____________________________________________________________
____________________________________________________________
ASSET PURCHASE AGREEMENT
_________________________
Between
GTE North Incorporated
and
PTI Communications of Michigan, Inc.
and
Pacific Telecom, Inc,
___________________________
March 29 ,1996
______________
_____________________________________________________________
_____________________________________________________________
TABLE OF CONTENTS
Page
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ARTICLE 1. DEFINITIONS .................................... 1
ARTICLE 2. PURCHASE AND SALE OF ASSETS .................... 7
2.1 Purchase and Sale of Assets..................... 7
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2.2 Purchased Property ............................. 7
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2.2.1 Telephone Plant ........................ 8
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2.2.2 Contracts .............................. 9
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2.2.3 Transferred Books and Records........... 9
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2.2.4 Licenses ............................... 9
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2.3 Leased Assets .................................. 9
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2.4 Excluded Property .............................. 10
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2.5 Assumption of Liabilities
2.5.1 Assumed Liabilities .................... 11
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2.5.2 Retained Liabilities ................... 12
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ARTICLE 3. PURCHASE PRICE AND DEPOSIT ..................... 13
3.1 Purchase Price ................................. 13
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3.2 Adjustments After Closing ...................... 14
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3.3 Performance Deposit ............................ 15
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3.4 Guaranty ....................................... 15
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ARTICLE 4. BILLING AND COLLECTION PROCEDURES .............. 15
4.1 Ownership of Accounts Receivable ............... 15
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4.2 Collection of Accounts Receivable .............. 16
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4.3 Carrier Access ................................. 16
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4.4 Customer Notification .......................... 16
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ARTICLE 5. REQUIRED APPROVALS, CONSENTS AND NOTIFICATIONS...17
5.1 State Regulatory Approval ...................... 17
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5.2 Debtholder Consents ............................ 17
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5.3 Lease and Contract Consents .................... 17
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5.4 Consents ....................................... 18
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5.5 HSR Act Review ................................. 19
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ARTICLE 6. PRECLOSING COVENANTS ........................... 19
6.1 Investigation by Buyer ......................... 19
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6.1.1 Environmental Assessment................ 20
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6.2 Operation of the Business ...................... 20
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6.2.1 Preservation of Business................ 21
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6.2.2 No Material Changes .................... 22
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6.3 Satisfaction of conditions ..................... 23
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6.4 Notification as to Certain Matters ............. 23
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ARTICLE 7. CONDITIONS PRECEDENT TO THE CLOSING ............ 23
7.1 Conditions Precedent to Obligations of Buyer.. . 23
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7.1.1 No Misrepresentation or Breach of Covenants
___________________________________________
and Warranties.......................... 23
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7.1.2 Documents ............................... 24
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7.1.3 No Pending Litigation ................... 24
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7.1.4 No Legal Obstruction .................... 24
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7.1.5 Material Adverse Changes................. 25
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7.1.6 Real Estate Transfers ................... 25
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7.2 Conditions Precedent to Obligations of Seller... 25
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7.2.1 No Misrepresentation or Breach of Covenants
___________________________________________
and Warranties .......................... 26
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7.2.2 Documents ............................... 26
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7.2.3 Purchase Price .......................... 26
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7.2.4 No Legal Obstruction .................... 26
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ARTICLE 8. THE CLOSING .................................... 26
8.1 The Closing .................................... 26
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8.2 Seller's Obligations at Closing ................ 27
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8.3 Buyer's Obligations at Closing ................. 28
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ARTICLE 9. REPRESENTATIONS AND WARRANTIES ................. 28
9.1 Representations and Warranties of Seller ....... 28
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9.1.1 Authorization and Effect of Agreement.... 28
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9.1.2 No Restrictions Against Sale of the
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Purchased Property ..................... 28
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9.1.3 Consents and Approvals of Governmental
______________________________________
Authorities ............................ 29
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9.1.4 No Violation of Law ..................... 29
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9.1.5 Corporate Organization .................. 29
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9.1.6 Brokers ................................. 30
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9.1.7 Assumed Liabilities ..................... 30
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9.1.8 Title to Purchased Property ............. 30
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9.1.9 Leases .................................. 31
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9.1.10 Tangible Assets ......................... 31
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9.1.11 No Adverse Change ....................... 32
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9.1.12 Contracts ............................... 32
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9.1.13 Insurance ............................... 33
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9.1.14 Taxes ................................... 34
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9.1.15 No Material Claims ...................... 34
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9.1.16 Tariffs: FCC Licenses ....................35
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TABLE OF CONTENTS
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Page
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9.1.17 Employee Matters ......................... 36
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9.1.18 Schedules of Telephone Plant ............. 39
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9.1.19 Access Lines and Minutes of Use .......... 39
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9.2 Representations and Warranties of Buyer ......... 40
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9.2.1 Corporate Organization ................... 40
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9.2.2 Authorization and Effect of Agreement..... 40
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9.2.3 No Restrictions Against Purchase of
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the Purchased Properties ............... 40
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9.2.4 No Violation of Law ...................... 41
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9.2.5 Financial Capacity ....................... 41
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9.2.6 Brokers .................................. 41
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9.2.7 Consents and Approvals of Governmental
______________________________________
Authority ............................... 42
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ARTICLE 10. CONTINUING BUSINESS RELATIONSHIPS .............. 42
10.1 Transition Agreement ........................... 42
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ARTICLE 11. ADDITIONAL COVENANTS OF THE PARTIES ............ 43
11.1 Intellectual Party ............................. 43
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11.1.1 No License ............................ 43
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11.1.2 Infringement .......................... 44
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11.1.3 Trademark Phaseout .................... 44
