STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of October 6, 2000 (the "Agreement") by
and among Central Utah Telephone, Inc., a Utah corporation ("Central Utah"),
each of the persons listed on Schedule A hereto (individually a "Seller" and
collectively "Sellers"), Brighton Communications Corporation, a Delaware
corporation (the "Company") and ▇▇▇▇▇ Telephone Corporation X, a Delaware
corporation and a wholly owned subsidiary of the Company (the "Purchaser").
WHEREAS, each of the Sellers desires to sell such Seller's stock interests in
Central Utah to Purchaser; and
WHEREAS, Purchaser desires to purchase all of the stock of Central Utah from
Sellers upon the terms and conditions set forth herein.
ARTICLE I--THE STOCK SALES
1.1 Sale and Purchase Each Seller hereby agrees, on the terms and
conditions herein, to sell to Purchaser the number of shares of common stock of
Central Utah ("CU Common Stock") set forth opposite such Seller's name on
Schedule A hereto. The Purchaser hereby agrees, on the terms and conditions
herein, to purchase from each Seller the number of shares of common stock of
Central Utah set forth opposite such Seller's name on Schedule A hereto. The
sales and purchases contemplated herein are hereinafter referred to as the
"Stock Sales." The CU Common Stock is sometimes hereinafter referred to as the
"Common Stock."
1.2 Purchase Price The total purchase price shall be $10,500,000 (the
"Purchase Price") to be allocated among the Sellers in accordance with Schedule
A, payable at the Closing referred to in Section 1.5 hereof.
1.3 Form of Purchase Price The purchase price shall be payable 50% in cash
and 50% in promissory notes issued by the Purchaser (the "Notes") in the form of
Schedule 1.3(a) hereto). Notes shall be valued at the principal amount thereof.
The Notes shall be secured pursuant to a Pledge and Escrow Agreement in the form
of Schedule 1.3(b) hereto.
1.4 Payment of the Purchase Price The Purchase Price shall be paid by
Purchaser to each Seller at the Closing Time by cashier or certified check or
wire transfer as requested by each Seller as to the cash portion and delivery of
Notes of Purchaser payable to each Seller as to the portion of the purchase
price paid by the Notes. To the extent any payment of the Purchase Price is to
be made by wire transfer, such bank wire transfer(s) shall be made to an account
or accounts that each Seller receiving the cash portion of the Purchase Price
shall designate in writing to Purchaser at least two business days prior to the
Closing Time.
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1.5 Closing The closing of the Stock Sales (the "Closing") shall take place
at 10:00 a.m. at the offices of Central Utah in Fairview, Utah, within ten days
after all of the conditions precedent set forth in Article VI have been
satisfied or waived, or at such other time, date and place (not later than March
31, 2001) as Purchaser and Sellers shall by written instrument designate. Such
time and date are herein referred to as the "Closing Time."
1.6 Transactions at the Closing Time
(a) At the Closing, each of the Sellers shall deliver to Purchaser the
following:
(i) stock certificates, in form suitable for transfer, registered in the
name of such Seller, evidencing the number of shares of Common Stock
to be purchased hereunder, with executed blank stock transfer powers
attached, and with all necessary stock transfer tax stamps attached
thereto;
(ii) all stock books, stock transfer ledgers, minute books and the
corporate seals of Central Utah and the Central Utah Subsidiaries (as
hereinafter defined), together with the resignations of all directors
of Central Utah and the Central Utah Subsidiaries other than as set
forth on Schedule 1.6 hereto;
(iii)subordination agreement(s) in such form(s) as may be requested by the
financial institution(s) lending funds for the acquisition by
Purchaser of the stock of Central Utah, executed by each Seller
subordinating the Sellers' interests under the Notes to the interests
of lenders to Purchaser and lenders to subsidiaries of Purchaser
guaranteed by Purchaser in an amount not to exceed the cash portion of
the Purchase Price plus the amount of any additional loans used by
Purchaser or subsidiaries of Purchaser for capital expenditures,
acquisitions and other investments in Central Utah including Central
Utah Subsidiaries plus any amounts permitted under Section 1.6 of the
Membership Purchase Agreement dated as of October 6, 2000 relating to
Central Telecom Services, LLC; and
(iv) each of the certificates and documents contemplated by Section 6.2.
(b) At the Closing, Purchaser shall deliver to each Seller
the following:
(i) the Purchase Price per share of CU Common Stock sold by such Seller as
required and in the manner indicated in this Article I.
(ii) each of the certificates and documents contemplated by Section 6.3.
(c) At or prior to the Closing, Central Utah shall enter into (1) an
Employment Agreement with Branch ▇▇▇ in the form of Schedule
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1.6(c)(1) hereto and (2) an Employment Agreement with ▇▇▇▇▇ ▇. ▇▇▇ in the form
of Schedule 1.6(c)(2) hereto.
(d) At the Closing, the Company and Sellers shall enter into an Escrow
Agreement in the form of Schedule 1.3(b).
ARTICLE II--REPRESENTATIONS AND WARRANTIES OF CENTRAL UTAH, AND
SELLERS
Except as set forth in the Disclosure Schedule delivered by Sellers and
Central Utah to the Purchaser prior to the execution of this Agreement (the
"Sellers Disclosure Schedule"), which Sellers Disclosure Schedule shall
reference disclosure items by section, each of the Sellers and Central Utah,
jointly and severally, represent and warrant to the Purchaser that:
2.1 Organization and Qualification; Subsidiaries
(a) Central Utah is a corporation validly existing and in good standing
under the laws of the State of Utah. Each subsidiary of Central Utah
("Central Utah Subsidiary" or collectively, "Central Utah
Subsidiaries") is a corporation validly existing and in good standing
under the laws of the State of Utah. Each of Central Utah and the
Central Utah Subsidiaries has the requisite corporate power and
authority, and, except as otherwise provided herein, is in possession
of all franchises, grants, authorizations, licenses, permits,
easements, consents, certificates, approvals and orders ("Central Utah
Approvals"), necessary to own, lease and operate its properties and to
carry on its business as it is now being conducted, and neither
Central Utah nor any Central Utah Subsidiary has received any notice
of proceedings relating to the revocation or modification of any
Central Utah Approvals.
(b) Central Utah and each Central Utah Subsidiary is duly qualified or
licensed as a foreign corporation to do business, and is in good
standing, in each jurisdiction where the character of its properties
owned, leased or operated by it or the nature of its activities makes
such qualification or licensing necessary, except where such failures
to be so duly qualified or licensed and in good standing would not,
either individually or in the aggregate, have a Material Adverse
Effect with respect to Central Utah or any Central Utah Subsidiary.
(c) A list of all of Central Utah Subsidiaries is set forth on Section
2.1(c) of Sellers Disclosure Schedule. Central Utah owns beneficially
and of record all of the outstanding shares of capital stock of each
of the Central Utah Subsidiaries. Central Utah does not directly or
indirectly own any equity or similar interests in, or any interests
convertible into or exchangeable or exercisable for any equity or
similar interest in, any corporation, partnership, joint venture or
other business association or entity other than in the ordinary course
of business, and in no event in excess of 5% of the outstanding equity
securities of such entity.
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(d) The minute books of Central Utah and each of the Central Utah
Subsidiaries contain true, complete and accurate records in all
material respects of all meetings and other corporate actions held or
taken of their respective stockholders and Boards of Directors
(including committees of their respective Boards of Directors).
2.2 Articles of Incorporation and Bylaws. Central Utah has previously
furnished to Purchaser a copy of the current Articles of Incorporation and
Bylaws, as amended or restated of Central Utah ("Central Utah Articles" or
"Central Utah Bylaws") and each Central Utah Subsidiary. Such Articles of
Incorporation and Bylaws of Central Utah and each Central Utah Subsidiary are in
full force and effect. Neither Central Utah nor any Central Utah Subsidiary is
in violation of any of the provisions of its Articles of Incorporation or
Bylaws.
2.3 Capitalization.
(a) The authorized capital stock of Central Utah consists of 250,000
shares of CU Common Stock. As of the date of this Agreement, (i)
182,788 shares of CU Common Stock are issued and outstanding (of which
none are restricted shares under employee benefit plans which have not
been awarded), all of which are duly authorized, validly issued, fully
paid and non-assessable, and were not issued in violation of any
preemptive right of any Central Utah stockholder and (ii) 4,012 shares
of CU Common Stock are held in the treasury of Central Utah. There are
no options, warrants or other rights, agreements, arrangements or
commitments of any character, including without limitation voting
agreements or arrangements, relating to the issued or unissued capital
stock of Central Utah or any Central Utah Subsidiary or obligating
Central Utah or any Central Utah Subsidiary to issue or sell any
shares of capital stock of Central Utah or any Central Utah
Subsidiary. There are no obligations of Central Utah or any Central
Utah Subsidiary to repurchase, redeem or otherwise acquire any shares
of Common Stock or the capital stock of any Central Utah Subsidiary.
Each of the outstanding shares of capital stock of each Central Utah
Subsidiary are duly authorized, validly issued, fully paid and
nonassessable, and were not issued in violation of any preemptive
rights of any Central Utah Subsidiary stockholder.
(b) Each Seller owns outright the number of shares of CU Common Stock set
forth opposite such Seller's name on Schedule A hereto, free and clear
of all encumbrances, security interests and charges of any kind. There
are no options, warrants or other rights, agreements, arrangements or
commitments of any character, including without limitation voting
agreements or arrangements relating to any shares set forth on
Schedule A hereto.
(c) Any shares of CU Common Stock purchased or otherwise acquired by
Central Utah or any Central Utah Subsidiary were purchased or acquired
in accordance with all laws including fiduciary duties.
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2.4 Authority.
(a) (i) The Declaration of Trust of the Ed and ▇▇▇▇ ▇▇▇ Family
Trust was executed by ▇▇▇▇▇ ▇. ▇▇▇ and ▇▇▇▇ ▇. ▇▇▇ as
Trustors and Trustees on March 5, 1997, and has not been
amended, supplement or modified, and remains in full force
and effect. ▇▇▇▇▇ ▇. ▇▇▇ and ▇▇▇▇ ▇. ▇▇▇ as Trustors and
Trustees have full power and authority to execute and
deliver this Agreement on behalf of the Ed and ▇▇▇▇ ▇▇▇
Family Trust and to sell, transfer and convey the shares of
CU Common Stock described on Schedule A to the Purchaser
pursuant to the terms and conditions of this Agreement.
(ii) The Declaration of Trust of the Branch and ▇▇▇▇▇ ▇▇▇ Family
Trust was executed by ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇ as
Trustors and Trustees on March 5, 1997, and has not been
amended, supplement or modified, and remains in full force
and effect. ▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇ as Trustors and
Trustees have full power and authority to execute and
deliver this Agreement on behalf of the Branch and ▇▇▇▇▇ ▇▇▇
Family Trust and to sell, transfer and convey the shares of
CU Common Stock described on Schedule A to the Purchaser
pursuant to the terms and conditions of this Agreement.
(b) Each of the Sellers and Central Utah has the requisite power and
authority to execute and deliver this Agreement, to perform their
respective obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by
each of the Sellers and Central Utah and the consummation by them of
the transactions contemplated hereby have been duly and validly
authorized by all necessary action and no other proceedings on the
part of each of the Sellers and Central Utah are necessary to
authorize this Agreement or to consummate the transactions so
contemplated hereby. This Agreement has been duly executed and
delivered by, and constitutes a valid and binding obligation of each
of the Sellers and Central Utah and, assuming due authorization,
execution and delivery by the Company and the Purchaser, is
enforceable against each of the Sellers and Central Utah and in
accordance with its terms, except as enforcement may be limited by
general principles of equity whether applied in a court of law or a
court of equity and by bankruptcy, insolvency and similar laws
affecting creditors' rights and remedies generally.
2.5 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by each of the Sellers
and Central Utah does not, and the performance of this Agreement and
the transactions contemplated hereby by each of the Sellers and
Central Utah shall not, (i) conflict with or violate Central Utah
Articles or Central Utah Bylaws or the Articles of Incorporation or
Bylaws of any Central Utah Subsidiary, (ii) conflict with or violate
any federal or state law, statute, ordinance, rule, regulation, order,
judgment or decree (collectively, "Laws") applicable to any Seller or
Central Utah or any Central Utah Subsidiary or by which any Seller or
Central Utah
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or any Central Utah Subsidiary or any of their respective properties
is bound or affected, or (iii), except as set forth in Schedule 2.5(a)
hereto, result in any breach of or constitute a default (or an event
that with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment,
acceleration, cancellation of, or result in rights of payment,
compensation or other rights or the creation of a lien or encumbrance
on any of the properties or assets of any Seller, Central Utah, or any
Central Utah Subsidiary pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which any Seller, Central Utah or
any Central Utah Subsidiary is a party or by which any Seller, Central
Utah or any Central Utah Subsidiary or its or any of their respective
properties is bound or affected.
