i)(B) of Section 2.6(b)
to Paying Agent, and (v) GCSI and Transitory Subsidiary shall cause Articles of
Merger in form and substance reasonably satisfactory the Parties (the "Articles
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of Merger") to be filed with the Secretary of State of the State of Alabama.
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2.5 Effect of Merger.
(a) General. The Merger shall become effective at the time (the
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"Effective Time") the Articles of Merger filed by GCSI and Transitory Subsidiary
with the Secretary of State of the State of Alabama become effective. The Merger
shall have the effect set forth in the Alabama Business Corporation Act. The
Surviving Corporation may, at any time after the Effective Time, take any action
(including executing and delivering any document) in the name and on behalf of
either GCSI or Transitory Subsidiary in order to carry out and effectuate the
transactions contemplated by this Agreement.
(b) Articles of Incorporation. The Articles of Incorporation of GCSI
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as in effect at the Effective Time shall be the Articles of Incorporation of the
Surviving Corporation.
(c) Bylaws. The Bylaws of GCSI as in effect at the Effective Time
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shall be the Bylaws of the Surviving Corporation.
(d) Directors and Officers. The directors and officers of Transitory
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Subsidiary holding office at and as of the Effective Time shall be the directors
and officers of the Surviving Corporation (retaining their respective positions
and terms of office).
(e) Conversion of QQSI Shares. At and as of the Effective Time, (i)
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each GCSI Share (other than any Dissenting Share) shall be converted into the
right to receive a prorata share (based on the number of issued and outstanding
GCSI Shares immediately before the Effective Time) of the Merger Consideration
and the Additional Merger Consideration and (ii) each Dissenting Share shall be
converted into the right to receive payment from the Surviving Corporation with
respect thereto in accordance with the provisions of the Alabama Business
Corporation Act. No GCSI Share shall be deemed to be outstanding or to have any
rights other than those set forth above in this Section 2.5(e) after the
Effective Time.
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(f) Conversion of Capital Stock of Transitory Subsidiary. At and
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as of the Effective Time, each share of common stock, $0.01 par value per share,
of Transitory Subsidiary shall be converted into one share of common stock,
$1.00 par value per share, of the Surviving Corporation.
2.6 Procedure for Payment
(a) Letter of Transmittal. Prior to the Closing, Buyer will cause
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Regions Bank ("Paying Agent") to mail or otherwise deliver a letter of
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transmittal (with instructions for its use) in form and substance reasonably
satisfactory to the Parties to each GCSI Stockholder for such GCSI Stockholder
to use in surrendering the certificates which represented his, her or its GCSI
Shares against payment of the Merger Consideration and the right to receive
Additional Merger Consideration.
(b) Establishment of Payment Fund. Immediately prior to the Effective
Time, (i) Buyer will cause Transitory Subsidiary transfer to Paying Agent
pursuant to a paying agent agreement in form and substance reasonably
satisfactory to the Parties, immediately available funds in amounts equal to (A)
the Merger Consideration, less the portion thereof to be paid by GCSI pursuant
to subclause (B) of this clause (i), and (B) the Additional Merger Consideration
as estimated by GCSI, the computation of which has been reported to Buyer in
writing at least two (2) business days prior to the Closing, and (ii) GCSI shall
transfer to Paying Agent immediately available funds in an amount equal to the
aggregate sales prices of the Non-Business Real Estate and the DigiPH Stock
(collectively, the "Payment Fund").
(c) Investment of Payment Fund. Buyer may cause Paying Agent to
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invest the cash included in the Payment Fund in one or more permitted
Investments reasonably satisfactory to the Parties; provided, however, that the
terms and conditions of the investments shall be such as to permit Paying Agent
to make prompt payment of the Merger Consideration and the Additional Merger
Consideration as necessary. Buyer may cause
Paying Agent to pay over to the Surviving Corporation any net earnings with
respect to the investments, and Buyer will cause the Surviving Corporation to
replace promptly any portion of the Payment Fund which Paying Agent loses
through investments. No interest will accrue or be paid to any holder of GCSI
Shares.
(d) Payment of Merger Consideration. (i) Upon surrender to Paying
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Agent of the certificate(s) representing GCSI Shares (other than Dissenting
Shares), Paying Agent shall pay to the GCSI Stockholder surrendering such
certificate(s) a prorata share (based on the number of issued and outstanding
GCSI Shares immediately prior to The Effective Time) of the sum of (A) the
Merger Consideration and (B) the estimated Capital Expenditures of GCSI made
after the Agreement Date and on or prior to the Effective Time not to exceed
$10,000,000.00, for each GCSI Share represented by the surrendered
certificate(s), which amount shall be paid by Paying Agent within one (1)
business day of its receipt of the surrendered certificate(s) by bank check or
other immediately available funds, and (ii) upon receipt of a disbursement
notice signed by Buyer and ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, anticipated to be not later than
fifteen (15) days after the Closing, the Paying Agent shall pay to each GCSI
Stockholder that has previously surrendered,
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or subsequently surrenders, such certificate(s) (other than certificates
representing Dissenting Shares) a prorata share (based on the number of issued
and outstanding GCSI Shares immediately prior To the Effective Time) of the
estimated Incentive Payment, reduced by any overestimate, or increased by any
underestimate, of Capital Expenditures of GCSI made after the Agreement Date and
on or prior to The Effective Time, as reflected in said joint disbursement
notice, for each GCSI Share represented by the surrendered certificate(s), which
amount shall be paid by Paying Agent within one (1) business day of receipt of
the joint disbursement notice or, in the case of a subsequently surrendered
certificate, within one (1) business day of its receipt of the subsequently
surrendered certificate, by bank check or other immediately available funds.
(e) Return of Unpaid Payment Fund. Buyer may cause Paying Agent to
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pay over to the Surviving Corporation any portion of the Payment Fund (including
any earnings thereon) remaining unpaid one hundred eighty (180) days after the
Effective Time, and thereafter all former GCSI Stockholders shall look to the
Surviving Corporation for payment of the Merger Consideration and the Additional
Merger Consideration (subject to abandoned property, escheat and other similar
laws).
(f) Expenses of Paving Agent. Buyer shall cause the Surviving
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Corporation to pay all charges and expenses of Paying Agent.
2.7 Closing of Transfer Records. After the Effective Time, transfers of
GCSI Shares outstanding prior to the Effective Time shall riot be made on the
stock transfer books of the Surviving Corporation.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF GCSI
GCSI represents and warrants to Buyer that the statements contained in this
Article III are correct and complete as of the Agreement Date and will be
correct and complete as of the Closing Date (as though made them and as though
the Closing Date were substituted for the Agreement Date throughout this Article
III), except as set forth in the disclosure schedules identified in this Article
III and to be delivered by GCSI to Buyer within thirty (30) days after the
Agreement Date (the "Disclosure Schedules"). The numbering of the Disclosure
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Schedules will correspond to the numbered paragraphs contained in this Article
III.
3.1 Organization, Qualification, and Corporate Power. GCSI is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Alabama. Schedule 3.1 shall contain a list of GCSI's
Subsidiaries. Each Subsidiary of GCSI is duly organized, validly existing and in
good standing under the laws of the jurisdiction of its organization. GCSI and
each of its Subsidiaries are duly authorized to conduct business and are in good
standing under the laws of each jurisdiction in which the character and location
of their respective properties or the nature of their respective businesses
require qualification, except where the lack of such qualification would not
have a Material Adverse Effect. GCSI and each of its Subsidiaries have full
corporate power and authority to own their respective properties and to carry on
that portion of the Business they presently are conducting.
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3.2 Capitalization; Constituent Documents. The entire authorized capital
of GCSI consists of 100,000 shares of common stock, S1.00 par value per share,
92,410 shares of which are issued and outstanding and constitute the GCSI
Shares. All of the GCSI Shares have been duly authorized and are validly issued,
fully paid and nonassessable. There are no outstanding or authorized options,
warrants, purchase rights, subscription rights, conversion rights, exchange
rights or other contracts or commitments that could require GCSI or any of its
Subsidiaries to issue, sell or otherwise cause to become outstanding any of its
capital stock. There are no outstanding or authorized stock appreciation,
phantom stock, profit participation or similar rights with respect to GCSI or
any of its Subsidiaries. True and complete copies of the Articles of
Incorporation and all amendments thereto, the bylaws as amended and currently in
force, all stock records and all corporate minute books and records of GCSI and
each of its Subsidiaries have been furnished for inspection by Buyer. Such stock
records accurately reflect all share transactions and the current stock
ownership of GCSI and each of its Subsidiaries. The corporate minute books and
records of GCSI and its Subsidiaries contain true and complete copies of all
resolutions adopted by the stockholders or the board of directors of GCSI and
its Subsidiaries, and any other action formally taken by GCSI and its
Subsidiaries.