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11.1.4 Third Party Software .................. 46
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11.2 Effect of Due Diligence and Related Matters..... 47
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11.3 Confidentiality ................................ 47
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11.4 Regulated Construction Projects and Budget ..... 48
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11.5 Further Assurances ............................. 49
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11.6 Prorations ..................................... 49
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11.7 Risk of Loss Prior to Closing .................. 50
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11.8 Cost Studies/NECA Matters ...................... 51
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11.8.1 Prior to Closing ....................... 51
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11.8.2 From and After Closing ................. 51
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11.9 Construction and Customer Deposits ............. 52
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11.10 Excluded Contracts ............................. 52
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11.11 Access to Books and Records .................... 53
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11.12 Purchase Price Allocation ...................... 54
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11.13 Real Property Transfers ........................ 54
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11.14 Bulk Sales Laws ................................ 55
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11.15 Prepaid Non-regulated Maintenance Agreements
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and Warranty Reserves ......................... 55
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11.16 Non-regulated Construction Work in Progress .... 55
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11.17 Vehicle Registration ........................... 56
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Page
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11.18 Telephone Directories Change Over .............. 56
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ARTICLE 12. EMPLOYEES AND EMPLOYEE MATTERS ................. 56
12.1 Employee Transfer Agreement ..................... 56
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ARTICLE 13. INDEMNIFICATION ................................ 57
13.1 Survival of Representations, Warranties
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and Covenants ................................. 57
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13.2 Limitations on Liability ....................... 58
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13.3 Indemnification ................................ 61
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13.4 Defense of Claims .............................. 62
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ARTICLE 14. ENVIRONMENTAL MATTERS .......................... 65
14.1 Seller's Representations and Warranties ........ 65
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14.1.1 Treatment of Data ...................... 65
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14.1.2 Phase I Reviews ........................ 65
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14.1.3 Phase II Reviews ....................... 66
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14.1.4 Indemnity for Due Diligence Activities...67
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14.1.5 Environmental Assessment Costs ......... 67
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14.2 Indemnification for Environmental Matters ...... 67
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14.2.1 Sole Remedy and Release ................ 67
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14.2.2 Indemnification of Buyer ............... 68
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14.2.3 Indemnnification of Seller ............. 68
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14.2.4 Assumption of Environmental Liabilities. 68
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14.2.5 Notice ................................. 69
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14.2.6 Actual Damages ......................... 69
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14.2.7 Limitations on Indemnification ......... 69
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14.3 Facilities Issues .............................. 70
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ARTICLE 15. TERMINATION .................................... 70
15.1 Termination Rights ............................. 70
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15.2 Effect of Termination .......................... 71
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ARTICLE 16. DISPUTE RESOLUTION.............................. 73
16.1 Exclusive Remedy ............................... 73
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16.2 Dispute Resolution Process ..................... 73
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16.3 Arbitration .................................... 74
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16.4 Costs and Attorneys' Fees ...................... 74
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16.5 Certain Limitations ............................ 74
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ARTICLE 17. MISCELLANEOUS .................................. 75
17.1 Notices ........................................ 75
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TABLE OF CONTENTS
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17.2 Press Release .................................. 76
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17.3 Expenses ....................................... 77
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17.4 Successors and Assigns ......................... 77
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17.5 Amendments ..................................... 77
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17.6 Captions ....................................... 77
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17.7 Entire Agreement ............................... 77
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17.8 Waiver ......................................... 78
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17.9 Third Parties .................................. 78
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17.10 Counterparts ................................... 78
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17.11 Governing Law .................................. 78
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17.12 Further Assurances ............................. 78
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17.13 Certain Interpretive Matters and Definitions ... 79
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INDEX OF SCHEDULES
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Schedule* Title
________ _____
1.17 Confidentiality Agreement
2.2 Purchased Exchanges
2.4(f) Other Excluded Property
2.5.1 (e) Joint Construction Projects
5.4 FCC Waivers
6.2.2(c) Employee Matters - Extraordinary Transactions
6.2.2(e) Accounting Changes
7.1.1 Seller's Closing Certificate
7.2.1 Buyer's Closing Certificate
8.2(b) Legal Opinion of Seller's Counsel
8.3(b) Legal Opinion by Buyer's Counsel
9.1.3 Other Consents and Approvals
9.1.4 Violation of Law
9.1.8-1 Bondholders
9.1.8-2 Real Property; Liens and Encumbrances
9.1.9 Leases
9.1.10 Tangible Assets; Exceptions
9.1.11 Adverse Changes
9.1.12(a) Material Contracts
9.1.12(b) Other Contracts
9.1.14 Taxes
9.1.15 Material Claims
9.1-16 FCC Licenses
9.1.17(a) Employee Benefit Plans, Etc.
9.1.17(b) Material Liabilities Under ERISA
9.1.17(c) ERISA Plans - Compliance, Etc.
9.1.17(d) Multiemployer Plans
9.1.17(e) Union Representation
9.1.18 Telephone Plant
9.1.19 Access Lines and Minutes of Use
10.1 Conversion Services Agreements
11.1.1 Intellectual Property
11.1.3 List of Marks
11.4 Improvement Expenditures
11.10 Excluded Contracts
11.12 Allocation of Purchase Price
11.16 Non-regulated Construction Work in Progress
12.1 Employee Transfer Agreement
14.1 (a) Environmental Compliance
14.1 (b) Environmental Permits
14.1 (c) Underground Storage Tanks
* The Schedule numbers refer to the appropriate Section
within the Agreement.
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is
made and entered into as of the 29th day of March, 1996, by
and between PTI Communications of Michigan, Inc., a Michigan
corporation ("Buyer"), and GTE North Incorporated, a
Wisconsin corporation ("Seller"), and Pacific Telecom, Inc.,
a Washington corporation, as guarantor of Buyer's
obligations ("PTI").
RECITALS
WHEREAS, Seller is in the business of providing
regulated local exchange telephone service in certain
areas of the state of Michigan; and
WHEREAS, Seller desires to sell, convey, assign,
transfer and deliver to Buyer, and Buyer desires to
purchase and accept from Seller, certain of its
telephone properties and related assets, upon
the terms and conditions set forth in this Agreement;
and
WHEREAS, Seller desires that PTI guaranty Buyer's
obligations hereunder and PTI agrees to guaranty Buyer's
obligations hereunder.
NOW, THEREFORE, the parties hereto, intending to
be legally bound, agree as follows:
ARTICLE 1. DEFINITIONS
For purposes of this Agreement and any amendment
hereto, the following terms are defined as set out below
or in the Section referenced below:
1.1 Accounts Receivable is defined in Section 2.4(b).
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1.2 Advanced Billing Amounts is defined in Section 4.1.