(b) The execution and delivery of this Agreement by each of the Sellers
and Central Utah does not, and the performance of this Agreement by
the Sellers and Central Utah and shall not, require any consent,
approval, authorization or permit of, or filing with or notification
to any governmental or regulatory authority except (i) for applicable
requirements, if any, of the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), and (ii) the consents or
approvals of the Public Service Commission of Utah ("PSCU") or the
Federal Communications Commission ("FCC") listed on Sellers Disclosure
Schedule.
2.6 Compliance; Permits. Neither Central Utah nor any Central Utah
Subsidiary is in conflict with, or in default or violation of, (i) to the best
of Sellers and Central Utah's knowledge after due inquiry, any Law applicable to
Central Utah or any Central Utah Subsidiary or by which its or any of their
respective properties is bound or affected, or (ii) any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which Central Utah or any Central Utah Subsidiary is
a party or by which Central Utah or any Central Utah Subsidiary or its or any of
their respective properties is bound or affected.
2.7 Reports; Financial Statements.
(a) Central Utah and each Central Utah Subsidiary have filed all forms,
reports and documents required to be filed with the PSCU and FCC, and
as of the date of this Agreement Central Utah has delivered to
Purchaser copies of its Annual Report to the PSCU for the years ended
December 31, 1997, 1998 and 1999 (the "Central Utah Reports"). The
Central Utah Reports, including all Central Utah Reports filed after
the date of this Agreement and prior to or at the Closing Time, (i)
were or will be prepared in all material respects in accordance with
the requirements of applicable Law and (ii) did not at the time they
were filed, or will not at the time they are filed, contain any untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary in order to make the statements
therein, in the light of
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the circumstances under which they were made, not misleading.
(b) Central Utah has heretofore furnished Purchaser with the audited
and unaudited financial statements for the periods and as of the
period endings listed as Item 2.7 (b) of Sellers Disclosure
Statement (the "Financial Statements"). The Financial Statements
(and the financial statements ("Section 4.1(i) Financial
Statements") to be furnished Purchaser pursuant to Section 4.1(i)
hereof), including the footnotes thereto, and except as indicated
therein, have been prepared in accordance with generally accepted
accounting principles consistently applied ("GAAP") and the
uniform system of accounts of the Federal Communications
Commission as set forth in 47. C.F.R. Part 32 and fairly present
in all material respects the financial condition and results of
the operations of entities included therein and the changes in
their financial position at such dates and for such periods;
provided however, that the Section 4.1(i) Financial Statements
shall be subject to normal year end adjustments. The term
"Balance Sheet" shall mean, as the context requires, either or
both of (i) the balance sheets of Central Utah (and its
consolidated subsidiaries) as of [December 31, 1999], and (ii)
the balance sheets of Central Utah (and its consolidated
subsidiaries) to be included in the Section 4.1(i) Financial
Statements.
(c) There are no material liabilities or obligations of any nature,
whether absolute, accrued, fixed, contingent, matured or
unmatured, against, relating to or affecting Central Utah, or any
Central Utah Subsidiary, except (i) as and to the extent
reflected or reserved against on the Balance Sheet of Central
Utah, and (ii) those incurred since the date of the latest
Balance Sheet of Central Utah in the ordinary course of business
consistent with prior practice and consistent with Sections 4.1
and 4.2 hereof and which individually or in the aggregate do not
have and are not expected to have a Material Adverse Effect on
Central Utah or any Central Utah Subsidiary.
(d) (i) The revenues attributable to long distance network access
that are included in the revenues stated in the Financial
Statements (and in the Section 4.1(i) Financial Statements) have
been calculated in a manner consistent with prior years, as
modified by and in accordance with, all applicable federal and
state rules and regulations; (ii) the cost separation studies for
the exchanges of Central Utah and any Central Utah Subsidiary
upon which the access settlement revenues set forth in the
Financial Statement (and in the Section 4.1(i) Financial
Statements) are based have been prepared in a manner consistent
with prior years, as modified by and in accordance with, all
applicable federal and state tariffs; and (iii) all local service
rates currently utilized by Central Utah and all of the Central
Utah Subsidiaries are in compliance with tariffs, to the extent
such tariffs are applicable.
2.8 Absence of Certain Changes or Events. Since December 31, 1999 to the
date of this Agreement, Central Utah and the Central Utah Subsidiaries have
conducted their businesses only in the
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ordinary course and in a manner consistent with past practice and, since
December 31, 1999, there has not been (i) any change in the financial condition,
results of operations or business of Central Utah or any of the Central Utah
Subsidiaries having a Material Adverse Effect with respect to Central Utah, (ii)
any damage, destruction or loss (whether or not covered by insurance) with
respect to any assets of Central Utah or any of the Central Utah Subsidiaries
having a Material Adverse Effect with respect to Central Utah or any Central
Utah Subsidiary, (iii) any declaration, setting aside or payment of any
dividends or distributions in respect of CU Common Stock or any redemption,
purchase or other acquisition of any of its securities or any of the securities
of any Central Utah Subsidiary, (iv) any strike, work stoppage, slow-down or
other labor disturbance suffered by Central Utah or the Central Utah
Subsidiaries, (v) any collective bargaining agreement, contract or other
agreement or understanding with a labor union or organization to which Central
Utah or any of the Central Utah Subsidiaries has been a party (vi) any union
organizing activities relating to employees of Central Utah or the Central Utah
Subsidiaries, (vii) any incurrence of debt for money borrowed or any lease of
any property or assets, (viii) any action, which if taken subsequent to the
execution of this Agreement and prior to the Closing Time, would constitute a
breach of Central Utah's covenants set forth in Article IV or (ix) any
transaction not in the ordinary course of business consistent with past
practice.
2.9 Absence of Litigation.
(a) Neither any Seller nor Central Utah nor any of the Central Utah
Subsidiaries is a party to any, and there are no pending or, to the
best of Sellers' and Central Utah's knowledge, threatened, legal,
administrative, arbitral or other proceedings, claims, actions or
governmental or regulatory investigations of any nature against or
relating in any way to Central Utah or any Central Utah Subsidiary, or
challenging the validity or propriety of the transactions contemplated
by this Agreement.
(b) There is no injunction, order, judgment, decree or regulatory
restriction imposed upon, or, to the best of Sellers' and Central
Utah's knowledge, threatened against any Seller or Central Utah
relating in any way to Central Utah or any Central Utah Subsidiary, or
the assets of Central Utah or any of the Central Utah Subsidiaries
which has had or may have a Material Adverse Effect with respect to
Central Utah.
2.10 Employee Benefit Plans.
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(a) Plans of Central Utah. Section 2.10(a) of Sellers Disclosure Schedule
lists (i) all employee benefit plans (as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), and all bonus, stock option, stock purchase, restricted
stock, incentive, deferred compensation, retiree medical or life
insurance, supplemental retirement, severance or other benefit plans,
programs or arrangements, and all material employment, termination,
severance or other employment contracts or employment agreements, with
respect to which Central Utah or any Central Utah Subsidiary has any
obligation (collectively, the "Plans"). Central Utah has furnished or
made available to Purchaser a copy of each Plan (or a description of
the Plans, if the Plans are not in writing) and a copy of each
material document prepared in connection with each such Plan,
including, without limitation, and where applicable, a copy of (i)
each trust or other funding arrangement, (ii) each summary plan
description and summary of material modifications, (iii) the three
most recently filed IRS Forms 5500 and related schedules, (iv) the
most recently issued IRS determination letter for each such Plan and
(v) the three most recently prepared actuarial and financial
statements in connection with each such Plan.
(b) Absence of Certain Types of Plans. No member of Central Utah's
"controlled group," within the meaning of Section 4001(a)(14) of
ERISA, maintains or contributes to, or within the five years preceding
the date of this Agreement has maintained or contributed to, an
employee pension benefit plan subject to Title IV of ERISA ("Title IV
Plan"). No Title IV Plan of any member of Central Utah's "controlled
group" is a "multiemployer pension plan" as defined in Section (3)37
of ERISA. None of the Plans obligates Central Utah or any of the
Central Utah Subsidiaries to pay material separation, severance,
termination or similar-type benefits solely as a result of any
transaction contemplated by this Agreement or as a result of a "change
in ownership or control," within the meaning of such term under
regulations adopted pursuant to Section 280G of the Internal Revenue
Code of 1986, as amended (the "Code").
(c) Compliance with Applicable Law. Each Plan has been operated in all
respects in accordance with the requirements of all applicable Laws
and all persons who participate in the operation of such Plans and all
Plan "fiduciaries" (within the meaning of Section 3(21) of ERISA) have
acted in accordance with the provisions of all applicable Laws, except
where such violations of applicable Laws would not, individually or in
the aggregate, have a Material Adverse Effect with respect to Central
Utah. Central Utah and the Central Utah Subsidiaries have performed
all obligations required to be performed by any of them under, are not
in any respect in default under or in violation of, and Central Utah
and the Central Utah Subsidiaries have no knowledge of any default or
violation by any party to, any Plan, except where such failures,
defaults or violations would not, individually or in the aggregate,
have a Material Adverse Effect with respect to Central Utah.
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(d) Qualification of Certain Plans. Each Plan that is intended to be
qualified under Section 401(a) of the Code or Section 401(k) of the
Code (including each trust established in connection with such a Plan
that is intended to be exempt from Federal income taxation under
Section 501(a) of the Code) has received a favorable determination
letter from the IRS (as defined herein) that it is so qualified, and
neither Sellers nor Central Utah are aware of any fact or event that
has occurred since the date of such determination letter from the IRS
that would adversely affect the qualified status of any such Plan. No
trust maintained or contributed to by Central Utah or any of the
Central Utah Subsidiaries is intended to be qualified as a voluntary
employees' beneficiary association or is intended to be exempt from
federal income taxation under Section 501(c)(9) of the Code.
(e) Absence of Certain Liabilities and Events. To the best of Sellers' and
Central Utah's knowledge after due inquiry, there has been no
prohibited transaction (within the meaning of Section 406 of ERISA or
Section 4975 of the Code) with respect to any Plan. Central Utah and
each of the Central Utah Subsidiaries have not incurred any liability
for any excise tax arising under Section 4972 or 4980B of the Code
that would individually or in the aggregate have a Material Adverse
Effect with respect to Central Utah, and, to the knowledge of Sellers,
Central Utah or the Central Utah Subsidiaries, no fact or event exists
that could give rise to any such liability.
(f) Plan Contributions. All contributions, premiums or payments required
to be made prior to the Closing Time with respect to any Plan have
been made on or before the Closing Time.
(g) Funded Status of Plans and Rights to Terminate. With respect to each
Title IV Plan, the present value of all accrued benefits under each
such Plan, based upon the actuarial assumptions used for funding
purposes in the most recent actuarial report prepared by each such
Plan's actuary with respect to each such Plan did not exceed, as of
the most recent valuation date, the then current value of assets of
such Plan, allocable to each accrued benefit. No provision of any such
Plan, nor any amendment thereto, would result in any limitation on the
rights of Central Utah or the Central Utah Subsidiaries to terminate
each such Plan and to receive any residual amounts under Section 4044
of ERISA.
(h) Employment Contracts. Neither Central Utah nor any Central Utah
Subsidiary is a party to any employment, consulting, severance or
other similar contracts with present or former employees, consultants,
officers or directors of Central Utah or any of the Central Utah
Subsidiaries. Neither Central Utah nor any Central Utah Subsidiary is
a party to any collective bargaining agreements.
2.11 Title to Property. Central Utah and each of the Central Utah
Subsidiaries have good and indefeasible title to all of their
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respective properties and assets, real (listed as Section 2.11(a) of Sellers
Disclosure Schedule) and personal (any items or groups of similar items in
excess of $10,000 are listed as Item 2.11(b) of Sellers Disclosure Schedule),
free and clear of all mortgage liens, and free and clear of all other liens,
charges and encumbrances except for such liens, charges and encumbrances (i)
listed as Item 2.11(c) of the Sellers Disclosure Schedule or (ii) described in
the title insurance policies provided in accordance with Section 6.2(h) hereof,
and, further, except for taxes not yet due and payable, pledges to secure
deposits and such minor imperfections of title, if any, as do not materially
detract from the value of or interfere with the present use or marketability of
the property affected thereby; and all leases (listed as Item 2.11(d) of Sellers
Disclosure Schedule) pursuant to which Central Utah or any of the Central Utah
Subsidiaries lease from others material amounts of real or personal property are
in good standing, valid and effective in accordance with their respective terms.
Substantially all buildings and equipment in regular use by Central Utah or any
of the Central Utah Subsidiaries have been reasonably maintained and are in good
and serviceable condition, reasonable wear and tear excepted.