3.3 Authorization of Transaction. The execution, delivery and performance
of this Agreement by GCSI has been duly authorized and approved by GCSI's board
of directors. GCSI has full power and authority (including full corporate power
and authority) to execute and deliver this Agreement and to perform its
obligations hereunder, provided, however, that GCSI cannot consummate the Merger
unless and until it receives the Requisite Stockholder Approval. This Agreement
constitutes the valid and legally binding obligation of GCSI, enforceable in
accordance with its terms and conditions.
3.4 Noncontravention. Except as shall be set forth on Schedule 3.4, to
the Knowledge of GCSI, neither the execution and the delivery of this Agreement,
nor the consummation of the transactions contemplated hereby, will (i) violate
any constitution, statute, regulation, rule, injunction, judgment, order,
decree, ruling, charge or other restriction of any Governmental Entity to which
any of GCSI or its Subsidiaries is subject or (ii) conflict with, result in a
breach of, constitute a default under, result in the acceleration of, create in
any party the right to accelerate, terminate, modify or cancel, or require any
notice or consent under any agreement, contract, lease, license, instrument or
other arrangement to which GCSI or any of its Subsidiaries is a party, by which
GCSI or any of its Subsidiaries is bound or to which any of their assets are
subject (or result in the imposition of any Lien upon any of their assets),
except where the violation, conflict, breach, default acceleration, termination,
modification, cancellation, failure to give notice or Lien would not have a
Material Adverse Effect. Neither the execution and delivery of this Agreement,
nor the consummation of the transactions contemplated hereby, will violate any
provision of the charter or bylaws (or similar governing documents) of GCSI or
any of its Subsidiaries. To the Knowledge of GCSI, and other than in connection
with (i) the provisions of the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act, the Alabama Business
Corporation Act, the Securities Act, the Securities Exchange Act and state
securities laws, (ii) the necessary notices to and approvals or consents, if
any, of the FCC, and (iii) the necessary notices to and approvals and consents,
if any, of state public utility commissions or similar state regulatory bodies
pursuant to applicable state laws regulating the telephone, commercial mobile
radio service or other telecommunications business, none of GCSI or its
Subsidiaries are required
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to give notice to, file with or obtain authorization, consent or approval of any
Governmental Entity in order for GCSI to perform its obligations under this
Agreement, except where the failure to give such notice, to file or to obtain
such authorization, consent or approval would not have a Material Adverse
Effect.
3.5 Financial Statements. GCSI has heretofore furnished or shall furnish
Buyer with true and complete copies of (i) the audited, consolidated financial
statements of GCSI and its Subsidiaries for fiscal years ended December 31,
1996, 1997 and 1998, consisting of the balance sheet at such dates and the
related statements of income, stockholders' equity and cash flow for said
periods, opined upon by Ernst & Young, LLP, GCSI's independent public
accountants (the "Audited Financial Statement"), and (ii) the unaudited
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financial statements of GCSI and its Subsidiaries for the two month period ended
February 28, 1999 (the "Interim Financial Statements") (the Audited Financial
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Statements and the Interim Financial Statements are hereinafter referred to,
collectively, as the "Financial Statements"). Except as disclosed therein, the
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Financial Statements present fairly, in all material respects, the financial
position and operating results of GCSI and its Subsidiaries as of the dates, and
during the periods, indicated therein, and were prepared in accordance with GAAP
consistently applied during such periods. Notwithstanding the foregoing, the
occurrence of any event or action, or the incurring of any claim or liability,
that adversely affects the financial position or operating results of GCSI or
its Subsidiaries as of the dates, and during the periods, covered by, and as
presented in, the Financial Statements shall not constitute a breach of or an
inaccuracy in this Section 3.5 if said event, action, claim or liability is the
subject of or is covered by another Section within this Article III (e.g.,
litigation is the subject of and is covered by Section 3.19) and the occurrence
or incurring thereof does not constitute a breach of or inaccuracy in such other
Section.
3.6 Absence of Changes. Except as shall be set forth on Schedule 3.6 and
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as contemplated hereby, since February 28, 1999, (i) none of GCSI or its
Subsidiaries have entered into any transaction that was not in the Ordinary
Course of Business; (ii) except for sales of goods and services in the Ordinary
Course of Business, the sale, or proposed sale, of the Non-Business Real. Estate
and the sale or otherwise transfer, or proposed sale or other transfer, of the
DigiPH Stock, there has been no sale, assignment, transfer, mortgage, pledge,
encumbrance or lease of any material asset or property of GCSI or any of its
Subsidiaries; (iii) there has been no declaration or payment of a dividend, or
any other declaration, payment or distribution of any type or nature to GCSI
Stockholders in respect of their GCSI Shares, whether in cash or property, and
no purchase or redemption of any GCSI Share; (iv) there has been no declaration,
payment or commitment for the payment, by GCSI or any of its Subsidiaries, of a
bonus or other additional salary, compensation or benefit to any employee of
GCSI or any of its Subsidiaries that was not in the Ordinary Course of Business;
(v) there has been no release, compromise, waiver or cancellation of any
material debt to, claim by, or right of GCSI or any of its Subsidiaries that was
not in the Ordinary Course of Business; (vi) there have been no capital
expenditures by GCSI or any of its Subsidiaries in excess of $100,000 for any
single item, or $500,000 in the aggregate, that were not included in the 1999
GCSI capital or operating budgets; (vii) there has been no change in accounting
methods or practices or revaluation of any asset of GCSI or any of its
Subsidiaries (other than accounts receivable written down in the Ordinary Course
of Business); (viii) there has been no material damage, destruction to or loss
of, physical property adversely affecting the Business taken as a whole; (ix)
there has been no material loan
11
by GCSI or any of its Subsidiaries, or guaranty by GCSI or any of its
Subsidiaries of any loan, to any employee of GCSI or any of its Subsidiaries;
(x) none of GCSI or its Subsidiaries have ceased to transact business with any
customer that, as of the date of such cessation, represented more than five
percent (5%) of the annual gross revenues of GCSI; (xi) to the Knowledge of
GCSI, there has been no amendment or termination of any material oral or written
contract, agreement or license to which GCSI or any of its Subsidiaries is a
party or by which any of them are bound, except in the Ordinary Course of
Business, or except as expressly contemplated hereby; (xii) none of GCSI or its
Subsidiaries have failed to satisfy any of its debts, obligations or liabilities
related to the assets of GCSI as the same became due and payable (except for
accounts payable which are paid in accordance with past practices and in the
Ordinary Course of Business); and (xiii) there has been no agreement or
commitment by GCSI or any of its Subsidiaries to do any of the foregoing.
3.7 Undisclosed Liabilities. To the Knowledge of GCSI, none of GCSI or
its Subsidiaries has any debt, liability or obligation, whether accrued,
absolute or otherwise, including any liability or obligation on account of taxes
or any governmental charge or penalty, interest or fine, except (i) as shall be
set forth on Schedule 3.7, (ii) debts, liabilities and obligations incurred in
------------
the Ordinary Course of Business after February 28, 1999, that would not have a
Material Adverse Effect, (iii) liabilities reflected on the Financial
Statements, and (iv) those debts, liabilities or obligations incurred as a
result of the transactions contemplated hereby. Notwithstanding the foregoing,
no debt, liability or obligation shall constitute a breach of or an inaccuracy
in this Section 3.7 if said debt, liability or obligation is the subject of or
is covered by another Section within this Article III (e.g., litigation is the
subject of and is covered by Section 3.19) and the existence of said debt,
liability or obligation does not constitute a breach of or inaccuracy in such
other Section.
3.8 Title to Properties. Except as shall be set forth on Schedule 318,
GCSI and each of its Subsidiaries has good and marketable title to all its real
and tangible personal property and assets used in the Business, and good and
valid title to its leasehold interests, in each case free and clear of any and
all Liens other than Permitted Liens. The existence of mortgages, encumbrances
and other Liens, other than those expressly set forth in this Agreement, shall
not be objections to title, provided that properly executed instruments, in
recordable form, necessary to satisfy the same are delivered to Buyer at
Closing.
3.9 Equipment, etc. GCSI has heretofore furnished Buyer with a list of
all items of tangible personal property (including computer hardware) used in
the operation of the Business in the manner in which it is now operated by GCSI
and its Subsidiaries (the "Equipment"), except for items of personal property
---------
having a net book value of less than $1,000. Except as shall be set forth on
Schedule 3.9, the Equipment, in the aggregate, is in satisfactory condition and
-------------
repair, ordinary wear and tear excepted, so as to operate the Business in the
manner in which it is now operated by GCSI and its Subsidiaries.