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1.3 Affiliate has the meaning given to that term in
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Rule 405 under the Securities Act of 1933, as amended.
1.4 This Agreement is defined in Section 17.7.
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1.5 Allocation is defined in Section 11.12.
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1.6 Assumed Liabilities is defined in Section 2.5.1.
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1.7 Bondholders is defined in Section 9.1.8.
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1.8 The Business means the business of providing
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local exchange and exchange access telecommunications
services and other related activities, services and
products within the Purchased Exchanges.
1.9 Buyer's Closing Certificate is defined in
___________________________
Section 7.2.1.
1.10 Casualty Notice is defined in Section 11.7.
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1.11 Casualty Termination Notice is defined in
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Section 11.7.
1.12 CERCLA means the Comprehensive Environmental
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Response, Compensation and Liability Act of 1980, as amended.
1.13 Claims is defined as any and all liabilities,
______
obligations, losses, damages, deficiencies, demands, claims,
penalties, settlements, judgments, actions, proceedings and
suits of whatever kind and nature and all reasonable costs
and expenses including reasonable attorneys' fees; provided,
however, Claims shall not include any regulatory liability
including any demand, or judgment resulting from an action
or proceeding before a State or Federal Regulatory body
having jurisdiction over Buyer's regulated activities.
1.14 Closing is defined in Section 8.1.
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1.15 Closing Date is defined in Section 8.1.
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1.16 Collection Period is defined in Section 4.2
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1.17 Confidentiality Agreement means the agreement
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between the parties dated March 14, 1995, which is attached
and incorporated into this Agreement as Schedule 1.17.
1.18 Construction Advances is defined in Section ll.9.
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1.19 Customer Deposits is defined in Section 11.9.
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1.20 Contracts is defined in Section 2.2.2.
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1.21 Debtholder Consents is defined in Section 5.2.
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1.22 Deposit is defined in Section 3.3.
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1.23 Direct Claim is defined in Section 13.4(b).
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1.24 Earned Accounts Receivable is defined in Section 4.1.
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1.25 Employee is defined in Section 9.1.17.
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1.26 Employment Agreements is defined in Section 9.1.17.
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1.27 Environmental Liabilities means all liabilities,
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obligations (including obligations to respond to, investigate
and remediate conditions caused by any Regulated Material),
responsibilities, losses, damages (including punitive or treble
damages), costs and expenses (including reasonable fees,
disbursements and expenses of counsel, experts, consultants and
expert witnesses), fines, penalties, interest or bonds, based
upon any Environmental Requirements of any Governmental
Authority, or as a consequence of noncompliance with
any Environmental
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Requirements or the release or threatened release of a
Regulated Material into the outdoor environment.
1.28 Environmental Requirements means all applicable
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federal, state, interstate and local government or agency
laws, statutes, ordinances, rules, regulations, codes,
orders, approvals and permits and requirements of common
law relating to protection of the outdoor environment.
1.29 ERISA means the Employee Retirement Income
_____
Security Act of 1974, as amended.
1.30 ERISA Plans is defined in Section 9.1.17(a).
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1.31 Estimated Purchase Price is defined in Section 3.1
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1.32 Evaluation Material is defined in the first
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paragraph of the Confidentiality Agreement.
1.33 Excluded Property is defined in Section 2.4.
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1.34 Executive Officers of an entity means the
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president and any vice president of the entity in charge of
a principal business unit, division or function.
1.35 Existing Environmental Requirements means those
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applicable provisions of any Environmental Requirements that
are both in effect and required to be met by Seller prior to
the Closing Date.
1.36 FCC means the Federal Communications Commission.
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1.37 FCC Consents is defined in Section 5.4.
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1.38 FCC Licenses is defined in Section 2.2.4.
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1.39 Final Purchase Price is defined in Section 3.2
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1.40 GAAP means generally accepted accounting principles.
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1.41 Governmental Authority is defined in Section 9.1.3.
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1.42 HSR Act means the Xxxx-Xxxxx-Xxxxxx Antitrust
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Improvements Act of 1976, as amended.
1.43 Improvement Expenditures is defined in Section 11.4
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1.44 Indemnifiable Losses is defined in Section 13.2(a).
____________________
1.45 Indemnification Payment is defined in Section l3.2(a).
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1.46 Indemnifying Party is defined in Section 13.2(a).
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1.47 Indemnitee is defined in Section 13.2(a).
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1.48 Intellectual Property is defined in Section 11.1.1.
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1.49 Interest Amount is defined in Section 15-2(a).
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1.50 IRC means the Internal Revenue Code of 1986, as amended.
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1.51 IRS means the Internal Revenue Service.
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1.52 Law is defined in Section 9.1.4.
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1.53 Leases is defined in Section 2.3.
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1.54 Liquid Investment means (i) direct obligations
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of the United States or any agency thereof, or obligations
guaranteed by the United States or any agency thereof, (ii)
commercial paper rated at least A-1 by Standard & Poor's
Corporation and P-1 by Xxxxx'x Investors Services, Inc., or
(iii) time deposits with, including certificates of deposit
issued by, a bank or trust company that is organized under
the laws of the United States or any state thereof.
1.55 Marks is defined in Section 11.1.3.
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1.56 Material Contracts is defined in Section 9.1.12.
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1.57 Other Licenses is defined in Section 2.2.4
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1.58 PBGC means the Pension Benefit Guaranty Corporation.
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1.59 Permitted Exceptions is defined in Section 11.13.
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1.60 Plans is defined in Section 9.1.17(a).
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1.61 Press Release is defined in Section 17.2.
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1.62 Proration Periods is defined in Section 11.6
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1.63 Purchase Price is defined in Section 3.1.
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1.64 Purchased Exchanges is defined in Section 2.2.
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1.65 Purchased Property is defined in Section 2.2.
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1.66 Real Property is defined in Section 2.2.1.
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1.67 Real Property Interests is defined in Section 2.2.1.
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1.68 Regulated Material means (i) any "hazardous
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substances as defined in CERCLA, (ii) any petroleum or
petroleum substance, and (iii) any other pollutant, waste,
contaminant, or other substance regulated under
Environmental Requirements.
1.69 Regulatory Approval is defined in Section 5.1.
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1.70 Retained Books and Records is defined in
__________________________
Section 2.4(c).