2.12 Environmental Matters. (a) (i) Each of Central Utah, the Central Utah
Subsidiaries and properties owned, leased or operated by Central Utah or the
Central Utah Subsidiaries, is in compliance with all applicable Environmental
Laws (as to any non-compliance prior to the ownership of any property by Central
Utah or a Central Utah Subsidiary, the representation and warranty in this
clause (i) is made to the best of Sellers and Central Utah's knowledge after due
inquiry); (ii) except as described in the Environmental Reports provided under
Section 6.2(g) hereof, and to the best of Sellers' and Central Utah's knowledge
after due inquiry, there is no asbestos or ureaformaldehyde materials in or on
any property owned, leased or operated by Central Utah or Central Utah
Subsidiaries and no electric transformers or capacitors, other than those owned
by public utility companies, on any such properties which contain any PCBs;
(iii) except as described in the Environmental Reports provided under Section
6.2(g) hereof, and to the best of Sellers' and Central Utah's knowledge after
due inquiry, there are no underground or aboveground storage tanks located on,
in or under any properties currently or formerly owned or operated by Central
Utah or any of the Central Utah Subsidiaries; (iv) Central Utah or the Central
Utah Subsidiaries have not received any notice, formal or informal from any
governmental agency or third party notifying Central Utah or the Central Utah
Subsidiaries of any Environmental Claim (as defined herein); (v) neither Central
Utah nor any Central Utah Subsidiary has been notified by any governmental
agency or any third party that either Central Utah or any Central Utah
Subsidiary may be a potentially responsible party for environmental
contamination or any Release (as defined below) of Hazardous Materials (as
defined below); (vi) Central Utah and each Central Utah Subsidiary have obtained
and each holds all Environmental Permits, (as defined below) relating to the
ownership or operations of Central Utah or any Central Utah Subsidiary; (vii)
Central Utah
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and each Central Utah Subsidiary is in material compliance with all terms,
conditions and provisions of all applicable Environmental Permits; (viii) no
Releases of Hazardous Materials have occurred at, from, in, on, to or under any
property owned, operated or leased by Central Utah or any Central Utah
Subsidiary that violate any Environmental Law, and no Hazardous Materials are
present in, on or about or migrating to or from any such property that would
give rise to an Environmental Claim by a third party against Central Utah or any
Central Utah Subsidiary (as to Releases prior to the ownership of the property
by Central Utah or a Central Utah Subsidiary, the representation and warranty
made in this clause (viii) is made to the best of Sellers and Central Utah's
knowledge after due inquiry); (ix) neither Central Utah nor any Central Utah
Subsidiary has, nor, to the best of Sellers and Central Utah's knowledge after
due inquiry, any predecessors thereof have, transported or arranged for the
treatment, storage, handling, disposal or transportation of any Hazardous
Material to any location which could result in an Environmental Claim against or
liability to Central Utah or any Central Utah Subsidiary; and (x) except as set
forth in Section 6.2(g), neither Central Utah nor any Central Utah Subsidiary
has any environmental report or statement prepared by or on its behalf or in its
possession or control relating to any of its present or former properties.
(b) For purposes of this Section:
"Environmental Claims: shall mean any and all administrative, regulatory,
judicial or private actions, suits, demands, notices, claims, liens,
investigations, injunctions or similar proceedings that may result in
Central Utah or any Central Utah Subsidiary being liable for: (i) a
violation of any Environmental Law; (ii) the release and ordered
remediation of any Hazardous Material, including without limitation, any
investigation, monitoring abatements, removal, remedial, corrective or
other response action in connection with the release of any Hazardous
Material or order or notice of liability or violation of a governmental
authority or Environmental Law; or (iii) any actual or alleged damage,
injury, threat or harm to the environment.
"Environmental Law: shall mean any and all federal, state and
----------------- local civil and criminal laws, statutes, ordinances,
orders, permits, codes, rules or regulations of any governmental or
regulatory authority relating to the protection of health, the environment,
natural resources, worker health and safety and/or governing the handling,
use, generation, treatment, storage, transportation, disposal, manufacture,
distribution, formulation, packaging, labeling, or Release of Hazardous
Materials, including but not limited to: the Clean Air Act, 42
U.S.C.ss.7401 et seq.; the -- --- Comprehensive Environmental Response,
Compensation and Liability Act of 1980, 42 U.S.C.ss.9601 et seq.; the
Federal Water Pollution -- --- Control Act, 33 U.S.C.ss.1251 et seq.; the
Hazardous Material -- --- Transportation Act 49 U.S.C.ss.1801 et seq.; the
Federal -- --- Insecticide, Fungicide and Rodenticide Act 7 U.S.C.ss.136 et
seq.; -- --- the Resource Conservation and Recovery Act of 1976 ("RCRA"),
42 ---- U.S.C.ss.6901 et seq.; the Toxic Substances Control Act, 15 U.S.C.
-- ---
12
ss.2601 et seq.; the Occupational Safety & Health Act of 1970, 29
-- ---
U.S.C.ss.651 et seq.; the Oil Pollution Act of 1990, 33 U.S.C.ss.2701
-- ---
et seq.; and the state analogies thereto, all as amended or
-- ---
superceded from time to time, on or before, but not after, the date
of Closing.
"Environmental Permits: shall mean any action, approval, consent, waiver,
exemption, variance, franchise, order, permit, authorization, right or license
issued from any federal, state or local governmental body, agency or authority
relating to the protection of health, the environment or natural resources.
"Hazardous Materials" shall mean any and all chemicals, pollutants,
contaminants, wastes, toxic substances, compounds, products, solid, liquid, gas,
petroleum, asbestos, asbestos- containing materials, polychlorinated biphenyls
or other regulated substances or materials which are hazardous, toxic or
otherwise harmful to the environment.
"Release: shall mean any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping or disposing of a
Hazardous Material into the environment.
2.13 Absence of Agreements. Neither Central Utah nor any Central Utah
Subsidiary is a party to any agreement, order, directive, memorandum of
understanding or similar arrangement with any governmental authority that
restricts materially the conduct of its business (other than restrictions
imposed by the PSCU or FCC on telephone companies generally, which do not,
individually or collectively, adversely affect the businesses of Central Utah
and the Central Utah Subsidiaries as currently conducted or proposed to be
conducted), nor has Central Utah or any Central Utah Subsidiary been advised
that any governmental authority is contemplating issuing or requesting (or is
considering the appropriateness of issuing or requesting) any such agreement,
order, directive, memorandum of understanding or similar arrangement.
2.14 Taxes.
(a) Central Utah and the Central Utah Subsidiaries are C corporations and
have timely filed all material Tax Returns (as defined below) required
to be filed by them or will duly and timely file (including any
extension periods) such Tax Returns, and, except for the property
taxes which are the subject of the Appeals to the Utah State Tax
Commission described in Section 2.14(a) of Sellers' Disclosure
Schedules, Central Utah and the Central Utah Subsidiaries have timely
paid and discharged all Taxes (as defined below) due in connection
with or with respect to the filing of such Tax Returns and have timely
paid all other Taxes as are due, except such as are being contested in
good faith by appropriate proceedings and with respect to which
Central Utah is maintaining reserves adequate for their payment as set
forth as Item 2.14(a) on Sellers Disclosure Schedule. The liability
for Taxes set forth on each such Tax Return adequately reflects the
Taxes required to be
13
reflected on such Tax Return. For purposes of this Agreement, "Tax" or
"Taxes" shall mean taxes, charges, fees, levies, and other
governmental assessments and impositions of any kind, payable to any
federal, state, local or foreign governmental entity or taxing
authority or agency, including, without limitation, (i) income,
franchise, profits, gross receipts, estimated, ad valorem, value
added, sales, use, service, real or personal property, capital stock,
license, payroll, withholding, disability, employment, social
security, workers compensation, unemployment compensation, utility,
severance, production, excise, stamp, occupation, premiums, windfall
profits, transfer and gains taxes, (ii) customs duties, imposts,
charges, levies or other similar assessments of any kind, and (iii)
interest, penalties and additions to tax imposed with respect thereto;
and "Tax Returns" shall mean returns, reports, and information
statements with respect to Taxes required to be filed with the United
States Internal Revenue Service (the "IRS") or any other governmental
entity or taxing authority or agency, domestic or foreign, including,
without limitation, consolidated, combined and unitary tax returns.
Neither the IRS nor any other governmental entity or taxing authority
or agency is now asserting, either through audits, administrative
proceedings or court proceedings, any deficiency or claim for
additional Taxes. Neither Central Utah nor any Central Utah
Subsidiaries has granted any waiver of any statute of limitations with
respect to, or any extension of a period for the assessment of, any
Tax. Except for statutory liens for current taxes not yet due, there
are no material tax liens on any assets of Central Utah or any Central
Utah Subsidiaries. Neither Central Utah nor any Central Utah
Subsidiaries has received a ruling or entered into an agreement with
the IRS or any other taxing authority that would have a Material
Adverse Effect with respect to Central Utah, after the Closing Time.
No agreements relating to allocating or sharing of Taxes exist among
Central Utah and the Central Utah Subsidiaries.
(b) The Balance Sheet of each of Central Utah includes due and sufficient
accruals for Taxes in accordance with GAAP in all material respects
with respect to any period for which tax returns for Central Utah or
any Central Utah Subsidiary were not filed or for which Taxes were not
then due and owing.
(c) True and complete copies of any and all Tax Returns for the last five
years and all tax audit reports with respect to Central Utah and any
Central Utah Subsidiary have been furnished to the Purchaser. Any
deficiencies proposed in tax audits have been duly and fully paid,
settled, or reserved against in the Financial Statements. Tax Returns
have not been audited by Federal or State tax authorities for the last
ten years.
(d) No election under Section 338 (or any predecessor provision) of the
Internal Revenue Code of 1986 (the "Code") has been made or filed by
or with respect to Central Utah or any Central Utah Subsidiary. No
consent to the application of Section 341(f)(2) of the Code (or any
predecessor provision) has been made or filed by or with respect to
Central Utah or any Central Utah Subsidiary or any of its assets or
properties. None of the assets
14
or properties of Central Utah or any Central Utah Subsidiary is an
asset or property that Central Utah is or will be required to treat as
being (i) owned by any other person pursuant to the provisions of
Section 168(f)(8) of the Internal Revenue Code of 1954, as amended and
in effect before the enactment of the Tax Reform Act of 1986, or (ii)
tax-exempt use property within the meaning of Section 168(h)(1) of the
Code. No closing agreement pursuant to Section 7121 of the Code (or
any predecessor provision) or any similar provision of any state,
local, or, if applicable, foreign Law has been entered into by or with
respect to Central Utah or any Central Utah Subsidiary or any of its
assets or properties.
(e) Neither Central Utah nor any Central Utah Subsidiary has agreed to
make any adjustment pursuant to Section 481(a) of the Code (or any
predecessor provision) by reason of any change in any accounting
method of Central Utah or any Central Utah Subsidiary, and neither
Central Utah nor any Central Utah Subsidiary has any application
pending with any governmental authority requesting permission for any
changes in any accounting method of Central Utah or any Central Utah
subsidiary. To the knowledge of Sellers and Central Utah, the Internal
Revenue Service has not proposed any such adjustment or change in
accounting method.
(f) Neither Central Utah nor any Central Utah Subsidiary has been or is in
violation (with or without notice or lapse of time or both) of any
applicable law relating to the payment or withholding of Taxes.
Central Utah and each Central Utah Subsidiary have duly and timely
withheld from employee salaries, wages, and other compensation and
paid over to the appropriate taxing authorities all amounts required
to be so withheld and paid over for all periods due and payable under
all applicable Laws.
(g) No audit is pending or, to the knowledge of Central Utah, threatened
with respect to any Taxes due from, or Tax Return filed by or relating
to, Central Utah or any Central Utah Subsidiary.
(h) Neither Central Utah nor any Central Utah Subsidiary is party to any
agreement, contract, or arrangement that would require Central Utah or
any Central Utah Subsidiary to make any gross-up payments with respect
to any Taxes or otherwise indemnify or hold harmless any employee with
respect to Taxes.
(i) Prior to the Closing Time, Central Utah shall notify Purchaser in
writing of any power of attorney granted by Central Utah or any
Central Utah Subsidiary concerning any Tax matter that will be in
force as of the Closing Time.
(j) Central Utah and Central Utah Subsidiaries have no deferred
intercompany gains or losses (as such term is defined in Treas.
Reg.ss.1.1502-13).
2.15 Insurance. Section 2.15 of the Sellers Disclosure Schedule lists all
material policies of insurance of Central Utah and Central Utah Subsidiaries
currently in effect. Neither Central
15
Utah nor any of Central Utah Subsidiaries has any liability for unpaid premiums
or premium adjustments not properly reflected on Central Utah's Financial
Statements.
2.16 Broker/Expenses. No broker, finder, consultant or investment banker is
entitled to any brokerage, finder's, consultant's, or other fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Sellers or Central Utah. Neither Central
Utah including Central Utah Subsidiaries nor Central Telecom Service, LLC, have
paid, or agreed to pay, in the aggregate in excess of $10,000 in connection with
the possible sale of Central Utah, Central Telecom Service, LLC, or the
transactions contemplated herein or in the Membership Purchase Agreement
referred to in Section 6.1(d) (the "Membership Purchase Agreement") since
January 1, 1999.
2.17 Material Adverse Effect. Since December 31, 1999, there has been no
Material Adverse Effect with respect to Central Utah.
2.18 Material Contracts/Licenses.
(a) Except as set forth in Section 2.18(a) of Sellers Disclosure Schedule,
neither Central Utah nor any Central Utah Subsidiary is a party to or
obligated under any material contract, agreement or other instrument
or understanding that is not terminable by Central Utah or Central
Utah Subsidiary without additional payment or penalty within 90 days.