3.10 Receivables. All of the trade receivables and notes receivable which
are reflected on the Financial Statements or which arose subsequent to the date
of the Interim Financial Statements, arose out of bona fide, arms-length
transactions and, to the Knowledge of GCSI, all such receivables are good and
collectible (or have been collected) in the Ordinary Course of
12
Business in accordance with their terms, and at the aggregate recorded amounts
thereof using normal collection practices, less the amount of applicable
reserves for doubtful accounts and for allowances and discounts. To the
Knowledge of GCSI, all such reserves, allowances and discounts were and are
adequate.
3.11 Inventory. To the Knowledge of GCSI, all inventory of GCSI and its
Subsidiaries which is held for sale or resale (the "Inventory") consists of
---------
items of a quantity and quality historically useable and/or saleable in the
Ordinary Course of Business, except for items of obsolete and slow-moving
material and materials which are below standard quality, all of which have been
written down on the Financial Statements to estimated net realizable value in
accordance with GAAP.
3.11 Intellectual Property.
(a) List of Intellectual Property. Schedule 3.12 shall identify all
------------------------------ -------------
of the following which are used in the Business or in which GCSI or any of its
Subsidiaries claims any ownership rights: (i) all trademarks, service marks,
trade names, trade dress and the like, including all common law marks
(collectively, together with the associated goodwill of each, "Trademarks")
----------
together with the information regarding all registrations and pending,
applications to register any such rights; (ii) all patents or the pending
applications to patent any technology or design; (iii) all copyrights and all
registrations of and applications to register copyrights; and (iv) all licenses
of rights in Trademarks, patents, copyrights and other intellectual property,
whether to or by GCSI or any of its Subsidiaries. The rights required to be so
identified, together with all licenses of rights in computer software and all
proprietary know how and trade secrets which are material to GCSI, any of its
Subsidiaries or the Business, are referred to herein collectively as the
"Intellectual Property."
-----------------------
(b) Ownership of Intellectual Property. GCSI or one of its
----------------------------------
Subsidiaries is the owner of, or duly licensed to use the Intellectual Property,
and the Intellectual Property exists and has been maintained in good standing.
No third party has asserted ownership rights in any of the Intellectual Property
(except to the extent that such Intellectual Property has been properly licensed
to or by GCSI or one of its Subsidiaries). To the Knowledge of GCSI none of
GCSI's or its Subsidiaries' use of the Intellectual Property infringes any right
of any third party, nor is any third party infringing on GCSI's or its
Subsidiaries' tights in the Intellectual Property.
(c) Computer Software. GCSI bas heretofore furnished Buyer with a
-----------------
list of all Software. GCSI or one of its Subsidiaries currently licenses, or
otherwise has the legal right to use, all of the Software (including any upgrade
alteration or enhancement with respect thereto), and to the Knowledge of GCSI,
all of the Software is being used in compliance with applicable licenses or
other agreements.
3.13 Year 2000. G-CSI has developed a Year 2000 readiness assessment and
remediation plan consisting of the following three (3) phases: (i) developing an
inventory of systems and equipment that may be affected by the Year 2000 date
change, (ii) assessment and (iii) remediation. The first phase has been
completed and involved developing an inventory of all information technologies
and non-information technologies systems, software and business
13
infrastructure systems and equipment that may be affected by the Year 2000 date
change. External parties, including customers, suppliers and service providers,
with which GTCS1 interacts and which may have Year 2000 readiness issues were
also identified. The second phase has also been completed and involved risk and
impact assessment, selection of appropriate remediation methods and
resource/cost assessment for compliance. This phase included contacting
suppliers or manufacturers for information regarding their Year 2000 readiness,
technical review of systems and compliance testing. The necessary actions to
bring each item into compliance were determined and remediation costs were
estimated. The third phase involves remediation for items found to be non-Year
2000 compliant. This phase includes replacement of equipment or upgrading
software or hardware and communications with GCSI's customers, suppliers and
service providers to determine Year 2000 issues as appropriate. Verification
testing has been, or will be, done to ensure the effectiveness of the
remediation efforts. Capital assets found to be non-compliant have been, or will
be, replaced or remediated in this phase. This phase is expected to be completed
by October, 1999. GCSI has estimated that the total cost of upgrading, replacing
and remediating its information technologies and non-information technologies
systems, software and business infrastructure systems and equipment is
approximately $7,500,000. These costs include Year 2000 remediation, integration
of business processes between operating companies and increasing capacity due to
projected growth of GCSI's services GCSI believes that these costs result from
adding additional system capacity and functionality, and that they are
capitalizable under GAAP. GCSI believes, based on currently available
information, that it will be able to properly manage its total Year 2000
exposure. There can be no assurance, however, that GCSI will be successful in
its effort or that the computer systems of other Persons on which GCSI relies
will be modified in a timely manner. Additionally, there can be no assurance
that a failure to modify such systems by another Person, or modifications that
are incompatible with GCSI's systems, would not have a Material Adverse Effect.
As a contingency plan to the Year 2000 plan, GCSI is investigating outsourcing
to third parties critical business functions.
3.14 Real Property.
(a) Schedule 3.14 shall contain a description of all Real Property.
(b) Except as shall be set forth on Schedule 3-14, there are no
parties in possession of any portion of the Real Property other than GCSI or its
Subsidiaries, whether as lessees, sublessees, tenants at will or trespassers.
(c) To the Knowledge of GCSI, there is no law, ordinance, order,
regulation or requirement now in existence or under active consideration by any
Governmental Entity, that would require, any material expenditure by GCSI or its
Subsidiaries to modify or improve any of the Real Property to bring it into
compliance therewith that would have a Material Adverse Effect.
(d) To the Knowledge of GCSI, the current uses of all buildings
and other structures utilized in the Business and located on the Real Property
substantially conform with an applicable federal, state and local governmental
building, zoning, health, safety, platting. subdivision or other laws,
ordinances or regulations, and no restrictive covenants to which the
14
Real Property is subject are being violated by GCSI or its Subsidiaries, except
for nonconformities or violations which would not have a Material Adverse Effect
3.15 Leases. Schedule 3.15 shall contain a list of all material leases
-------------
pursuant to which GCSI or any of its Subsidiaries leases to or from a Person
other than GCSI or any of its Subsidiaries, as lessor or lessee, real or
tangible personal property used in operating: the Business or otherwise (the
"Leases"), true and complete copies of which have previously been provided to
Buyer. To the Knowledge of GCSI, all of the Leases are valid, binding and
enforceable against GCSI or its Subsidiaries and against the other parties
thereto, in accordance with their respective terms, and there is not under any
such Lease, any existing default by GCSI or its Subsidiaries, or by any other
party thereto, or any condition or event that, with notice or lapse of time or
both, would constitute a default. GCSI has not received notice that the lessor
of any of the Leases intends to cancel, suspend or terminate such Lease or to
exercise or not exercise any option thereunder. For purposes of inclusion on
Schedule 3.15, a Lease shall be deemed material if it is a lease for real
property or if it requires the payment by, or to, GCSI or its Subsidiaries of
$25,000 or more during any 12-month period for tangible personal property.
3.16 Contracts. Schedule 1.16 shall contain a list of all material
-------------
contracts, agreements and commitments (whether written or oral) to which GCSI or
any of its Subsidiaries is, directly or indirectly, a party (in its own name or
as a successor in interest), or by which it or any of its properties or assets
is otherwise bound, including any service agreements, customer agreements,
supplier agreements, agreements to lend or borrow money, shareholder agreements,
employment agreements, agreements relating to GCSI Intellectual Property and the
like (collectively, the "Contracts"). True and complete copies of the Contracts
---------
(or a true and complete narrative description of any oral Contract) previously
have been provided to Buyer. Neither GCSI or its Subsidiaries nor, to the
Knowledge of GCSI any other party to any of the Contracts (i) is in material
default under (nor does there exist any condition that, with notice or lapse of
time or both, would cause such a material default under) any of the Contracts,
or (ii) has waived any right it may have under any of the Contracts, the waiver
of which would have a Material Adverse Effect. To the Knowledge of GCSI, all of
the Contracts constitute the valid and binding obligations of GCSI or its
Subsidiaries, enforceable in accordance with their respective terms, and of the
other parties thereto. For purposes of inclusion on Schedule 3.16, a Contract
-------------
shall be deemed material if it requires payment by, or to, GCSI or its
Subsidiaries of $25,000 or more during any 12-month period.