1.71 Retained Liabilities is defined in Section 2.5.2.
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1.72 The Sale is defined in Section 2.4.
____
1.73 Seller's Closing Certificate is defined in
____________________________
Section 7.1.1.
1.74 Tax Returns means a report, return or other
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information statement required to be supplied to a Governmental
Authority with respect to Taxes, including, where permitted or
required, combined or consolidated returns for any group of
entities that includes Seller.
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1.75 Tax(es) means any foreign, federal, state,
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provincial, county or local income, sales, use, transfer,
excise, franchise, stamp duty, custom duty, real and
personal property, gross receipt, capital stock, production,
business and occupation, disability, employment, payroll,
severance, recording, ad valorem, gains, value-added,
unemployment compensation, general corporate, profits,
registration, unincorporated business, alternative, social
security, estimated, add-on, minimum, privilege, or
withholding tax and any interest and penalties and
additions to such taxes (civil or criminal) related thereto
or to the nonpayment thereof and related notarial fees.
1.76 Telephone Plant is defined in Section 2.2.1.
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1.77 Third Party Claim is defined in Section 13.4(a).
_________________
1.78 Transferred Books and Records is defined in
_____________________________
Section 2.2.3.
1.79 Transition Services Agreements is defined in
______________________________
Section 10.1.
ARTICLE 2. PURCHASE AND SALE OF ASSETS
2.1 Purchase and Sale of Assets. Subject to the terms
___________________________
and conditions of this Agreement, Seller agrees to sell,
convey, transfer, assign and deliver to Buyer, and Buyer
agrees to purchase and accept, at the Closing, all of
Seller's right, title and interest in and to the Purchased
Property, free and clear of all security interests, liens,
or encumbrances, except for Permitted Exceptions.
2.2 Purchased Property. For purposes of this Agreement,
__________________
the "Purchased Property" consists of the Telephone Plant,
Contracts, Transferred Books and Records and FCC Licenses
in effect or owned by Seller on the Closing Date that
pertain solely
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to the telephone exchanges listed in Schedule 2.2 (the
"Purchased Exchanges") other than the Excluded Property.
2.2.1 Telephone Plant. For purposes of this
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Agreement, Telephone Plant" means the Real Property, Real
Property interests, machinery, equipment, vehicles and all
other assets and properties used in connection with the
conduct of the Business, including, without limitation,
all improvements, plants, systems, structures, construction
work in progress, telephone cable (wherever located and
whether in service or under construction), microwave
facilities (including frequency spectrum assignments),
telephone line facilities, telephones, machinery,
furniture, fixtures, materials, supplies, tools,
implements, conduits, stations, substations, equipment
(including, without limitation, central office equipment,
subscribers' station equipment and other equipment in
general), instruments, house-wiring connections and all
other equipment of every nature and kind owned by Seller
and used in connection with the Business. For purposes of
this Agreement, "Real Property" means the real property
owned by Seller and used in connection with the Business,
including, without limitation, all land, buildings,
structures, appurtenances, improvements or privileges
located thereon. "Real Property Interests" means easements,
rights of way, licenses or other interests in real property
other than interests in fee or leasehold interests. Without
limiting the generality of the foregoing, the Telephone
Plant includes the assets that would be property included
in the fixed asset accounts referenced in Part 32 of the
FCC's Rules and Regulations (47 C.F.R. Part 32), as such
accounts are reflected in Schedule 9.1.18.
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2.2.2 Contracts. For purposes of this Agreement,
_________
"Contracts" means all agreements that relate to the
Business between Seller or any Affiliate of Seller and
(i) Seller's customers or (ii) other entities or persons
who are not Affiliates of Seller and who have business
relationships with Seller that relate to the Business
except for the agreements described on Schedule 11.1O
(which are agreements not to be assigned by Seller).
2.2.3 Transferred Books and Records. For
_____________________________
purposes of this Agreement, "Transferred Books and Records"
means all of Seller's customer or subscriber lists and
records, accounts billing, plant and continuing property
records, plans, blueprints, specifications, designs,
drawings, surveys, engineering reports, personnel records
(where applicable) and all other documents, computer data
and records relating to the Business, the Purchased Property,
the Employees and/or the Assumed Liabilities, except for the
Retained Books and Records.
2.2.4 Licenses. For purposes of this Agreement,
________
"FCC Licenses" means all licenses, certificates, permits or
other authorizations granted to Seller by the FCC that are
used in the conduct of the Business. For purposes of this
Agreement, "0ther Licenses" means all licenses, certificates,
permits, franchises or other authorization granted to Seller
by state and local regulatory agencies that are used in the
conduct of the Business.
2.3 Leased Assets. Seller shall, on the Closing Date,
_____________
assign to Buyer all of its interests, rights, benefits
and obligations as lessee with respect to all real and
personal property leases that are necessary or
useful in connection with Seller's conduct of the
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Business (the "Leases"). The assignment of the Leases is
subject to the provisions of Section 5.3.
2.4 Excluded Property. The sale contemplated by this
_________________
Agreement (the "Sale" shall not include the Excluded
Property. For purposes of this Agreement, "Excluded
Property" means the following, subject to the
provisions of Sections 4.2, 11.6 and 11.9:
(a) Cash, cash equivalents and investments;
(b) All accounts receivable, trade and otherwise,
of Seller outstanding as of the Closing Date (the "Accounts
Receivable"), other than the Advanced Billing Amounts
referred to in Section 4.1;
(c) The general ledger and all books and records
relating to (i) tax returns and tax records, (ii) the
Excluded Property, or (iii) the Retained Liabilities
(collectively, the "Retained Books and Records"); provided,
however, that Seller shall provide Buyer with access to the
Retained Books and Records pertaining to the Business, upon
reasonable request, and shall provide assistance in
determining the appropriate adjustments for plant
related tax-book timing differences;
(d) All trademarks, trade names, trade dress,
logos and any other intangible assets that use or
incorporate the word "GTE" and as provided in
Sections 11.1.1 and 11.14;
(e) Seller's interests in any business other
than the Business, including without limitation cellular
service areas or any applications or licenses granted
with respect thereto;
(f) Such other assets (i.e., encryption decoder
devices, AWAS terminals, etc.), if any, as Seller lists
and identifies on Schedule 2.4(f); and
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(g) The Contracts listed on Schedule 11.10.