Each contract disclosed on Sellers Disclosure Schedule is in full
force and effect and constitutes a legal, valid, and binding
obligation of Central Utah or a Central Utah Subsidiary, and (to the
knowledge of Sellers and Central Utah) each other party in accordance
with its terms, except as such enforcement may be limited by
applicable bankruptcy, insolvency, moratorium, or similar laws
affecting the enforcement of creditors' rights generally, or by
general principles of equity (regardless of whether such
enforceability is considered in a proceeding in law or in equity).
Neither Central Utah nor any Subsidiary nor (to the knowledge of
Seller and Central Utah) any other party to any such contract is in
violation or breach of or default under any such contract (with or
without notice or lapse of time or both). Since December 31, 1998, no
such contract has been amended or supplemented in any material
respect. For purposes of this Section 2.18, the term "material
contract" shall include any agreement, contract, instrument or
understanding involving the payment or receipt by Central Utah or any
Central Utah Subsidiary of $10,000 ($25,000 in the case of billing and
collecting agreements) or more per year or $25,000 ($100,000 in the
case of billing and collecting agreements) or more in the aggregate
through the life of the contract.
(b) Material Licenses. Section 2.18(b) of the Sellers Disclosure Schedule
contains a true and complete list and brief description of all
franchises, permits, licenses, approvals, and other authorizations
that are necessary for the business,
16
operations, and affairs of Central Utah or any Central Utah Subsidiary
as currently being or contemplated to be conducted. Central Utah or a
Central Utah Subsidiary owns or validly holds each such franchise,
permit, license, approval, and other authorization. Each such
franchise, permit, license, approval, and other authorization is
valid, in good standing, and in full force and effect. To the
knowledge of Sellers and Central Utah, no basis exists for the
termination, suspension, restriction, or limitation of any such
franchise, permit, license, approval, or other authorization.
2.19 Intangible Property. Central Utah or Central Utah Subsidiaries are the
owners of all right, title and interest in and to each item of intangible
personal property and each other invention, process, design, formula, license,
royalty arrangement, trade secret, know how and proprietary technique necessary
for the conduct of their respective businesses, which are listed as Section 2.19
of Sellers Disclosure Schedule. Central Utah or Central Utah Subsidiaries have
the right and authority to use each item of intangible personal property and
each other invention, process, design, formula, license, royalty arrangement,
trade secret, know how and proprietary technique necessary for the conduct of
the business of Central Utah and/or the Subsidiaries and such use does not
conflict with, infringe upon or violate any patent, trademark, trade name,
trademark or trade name registration, copyright, copyright registration or any
pending application relating thereto of any other person, firm or corporation.
2.20 State Takeover Statutes; Absence of Supermajority Provision. No
provision of the Utah Business Corporation Law or Central Utah's Articles or
Bylaws or other governing instruments of Central Utah Subsidiaries or the terms
of any rights plan or other takeover defense mechanism of Central Utah would,
directly or indirectly, restrict or impair the ability of any Seller or
Purchaser to consummate the transactions contemplated by this Agreement nor will
any such provisions restrict or impair the ability of the Purchaser to exercise
the same rights to vote or otherwise exercise the same rights as the other or
former stockholders of Central Utah in the event that Purchaser were to acquire
securities of Central Utah.
2.21 Easements Rights of Way. To the best of Sellers' and Central Utah's
knowledge after due inquiry, Central Utah and each Central Utah Subsidiary has a
valid leasehold interest in or right to use, free and clear of all liens and
payments, each real property easement, right of way, and lease that is required
for its business, operations, and affairs as currently being or contemplated to
be conducted. Each such easement, right of way, and lease is in full force and
effect and constitutes a legal, valid, and binding obligation of Central Utah or
a Central Utah Subsidiary and (to the knowledge of Sellers and Central Utah)
each other party thereto, enforceable against the parties thereto in accordance
with the terms thereof. Except as described on Section 2.21 on Sellers
Disclosure Schedule, there have been no disputes
17
concerning rights of way in which Central Utah or any Central Utah Subsidiary
has been involved during the last five years. To the knowledge of Sellers and
Central Utah there are no events or circumstances that would materially and
adversely affect the rights of way of Central Utah or any Central Utah
Subsidiary for its telephone and cables and lines to conduct its business as
presently conducted.
2.22 Transactions with Affiliates. Neither Central Utah nor any Central
Utah Subsidiary has made since December 31, 1997, any payments or distributions
to any present or former director, officer or person holding in excess of 1% of
outstanding common stock, of Central Utah or any Central Utah Subsidiary, or any
affiliate of any such person, other than normal directors fees, normal
retirement benefits under the Plans, normal salary and other employee
compensation, and normal dividends, and there have been and are no outstanding
liabilities or contracts between or among Central Utah or any Central Utah
Subsidiary and any such person or affiliate of such person.
2.23 Year 2000 Representation. No technology owned, developed or licensed
by Central Utah or any Central Utah Subsidiary or used in connection with their
business (including, but not limited to, information systems and technology,
commercial and noncommercial hardware and software, firmware, mechanical or
electrical products, embedded systems, or any other electro-mechanical or
processor- based system, whether as part of a desktop system, office system,
building system or otherwise) (collectively, the "Technology") has experienced
or will experience any malfunctions, premature cancellation or expiration of
contractual rights or deletion of data, or any other problems in connection with
(i) the year 2000 (and all subsequent years) as distinguished from 1900 years,
(ii) the date February 29, 2000, and all subsequent leap years, or (iii) the
date September 9, 1999. Insofar as this representation and warranty relates to
services to be provided by a third party, it is based upon written assurances
received by Central Utah from such party.
ARTICLE IIA--SECURITIES REPRESENTATIONS
Each Seller makes the following representations and warranties, severally
and not jointly, to the Purchaser and to ▇▇▇▇▇ Interactive Corporation:
2A.1 Investment Purpose. Each Seller is acquiring the Notes for his own
account as principal for investment only and not with a present view towards the
public sale or distribution thereof, except pursuant to sales exempted from
registration under the Securities Act of 1933, as amended (the "1933 Act").
2A.2 Sophisticated Investor Status. Each Seller has such business and
financial experience as is required to give him the capacity to protect his own
interests in connection with the
18
decision to receive the Note.
2A.3 Reliance on Exemptions. Such Seller understands that the Notes are
being offered and sold to it in reliance upon specific exemptions from the
registration requirements of United States federal and state securities laws and
that Purchaser and ▇▇▇▇▇ Interactive Corporation are relying upon the truth and
accuracy of, and such Seller's compliance with, the representations, warranties,
agreements, covenants, acknowledgments and understandings of such Seller set
forth in Article IIA in order to determine the availability of such exemptions
and the eligibility of such Seller to acquire the Notes.
2A.4 Information. Such Seller has been furnished with all materials
relating to the business, finances and operations of Purchaser and ▇▇▇▇▇
Interactive Corporation and materials relating to the Notes which have been
requested by such Seller. Such Seller has been afforded the opportunity to ask
questions of Purchaser and ▇▇▇▇▇ Interactive Corporation and has received what
such Seller believes to be satisfactory answers to any such inquiries. Neither
such inquiries nor any other due diligence investigation conducted by such
Seller or any of its advisors or representatives shall modify, amend or affect
such Seller's right to rely on Purchaser's representations and warranties
contained in Article III below.
2A.5 No Governmental Review. Such Seller understands that no United States
federal or state agency or any other government or governmental agency has
passed upon or made any recommendation or endorsement of the Notes.
2A.6 Transfer or Resale. Such Seller understands that (i) no public market
now exists for the Notes and it is very unlikely that a public market will ever
exist for the Notes, (ii) the Notes have not been and are not being registered
under the 1933 Act or any applicable state securities laws, and may not be
transferred unless (a) subsequently included in an effective registration
statement thereunder, or (b) such Seller shall have delivered to the Purchaser
an opinion of counsel (which opinion shall be reasonably satisfactory to the
Purchaser) to the effect that the Notes to be sold or transferred may be sold or
transferred pursuant to an exemption from such registration; and (iii) neither
the Purchaser nor any other person is under any obligation to register such
Notes under the 1933 Act or any state securities laws or to comply with the
terms and conditions of any exemption thereunder.
2A.7 Legends. Such Seller understands that the Notes may bear a restrictive
legend in substantially the form on Schedule 1.3(a) hereto (and a stop-transfer
order may be placed against transfer of the Notes).
ARTICLE III--REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE
PURCHASER
19
Except as set forth in the Disclosure Schedule delivered by the Company to
Seller prior to the execution of this Agreement (the "Purchaser Disclosure
Schedule"), which Purchaser Disclosure Schedule shall reference disclosure items
by section, the Purchaser, jointly and severally, represent and warrant to the
Sellers and Central Utah that:
3.1 Organization and Qualification.
(a) Each of the Company and the Purchaser is a corporation validly
existing and in good standing under the laws of the states of
Delaware.
(b) Each of the Company and the Purchaser is duly qualified or licensed as
a foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of its properties owned, leased or
operated by it or the nature of its activities makes such
qualification or licensing necessary, except for such failures to be
so duly qualified or licensed and in good standing that would not,
either individually or in the aggregate, have a Material Adverse
Effect with respect to the Company.
3.2 Authority. The Company and the Purchaser have the requisite corporate
power and authority to execute and deliver this Agreement and to perform their
respective obligations hereunder and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement by the Company and the
Purchaser and the consummation by the Company and the Purchaser of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action on the part of the Company and the Purchaser and no
other corporate proceedings on the part of the Company and the Purchaser are
necessary to authorize this Agreement or to consummate the transactions so
contemplated hereby. This Agreement has been duly and validly executed and
delivered by the Company and the Purchaser and constitutes the valid and binding
obligation of the Company and the Purchaser and assuming the authorization,
execution and delivery by Purchaser, is enforceable against the Company and the
Purchaser in accordance with its terms, except as enforcement may be limited by
general principles of equity, whether applied in a court of law or a court of
equity, and by bankruptcy, insolvency and similar laws affecting creditors'
rights and remedies generally.
3.3 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by the Company and the
Purchaser does not, and the performance of this Agreement by the
Company and the Purchaser shall not, (i) conflict with or violate the
Articles of Incorporation or Bylaws of the Company or the Purchaser,
(ii) conflict with or violate any Laws applicable to the Company or
the Company Subsidiary or by which any of their respective properties
is bound or affected, or (iii) result in any breach of or constitute a
default (or an event which with notice or lapse of time or both would
become a default) under,
20
or give to others any rights of termination, amendment, acceleration
or cancellation of, or result in the creation of a lien or encumbrance
on any of the properties or assets of the Company or the Purchaser
pursuant to, any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation to
which the Company or the Purchaser is a party or by which the Company
or the Purchaser or its or any of their respective properties is bound
or affected.
(b) The execution and delivery of this Agreement by the Company and the
Purchaser does not, and the performance of this Agreement by the
Company shall not, require any consent, approval, authorization or
permit of, or filing with or notification to, any governmental or
regulatory authority, domestic or foreign, except the HSR Act and the
consents or approvals of the PSCU or FCC listed on the Sellers
Disclosure Schedule.
ARTICLE IIIA--SECURITIES REPRESENTATIONS
Each of the Company and the Purchaser makes the following representations
and warranties, jointly and severally, to the Sellers:
3A.1 Investment Purpose. The Purchaser is acquiring the CU Common Stock for
its own account as principal for investment only and not with a present view
towards the public sale or distribution thereof, except pursuant to sales
exempted from registration under the 1933 Act.
3A.2 Accredited Investor Status. The Purchaser is an "accredited investor"
as that term is defined in Rule 501(a) of Regulation D and has such business and
financial experience as is required to give it the capacity to protect its own
interests in connection with the decision to receive the CU Common Stock.
3A.3 Reliance on Exemptions. The Purchaser understands that the CU Common
Stock is being offered and sold to it in reliance upon specific exemptions from
the registration requirements of United States federal and state securities laws
and that the Sellers are relying upon the truth and accuracy of, and the
Purchaser's compliance with, the representations, warranties, agreements,
covenants, acknowledgments and understandings of the Purchaser set forth in
Article IIIA in order to determine the availability of such exemptions and the
eligibility of the Purchaser to acquire the CU Common Stock.
3A.4 Information. The Purchaser and the Company have been furnished with
all materials relating to the business, finances and operations of the Central
Utah and the Central Utah Subsidiaries and materials relating to the CU Common
Stock which have been requested by the Purchaser and the Company. The Purchaser
and the Company have been afforded the opportunity to ask questions of the
Sellers, Central Utah and the Central Utah Subsidiaries and have received what
the Purchaser and the Company believe to be
21
satisfactory answers to any such inquiries. Neither such inquiries nor any other
due diligence investigation conducted by the Purchaser or the Company or any of
their advisors or representatives shall modify, amend or affect the Purchaser's
or the Company's right to rely on Sellers', Central Utah's or the Central Utah
Subsidiaries' representations and warranties contained in Article II below.
3A.5 No Governmental Review. The Purchaser and the Company understand that
no United States federal or state agency or any other government or governmental
agency has passed upon or made any recommendation or endorsement of the CU
Common Stock.