3.17 Directors and Officers. Schedule 3.17 shall contain a list as of the
-------------
Agreement Date of the directors and officers of GCSI and its Subsidiaries.
3.18 Bank Accounts. Schedule 18 shall contain a list of each bank or other
-----------
financial institution in which GCSI or any of its Subsidiaries have an account,
safe deposit box or lock box arrangement, the name of GCSI or its Subsidiary in
whose name such account, box or arrangement is held, the identifying numbers or
symbols of the account, box or arrangement, and the name of each person
authorized to draw thereon or to have access thereto.
3.19 Litigation. Except as shall be set forth on Schedule 3.1.9 there is
no suit, action, claim, investigation or proceeding pending, or, to the
Knowledge of GCSI, threatened, against
15
GCSI, any of its Subsidiaries or the Business, nor is there any judgment,
decree, injunction or order of any applicable Governmental Entity or arbitrator
outstanding against GCSI or any of its Subsidiaries which could have a Material
Adverse Effect
3.20 Employee Benefit Plans; Labor Relations.
(a) Benefit II Plans. Except as shall be set forth on Schedule 3.20
them are no employee benefit plan, agreements or arrangements maintained by GCSI
or its Subsidiaries, including (i) "employee benefit plans" within the meaning
of Section 3(3) of ERISA, (ii) current or deferred compensation, pension, profit
sharing, vacation or severance plans or programs, or (iii) medical, hospital,
accident, disability or death benefit plans (collectively "Benefit Plans"). All
-------------
Benefit Plans are administered in accordance with, and are in material
compliance with, all applicable laws and regulations. No material default
exists with respect to the obligations of GCSI or its Subsidiaries under any
Benefit Plan.
(b) Labor Relations. None of GCSI or its Subsidiaries are a party to
---------------
any collective bargaining agreement; no collective bargaining agent has been
certified as a representative of any of the employees of GCSI or any of its
Subsidiaries; no representation campaign or election is now in progress with
respect to any employee of GCSI or any of its Subsidiaries; and there are no
labor disputes, grievances, controversies, strikes or requests for union
representation pending, or, to the Knowledge of GCSL threatened, relating to or
affecting the Business. To the Knowledge of GCSI, no event has occurred that
could give rise to any such dispute, controversy, strike or request for
representation.
3.21 ERISA.
(a) Compliance of Benefit Plans. All Benefit Plans that are subject
---------------------------
to ERISA have been administered in accordance with, and are in material
compliance with, the applicable provisions of ERISA. Each of the Benefit Plans
that is intended to meet the requirements of Section 401(a) of the Code meets
the requirements of Section 401 (a) of the Code. As of June 8, 1994, the ESOP
has been determined by the Internal Revenue Service to meet such requirements
within the meaning of such provision and such determination has not been revoked
or withdrawn. No Benefit Plan is subject to Title IV of ERISA or Section 412 of
the Code. GCSI and its Subsidiaries have not engaged in any nonexempt
"prohibited transactions", as such term is defined in Section 4975 of the Code
or Section 406 of ERISA, involving the Benefit Plans that would subject GCSI or
its Subsidiaries to the penalty or tax imposed under Section 502(i) of ERISA or
Section 4975 of the Code, GCSI and its Subsidiaries have not engaged in any
transaction described in Section 4069 of ERISA within the last five (5) years.
Except as shall be set forth on Schedule 3.21 or pursuant to the terms of the
Benefit Plans, neither the execution and delivery hereof nor the consummation of
the transactions contemplated hereby will (i) result in any payment (including
severance, unemployment compensation or golden parachute) becoming due to any
director, officer or other employee of GCSI, or (ii) increase any benefit
otherwise payable under any Benefit Plan or result in the acceleration of the
time of payment or vesting of any such benefit, which would require the
Surviving Corporation to make additional contributions to any Benefit Plan.
16
(b) No Reportable Event. No notice of a "reportable event", within
-------------------
the meaning of Section 4043 of ERISA, for which the 30-day reporting requirement
has riot been waived, has been required to be filed for any Benefit Plan that is
an "employee pension benefit plan" within the meaning of Section 3(2) of ERISA
and that is intended to meet the requirements of Section 401(a) of the Code, or
by GCSI or any entity that is considered one employer with GCSI under Section
4001 of ERISA or Section 414 of the Code, within the 12-month period ending on
the Closing Date. GCSI and its Subsidiaries have not incurred any liability to
the Pension Benefit Guaranty Corporation in respect of any Benefit Plan that
remains unpaid.
3.22 Taxes. Except as shall be set forth on Schedule 3.22, GCSI and its
Subsidiaries have duly and timely filed all federal, state and local income,
franchise, excise, real and personal property and other tax returns and reports,
including extensions, required to have been filed by GCSI or its Subsidiaries on
or prior to the Closing Date. All of such tax returns and reports are true,
complete and accurate in all material respects. GCSI and its Subsidiaries have
duly and timely paid all taxes and other governmental charges, and all interest
and penalties with respect thereto, shown on said returns or reports (whether by
way of withholding or otherwise) to any federal, state, local or other taxing
authority (except to the extent the same are being contested in good faith and
adequate reserves therefor have been provided in the Financial Statements). As
of the Closing Date, all deficiencies proposed as a result of any audit have
been paid or settled. GCSI and its Subsidiaries are not parties to, or bound
by, or otherwise in any way obligated under, any tax sharing or similar
agreement GCSI and its Subsidiaries have not consented to have the provisions of
Section 341(f)(2) of the Code (or comparable state law provisions) apply to it
and GCSI and its Subsidiaries have not agreed or been requested to make any
adjustment under Section 481(c) of the Code by reason of a change in accounting
method or otherwise.
3.23 Compliance with Applicable Laws. To the Knowledge of GCSI, GCSI and
its Subsidiaries hold all material permits, licenses, variances, exemptions,
orders and approvals of all Governmental Entities necessary to own, lease or
operate all of the assets and properties of GCSI and its Subsidiaries, as
appropriate, and to carry on the Business as presently conducted (the
"Permits"). To the Knowledge of GCSI, GCSI and its Subsidiaries are in material
compliance with (i) all applicable laws, ordinances and regulations applicable
to the Business, (ii) any court or administrative order or process applicable to
the Business, including, without limitation, those of the FCC, Occupational
Safety and Health Administration, Equal Employment Opportunity Commission, and
National Labor Relations Board, and (iii) the terms of the Permits. Except as
shall be set forth on Schedule 3.23. To the Knowledge of GCSI, none of the
Permits will be adversely impacted or affected by or as a result of the Merger.
The Permits shall be listed on Schedule 3.23; however, true and complete copies
of all Permits previously have been provided to Buyer.
3.24 Environmental Matters. Except as shall be set forth on Schedule 3.24,
-------------
to the Knowledge of GCSI, no Real. Property is contaminated with any Hazardous
Substance. GCSI and its Subsidiaries are not parties to any litigation or
administrative proceeding nor, to the Knowledge of GCSI, is any litigation or
administrative proceeding threatened against them, that, in either case, asserts
or alleges that GCSI or its Subsidiaries (i) violated any Environmental Law,
(ii) is required to clean up, remove or take remedial or other responsive action
due to the disposal, deposit, discharge, leak or other release of any Hazardous
Substance, or (iii) is required
17
to pay all or a portion of the cost of any past, present or future cleanup,
removal or remedial or other action that arises out of or is related to the
disposal, deposit, discharge, leak or other release of any Hazardous Substance.
Except as shall be set forth on Schedule 3.24, to the Knowledge of GCSI, (i)
them am not any tanks or other facilities on, under or at any Real Property
containing materials that, if known to be present in soil or ground water, would
require cleanup, removal or other remedial action under any Environmental Law,
and (ii) GCSI and its Subsidiaries are not subject to any judgment, order or
citation related to or arising out of any Environmental Law and have not been
named or listed as potentially responsible parties by any Governmental Entity in
a matter related to or arising out of any Environmental Law.