2.5 Assumption of Liabilities.
_________________________
2.5.1 Assumed Liabilities. Buyer hereby agrees
___________________
to assume, perform and discharge, as of the Closing Date,
the specific liabilities, responsibilities and obligations
set forth below with respect to the Purchased Property
(the "Assumed Liabilities"):
(a) Conduct of Business after Closing.
_________________________________
All liabilities, responsibilities and obligations arising
out of or resulting from the use or ownership of the
Purchased Property after the Closing Date or the conduct
of the Business by Buyer after the Closing Date;
(b) Employment Matters. All liabilities,
__________________
responsibilities and obligations that are to be assumed by
Buyer under Article 12 with respect to Employees;
(c) Environmental Matters. All liabilities,
_____________________
responsibilities and obligations that are to be assumed
by Buyer under Article 14 with respect to
Environmental Liabilities;
(d) Contracts: Leases. All liabilities,
_________________
responsibilities and obligations that arise after the
Closing Date in connection with the performance of the
Contracts and the Leases:
(e) Joint Construction Projects. Those
___________________________
liabilities, responsibilities and obligations which are set
forth in Schedule 2.5.1 (e) to third parties that relate to
arrangements and commitments between Seller and a third
party for the construction of mutual transmission facilities
between various switching points;
-11-
(f) Construction in Progress. All
________________________
liabilities, responsibilities and obligations relating to
post-Closing engineering and construction required to complete
scheduled construction and other capital expenditure projects;
(g) Customer Deposits and Construction Advances.
___________________________________________
All liabilities, responsibilities and obligations relating
to Customer Deposits, as set forth in Section 11.9, including
any interest thereon which has accrued through the Closing
Date and Construction Advances; and
(h) Advanced Billing Amounts. All
________________________
liabilities, responsibilities and obligations relating to
Advanced Billing Amounts.
2.5.2 Retained Liabilities. Seller shall retain
____________________
and have full responsibility and obligation with respect to,
and shall indemnify Buyer against, all liabilities,
responsibilities and obligations of Seller, other than those
liabilities, responsibilities and obligations that are
specifically assumed by Buyer pursuant to Section 2.5.1 or
any other provision of this Agreement (the "Retained
Liabilities"). Without limiting the generality of the
foregoing, but subject to liabilities that are
specifically assumed pursuant to Section 2.5.1 or other
provisions of this Agreement, the Retained Liabilities shall
include the following liabilities, responsibilities and
obligations of Seller
(a) All liabilities, responsibilities and
obligations relating to the use or ownership of the
Purchased Property on or before the Closing Date or to the
conduct of the Business on or before the Closing Date;
(b) All current liabilities of Seller
as of the Closing Date, including, without limitation,
trade payables;
-12-
(c) All long-term debt of Seller, including
without limitation, indebtedness to the Bondholders;
(d) Subject to Sections 11.6 and 11.14, all
federal, state and local income, franchise, gross receipts and
similar taxes of Seller or its consolidated or combined group
and all federal, state and local income, franchise, gross
receipts and sales, use, property or other taxes relating to
the conduct of the Business on or before the Closing Date or
the use, ownership or operation of the Purchased Property on
or before the Closing Date;
(e) Subject to Article 12, all liabilities
and obligations arising on or before the Closing Date with
respect to the Employees, and any such liabilities or
obligations that arise after the Closing Date to the extent
that such liabilities and obligations relate to facts,
circumstances or conditions arising or occurring on or before
the Closing Date;
(f) All liabilities, responsibilities and
obligations arising out of or related to the litigation,
claims and other matters set forth on Schedule 9.1.15 and
any other litigation based on facts, circumstances or
conditions arising or occurring on or before the Closing
Date excluding regulatory proceedings; and
(g) All liabilities, responsibilities and
obligations arising on or before the Closing Date relating
to collective bargaining or other union contracts.
ARTICLE 3. PURCHASE PRICE AND DEPOSIT
3.1 Purchase Price. In consideration of the sale
______________
of the Purchased Property and other undertakings of Seller
in this Agreement, Buyer will pay to Seller the sum of
-00-
Xxxxxx-Xxxx Xxxxxxx dollars ($25,000,000) subject to
adjustment as provided in Section 11.4, together with
any other adjustments contemplated in this Agreement
(the "Purchase Price"). At Closing, Buyer shall pay to
Seller an Estimated Purchase Price which shall be the
Purchase Price (less the Deposit) as adjusted in an amount
based upon Sellers good faith estimate of the adjustments
described in the first sentence of this Section 3.1. Seller
shall give Buyer notice of the Estimated Purchase Price at
least twenty (20) days prior to Closing.
3.2 Adjustments After Closing. Ninety (90) days
_________________________
following the Closing Date, Seller shall deliver to Buyer
the final calculations of the Purchase Price, as adjusted
pursuant to Section 3.1. Within thirty (30) days following
the delivery of such calculations and adjustments to Buyer,
Buyer shall notify Seller of any objection thereto, stating
in reasonable detail the reasons therefor; otherwise, such
calculations and adjustments of the Purchase Price and the
proration shall be final and binding on Seller and Buyer and
shall be the Final Purchase Price. If Buyer shall object,
Seller and Buyer shall work in good faith to agree on the
correct amount for the Final Purchase Price.
(a) If the Final Purchase Price shall exceed the
Estimated Purchase Price, Buyer shall cause to be transferred
to such account in the United States as Seller may specify,
immediately available funds, in U.S. dollars, the amount equal
to such excess. Amounts not so transferred within 120 days
after Close shall be subject to interest thereon at the rate of
five percent (5%) per annum, or
(b) If the Estimated Purchase Price shall exceed the
Final Purchase Price, Seller shall cause to be transferred to
such account in the United
-14-
States as Buyer may specify, immediately available funds, in
U.S. dollars, the amount equal to such excess. Amounts not
so transferred within 120 days after Close shall be subject
to interest thereon at the rate of five percent (5%) per annum.