3A.6 Transfer or Resale. The Purchaser and the Company understand that (i)
no public market now exists for the CU Common Stock and it is very unlikely that
a public market will ever exist for the CU Common Stock, (ii) the CU Common
Stock has not been and is not being registered under the 1933 Act or any
applicable state securities laws, and may not be transferred unless (a)
subsequently included in an effective registration statement thereunder, or (b)
the Purchaser or the Company shall have delivered to the Sellers an opinion of
counsel (which opinion shall be reasonably satisfactory to the Sellers) to the
effect that the CU Common Stock to be sold or transferred may be sold or
transferred pursuant to an exemption from such registration; and (iii) neither
the Sellers, Central Utah, the Central Utah Subsidiaries nor any other person is
under any obligation to register such Notes under the 1933 Act or any state
securities laws or to comply with the terms and conditions of any exemption
thereunder.
3A.7 Legends. The Purchaser and the Company understand that the CU Common
Stock may bear a restrictive legend (and a stop- transfer order may be placed
against transfer of the CU Common Stock).
ARTICLE IV--COVENANTS OF THE SELLERS AND CENTRAL UTAH
4.1 Affirmative Covenants. Each of the Sellers and Central Utah covenants
and agrees with the Purchaser that from and after the date of this Agreement and
prior to the Closing Time, unless the prior written consent of the Purchaser
shall have been obtained and except as otherwise contemplated herein, each
Seller and Central Utah will cause Central Utah and each Central Utah Subsidiary
to:
(a) operate its business only in the ordinary course consistent with past
practices or as described as Section 4.1(a) of Sellers Disclosure
Schedule;
(b) use reasonable efforts to preserve intact its business organization
and assets, maintain its rights and franchises, retain the services of
its officers and key employees and maintain its relationships with and
the good will of regulators and customers;
22
(c) maintain and keep its properties in as good repair and condition as at
present, ordinary wear and tear excepted;
(d) keep in full force and effect insurance and bonds comparable in amount
and scope of coverage to that now maintained by it;
(e) perform in all material respects all obligations required to be
performed by it under all material contracts, leases, and documents
relating to or affecting its assets, properties, and business;
(f) maintain in good standing all franchises, permits, licenses, approvals
and other authorizations owned or held by Central Utah or any Central
Utah Subsidiary;
(g) comply in all material respects with all laws and regulations
applicable to the business operations and affairs of Central Utah and
Central Utah Subsidiaries;
(h) take such reasonable actions as are requested by the Purchaser to
satisfy the conditions to and complete the Sale; and
(i) provide to Purchaser Central Utah's monthly financial statements
promptly upon their completion.
4.2 Negative Covenants. Except as specifically contemplated by this
Agreement, from the date of this Agreement until the Closing Time, each of the
Sellers and Central Utah shall not permit Central Utah or any Central Utah
Subsidiary to do, without the prior written consent of the Purchaser, any of the
following:
(a) except as required by applicable Laws or to maintain qualification
pursuant to the Code or set forth as Section 4.2(a) on Sellers
Disclosure Schedule, adopt, amend, renew or terminate any Plan or any
agreement, arrangement, plan or policy between Central Utah or any
Central Utah Subsidiary and one or more of its current or former
directors, officers or employees, or except as required by applicable
law, increase in any manner the base salary, bonus, incentive
compensation or fringe benefits of any director, officer or employee
or pay any benefit not required by any plan or agreement as in effect
as of the date hereof;
(b) declare or pay any dividend on, or make any other distribution in
respect of, its outstanding shares of capital stock, except for
dividends by a Central Utah Subsidiary to Central Utah;
(c)(i) redeem, purchase or otherwise acquire any shares of its capital
stock or any securities or obligations convertible into or
exchangeable for any shares of its capital stock, or any options,
warrants, conversion or other rights to acquire any shares of its
capital stock or any such securities or obligations; (ii) merge with
or into any other corporation, permit any other
23
corporation to merge into it or consolidate with any other
corporation, or effect any reorganization or recapitalization; (iii)
purchase or otherwise acquire any substantial portion of the assets,
or more than 5% of any class of stock, of any corporation or other
business other than in the ordinary course of business and consistent
with past practice; (iv) liquidate, sell, dispose of, or encumber any
assets or acquire any assets, other than in the ordinary course of its
business consistent with past practice; or (v) split, combine or
reclassify any of its capital stock or issue or authorize or propose
the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock;
(d) issue, deliver, award, grant or sell, or authorize or propose the
issuance, delivery, award, grant or sale of, any shares of any class
of capital stock of Central Utah or any Central Utah Subsidiary
(including shares held in treasury) or any rights, warrants or options
to acquire, any such shares;
(e) directly or indirectly through any director, officer, shareholder,
employee, agent, adviser or otherwise, orally or in writing, initiate,
solicit, encourage, respond to, discuss, negotiate or accept any
inquiries, indications of interest, proposals or offers from, or make
any inquiries, indications of interest, proposals, offers, counter
proposals or counteroffers to, or furnish any information to, any
other person with respect to (i) an acquisition of shares of Central
Utah or any Central Utah Subsidiary, (ii) additional equity or
convertible debt financing for Central Utah or any Central Utah
Subsidiary, (iii) an acquisition of all or part of the assets of
Central Utah or any Central Utah Subsidiary, (iv) a merger,
consolidation or any other transaction which would result in a change
in control in Central Utah or any Central Utah Subsidiary or a
substantial change in the business of Central Utah or any Central Utah
Subsidiary, or (v) provide third parties with any nonpublic
information relating to any such inquiry or proposal;
(f) propose or adopt any amendments to the Articles of Incorporation or
any Bylaws of Central Utah or any Central Utah Subsidiary in any way
adverse to the Purchaser;
(g) change any of its methods of accounting in effect at December 31, 1999
or change in any material respect its methods of reporting income or
deductions for federal income tax purposes from those employed in the
preparation of its federal income tax returns for the taxable year
ended December 31, 1999, except as may be required by Law or GAAP;
(h) change in any material respect any material policies concerning the
business or operations of Central Utah or any Central Utah
Subsidiaries (except as required by Law) including, without limitation
taking any action to: (i) except in connection with the US West
Agreement described in Section 4.9 hereof and as set forth in Item
4.2(h) of the Sellers Disclosure Schedule sell, assign, transfer,
pledge, mortgage or otherwise encumber any of its
24
assets, except for those sales, assignments and transfers (but
excluding pledges, mortgages or encumbrances) incurred in individual
amounts of less than $15,000 incurred in the ordinary course of
business consistent with past practice subject to an aggregate maximum
of $100,000; (ii) make any investment except in Permitted Investments
with a maturity of six months or less; (iii) except with respect to
those described on Section 4.2 (h) of the Sellers' Disclosure
Schedules, enter into any agreement with respect to any acquisition of
or acquire assets except in individual amounts of less than $15,000
incurred in the ordinary course of business consistent with past
practice subject to an aggregate maximum of $100,000, or any
discharge, waiver, satisfaction, release or relinquishment of any
material contract rights, liens, encumbrances, debt or claims, except
in individual amounts of less than $1,000 in the ordinary course of
business consistent with past practice subject to an aggregate maximum
of $10,000; (iv) settle any claim, action, suit, litigation,
proceeding, arbitration, investigation or controversy of any kind, for
any amount in excess of $10,000, net of any insurance proceeds, or in
any manner which would restrict the operations or business of Central
Utah or any Central Utah Subsidiaries; (v) except with respect to
those described on Section 4.2 (h) of the Sellers' Disclosure
Schedules, make any capital expenditure, except in individual amounts
of less than $10,000 incurred in the ordinary course of business
consistent with past practice subject to an aggregate maximum of
$50,000; (vi) enter into any transaction with a present or former
director, officer, employee or stockholder of Central Utah or any
Central Utah Subsidiary or any affiliate of any such person; (vii)
incur any indebtedness for money borrowed or lease any property or
assets; (viii) lower any current prices or rates with respect to
telephone or other services provided by Central Utah or any Central
Utah Subsidiary except for changes in the ordinary course of business
or as otherwise required by regulatory authorities; or (ix) take any
action or fail to take any action which individually or in the
aggregate is likely to have a Material Adverse Effect with respect to
Central Utah;
(i) agree in writing or otherwise to do any of the foregoing.
4.3 Access and Information.
(a) From the date of this Agreement until the Closing Time and upon
reasonable notice, Sellers and Central Utah shall, and shall
cause each Central Utah Subsidiary to, afford to the Purchaser's
officers, employees, accountants, legal counsel and other
representatives of the Purchaser, access, during normal business
hours, to all its properties, books, contracts, commitments and
records, excluding any books, contracts, commitments and records
related to the Stock Sales. From the date of this Agreement and
until the Closing Time, Sellers and Central Utah shall (and shall
cause each Central Utah Subsidiary to) furnish promptly (as soon
as available or received by Central Utah or any Central Utah
Subsidiary) to the Purchaser (i) a copy of each Central Utah
Report filed by it or received by it after the date of
25
this Agreement and prior to the Closing Time pursuant to the
requirements of the HSR Act or any other applicable Laws promptly
after such documents are available, (ii) a copy of any action,
including all minutes, taken by the Board of Directors, or any
committee thereof, of Central Utah or Central Utah Subsidiaries
and any documents or other materials of any kind provided to such
Boards or committees promptly after such action, minutes,
materials or other documents become available without further
request by the Purchaser, (iii) a copy of each Tax Return filed
by Central Utah and each Central Utah Subsidiary for the three
most recent years available, a copy of any correspondence
received from the IRS or any other governmental entity or taxing
authority or agency and any other correspondence relating to
Taxes, and any other documents relating to Taxes as the Purchaser
may reasonably request, and (iv) all other information concerning
its business, properties and personnel as the Purchaser may
reasonably request.
(b) Unless otherwise required by Law, the parties will hold any such
information which is nonpublic in confidence until such time as
such information becomes publicly available through no wrongful
act of either party, and in the event of termination of this
Agreement for any reason each party shall promptly return all
nonpublic documents obtained from any other party, and any copies
made of such documents, to such other party or destroy such
documents (including any resulting work product) and copies;
provided that Purchaser's ultimate parent company, ▇▇▇▇▇
Interactive Corporation, may make such disclosure concerning the
transactions contemplated herein as it deems necessary or
appropriate because of its status as a public company.
4.4 Update Disclosure; Breaches.
(a) From and after the date of this Agreement until the Closing Time,
Sellers and Central Utah shall update the Purchaser on a regular
basis by written notice to the Purchaser to reflect any matters
which have occurred from and after the date of this Agreement
which, if existing on the date of this Agreement, would have been
required to be described on Sellers Disclosure Statement.
(b) Sellers and Central Utah shall, in the event any of them becomes
aware of the impending or threatened occurrence of any event or
condition which would cause or constitute a material breach (or
would have caused or constituted a material breach had such event
occurred or been known prior to the date of this Agreement) of
any of their representations or agreements contained or referred
to herein, give prompt written notice thereof to the Purchaser
and use its best efforts to prevent or promptly remedy the same;
provided, however, that the delivery of any notice pursuant to
this Section shall not limit or otherwise affect the remedies
available hereunder to the Purchaser. If, however, the Purchaser
consummates the Stock Sales, it shall be deemed to have waived
any breach of a representation, warranty or covenant which has
been corrected by amendment by the information disclosed by
Sellers or Central Utah pursuant to this Section prior to the
26
satisfaction of the conditions to the purchase set out in Article
VI.
4.5 Expenses. All Expenses (as defined below) incurred by the parties
hereto shall be borne solely and entirely by the party which has incurred the
same. "Expenses" as used in this Agreement shall include all reasonable
out-of-pocket expenses (including, without limitation, all fees and expenses of
counsel, accountants, investment bankers, experts and consultants to the party
and its affiliates incurred by a party or on its behalf in connection with or
related to the authorization, preparation and execution of this Agreement, the
solicitation of stockholder approvals and all other matters related to the
closing of the transactions contemplated hereby. Neither Central Utah including
Central Utah Subsidiaries nor Central Telecom Service, LLC shall pay or agree to
pay in the aggregate in excess of $100,000 in connection with the consummation
of the transactions contemplated in this Agreement and the Membership Purchase
Agreement, except with the prior written consent of the Purchaser.
4.6 Delivery of Stockholder List. Sellers and Central Utah shall deliver to
the Purchaser or its designee, prior to the Closing Time, a true and complete
list setting forth the names and addresses of Central Utah's stockholders, their
holdings of stock as of the latest practicable date, and such other stockholder
information as the Purchaser may reasonably request.
4.7 Shareholder Indebtedness. Each Seller agrees to pay or cause to be paid
any and all advances and indebtedness (including interest thereon) owed by such
Seller and any Affiliate of such Seller to Central Utah or any Central Utah
Subsidiary or Central Telecom Service, LLC, on or prior to the Closing Time.
4.8 Employment Agreements At or prior to the Closing, Central Utah and each
of the Sellers shall execute an Employment Agreement in the form of Schedule
1.6(c)(1) or 1.6(c)(2), as the case may be.