3.25 Interest in Customers, Suppliers and Competitors. Except as shall be
set forth on Schedule 3.25, no officer or director of GCSI or its Subsidiaries,
-------------
no GCSI Stockholder owning five percent (.5%) or more of the GCSI Shares and, to
the Knowledge of GCSI, no spouse, parent, sibling or lineal descendent of any of
the foregoing, has any direct or indirect material interest in any material
customer, supplier or competitor of GCSI or its Subsidiaries, or in any Person
from whom or to whom GCSI or its Subsidiaries lease any real or personal
property, or in any other Person with whom GCSI or its Subsidiaries are doing
business, directly or indirectly (including as a debtor or creditor), whether in
existence as of the Closing Date or proposed, other than the ownership of stock
of publicly traded corporations and other entities,
3.26 Insurance. To the Knowledge of GCSI, GCSI or one of its Subsidiaries
currently maintains, in full force and effect a insurance policies that are
required or customarily maintained for the conduct of the Business or the
ownership of GCSI's and its Subsidiaries' property (both real and personal),
including, without limitation, workers compensation, and property and casualty
insurance (the "The Insurance Policies"). The Insurance Policies shall be
listed on Schedule 3.26, and true and complete copies of all Insurance Policies
-------------
previously have been provided to Buyer. GCSI or its Subsidiaries have paid all
premiums due thereunder and, to the Knowledge of GCSI, (i) are not in default
regarding any material provision of any Insurance Policy, and (ii) have not
failed to present any notice or material claim thereunder in a due and timely
fashion.
3.27 Bankruptcy. None of GCSI or its Subsidiaries have filed a petition or
request for reorganization or protection or relief under the bankruptcy laws of
the United States or any state or territory thereof, made any general assignment
for the benefit of creditors, or consented to the appointment of a receiver or
trustee, including a custodian under the United States bankruptcy laws, whether
such receiver or trustee was appointed in a voluntary or involuntary proceeding.
3.28 Brokers' Fees. None of GCSI or its Subsidiaries have any liability or
obligation to pay any fees or commissions to any broker, finder or agent, with
respect to the transactions contemplated by this Agreement; provided that ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ and Company, certified public accountants, have served as financial
consultants to GCSI and various of the GCSI Stockholders and the fees of ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ and Company have been, and will be, paid by GCSI as provided in Section
8.3.
18
3.29 Absence of Other Warranties. Except as and to the extent expressly
set forth in this Agreement, GCSI does not make any representation or warranty
whatsoever, and disclaims any liability and responsibility for any statement or
information not contained in this Agreement or any Disclosure Schedule or any
document contemplated hereby made or communicated, by oversight or otherwise
(orally or in writing), to Buyer (including, without limitation, any opinion,
information, projection, statement or advice provided by any employee, officer,
agent, stockholder or other representative of GCSI or its Subsidiaries in
connection with the transactions contemplated hereby). Without limiting the
foregoing, Buyer acknowledges that any estimates of future profitability of the
Business based upon any financial statements or other financial information
provided to Buyer by GCSI or its Subsidiaries are inherently uncertain and
subject to a variety of variables which are difficult or impossible to predict.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF BUYER
Buyer represents and warrants to GCSI that the statements contained in this
Article IV are correct and complete as of the Agreement Date and will be correct
and complete as of the Closing Date (as though made then and as though the
Closing Date were substituted for the Agreement Date throughout this Article
IV).
4.1 Organization, Qualification, and Corporate Power. Buyer is a limited
liability company, and prior to the Closing Buyer shall cause Transitory
Subsidiary to be a corporation, duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization or
incorporation. Buyer is, and prior to the Closing Buyer shall cause Transitory
Subsidiary to be, duly authorized to conduct business and in good standing under
the laws of each jurisdiction in which the character and location of its
properties or the nature of its business requires qualification, except where
the lack of such qualification would not have a Material Adverse Effect. Buyer
has, and Buyer shall cause Transitory Subsidiary to have, full power and
authority to own its properties and to carry on its business as presently
conducted.
4.2 Financing. Buyer possesses, and has furnished to GCSI, true and
complete copies of binding written commitments from financially responsible
lenders (the "Financial Commitments") to provide Buyer and Transitory Subsidiary
with all of the financing they will require in order to perform their
obligations under this Agreement, to consummate the Merger and to fund the
working capital needs of the Surviving Corporation and its Subsidiaries after
the Closing.
4.3 Authorization of Transaction. The execution, delivery and performance
of this Agreement by Buyer has been duly authorized and approved by Buyer's
board of directors. Buyer has full power and authority to execute and deliver
this Agreement and to perform its obligations hereunder. This Agreement
constitutes the valid and legally binding obligation of Buyer, enforceable in
accordance with its terms and conditions.
4.4 Noncontravention. To the Knowledge of Buyer, neither the execution
and the delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, will
19
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge or other restriction of any Governmental Entity to
which either Buyer is or Transitory Subsidiary will be, subject or (ii) conflict
with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify
or cancel, or require any notice of consent under any agreement, contract,
lease, license, instrument or other arrangement to which either Buyer is, or
Transitory Subsidiary will be, a party or by which they are or will be bound or
to which any of their assets are or will be subject (or result in the imposition
of any Lien upon any of their assets), except where the violation, conflict,
breach, default, acceleration, termination, modification, cancellation, failure
to give notice or Lien would not have a Material Adverse Effect. Neither the
execution and delivery of this Agreement, nor the consummation of the
transactions contemplated hereby, will violate any provision of the articles of
organization, operating agreement, charter or bylaws of Buyer or Transitory
Subsidiary. To the Knowledge of Buyer and other than in connection with (i) the
provisions of the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act, the Alabama Business Corporation Ac4
the Securities Act, the Securities Exchange Act and state securities laws, (ii)
the necessary notices to and consents and approvals, if any, of the FCC, and
(iii) the necessary notices to and consents and approval if any, of state public
utility commissions or similar state regulatory bodies pursuant to applicable
state laws regulating the telephone, commercial mobile radio service or other
telecommunications business, Buyer is not, and Transitory Subsidiary will not
be, required to give any notice to, file with or obtain authorization, consent
or approval of any Governmental Entity in order for Buyer to perform its
obligations under this Agreement except where the failure to give such notice,
to file or to obtain such authorization, consent or approval would not have a
Material Adverse Effect
4.5 Investment The GCSI Shares are being acquired by Buyer in a private
transaction for its own account and not with a view to, or for offer or resale
in connection with, any distribution within the meaning of Section 2(l1) of the
Securities Act. Buyer hereby acknowledges that the GCSI Shares arc unregistered
and must be held indefinitely unless they are subsequently registered under the
Securities Act or an exemption from such registration is available. Buyer
acknowledges and agrees that it will not make any disposition of the GCSI Shares
which will or may involve GCSI or the GCSI Stockholders in a violation of the
Securities Act, the Securities Exchange Act or of any state securities laws.
4.6 Brokers' Fees. Buyer has no liability or obligation to pay any fees
or commissions to any broker, finder or agent with respect to the transactions
contemplated by this Agreement for which GCSI or its Subsidiaries could become
liable or obligated.
4.7 Evaluation of Business. Buyer has made its ohm evaluation of the
Business and the GCSI Shares based upon information determined by Buyer to be
sufficiently complete and reliable for such purposes.
ARTICLE V
DISCLOSURE SCHEDULES; STANDARDS
FOR REPRESENTATIONS AND WARRANTIES
5.1 Disclosure Schedules. The parties acknowledge that as of the date of
this
20
Agreement, GCSI has not delivered the Disclosure Schedules. GCSI covenants and
agrees to deliver the Disclosure Schedules to Buyer no later than the close of
business on the date that is thirty (30) days after the Agreement Date, and that
the Disclosure Schedules are subject to the reasonable review of, and acceptance
by, Buyer, provided, that Buyer shall be deemed to have accepted the items or
matters identified on the Disclosure Schedules unless Buyer gives GCSI written
notice of its objection to any such item or matter within fifteen (15) days
after Buyer's receipt of the Disclosure Schedules. Notwithstanding anything in
this Agreement to the contrary, the mere inclusion of an item in the Disclosure
Schedules as an exception to a representation or warranty shall not be deemed an
admission by GCSI that such item represents a material exception or material
fact, event or circumstance or that such item has had or could be reasonably
expected to have a Material Adverse Effect.
5.2 Standards. No representation or warranty of GCSI contained in
Article III or of Buyer contained in Article IV shall be deemed untrue or
incorrect for any purpose under this Agreement as a consequence of the existence
or absence of any fact, circumstance or event unless such fact, circumstance or
event, individually or when taken together with all other facts, circumstances
or events inconsistent with such representation or warranty contained in Article
III, in the case of GCSI, or Article IV, in the case of Buyer, has had or could
be reasonably expected to have a Material Adverse Effect with respect to GCSI or
Buyer, respectively.
ARTICLE VI
COVENANTS
The Parties agree as follows with respect to the period commencing on the
Agreement Date and ending as of the Effective Time.