3.3 Performance Deposit. Concurrently with the execution
___________________
and delivery hereof, Buyer shall pay to Seller by wire transfer
of immediately available funds the sum of One Million Two
Hundred Fifty Thousand dollars ($1,250,000) (the "Deposit"), to
be held by Seller against payment of the Purchase Price and as
security for the performance by Buyer of its obligations under
this Agreement and shall become nonrefundable except as provided
in Article 15.
3.4 Guaranty. PTI guarantees Buyer's financial
________
obligations and performance hereunder. PTI agrees to cause
Buyer to perform each of Buyees agreements and covenants
contained in this Agreement. PTI shall be liable to the
same extent as Buyer (but only to that extent) for any
non-performance of Buyees agreements and covenants
contained in this Agreement.
ARTICLE 4. BILLING AND COLLECTION PROCEDURES
4.1 Ownership of Accounts Receivable. The parties
________________________________
acknowledge that Sellees "Accounts Receivable" for the
Business as of the Closing Date will include both amounts
that have been earned by Seller relating to service on or
before the Closing Date, whether billed or unbilled,
hereinafter collectively referred to as "Earned Accounts
Receivable," and amounts that have been billed as of the
Closing Date by Seller but are unearned (i.e., relating
to service after the Closing Date), hereinafter referred
to as the "Advanced Billing Amounts."
-15-
4.2 Collection of Accounts Receivable. Buyer agrees
_________________________________
to act as a collection agent for Seller's Earned Accounts
Receivable for a period of ninety (90) days subsequent to
the Closing Date (the "Collection Period"). Buyer will
receive all cash collections and remit to Seller at the
end of each month an amount equal to Earned Accounts
Receivable actually collected during said month. During
the Collection Period, Buyer agrees to follow its normal
collection procedures. At the end of the Collection Period,
Buyer will send Seller a list of all uncollected account
balances relating to the Earned Accounts Receivable.
After the Collection Period, the collection of any such
outstanding balances will be the responsibility of Seller.
4.3 Carrier Access. Seller shall render its own final
______________
carrier access bills to its interexchange carriers for
minutes, messages and other applicable charges up to the
Closing Date. Seller shall be responsible for collecting,
and settling any disputes associated with its final bills
to the interexchange carriers.
4.4 Customer Notification. For a period of at least
_____________________
one (1) month prior to the Closing Date, Seller will permit
Buyer, at Buyer's expense, to insert preprinted single-page
subscriber education materials into billing documentation to
be delivered to subscribers affected by the Sale. Other
means of notifying subscribers may be employed by either
party, at the expense of the initiating party, but in no
event shall any notification be initiated without the prior
consent of the other party (which consent shall not be
unreasonably withheld) and earlier than two (2) months
prior to the Closing Date.
-16-
ARTICLE 5. REQUIRED APPROVALS, CONSENTS AND NOTIFICATIONS
5.1 State Regulatory Approval. Promptly after the date
_________________________
of this Agreement, Buyer, and where required Buyer and Seller,
shall file the appropriate application(s) and notice(s) with
the Michigan Public Service Commission, seeking an order
permitting the transfer of service in the Purchased Exchanges
to Buyer (the "Regulatory Approval"). Buyer will be
responsible for establishing the tariff for its post-Closing
operations in Michigan. To the extent assignable, Seller will
assign its local community right of way agreements to Buyer.
Buyer agrees to use its best efforts to obtain the Regulatory
Approval and the parties agree to cooperate fully with each
other and with the applicable regulatory agency to obtain the
Regulatory Approval at the earliest practicable date.
5.2 Debtholder Consents. Seller shall take all actions
___________________
necessary with respect to its Bondholders to obtain the
termination or release, at Closing, of all security
agreements, mortgages and financing statements relating to
the Purchased Property (such termination or release being
hereinafter referred to as the "Debtholder Consents"). Buyer
agrees to cooperate in good faith with Seller in obtaining
the required Debtholder Consents.
5.3 Lease and Contract Consents. As promptly as
___________________________
practicable after the execution date, the parties hereto
shall mutually seek the consent, approval or waiver of the
third party to any Lease or Material Contract that requires
consent, approval or waiver as a condition to an assignment
of such Lease or Material Contract. To the extent any of
the approvals, consents or waivers required to assign any
such Lease or Material Contract have not been obtained with
respect to any Lease or Material
-17-
Contract as of the Close Date, Seller shall continue to
use its best efforts to obtain the consent of such Lessor
or other third party to a Material Contract that is
required for the transfer or assignment of such Lease or
Material Contract after the Close Date. Refusal by such
other third party to release Seller from a Lease or
Material Contract shall not excuse Seller from entering
into an assignment of such Lease or Material Contract.
From the Close Date until such approval, consent or waiver
is obtained, Seller shall hold such Leases and Material
Contracts, or ancillary rights as agent for Buyer, and
preserve the benefit of and enforce the same as agent for
Buyer to the fullest extent permissible under the
applicable Lease or Material Contract. Buyer and Seller
agree that upon request by either party, at Closing, they
will enter into an agency agreement in form and substance
mutually satisfactory to each party specifying the terms
and conditions upon which Seller will so act as Buyer's
agent. Buyer and Seller agree to use their best efforts
to list all Leases on Schedule 9.1.9 and Material Contracts
on Schedule 9.1.12(a) which are to be assigned to Buyer;
however, failure to list a Lease(s), Material Contract(s)
or Contract(s) shall not negate the general assignment of
said Lease(s), Material Contract(s) or Contract(s)
pertaining to the Purchased Property.
5.4 Consents. Promptly after the date of this
________
Agreement, the parties shall use their best efforts to
obtain (i) the FCC's consent to the transfer of the FCC
Licenses (as listed in Schedule 9.1.16) from Seller to
Buyer, (ii) the FCC waivers set forth on Schedule 5.4
(all such consents or waivers are collectively referred
to as the FCC Consents), and (iii) the consents necessary
to transfer the Other Licenses.
-18-
5.5 HSR Act Review. Within thirty (30) business days
______________
after the date of this Agreement, the parties will make
such filings, at Buyer's sole cost and expense, as may be
required by the HSR Act with respect to the Sale.