4.9 US West Agreements. Sellers and Central Utah shall consult with
Purchaser in advance with respect to any actions which Central Utah or Skyline
Telecom, Inc. are considering taking with respect to the pending acquisition of
three telephone exchanges from US West Communications, Inc. pursuant to
agreements dated as of October 22, 1999, obtaining regulatory approvals with
respect thereto, obtaining a long-term commitment from the United States
military with respect to the Dugway Exchange, the financing of the acquisitions,
and other matters relating thereto.
ARTICLE V--ADDITIONAL AGREEMENTS
5.1 Appropriate Action; Consents; Filings. The Sellers, Central Utah and
the Purchaser shall use all reasonable efforts to (i) take, or cause to be
taken, all appropriate action, and do, or
27
cause to be done, all things necessary, proper or advisable under applicable Law
to consummate and make effective the transactions contemplated by this
Agreement, (ii) obtain all consents, licenses, permits, waivers, approvals,
authorizations or orders required under Law required in connection with the
authorization, execution and delivery of this Agreement and the consummation by
them of the transactions contemplated hereby, and (iii) make all necessary
filings, and thereafter make any other required submissions, with respect to
this Agreement and the transactions contemplated herein required under any
applicable Law; provided that the Purchaser and Sellers and Central Utah shall
cooperate with each other in connection with the making of all such filings,
including providing copies of all such documents to the non-filing party and its
advisors prior to filing and, if requested, accepting all reasonable additions,
deletions or changes suggested in connection therewith. The Sellers, Central
Utah and the Purchaser shall furnish all information required for any
application or other filing to be made pursuant to the rules and regulations of
any applicable Law in connection with the transactions contemplated by this
Agreement. In case at any time after the Closing Time any further action is
necessary or desirable to carry out the purposes of this Agreement, each party
to this Agreement shall use all reasonable efforts to take all such necessary
action.
5.2 Notification of Certain Matters. The Sellers and Central Utah shall
give prompt notice to the Purchaser, and the Purchaser shall give prompt notice
to the Sellers and Central Utah of (i) the occurrence or non-occurrence of any
event, the occurrence or non-occurrence of which would be likely to cause any
representation or warranty contained in this Agreement to be untrue or
inaccurate and (ii) any failure of the Sellers or Central Utah or the Purchaser,
as the case may be, to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder; provided, however,
that the delivery of any notice pursuant to this Section shall not limit or
otherwise affect the remedies available hereunder to the party receiving such
notice. If, however, the parties consummate the Stock Sales contemplated herein,
they (including the shareholders of Central Utah) shall be deemed to have waived
any breach of a representation, warranty or covenant which has been corrected by
amendment by the information disclosed pursuant to this Section prior to the
satisfaction of the conditions of the purchase contemplated herein set out in
Article VI.
5.3 Escrow Agreement. At the Closing the Company and Sellers will execute
and deliver an Escrow Agreement in the form of Schedule 1.3(b).
ARTICLE VI--CONDITIONS OF PURCHASE AND SALE/CLOSING
6.1 Conditions to Obligation of Each Party to Effect the Stock Sales. The
respective obligations of each party to effect the Stock Sales shall be subject
to the satisfaction at or prior to the Closing Time of the following conditions:
28
(a) Governmental Approvals. The approvals of the PSCU1 and the FCC
(collectively, "Governmental Approvals") shall have been obtained
and shall be in full force and effect. The terms and conditions
of the Governmental Approvals shall be acceptable in all material
respects to Sellers and the Purchaser in the exercise of their
reasonable discretion, including, but not limited to, regulatory
treatment of any gain on sale which shall allow for all of the
gain to be retained by Sellers and preclude the PSCU from
including the gain, or any part of it, in any further regulatory
proceeding for rate-making or any other purpose. If either party
deems it advisable such approvals shall have become final and
non- appealable.
(b) No Order. No federal or state governmental or regulatory
authority or other agency or commission, or federal or state
court of competent jurisdiction, shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation,
executive order, decree, injunction or other order (whether
temporary, preliminary or permanent) which has the effect of
restricting, preventing or prohibiting consummation of the
transactions contemplated by this Agreement.
(c) ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act. If a filing under the HSR Act is required
to be made prior to consummation of the purchase and sale, early
termination shall have been granted or applicable waiting periods
shall have expired under the HSR Act.
(d) Membership Purchase Agreement. The Membership Purchase Agreement,
dated as of October 6, 2000, by and between Central Telcom
Services, LLC, the members thereof, Brighton Communications
Corporation and ▇▇▇▇▇ Telephone Corporation X, shall have closed
or shall close concurrently with the Closing of this Agreement in
accordance with the terms and conditions thereof.
6.2 Additional Conditions to Obligations of the Purchaser. Any certificates
or opinions given pursuant to this Section 6.2 shall, at the Purchaser's
request, be made to and given to any person providing financing to the Purchaser
or Central Utah. The obligations of the Purchaser to effect the purchase and
sale are also subject to the following conditions:
(a) Representations and Warranties. Each of the representations and
warranties of Sellers and Central Utah contained in this
Agreement, without giving effect to any update to Sellers
Disclosure Schedule or notice to the Purchaser under Section 4.4,
shall be true and correct as of the date of this Agreement and
(except to the extent such representations and warranties speak
as of an earlier date) as of the Closing Time as though made on
and as of the Closing Time. -------- 1It is agreed that the
approval of the PSCU is considered a required approval whether or
not it is legally required.
29
(b) Agreements and Covenants. The Sellers and Central Utah shall have
performed or complied in all material respects with all
agreements and covenants required by this Agreement to be
performed or complied with by each of them on or prior to Closing
Time.
(c) Consents Obtained. All Central Utah Approvals (which shall be
deemed to include the PSCU, all items referred to in Section 2.5
or 2.6 of this Agreement or which should have set forth in such
Sections to Sellers Disclosure Statement) and all filings
required to be made by Sellers and Central Utah for the
authorization, execution and delivery of this Agreement and the
consummation by it of the transactions contemplated hereby shall
have been made by Sellers and Central Utah and obtained in form
and substance satisfactory to the Purchaser in its sole
discretion (including without limitation without any terms or
conditions which the Purchaser deems adverse) and, if Purchaser
deems it advisable, shall have become final and non-appealable.
(d) No Challenge. There shall not be pending or threatened any
action, proceeding or investigation before any court or
administrative agency or by a government agency (i) challenging
or seeking material damages in connection with, the Stock Sales
or (ii) seeking to restrain, prohibit or limit the exercise of
full rights of ownership or operation by the Purchaser of all or
any portion of the business or assets of Central Utah or any
Central Utah Subsidiary, which in either case is reasonably
likely to have a Material Adverse Effect with respect to Central
Utah or the Purchaser.
(e) No Material Adverse Changes. Since the date of the Agreement,
there shall not have been any change in the financial condition,
results of operations or business of Central Utah and Central
Utah Subsidiaries, taken as a whole, or any of the matters
referred to in Section 4.9 hereof, that either individually or in
the aggregate would have a Material Adverse Effect with respect
to Central Utah.
(f) Adjusted Working Capital. Central Utah and the Central Utah
Subsidiaries (consolidated) shall have Adjusted Working Capital
at the Closing Time of at least $1.1 million. For purposes of
this Section 6.2 (f), Adjusted Working Capital shall mean current
assets plus noncurrent marketable securities and investments
valued at their current market value and long-term receivables
from shareholders, less current liabilities (including Central
Utah's transaction expenses), all calculated in accordance with
GAAP.
(g) Environmental Investigation. Within 30 days following the
execution of this Agreement, Sellers, Central Utah and Purchaser
shall mutually select a qualified environmental consultant to
conduct, and prepare, a Phase I Environmental Report (or, at
Purchaser's option, an Environmental Site Survey) with respect to
Central Utah and Central Utah Subsidiaries, properties
30
and operations, which review shall be conducted in accordance
with ASTM standards. Purchaser shall have the right to conduct
such further environmental investigations as it deems appropriate
(which collectively with the Phase I Environmental (and Site
Survey) investigations referred to in the preceding sentence are
collectively referred to as the "Environmental Investigation").
The Environmental Investigation of Central Utah and Central Utah
Subsidiaries' properties and operations conducted on behalf of
the Purchaser shall be satisfactory in all material respects to
the Purchaser in its sole discretion and to any person providing
financing to the Purchaser or Central Utah.
(h) Title Insurance. On or before the Closing Time, Central Utah will
furnish to the Purchaser a title insurance policy with liability
limits that shall be satisfactory to the Purchaser and issued by
a title insurance company in such forms, amounts and by such
title insurance company as shall be reasonably satisfactory to
the Purchaser and its counsel, insuring Central Utah (and each
applicable Central Utah Subsidiary) as the owner of the parcels
of real property owned by Central Utah or any Central Utah
Subsidiary and insuring the Purchaser as the tenant of parcels of
real property that are subject to a real property lease under
which Central Utah or any Central Utah Subsidiary is a tenant. An
adequate description of all such real property and the nature of
the interest of Central Utah and each Central Utah Subsidiary in
such real property is listed on Section 6.2(h) of the Sellers
Disclosure Schedule. The title policy shall be subject only to
such exceptions as shall be approved by, and shall contain such
endorsements as may be reasonably required by, the Purchaser and
its counsel. The cost of such title policies shall be borne by
Central Utah.
(i) Opinion of Counsel.
(a) The Purchaser shall have received from ▇▇▇▇▇▇▇▇▇ &
▇▇▇▇▇, counsel to Sellers ("Sellers' Counsel") an
opinion dated the Closing Time, in substantially the
form attached hereto as Schedule 6.2(i)(a) and
containing such additional opinions as the financial
institution(s) lending funds for the acquisition by
Purchaser of CU Common Stock shall request. Sellers'
Counsel may rely as to FCC matters on an opinion of FCC
counsel acceptable to Purchaser and in form and
substance reasonably satisfactory to the Purchaser.
(b) The Purchaser shall have received from Utah counsel to
the Purchaser ("Utah Counsel") an opinion dated the
Closing Time in substantially the form attached hereto
as Schedule 6.2(i)(b) and containing such additional
opinions as the financial institution(s) lending funds
for the acquisition by Purchaser of CU Common Stock
shall request.
(j) Officers Certificate. The Purchaser shall have received a
certificate of the President (i.e., Branch ▇▇▇) and Treasurer
(i.e., ▇▇▇▇▇ ▇. ▇▇▇) of Central Utah and the Central Utah
Subsidiaries with respect to the conditions set forth in Sections
31
6.2(a), (b), (e) and (f).
(k) All Sellers. Each Seller shall have complied with all of such
Seller's representations, warranties, agreements and obligations
herein and shall have tendered such Seller's shares of CU Common
Stock to Purchaser for purchase as contemplated herein.
(l) Payment of Indebtedness. All receivables and other indebtedness
(including all interest thereon) owed by all of the Sellers of
Central Utah and their respective Affiliates to Central Utah or
any Central Utah Subsidiary or Central Telecom Service, LLC shall
have been paid off in full on or prior to the Closing Time.
(m) Term of Notes. If any financial institution(s) proposing to lend
funds for the acquisition by Purchaser of the stock of Central
Utah shall require that the Notes have a maturity date later than
the maturity date contemplated in Schedule 1.3(a) hereto, the
Sellers shall have the option, at their sole discretion, to
either (i) accept Notes with such later maturity date instead of
the maturity date contemplated in Schedule 1.3(a)or (ii)
terminate this Agreement without any liability to Purchaser.
6.3 Additional Conditions to Obligations of Sellers. The obligation of
Sellers to effect the Stock Sales is also subject to the following conditions:
(a) Representations and Warranties. Each of the representations and
warranties of the Purchaser set forth in this Agreement, without
giving effect to any notice to Central Utah under Section 5.2,
shall be true and correct as of the date of this Agreement and
(except to the extent such representation and warranties speak as
of an earlier date) as of the Closing Time, as though made on and
as of the Closing Time. Central Utah shall have received a
certificate signed on behalf of the Purchaser and the Company by
the Chief Executive Officer or President and the Chief Financial
Officer of the Purchaser to the foregoing effect and to the
effect set forth in 6.3(b).
(b) Agreements and Covenants. The Purchaser shall have performed or
complied in all material respects with all agreements and
covenants required by this Agreement to be performed or complied
with by it on or prior to the Closing Time.
(c) Consents Under Agreements. All consents, waivers, approvals,
authorizations or orders required to be obtained, and all filings
required to be made by the Purchaser for the authorizations,
execution and delivery of this Agreement and the consummation by
it of the transactions contemplated hereby shall have been
obtained and made by the Purchaser.
(d) Opinion of Counsel. Central Utah shall have received from ▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇, counsel to the Purchaser ("Purchaser
32
Counsel") an opinion dated the Closing Time, in substantially the
form set forth in Schedule 6.3(b) to this Agreement. Purchaser
Counsel may rely as to certain matters of Utah law on the opinion
of Utah Counsel referred to in Section 6.2(i)(b).