6.1 General. Each of the Parties will use its best efforts to take all
action and to do all things necessary in order to consummate and make effective
the transactions contemplated by this Agreement (including satisfaction, but not
waiver, of the closing conditions set forth in Article VII).
6.2 Notices and Consents. GCSI will give any notices (and will cause each
of its Subsidiaries to give any notices) to third parties, and will use its
reasonable best efforts to obtain (and will cause each of its Subsidiaries to
use its reasonable best efforts to obtain) any third party consents, that Buyer
reasonably may request in connection with the matters referred to in Section
3.4. Buyer will give any notices (and will cause Transitory Subsidiary to give
any notices.) to third parties, and will use its reasonable best efforts to
obtain (and will cause Transitory Subsidiary to use its reasonable best efforts
to obtain) any third party consents, that GCSI reasonably may request in
connection with the matters referred to in Section 4.4.
6.3 Regulatory Matters and Approvals. Each of the Parties will (and will
cause each of its Subsidiaries to) give any notices to, make any filings with,
and use its reasonable best efforts to obtain any authorizations, consents and
approvals of Governmental Entities in connection with the matters referred to in
Section 3.4 and Section 4.4. Without limiting the generality of the foregoing:
21
(a) Alabama Business Corporation. GCSI will call a special meeting
----------------------------
of the GCSI Stockholders (the "Special Meeting") in order that the GCSI
Stockholders may consider and vote upon the adoption of this Agreement and
the approval of the Merger in accordance with the Alabama Business
Corporation Act. Within seven (7) days after entry of the Court
Confirmation, GCSI will mail or otherwise deliver to the GCSI Stockholders
(i) notice of the Special Meeting, (ii) a copy of this Agreement, (iii) a
certified copy of the resolutions of the board of directors of GCSI
approving this Agreement and the Merger and recommending the adoption of
this Agreement and the approval of the Merger to the GCSI Stockholders, and
(iv) such other documents as the board of directors of GCSI shall deem,
appropriate (the "Stockholder Materials").
(b) ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act. Within fourteen (14) days after the
---------------------
Agreement Date, each of the Parties will file any Notification and Report
Forms and related material required to be filed with the Federal Trade
Commission and the Antitrust Division of the United States Department of
Justice under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act, will use its reasonable best
efforts to obtain an early termination of the applicable waiting period,
and will make any further filings pursuant thereto that may be necessary,
proper or advisable.
(c) FCC and State Public Utility Commissions. Within fourteen (14)
----------------------------------------
days after the Agreement Date, the Parties shall file such individual or
joint applications which may be required, with the FCC and state public
utility commissions or similar state regulatory bodies in Alabama, Florida,
Louisiana and Mississippi to reflect the change of control of various
operating certificates, permits or other licenses held by GCSI or its
Subsidiaries. The Parties shall also file any post transaction notices as
may be required by such Governmental Entities within the time periods
prescribed by law.
6.4 Operation of Business. GCSI will not (and will not cause or
permit any of its Subsidiaries to) engage in any practice, take any action or
enter into any transaction outside the Ordinary Course of Business. Without
limiting the generality of the foregoing:
(a) none of GCSI or its Subsidiaries will authorize or effect
any change in its charter or bylaws;
(b) none of GCSI or its Subsidiaries will grant any options,
warrants or other rights to purchase: or obtain any of its capital
stock or issue, sell or otherwise dispose of any of its capital stock;
(c) none of GCSI or its Subsidiaries will declare, set aside or
pay any dividend or distribution with respect to its capital stock
(whether in cash or in kind), or redeem, repurchase or otherwise
acquire any of its capital stock;
(d) GCSI or its Subsidiaries will issue any note, bond or other
debt security or create, incur, assume or guarantee any indebtedness
for borrowed money or capitalized lease obligation outside the
Ordinary Course of Business, except as issued, created, incurred,
assumed or guaranteed (i) in a transaction
22
provided for in 1999 Operating Budget or the 1999 Capital Budget, or
(ii) with respect to intercompany loans or transfers among GCSI and
its Subsidiaries;
(e) none of GCSI or its Subsidiaries will sell, transfer, convey
or impose any Lien on any material assets outside the Ordinary Course
of Business, except for Liens imposed pursuant to a transaction
permitted by paragraph (d) of this Section 6.4;
(f) none of GCSI or its Subsidiaries will make any capital
investment in, make any loan to or acquire the securities or assets of
any other Person outside the Ordinary Course of Business, except with
respect to intercompany loans or transfers among GCSI and its
Subsidiaries;
(g) none of GCSI or its Subsidiaries will make any change in the
terms of employment applicable to any of its directors, officers or
employees outside the Ordinary Course of Business; and
(h) none of GCSI or its Subsidiaries will commit to any of the
foregoing.
6.5 Full Access. GCSI will (and will cause each of its Subsidiaries to)
permit representatives of Buyer to have full access, at all reasonable times and
in a manner so as not to interfere with the normal business operations of GCSI
and its Subsidiaries, to all premises, properties, personnel, books, records
(including tax records), contracts and documents of or pertaining to GCSI and
its Subsidiaries. Buyer will treat and hold as such any Confidential
Information it receives from GCSI or its Subsidiaries in the course of the
reviews contemplated by this Section 6.5, will not use any of the Confidential
Information except in connection with this Agreement and, if this Agreement is
terminated for any reason whatsoever, agrees to return to GCSI all tangible
embodiments (and all copies) thereof regardless of by whom generated which are
in its possession or the possession of its advisers, consultants, accountants or
attorneys.
6.6 Notice of Developments. Each Party will give prompt written notice to
the other of any breach of or inaccuracy in any of its own representations and
warranties in Article III or Article IV. Unless the other party has the right
to terminate this Agreement pursuant to Section 8.1 by reason thereof and
exercises such right within the earlier of ten (10) days after receipt of such
written notice or the Closing Date, the written notice shall be deemed to have
amended and qualified the representations and warranties in Article III or
Article IV, and to have cured any breach of or inaccuracy in a representation or
warranty that otherwise might have existed.
6.7 Exclusivity. GCSI will not (and will not cause or permit any of its
Subsidiaries to) initiate the submission of any proposal or offer from any
Person relating to the acquisition of all or substantially all of the capital
stock or assets of GCSI or its Subsidiaries (including any acquisition
structured as a merger, consolidation or share exchange); provided, however,
should (i) any Person other than Buyer submit a new proposal or offer for the
acquisition of all of the GCSI Shares (including merger, consolidation or share
exchange) prior to the ▇▇▇▇▇▇▇▇▇
▇▇
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, (▇▇) at the Special Meeting the GCSI Stockholders do not
vote a sufficient number of the GCSI Shares in favor of this Agreement and the
Merger in order to achieve the Requisite Shareholder Approval and (iii) within
six (6) months after the date of the Special Meeting, said Person agrees to
acquire all of the GCSI Shares for aggregate consideration (the "Third-Party
-----------
Consideration") greater than the aggregate of the Merger Consideration and the
-------------
Additional Merger Consideration, GCSI shall pay to Buyer $10,000,000 (the
"Topping Fee").
6.8 Insurance and Indemnification.
(a) Director and Officer Insurance. Buyer shall provide each
------------------------------
individual serving as a director or officer of GCSI or any of its
Subsidiaries immediately prior to the Effective Time, or who had served in
any such capacity at any time during the period commencing three (3) years
prior to the Effective Time, with liability insurance for a period of
forty-eight (48) months after the Effective Time no less favorable in
coverage and amount than any comparable insurance GCSI maintained in
effect immediately prior to the Effective Time.
(b) Maintenance of Exculpatory and Indemnity Clause. Buyer will not
-----------------------------------------------
take any action to alter or impair any exculpatory or indemnification
provisions now existing in the charter or bylaws of GCSI or its
Subsidiaries for the benefit of any individual who served as a director or
officer of GCSI or any of its Subsidiaries at any time prior to the
Effective Time.
(c) Indemnity. Buyer will indemnify each individual who served as a
---------
director or officer of GCSI or any of its Subsidiaries at any time prior to
the Effective Time from and against any and all actions, suits,
proceedings, hearings, investigations, charges, complaints, claims,
demands, injunctions, judgments, orders, decrees, rulings, damages, dues,
penalties, fines, costs, amounts paid in settlement, liabilities,
obligations, liens, losses, expenses and fees, including, without
limitation, all court costs and attorneys' fees and expenses, resulting
from, arising out of, relating to, in the nature of or caused by this
Agreement or any of the transactions contemplated herein.