Thereafter, the parties will file as promptly as practicable
any supplemental information that may be requested by the
U.S. Federal Trade Commission or the U.S. Department of
Justice pursuant to the HSR Act. The parties agree to
cooperate in seeking early termination of the waiting
periods under the HSR Act.
ARTICLE 6. PRECLOSING COVENANTS
6.1 Investigation by Buyer. Prior to the Closing,
______________________
upon reasonable notice from Buyer to Seller given in
accordance with this Agreement and subject to approval
by Seller's appointed representative, Seller will afford
to the authorized representatives of Buyer reasonable
access during normal business hours to the books and
records relating to the Purchased Property (including,
without limitation, relevant tax information)and to
the personal and real property comprising the Purchased
Property, so as to afford Buyer the opportunity to make
such review, examination and investigation of the
Business and the Purchased Property as Buyer may desire
to make; provided, however, that all environmental
sampling or other testing shall be performed in
accordance with Section 6.1.1 and Section 14.1 herein.
Buyer will be permitted to make extracts from or copies
of such books and records as may be reasonably necessary.
Buyer will not contact any employee, customer or supplier
of Seller as to this Agreement or the matters involved
herein without the prior written approval of Seller.
Prior to the Closing, Seller will furnish such
financial and operating
-19-
data and other information pertaining to the Business as
Buyer may reasonably request; provided, however, that
nothing herein will obligate Seller to take actions that
would unreasonably disrupt the normal course of the
business of Seller or violate the terms of any applicable
Law or any contract to which Seller is a party or to
which any of its assets is subject. Any information or
document provided to Buyer or acquired by Buyer during this
investigation shall be deemed "Evaluation Material as that
term is defined in the Confidentiality Agreement and shall
be subject in all cases to the terms of the
Confidentiality Agreement.
6.1.1 Environmental Assessment. Within thirty
________________________
(30) days from the date of this Agreement, Buyer may
conduct an environmental audit. Such environmental audit
may include but not be limited to (i) compliance with
Environmental Requirements; (ii) any proceeding or
investigation by any governmental authority evaluating
whether any remedial work is needed to respond to a
release of any hazardous substance; (iii) whether any
leaking is occurring or has occurred from underground
storage tanks or above ground storage tanks ("UST's")
and if such UST's are in compliance with all Environmental
Requirements; and whether any of the Purchased Property
is constructed with or contains asbestos-containing
material and if so the location and condition of such
material. Buyer shall cause the independent environmental
consultant to issue within one hundred and twenty (120)
days of said engagement a report regarding the
environmental audit and provide a copy to Seller. The
environmental audit shall be conducted as contemplated
in Section 14.1.
6.2 Operation of the Business.
_________________________
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6.2.1 Preservation of Business. Except with
________________________
the prior consent of Buyer, from the date of this Agreement
until the Closing Date, Seller shall:
(a) Conduct the Business in the ordinary
course in accordance with prudent business judgment and
consistent with past practice and policy and shall (i)
preserve the Business as an ongoing business, (ii) keep
available to the Business its services and the services of
its Affiliates to the same extent as such were generally
available throughout the calendar year 19__ and are
available on the date hereof, (iii) not take any action
that would jeopardize any material and beneficial
contractual relationships with persons having business
dealings with the Business, and (iv) preserve all of the
Business' tariffs, certificates, licenses, authorizations
and other rights;
(b) Conduct the Business in
substantially the same manner as it is presently being
conducted, and, with respect to the Business, refrain from
entering into any material transaction or contract other
than in the ordinary course of business or making any
material change in its methods of management, marketing,
accounting or operations;
(c) Not institute any proceeding with
respect to, or otherwise change, amend or supplement any
of its tariffs or make any other filings with the Michigan
Public Service Commission except in the ordinary course of
business and except as disclosed on Schedule 9.1.16;
(d) Maintain the Purchased Property
in good repair, order and condition, reasonable wear
and use excepted.
-21-
6.2.2 No Material Changes. Except as
___________________
contemplated by this Agreement or as otherwise consented
to by Buyer, prior to the Closing, Seller will not:
(a) Make any material change in the
general nature of the Business;
(b) Sell, lease or dispose of, or make
any contract for the sale, lease or disposition of any
Purchased Property other than in the ordinary course
of business;
(c) Materially increase the benefit
provided under any plans concerning employee benefits
or materially increase the general rates of compensation
of its Employees, except (i) as required by Law, (ii)
pursuant to any Contract (iii) in the ordinary course of
business of Seller, or (iv) as listed or described on
Schedule 6.2.2(c);
(d) Enter into any new written
employment agreement, or union agreement with, or
commitment to, the Employees (including any new commitment
to pay retirement or other benefits or other amendments to
Seller's retirement plans);
(e) Maintain the books and records of
the Business other than in accordance with prior practice,
except as mandated by the FCC, required by GAAP or as
disclosed on Schedule 6.2.2(e); or
(f) Make any commitment to take any
actions prohibited by the provisions of this Section 6.2.2.
-22-
6.3 Satisfaction of Conditions. Without limiting
__________________________
the generality or effect of any provision of Article 7, the
parties will use their best efforts to satisfy promptly all
conditions required to be satisfied prior to the Closing.
6.4 Notification as to Certain Matters. Each party
__________________________________
will promptly notify the other party of any information of
which it becomes aware on or before the Closing Date that
would cause any representation or warranty of such other
party contained in this Agreement not to be true and correct
as of the date on which it was made or as of the Closing Date.
ARTICLE 7. CONDITIONS PRECEDENT TO THE CLOSING
7.1 Conditions Precedent to Obligations of Buyer. The
____________________________________________
obligations of Buyer to consummate the Sale shall be subject
to the satisfaction, at or prior to the Closing, of each of
the following conditions, any one or more of which may be
waived at the option of Buyer:
7.1.1 No Misrepresentation or Breach of Covenants
___________________________________________
and Warranties. There shall have been no breach by Seller of
______________
any of its covenants to be performed in whole or in part prior to the
Closing, except for any breach that would not have a
material adverse effect on the Business, and the
representations and warranties of Seller in
Section 9.1 shall be true and correct as of the Closing,
except for such representations or warranties that are made
expressly as of some other date, which shall be true and
correct as of such other date, and, in each case, except to
the extent that the facts that caused such representations
and warranties not to be true and correct do not have a
material adverse effect on the Business; and Seller shall have
-23-
delivered to Buyer a certificate ("Seller's Closing
Certificate") in substantially the form attached as
Schedule 7.1.1, dated the Closing Date and signed by
Seller, certifying each of the foregoing, or specifying
those respects in which such covenants have not been
performed or such representations and warranties are not
true and correct (in which event, if the Closing occurs,
any claim with respect to matters so specified shall
be waived by Buyer).