ARTICLE VII--TERMINATION, AMENDMENT AND WAIVER
7.1 Termination. This Agreement may be terminated at any time prior to the
Closing Time:
(a) by mutual written consent of the Purchaser and Sellers holding at
least 75% of the outstanding shares of CU Common Stock;
(b) by Sellers holding at least 75% of the outstanding shares of CU
Common Stock or the Purchaser (i) if there has been a breach in
any material respect (except that where any statement in a
representation or warranty expressly includes a standard of
materiality, such statement shall have been breached in any
respect) of any representation, warranty, covenant or agreement
on the part of the Purchaser, on the one hand, or the Sellers,
Central Utah, on the other hand, set forth in this Agreement, or
(ii) if any representation or warranty of Sellers and Central
Utah, on the one hand, or the Purchaser, on the other hand, shall
be discovered to have become untrue in any material respect
(except that where any statement in a representation or warranty
expressly includes a standard of materiality, such statement
shall have become untrue in any respect), in either case (i) or
(ii) which breach or other condition has not been cured within 10
business days following receipt by the nonterminating party of
notice of such breach or other condition, or which breach or
other condition by its nature, cannot be cured prior to the
Closing Time; provided, however, that this Agreement may not be
terminated pursuant to this clause (b) by the breaching party or
party making any representation or warranty which shall have
become untrue in any material respect;
(c) by either the Purchaser or Sellers holding at least 75% of the
outstanding shares of CU Common Stock if any permanent injunction
preventing the consummation of the purchase and sale shall have
become final and nonappealable;
(d) by the Purchaser at any time prior to the Closing if additional
due diligence by the Purchaser reveals information relating to or
affecting Central Utah or any Central Utah Subsidiary which in
the opinion of the Purchaser has a Material Adverse Effect with
respect to Central Utah or the Central Utah Subsidiaries.
(e) by either the Purchaser or Sellers holding at least 75% of the
outstanding shares of CU Common Stock if the Stock Sales shall
not have been consummated by March 31, 2001, for a reason other
than the failure of the party seeking termination to comply with
its obligations under this Agreement; or
(g) by either the Purchaser or Sellers holding at least 75%
33
of the outstanding shares of CU Common Stock if any regulatory
authority has denied approval of the transactions contemplated
herein, and neither the Purchaser nor Central Utah has, within 30
days after the entry of such order denying approval, filed a
petition seeking review of such order as provided by applicable
law.
7.2 Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 7.1, this Agreement shall forthwith become void
and all rights and obligations of any party shall cease except that nothing
herein shall relieve any party from liability for any breach of this Agreement
or any representation, warranty, covenant or agreement contained in this
Agreement or shall restrict either party's rights in the case thereof.
7.3 Waiver. At any time prior to the Closing Time, the parties may (a)
extend the time for the performance of any of the obligations or other acts of
the other party, (b) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto and (c)
waive compliance with any of the agreements or conditions contained herein. Any
such extension or waiver shall be valid only if set forth in a written
instrument signed on behalf of such party, but such extension or waiver or
failure to insist on strict compliance with an obligation, covenant, agreement
or condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure.
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification by Sellers. Subject to the provisions of this Article
VIII and of Article IX hereof, Sellers, jointly and severally, shall indemnify
the Company, Purchaser, Central Utah, the Central Utah Subsidiaries, and any
Affiliate of the Company, Purchaser, Central Utah, and the Central Utah
Subsidiaries, and any officer, director, or employee of the Company, Purchaser,
Central Utah, the Central Utah Subsidiaries or any Affiliate of the Company,
Purchaser, Central Utah or the Central Utah Subsidiaries ("Purchaser Party") in
respect of, and hold each Purchaser Party harmless against, any and all damages,
obligations, losses, lost profits, expenses (including reasonable attorneys'
fees), liabilities, costs (including environmental response, remediation, and
cleanup costs resulting from a material breach of Sellers' or Central Utah's
representations, warranties, covenants and agreements), fines, and fees
("Damages") resulting from or relating to any one or more of the following:
(a) any misrepresentation, breach of warranty, or nonfulfillment of
or failure to perform any material covenant or agreement made by
any Sellers or Central Utah included in the Agreement or the
certificates delivered by Sellers or Central Utah
34
pursuant to Article VI hereof; and
(b) any action, suit, investigation, arbitration, or proceeding
against any Purchaser Party (whether as a defendant, counterclaim
or third party defendant, intervenor, or otherwise) resulting
from or relating to any act or failure to act before the Closing
Time by any Sellers or Central Utah or Central Utah Subsidiaries,
which if determined adversely to any Purchaser Party would
entitle the Purchaser Party to indemnification pursuant to this
Agreement.
8.2 Indemnification by Purchaser. Subject to the provisions of this Article
VIII and of Article IX hereof, the Company and Purchaser, will, jointly and
severally, indemnify each Seller and any Affiliate of each Seller ("Seller
Party") in respect of, and hold each Sellers Party harmless against, any and all
Damages (as defined in Section 8.1 hereof) resulting from or relating to any
misrepresentation, breach of warranty, or nonfulfillment of or failure to
perform any covenant or agreement made by Purchaser included in this Agreement
or the certificates delivered by Purchaser pursuant to Article VI hereof.
8.3 Representations and Warranties. All representations, warranties,
covenants, and agreements made herein or pursuant hereto will be deemed to be
material and to have been relied upon by the parties hereto.
8.4 Indemnification Procedure. Any person or entity entitled to
indemnification under Section 8.1 or 8.2 hereof that asserts a claim under
Sections 8.1 or 8.2 hereof is hereinafter referred to as the "Indemnitee," and
the party against whom such claim is asserted under Section 8.1 or 8.2 hereof is
hereinafter referred to as the "Indemnifying Party."
(a) If an Indemnitee becomes aware of any matter that it believes is
indemnificable pursuant to this Article VIII and such matter
involves (i) any claim made against the Indemnitee by any person
or entity other than a Purchaser Party or a Sellers Party or (ii)
the commencement of any action, suit, investigation, arbitration,
or similar proceeding against Indemnitee by any person or entity
other than a Purchaser Party or a Sellers Party, Indemnitee will
give the Indemnifying Party prompt written notice of such claim
or the commencement of such action, suit, investigation,
arbitration, or similar proceeding. Such notice will (A) provide
(with reasonable specificity) the bases on which indemnification
is being asserted, (B) set forth the actual or estimated amount
of Damages for which indemnification is being asserted, and (C)
be accompanied by copies of all relevant pleadings, demands, and
other papers served on Indemnitee. If Indemnifying Party's
ability to defend against any such claim, action, suit,
investigation, arbitration, or similar proceeding is irrevocably
prejudiced by the failure of Indemnitee to provide prompt written
notice, as provided above, then Indemnifying Party will not be
obligated to indemnify Indemnitee with respect to such
35
prejudiced claim, action, suit, investigation, arbitration, or
similar proceeding.
(b) Indemnifying Party will have a period of the earlier of (i)
thirty calendar days or (ii) three days prior to the date of the
earliest statutory response (after the delivery of each notice
required by Section 8.4(a) hereof) within which to respond to
such notice. If Indemnifying Party accepts full responsibility
for the claim described in such notice or does not respond within
such response period, Indemnifying Party will be obligated to
compromise or defend (and will control the defense of) such
claim, at its own expense and by counsel chosen by Indemnitee and
reasonably satisfactory to Indemnifying Party, and Indemnifying
Party will provide the Indemnitee with such assurances as may be
reasonably required by the Indemnitee to assure that Indemnifying
Party will assume, and be responsible for, the entire liability
for such claim, subject to the limitations set forth in this
Article VIII. Indemnitee will cooperate reasonably with
Indemnifying Party and counsel for Indemnifying Party in the
defense against any such claim, and the Indemnitee will have the
right to participate at its own expense in the defense of any
such claim. If Indemnifying Party responds within such response
period denying or rejecting responsibility for such claim in
whole or in part or fails to promptly provide Indemnitee with
such assurances as may be reasonably required by Indemnitee as
provided above, Indemnitee will be free, without prejudice to any
of Indemnitee's rights hereunder, to compromise or settle or
defend (and control the defense of) such claim and to pursue such
remedies as may be available to Indemnitee under applicable Law.
(c) Any compromise or settlement of any claim (whether defended by
Indemnitee or by the Indemnifying Party) will require the prior
written consent of Indemnitee and, except as provided in the last
sentence of Section 8.4(b), Indemnifying Party. If, however,
Indemnitee refuses to consent to a bona fide offer of compromise
or settlement that (i) Indemnifying Party desires to accept and
(ii) imposes no obligation or liability on Indemnitee and does
not adversely restrict Indemnitee in its business or condition,
Indemnitee may continue to pursue such claim, free of any
participation by Indemnifying Party, at the sole expense of
Indemnitee. In such event, the obligation of Indemnifying Party
to Indemnitee will equal the lesser of (i) the amount of the
offer of compromise or settlement that Indemnifying Party desired
to accept, plus the reasonable out-of-pocket expenses (except for
expenses resulting from Indemnitee's participation in any defense
controlled by Indemnifying Party) incurred by Indemnitee before
the date the Indemnifying Party notified Indemnitee of the offer
of compromise or settlement, or (ii) the actual out-of-pocket
amount that Indemnitee is obligated to pay as a result of
Indemnitee's continuing to pursue such claim, plus the reasonable
out-of-pocket expenses (except for expenses resulting from
Indemnitee's participation in any defense controlled by
Indemnifying Party) incurred by Indemnitee before the date
Indemnifying Party notified Indemnitee of the offer of compromise
or settlement, minus the reasonable out-of-pocket expenses
incurred by Indemnifying Party
36
after such notice date.
(d) If an Indemnitee becomes aware of any matter that it believes is
indemnifiable pursuant to Article VIII hereof and such matter
involves a claim made by any Purchaser Party or Seller Party,
Indemnitee will give Indemnifying Party prompt written notice of
such claim. Such notice will (i) provide (with reasonable
specificity) the bases for which indemnification is being
asserted and (ii) set forth the actual or estimated amount of
Damages for which indemnification is being asserted. Indemnifying
Party will have a period of thirty calendar days (after the
delivery of each notice required by this Section 8.4(d)) within
which to respond to such notice. If Indemnifying Party accepts
full responsibility for the claim described in such notice or
does not respond within such thirty-day period, the actual or
estimated amount of Damages reflected in such notice will be
conclusively deemed a liability that Indemnifying Party owes, and
will pay (in cash) upon demand, to Indemnitee. If Indemnifying
Party has timely disputed such claim, as provided above,
Indemnifying Party and Indemnitee agree to proceed in good faith
to negotiate a resolution of such dispute. If all such disputes
are not resolved through negotiations, either Indemnifying Party
or Indemnitee may initiate litigation to resolve such disputes.
8.5 Limitations on Sellers' Indemnification Obligations.
(a) Threshold/Maximum Amount. Sellers shall not be liable for, or
otherwise be required to indemnify against, any Damages
sustained, suffered or incurred by any Purchaser Party unless
Damages in the aggregate for all Purchaser Parties (as defined in
this Agreement and the Membership Purchase Agreement) relating to
this Agreement and the Membership Purchase Agreement equal or
exceed $100,000, in which event, any and all Purchaser Parties
who sustained, suffered or incurred the Damages shall be entitled
to be indemnified with respect to the full amount of its Damages,
up to a maximum of $7.5 million dollars in the aggregate relating
to this Agreement and the Membership Purchase Agreement.
(b) Reduction of Damages. In computing the amount of Damages which
are sustained, suffered or incurred by an Indemnitee, the
Indemnifying Party or Parties are to be given the benefit of (i)
insurance proceeds, if any (up to the maximum amount of Damages),
that the Indemnitee shall have the right to receive.
(c) Limitation on Recovery From Each Seller. No Seller shall be
required to pay Damages in excess of the purchase price (both
cash and Notes) for his, her or its shares of Central Utah as set
forth on Schedule A. In addition, any Seller receiving Promissory
Notes may pay for his, hers or its indemnification obligation by
surrendering Promissory Notes issued to him, her or it, which
will be valued for payment purposes at the principal amount
thereof, plus accrued but unpaid interest. If the Damages are
less than the Promissory Note, the outstanding principal balance
of Promissory Note shall remain outstanding as to that
37
portion thereof exceeding the Damages. Purchaser will give such
Seller notice of the adjusted outstanding principal amount of
such Promissory Note.
(d) Exceptions. The threshold and maximum amounts in subparagraph (a)
and (c) hereof shall not apply to any misrepresentation, breach
of warranty, or nonfulfillment of or failure to perform any
covenant or agreement made by any Seller included in this
Agreement or the certificates delivered by Sellers pursuant to
Article VI hereof that relates to the capitalization of Central
Utah (Section 2.3) or its Subsidiaries (Section 2.1(c)), the
ownership of Central Utah's securities by Sellers (Section 2.3)
or transactions (or omissions or failures to act) between or
among Central Utah (and Central Utah Subsidiaries) and any Seller
(and its Affiliates). Notwithstanding anything to the contrary in
this Agreement, if the Closing occurs, no claim for
indemnification may be asserted by any Purchaser Party with
respect to any matter discovered by or known to Purchaser Party
on or before the Closing Time.