6.9 Real Estate Sale. On or before the Closing Date, GCSI shall
convey, or cause to be conveyed, to ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇,
individually, the real property Commonly known as the Magnolia
Hotel and the County Road 55 Farm Property, including all (i)
furniture, furnishings and other personal property situated on or
within such real property (collectively, the "Non-Business Real
-----------------
Estate") in accordance with the terms and conditions of the Real
------
Estate Sales Contract in form and substance reasonably
satisfactory to the Parties, and the proceeds of such sale
received by GCSI shall be transferred to Paying Agent for payment
to the GCSI Stockholders as part of the Merger Consideration.
6.10 Board Approval. The Board of Directors of GCSI shall recommend
that the GCSI Stockholders approve the Merger, and will not
terminate that
24
recommendation unless there is a failure of a condition to
Closing set forth in Section 7.2.
ARTICLE VII
CONDITIONS TO OBLIGATION TO CLOSE
7.1 Conditions to Obligation of Buyer. The obligation of Buyer to
consummate the transaction to be performed by it in connection with the Closing
is subject to the satisfaction of the following conditions:
(a) this Agreement and the Merger shall have received the Requisite
Stockholder Approval;
(b) the representations and warranties of GCSI set forth in Article
III shall be true and correct in all material respects at and as of the
Closing Date;
(c) GCSI shall have performed and complied with all of its covenants
hereunder in all material respects through the Closing;
(d) there shall not be any judgment, order, decree, stipulation,
injunction or charge in effect preventing consummation of any of the
transactions contemplated by this Agreement;
(e) GCSI shall have delivered to Buyer (i) a Certificate of Existence
of GCSI issued by the Alabama Secretary of State, (ii) a Certificate of
Good Standing of GCSI issued by the Alabama Department of Revenue, (iii)
certified copies of the resolutions of the board of directors of GCSI and
the GCSI Stockholders approving the Merger and (iv) a noncompetition
agreement of ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇
▇. ▇▇▇▇▇▇ and ▇▇▇▇ ▇. ▇▇▇▇▇▇ in form and substance reasonably acceptable to
Buyer;
(f) all applicable waiting periods (and any extensions thereof) under
the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act shall have expired or otherwise been terminated
and the Parties shall have received all other authorizations, consents and
approvals of Governmental Entities referred to in Section 3.4 and Section
4.4 above;
(g) Buyer shall have received from counsel to GCSI an opinion in form
and substance reasonably satisfactory to Buyer, addressed to Buyer and
dated as of the Closing Date; and
(h) all actions to be taken by GCSI in connection with the
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments and other documents required to effect the
transactions contemplated hereby will be reasonably satisfactory in form
and substance to Buyer.
25
Buyer may waive any condition specified in this Section 7.1 by a writing so
stating delivered to GCSI at or prior to the Closing.
7.2 Conditions to Obligation of GCSI. The obligation of GCSI to
consummate the transactions to be performed by it in connection with the Closing
is subject to satisfaction of the following conditions:
(a.) this Agreement and the Merger shall have received the Requisite
Stockholder Approval, The Parties acknowledge that ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇. Jr., as co-trustees (the "Co-Trustees") of the ▇▇▇▇
-----------
▇▇▇▇▇▇▇ ▇▇▇▇▇ Irrevocable Trust dated December 23, 1993, and the ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇ Testamentary Trust, under the Last Will and Testament of ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, deceased, intend to file a petition with the Circuit Court
of ▇▇▇▇▇▇▇ County, Alabama within fourteen (14) days of the Agreement Date
requesting the Court to confirm the sale of the GCSI Shares held by such
trusts pursuant to the terms of this Agreement and the Merger (the "Court
-----
Confirmation"), and that if the Court fails to confirm said sale, the Co-
------------
Trustees will vote said GCSI Shares against this Agreement and the Merger,
and GCSI will not receive the Requisite Stockholder Approval;
(b) the trustees of the ESOP (the "ESOP Trustees') shall have
received from ESOP participants or former participants instructions, that
have not been revoked, to sell to Buyer a number of GCSI Shares greater
than fifty percent (50%) of the GCSI Shares allocated to the accounts of
ESOP participants or former participants;
(c) the ESOP Trustees shall have received a fairness opinion
reasonably acceptable to the ESOP Trustees with respect to the transactions
contemplated by this Agreement;
(d) the representations and warranties of Buyer set forth in Article
IV shall be true and correct in all material respects at and as of the
Closing Date;
(e) Buyer shall have performed and complied with all of its covenants
hereunder in all material respects through the Closing.
(f) there shall not be any judgment, order, decree, stipulation,
injunction or charge in effect preventing consummation of any of the
transactions contemplated by this Agreement-,
(g) Buyer shall have delivered to GCSI (i) a Certificate of Existence
of Buyer issued by the Delaware Secretary of State and of Transitory
Subsidiary issued by the Alabama Secretary of State, (ii) Certificates of
Good Standing of Buyer issued by the Delaware Secretary of State and of
Transitory Subsidiary issued by the Alabama Department of Revenue, and
(iii) certified copies of the resolutions of the board of directors of
Buyer and of the board of directors and shareholder of Transitory
Subsidiary approving the Merger,
26
(h) all applicable waiting periods (and any extensions thereof) under
the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act shall have expired or otherwise been terminated
and the Parties shall have received all other authorizations, consents and
approvals of Governmental Entities referred to in Section 3.4 and Section
4.4;
(i) GCSI shall have received from counsel to Buyer an opinion in form
and substance reasonably satisfactory to GCSI, addressed to GCSI and dated
as of the Closing Date;
(j) In the event Buyer contemplates refinancing all or any portion of
the Long Term Debt immediately following the Effective Time, GCSI shall
have received written evidence that all requirements of and conditions to
said refinancing have been satisfied; and
(k) all actions to be taken by Buyer in connection with the
consummation of the transactions contemplated hereby and all certificates.
opinions, instruments and other documents required to effect the
transactions contemplated hereby will be reasonably satisfactory in form
and substance to GCSI.
Except for the conditions contained in paragraphs (a), (b), (c) and (h) of this
Section 7.2, GCSI may waive any condition specified in this Section 7.2 by a
writing so stating delivered to Buyer at or prior to the Closing.
7.3 Deemed Waiver. If either Party is not obligated a. Closing to perform
pursuant to this Agreement, the Party not so obligated may terminate this
Agreement by delivering to the other Party notice of termination in writing in
accordance with Article VIII. Provided, however, if either Party is not
obligated to perform pursuant to this Agreement but nevertheless elects to
perform, and the other Party is obligated to perform, the Parties shall proceed
with the consummation of this Agreement as if all Parties were obligated to do
so, and the Party who is not obligated to proceed but elects to do so shall be
deemed to have specifically waived in writing, as provided in Section 7.1 and
Section 7.2, as the case may be, the fulfillment of the condition or conditions,
the nonfulfillment of which excused the obligation of said Party to perform
pursuant to this Agreement as contemplated by Section 7.1 and Section 7.2, as
the case may be.
ARTICLE VIII
TERMINATION
8.1 Termination of Agreement. Either Party may terminate this Agreement
with the prior authorization of its board of directors (whether before or after
stockholder approval) as provided below:
(a) the Parties may terminate this Agreement by mutual written
consent at any time prior to the Effective Time;
27
(b) Buyer may terminate this Agreement by giving written notice to
GCSI at any time prior to Closing (i) in the event GCSI has breached any
material representation, warranty or covenant contained in this Agreement
in any material respect, Buyer has notified GCSI of the breach, and the
breach has continued without cure for a period of thirty (30) days after
the notice of breach, or (ii) if the Closing shall not have occurred on or
before September 30, 1999, by reason of the failure of any condition
precedent under Section 7.1 (unless the failure results primarily from
Buyer breaching any representation, warranty or covenant contained in this
Agreement);
(c) GCSI may terminate this Agreement by giving written notice to
Buyer at any time prior to Closing (i) in the event Buyer has breached any
material representation, warranty or covenant contained in this Agreement
in any material respect, GCSI has notified Buyer of the breach, and the
breach has continued 'without cure for a period of thirty (30) days after
the notice of breach or (ii) if the Closing shall not have occurred on or
before September 30, 1999, by reason of the failure of any condition
precedent under Section 7.2 (unless the failure, results primarily from
GCSI breaching any representation, warranty or covenant contained in this
Agreement); or
(d) either Party may terminate this Agreement by giving written
notice to the other Party at any time after the Special Meeting in the
event this Agreement and the Merger fail to receive the Requisite
Stockholder Approval.