(e) Security for Indemnification. $1.8 million principal amount of
Notes and the Notes issued pursuant to the Membership Purchase
Agreement shall be held by Purchaser as security for Sellers' (as
defined herein and in the Membership Purchase Agreement)
indemnification obligations relating to this Agreement and the
Membership Purchase Agreement, but the holders of such Notes
shall be entitled to receive all interest on such Notes so long
as such holder of the Notes shall not be in default of his or her
indemnification obligations. Such Notes (or the excess over
claimed indemnification) shall be delivered to the holders of
such Notes if no claim for indemnification has been made (or if
made has been resolved) on the eighteen month anniversary of the
Closing Time.
8.6 Limitations on Purchaser's Indemnification Obligations.
Purchaser shall not be liable for, or otherwise be required to indemnify
against, any Damages sustained, suffered or incurred by any Sellers Party unless
damages in the aggregate for all Sellers Parties (as defined in this Agreement
and the Membership Purchase Agreement) relating to this Agreement and the
Membership Purchase Agreement, equal or exceed $100,000, in which event, the
Sellers Party who sustained, suffered or incurred the Damages shall be entitled
to be indemnified with respect to the full amount of its Damages up to a maximum
of $7.5 million in the aggregate relating to this Agreement and the Membership
Purchase Agreement.
ARTICLE IX
SURVIVAL OF REPRESENTATION
9.1 Survival of Representations. All representations and
38
warranties of Sellers, Central Utah, and Purchaser contained in this Agreement
shall survive the Closing Time and shall continue for a period of two years
after the Closing Time, at which time such representations and warranties
(except for Sections 2.3, 2.4, 2.6, 2.14, and 2.22) shall expire and become null
and void, unless prior to the expiration of the two-year period beginning at the
Closing Time, written notice of a claim for the inaccuracy or breach of such
representations and warranties shall be made to Sellers or Purchaser, as the
case may be. Sections 2.3, 2.4, 2.6, 2.14, and 2.22 shall survive until sixty
calendar days after the expiration of all applicable statutes of limitations
(including all periods of extension, whether automatic or permissive), at which
time they shall expire and become null and void, unless prior to the expiration
thereof, written notice of a claim for the inaccuracy or breach of Sections 2.3,
2.4, 2.6, 2.14, and 2.22 shall be made to Sellers.
ARTICLE X--GENERAL PROVISIONS
10.1 Notices. All Notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed given if delivered
personally, telecopied (with confirmation), mailed by register or certified mail
(postage prepaid, return receipt requested) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice) and shall be effective upon receipt:
(a) If to the Company or Purchaser:
Brighton Communications Corporation or ▇▇▇▇▇
Telephone
Corporation X
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
(b) If to Sellers:
I. Branch ▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
39
Copy to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, ▇▇
▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
(c) If to Central Utah
Central Utah Telephone, Inc.
▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
10.2 Certain Definitions. For purposes of this Agreement, the term:
(a) "affiliate" means a person that directly or indirectly, through
one or more intermediaries, controls, is controlled by, or is
under common control with, the first mentioned person; including,
without limitation, any partnership or joint venture in which any
person (either alone, or though or together with any other
subsidiary) has, directly or indirectly, an interest of 5% or
more;
(b) "business day" means any day other than a day on which
federally-chartered banks are required or authorized to be
closed;
(c) "control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly or as
trustee or executor, of the power to direct or cause the
direction of the management or policies of a person, whether
through the ownership of stock or as trustee or executor, by
contract or credit arrangement or otherwise;
(d) "Material Adverse Effect" means, with respect to Central Utah or
an Central Utah Subsidiary, as the case may be, (i) any adverse
effect on the business, assets, properties, liabilities, results
of operations or financial condition of, and which is material
with respect to, Central Utah or Central Utah Subsidiary, or (ii)
any effect that materially impairs the ability of the Purchaser
to consummate the transactions contemplated hereby. (e)
"Permitted Investment" means investments issued or fully
guaranteed as to principal and interest by the United States (or
any money market mutual fund which invests solely in such
investments) or certificates of deposits or accounts fully
insured by the Federal Deposit Insurance Corporation;
(f) "person" means an individual, corporation, partnership,
association, trust, unincorporated organization, other entity or
group (as defined in Section 13(d) of the Exchange Act); and
40
(g) "subsidiary" or "subsidiaries" of Central Utah, the Company, the
Purchaser, or any other person, means any corporation,
partnership, joint venture or other legal entity of which Central
Utah, the Company, the Purchaser or such other person, as the
case may be (either alone or through or together with any other
subsidiary), owns, directly or indirectly, 50% or more of the
stock or other equity interests the holders of which are
generally entitled to vote for the election of the board of
directors or other governing body of such corporation or other
legal entity.
10.3 Headings. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
10.4 Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner adverse to
any party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that
transactions contemplated hereby are fulfilled to the extent possible.
10.5 Entire Agreement. This Agreement constitutes the entire agreement of
the parties and supersedes all prior agreements and undertakings, both written
and oral, between the parties, or any of them, with respect to the subject
matter hereof and, except as otherwise expressly provided herein, is not
intended to confer upon any other person any rights or remedies hereunder.
10.6 Assignment. This Agreement shall not be assigned by operation of law
or otherwise, except that the Company may assign all or any of its rights
hereunder to any affiliate provided that no such assignment shall relieve the
assigning party of its obligations hereunder. In addition, the Company may
insert one or more additional subsidiaries between the Company and the
Purchaser.
10.7 Parties in Interest. This Agreement shall be binding upon and inure
solely to the benefit of each party and nothing in this Agreement, express or
implied, is intended to or shall confer upon any other person any right, benefit
or remedy of any nature whatsoever under or by reason of this Agreement.
10.8 Governing Law; Venue. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
law. Any action relating to this Agreement brought by Sellers or, prior to the
Closing, by
41
Central Utah in the State of Utah shall be brought in the Federal District Court
in Salt Lake City, Utah if there is jurisdiction in such court or, if there is
not jurisdiction in such court in such Federal Court, in Utah state courts in
Salt Lake City County.
10.9 Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties in separate counterparts, each of
which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
10.10 Amendment/Waiver. This Agreement may not be amended except by an
instrument in writing signed by the parties hereto. No provision or obligation
in this Agreement may be waived except by an instrument in writing signed by the
waiving party(s). Any instrument amending this Agreement or waiving any
provision or obligation herein shall be deemed to have been taken on behalf of
and signed by all Sellers if the instrument in writing is signed by Sellers
holding at least 75% of the outstanding shares of CU Common Stock.
42
IN WITNESS WHEREOF, Central Utah, the Sellers, Central Utah, the Company
and the Purchaser have caused this Agreement to be executed as of the date first
written above by their respective officers thereunto duly authorized.
CENTRAL UTAH TELEPHONE, INC. ("Central Utah")
By:
--------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇
Title: President
▇▇▇▇▇ TELEPHONE CORPORATION X
("Purchaser")
By:
----------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President
BRIGHTON COMMUNICATIONS CORPORATION
("Company")
By:
-----------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President
▇▇▇▇▇▇▇
▇▇ & ▇▇▇▇ ▇▇▇ Family Trust
By: ______________________
Name: ▇▇▇▇▇ ▇. ▇▇▇
Title: Trustee
By: ______________________
Name: ▇▇▇▇ ▇▇▇
Title: Trustee
Branch & ▇▇▇▇▇ ▇▇▇ Family Trust
By: _______________________
Name: ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇
Title: Trustee
By: _______________________
Name: ▇▇▇▇▇ ▇. ▇▇▇
Title: Trustee
---------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇
SCHEDULE 1.3(a)
43
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY STATE ACT. THIS NOTE MUST BE HELD INDEFINITELY AND MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS MAKER RECEIVES AN
OPINION OF COUNSEL, OR OTHER EVIDENCE, REASONABLY ACCEPTABLE TO IT STATING THAT
SUCH SALE OR TRANSFER IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY
REQUIREMENTS OF SAID ACTS.
SUBORDINATED PROMISSORY NOTE
$_______________ Rye, NY, _______, 2000*
1. Obligation. For value received, the undersigned, ▇▇▇▇▇ Telephone
Corporation X, a Delaware corporation ("Maker"), hereby promises to pay to the
order of __________, an individual ("Payee") at the address set forth below for
notices to Payee, or at such other place as Payee may from time to time
designate, the principal sum of $_________ together with interest (calculated on
a 365-day year) on the unpaid principal of this Note, computed from the date
hereof until the stated maturity hereof at the rate per annum set forth herein.
2. Interest. The unpaid principal balance of this Note
--------
shall bear interest prior to maturity at the rate of ten percent
(10%), payable quarterly in arrears without notice or demand by
Payee.
3. Payment. The principal amount of and all accrued and
-------
unpaid interest on this Note shall be due and payable without
notice or demand by Payee on ___________, 2005*.
* Closing Date
** Fifth anniversary of Closing Date
44
4. Usury. Any provision in this Note or in any other document executed in
connection herewith, or in any other agreement or commitment, whether written or
oral, express or implied, to the contrary notwithstanding, Payee shall not in
any event be entitled to receive or collect, nor shall or may amounts received
hereunder be credited, so that Payee shall be paid, as interest, a sum greater
than the highest rate of interest permitted under applicable law. If any
construction of this Note, or of any and/or all other papers, agreements or
commitments, indicates a different right given to Payee or ask for, demand or
receive any larger sum as interest, such as a mistake in calculation or wording,
which this clause shall override and control, it being the intention of the
parties that this Note and all other instruments relating to this Note shall in
all things comply with applicable law, and proper adjustment shall automatically
be made accordingly. In the event Payee ever receives, collects or applies as
interest, any sum in excess of the highest rate of interest permitted under
applicable law, such excess amount shall be applied to the reduction of the
unpaid principal balance of this Note, and, if this Note is paid in full, any
remaining excess shall be paid to Maker. In determining whether or not the
interest paid or payable, under any specific contingency, exceeds the highest
rate of interest permitted under applicable law, Payee and Maker shall, to the
maximum extent permitted under applicable law, (i) characterize any nonprincipal
payment as an expense, fee or premium rather than as interest, (ii) exclude
voluntary prepayments and the effects thereof, and (iii) allocate and "spread"
the total amount of interest throughout the entire term of this Note so that the
interest rate is uniform throughout the entire term hereof.
5. Subordination. [Language acceptable to acquisition financing]
6. Prepayment. This Note may be prepaid at any time upon ten business days
notice to Payee.
7. Event of Default. If Maker fails to pay any principal or interest on
this Note or any principal or interest on the Note executed by the Maker in
favor of Payee in connection with the acquisition by it of the membership
interests of Central Telcom Services, LLC, under that certain Membership
Purchase Agreement, dated August ___, 2000, when due and payable or declared due
and payable and such default continues for thirty (30) days, then such event
shall constitute an "Event of Default."
8. Remedy. Upon the occurrence and during the continuance of an Event of
Default, Payee shall have all of the rights and remedies provided in this Note,
as well as those rights and remedies provided by applicable law, rule or
regulation. In conjunction with and in addition to the foregoing rights and
remedies of Payee, Payee may, if the Event of Default continues for more than
one hundred and twenty (120) days, declare all
45
indebtedness due under this Note, although otherwise unmatured, to be due and
payable immediately without notice or demand whatsoever. All rights and remedies
of Payee hereunder are cumulative and may be exercised singly or concurrently.
The exercise of any right or remedy will not be a waiver of any other.
9. Waiver. Maker hereby waives demand, presentment for payment, notice of
dishonor, protest, notice of protest, and diligence in collecting or bringing
suit against any party liable hereon, and further agrees to any and all
extensions, renewals, modifications, partial payments, and substitutions of
evidence of indebtedness before or after maturity.
10. Costs and Attorneys' Fees. In the event that Payee successfully brings
legal action for the payment of any amounts owed hereunder, Maker hereby agrees
to pay to Payee all reasonable expenses and costs of such legal action,
including, but not limited to, reasonable attorneys' fees incurred in connection
with any such legal action, in addition to the principal and interest then due.
11. New York Law to Apply. This note shall be governed by and construed in
accordance with the internal laws of the State of New York.
12. Notice. Any notice or demand or payment required to be given hereunder
shall be in writing and shall be deemed to have been duly given and received, if
given by hand, when a writing containing such notice is received by the person
to whom addressed or, if given by mail, seventy-two (72) hours after a certified
or registered letter containing such notice or payment, with postage prepaid, is
deposited in the United States mails, addressed to:
Maker : ▇▇▇▇▇ Telephone Corporation X
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Payee:
13. Terms. For purposes of this Note, the term "Payee" shall include any
subsequent permitted holder or assigns of this Note.
14. Successors and Assigns. All of the covenants, obligations, promises and
agreements contained in this Note made by Maker shall be binding upon its
successors and assigns; notwithstanding, however, that Maker shall not assign
this Note or its performance hereunder without the prior written consent of
Payee, which shall not be unreasonably withheld.
IN WITNESS WHEREOF, the Maker has executed this Note to be effective as
of he day and year first above written.
46
MAKER:
▇▇▇▇▇ TELEPHONE CORPORATION X
By: _________________________
Title: President
Print Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
47