8.2 Effect of Termination. Except as hereinafter provided, if either
Party terminates this Agreement pursuant to Section 8.1, all rights and
obligations of the Parties hereunder shall terminate without any liability of
either Party; provided, however, that the confidentiality provisions contained
in Section 6.5 and the provisions of Section 6.7 concerning the Topping Fee
shall survive any such termination. In the event either Party terminates this
Agreement because the other Party has materially breached or materially failed
to perform its agreements and covenants contained in Article II, VI or IX of
this Agreement, the nonbreaching Party shall be entitled to pursue all legal and
equitable remedies against the breaching Party for such breach or failure to
perform, including specific performance. All costs, fees and expenses
(including reasonable attorneys' fees and expenses) incurred by the nonbreaching
Party in connection with enforcing its rights hereunder with respect to such
breach or failure to perform shall be paid by the breaching Party.
8.3 Fees and Expenses. Except as otherwise provided herein, the
reasonable costs, fees and expenses incurred in connection with the negotiation,
drafting and execution of this Agreement, and the consummation of the
transactions contemplated hereby (including the reasonable fees and expenses of
counsel, accountants and appraisers) shall be paid by the Party incurring such
fees or expenses; provided that up to $1,500,000 of such costs, fees and
expenses incurred by the GCSI Stockholders and the ESOP shall be paid by GCSI at
the Closing, which payment shall not be deemed a reduction in the cash or cash
equivalents of GSLI as of the Effective Time.
8.4 Survival. Except for the provisions of Article II concerning payment
of the Merger Consideration and the Additional Merger Consideration, and the
provisions of Section
28
6.8 concerning insurance and indemnification (the "Surviving Obligations"), none
---------------------
of the representations, warranties, agreements and covenants of the Parties
contained herein or in any Disclosure Schedule, certificate or other instrument
or writing delivered in connection herewith, shall survive the Closing. Except
as provided in Section 8-2, each Party's sole remedy on account of a breach
hereof by the other Party is the right to terminate this Agreement pursuant to
this Article VIE. After the Closing, neither Party shall have any liability or
obligation to the other except with respect to the Surviving Obligations and
each of GCSI and Buyer covenant never to institute, directly or indirectly, any
action or proceeding of any kind against the other or against any GCSI
Stockholder based on or arising out of, or in any manner related to, the breach
of a representation, warranty, agreement or covenant contained in this
Agreement, except with respect to the Surviving Obligations.
ARTICLE IX
DigiPH
Prior to Closing, GCSI shall sell or otherwise transfer the stock it owns (the
"DigiPH Stock") in DigiPH Holding Company, Inc., an Alabama corporation
------------
("DigiPH") which owns all of the issued and outstanding stock of DigiPH
------
Communications, Inc, a Delaware corporation which in turn owns all of the issued
and outstanding stock of DigiPH PCS, Inc., an Alabama corporation which holds
eight (8) FCC licenses to provide broadband PCS services in portions of the
States of Alabama, Florida and Mississippi, either to Millry Management
Corporation, an Alabama corporation ("Millry"), or another Person, consistent
------
with the terms of that certain Stockholder's Agreement dated March 13,1997 by
and among DigiPH, GCSI and Millry, and the proceeds of such sale or other
transfer received by GCSI shall be transferred to Paying Agent for payment to
the GCSI Stockholders as part of the Merger Consideration.
ARTICLE X
MISCELLANEOUS
10.1 Press Releases and Public Announcements. Neither Party shall issue
any press release or make any public announcement relating to the subject matter
of this Agreement without the prior written approval of the other Party;
provided, however, that either Party may make any public disclosure it believes
in good faith is required by applicable law or any listing or trading agreement
concerning its publicly-traded securities (in which case the disclosing Party
will use its best efforts to advise the other Party prior to making the
disclosure).
10.2 No Third-Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns; provided, however, that (i) the provisions in
Article 11 concerning payment of the Merger Consideration and the Additional
Merger Consideration are intended for the benefit of the GCSI Stockholders and
(ii) the provisions in Section 6.9 concerning insurance and indemnification are
intended for the benefit of the individuals specified therein and their
respective legal representatives.
10.3 Entire Agreement. This Agreement (including the documents referred to
herein) constitutes the entire agreement among the Parties and supersedes any
prior understandings,
29
agreements or representations by or among the Parties, written or oral, to the
extent they relate in anyway to the subject matter hereof.
10.4 Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. Upon prior written notice to GCSI, Buyer may assign its
rights and obligations under this Agreement to a wholly-owned Subsidiary of
Buyer, provided that Buyer remains principally liable hereunder for the
performance of said obligations. Except as provided in the preceding sentence,
no Party may assign either this Agreement or any of its rights, interests or
obligations hereunder without the prior written approval of the other Parties.
10.5 Counterparts. This Agreement May be executed in one or more
counterparts, each of which shall be deemed an original but an of which together
will constitute one and the same instrument.
10.6 Readings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
10.7 Notices. All notices, requests, demands, claims and other
communications hereunder will be in writing. Any notice, request, demand, claim
or other communication hereunder shall be deemed duly given if (and then two (2)
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to GCSI:
Gulf Coast Services, Inc.
▇.▇. ▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Chief Executive Officer
(▇▇▇) ▇▇▇-▇▇▇▇
(▇-▇▇) ▇▇▇-▇▇▇▇ fax
With a copy to:
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, as a Trustee of the ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
Irrevocable Trust and the ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ Testamentary
Trust
c/o M. ▇▇▇▇ ▇▇▇▇▇, Esq.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ fax
▇▇▇▇▇▇▇▇@▇▇▇▇▇▇▇.▇▇▇ e-mail
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇., as a Trustee of the ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇
30
Irrevocable Trust and the ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ Testamentary
Trust
Hand ▇▇▇▇▇▇▇▇, L.L.C.
Suite 3000
10 ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ fax
▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇ e-mail
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, P.C.
▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ fax
▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇ e-mail
C. ▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
Cabaniss, Johnston, ▇▇▇▇▇▇▇, ▇▇▇▇▇ & ▇'▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ fax
▇▇▇@▇▇▇▇▇▇▇▇.▇▇▇ e-mail
H. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
Pierce, Ledyard, Lata & Wasdan P.C.
▇▇▇▇▇ ▇▇▇
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ fax
▇▇▇@▇▇▇▇▇.▇▇▇ e-mail
If to Buyer:
Madison River Telephone Company, LLC
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ fax
________________ e-mail
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With a copy to:
▇▇▇▇▇ ▇. ▇▇▇▇▇, Vice Pres - General Counsel
Madison River Communications
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
(919) 493-7030 ext. 47
(▇▇▇) ▇▇▇-▇▇▇▇ fax
▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇ e-mail
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Wyrick, Robbins, ▇▇▇▇▇ & ▇▇▇▇▇▇, LLP
Suite 300
4101 Lake ▇▇▇▇▇ Trail
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
Fax (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇▇▇▇@▇▇▇▇▇▇.▇▇▇ e-mail
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ fax
▇▇▇▇▇▇▇▇@▇▇▇.▇▇▇. e-mail
Either Party may send any notice, request, demand, claim or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail or electronic mail), but no such notice, request,
demand, claim or other communication shall be deemed to have been duly given
unless and until it actually is received by the intended recipient. Either
Party may change the address to which notices, requests, demands, claims and
other communications hereunder are to be delivered by giving the other Party
notice in the manner herein set fort
10.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Alabama without giving effect
to any choice or conflict of law provision or rule (whether of the State of
Alabama or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of Alabama.
10.9 Amendments and Waivers. The Parties may mutually amend any provision
of this Agreement at any time prior to the Effective Time; provided, however,
that any amendment effected subsequent to the Requisite Stockholder Approval
will be subject to the restrictions
32
contained in the Alabama Business Corporation Act. No amendment of any provision
of this Agreement shall be valid unless the same shall be in writing and signed
by each of the Parties. No waiver by either Party of any default,
misrepresentation or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation or breach of warranty or covenant hereunder or affect
in any way any rights arising by virtue of any prior or subsequent occurrence.
10.10 Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
10.11 Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring either Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context otherwise requires. The
word "including" shall mean including without limitation.
---------
10.12 Incorporation of Exhibits and Disclosure Schedules. The Exhibits
and Disclosure Schedules identified in this Agreement are incorporated herein by
reference and made a part hereof.
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement and
Plan of Merger on the date first above written.
ATTEST: MADISON RIVER TELEPHONE
COMPANY, LLC
▇▇▇▇▇ ▇. ▇▇▇▇▇ By: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------- ---------------------------------
Its Secretary Its: Managing Director-Corporate Development
----------- ----------------------------------------
ATTEST: GULF COAST SERVICES, INC.
________________________________ By: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------
Its Secretary Its: Chief Executive Officer
--------------------------
34