7.1.2 Documents. Seller shall have delivered
_________
to Buyer all documents required by Section 8.2.
7.1.3 No Pending Litigation. There shall not
_____________________
be any litigation or other proceeding pending or threatened
to restrain or invalidate any of the transactions
contemplated hereby.
7.1.4 No Legal Obstruction. If a filing is
____________________
required under the HSR Act, all required waiting periods
under the HSR Act shall have expired or been terminated,
each of the required Debtholder Consents shall have been
obtained, and the required Regulatory Approval and FCC
Consents shall have been obtained free of any special
terms, conditions or restrictions that are unacceptable
to Buyer based upon good faith business concerns that
are not commercially unreasonable (other than any
such approvals or consents which, if not obtained, would
not have a material adverse effect on the Business).
For purposes of this Agreement, all such approvals and
consents shall be deemed to have been obtained upon the
granting thereof, regardless of whether any appeals
period has expired. In addition, there shall not have
been entered a preliminary or permanent injunction,
temporary restraining order or other judicial or
-24-
administrative order or decree in any jurisdiction, the
effect of which prohibits the Closing.
7.1.5 Material Adverse Changes. There shall have
________________________
been no material adverse changes to the Purchased Property
or results of operations of the Business, and Seller shall
not have suffered any material loss or damage to the
Purchased Property, whether or not insured, that would
materially affect or impair its ability to conduct the Business.
7.1.6 Real Estate Transfers. Seller shall have
_____________________
complied with Section 11.13 with respect to its Real
Property to be transferred to Buyer.
7.2 Conditions Precedent to Obligations of Seller.
_____________________________________________
The obligations of Seller to consummate the transactions
contemplated by this Agreement shall be subject to the
satisfaction, at or prior to the Closing, of each of the
following conditions, any one or more of which may be
waived at the option of Seller:
7.2.1 No Misrepresentation or Breach of Covenants
___________________________________________
and Warranties. There shall have been no material breach by
______________
Buyer of any of its covenants to be performed in whole or
in part prior to the Closing, and the representations and
warranties of Buyer in Section 9.2 shall be true and
correct in all material respects as of the Closing,
except for representations or warranties made expressly
as of some other date, which shall be true and correct in
all material respects as of such other date, and Buyer
shall have delivered to Seller a certificate ("Buyer's
Closing Certificate") in substantially the form attached
as Schedule 7.2.1, dated the Closing Date and signed
by one of its Executive Officers, certifying each of the
foregoing or specifying those respects in which such
covenants have not been performed or such representations
-25-
and warranties are not true and correct (in which event,
if the Closing occurs, any claim with respect to matters
so specified shall be waived by Seller).
7.2.2 Documents. Buyer shall have delivered
_________
to Seller all documents required by Section 8.3.
7.2.3 Purchase Price. Buyer shall have
______________
delivered to Seller, in the manner specified in
Section 3.1, the Purchase Price (less the Deposit).
7.2.4 No Legal Obstruction. If a filing is
____________________
required under the HSR Act, all required waiting periods
under the HSR Act shall have expired or been terminated,
each of the required Debtholder Consents shall have been
obtained, and the required Regulatory Approval and FCC
Consents shall have been obtained free of any special
terms, conditions or restrictions that are unacceptable
to Seller based upon good faith business concerns that
are not commercially unreasonable (other than any such
approvals or consents which, if not obtained, would not
have a material adverse effect on the Business). For
purposes of this Agreement, all such approvals and
consents shall be deemed to have been obtained upon the
granting thereof, regardless of whether any appeals
period has expired. In addition, there shall not have
been entered a preliminary or permanent injunction,
temporary restraining order or other judicial or
administrative order or decree in any jurisdiction,
the effect of which prohibits the Closing.
ARTICLE 8. THE CLOSING
8.1 The Closing. Subject to the terms and conditions
___________
of this Agreement, the closing of the Sale (the "Closing")
shall be held at 9 A.M. local time at the offices of
-26-
GTE Telephone Operations at 000 Xxxxxx Xxxxx, Xxxxxx,
Xxxxx 00000, on the date agreed upon by the parties,
provided such date shall be (i) the last business day
of the month, and (ii) at least thirty (30) days, but
not more than ninety (90) days, or as mutually agreed
upon between the Buyer and Seller, after the date
Seller notifies Buyer in writing of its determination
that all required Regulatory Approvals, Debtholder
Consents and FCC Consents have been obtained, or at
such other time and place as the parties may agree (the
"CLOSING Date"). Such Closing shall be deemed to have
occurred as of 11:59 P.M. on the last calendar day of
said month.
8.2 Seller's Obligations at Closing. At the Closing,
_______________________________
Seller shall deliver to Buyer the following documents:
(a) Bills of sale, warranty deeds, assignments
and other good and sufficient instruments of transfer
(including, without limitation, vehicle titles) to
transfer title or its interest in the Purchased
Property to Buyer,
(b) A legal opinion from Xxxxxxx X. Xxxxxx,
Vice President and General Counsel of GTE Service
Corporation, as counsel for Seller, dated as of the
Closing Date and in the form of Schedule 8.2(b);
(c) Seller's Closing Certificate;
(d) Instruments of assignment or, to the extent
set forth in Section 5.3, subleases for the Leases;
(e) Mortgage satisfactions, UCC Form 3 Termination
Statements and other instruments necessary to remove, release
and terminate all security interests held by the Bondholders
or any other debtholder on the Purchased Property; and
-27-
(f) All of the documents and papers required of
Seller as conditions to Closing, including without limitation,
the Regulatory Approvals, Debtholder Consents and FCC Consents.
8.3 Buyer's Obligations at Closing. At the Closing,
______________________________
Buyer shall deliver to Seller the following:
(a) The Purchase Price (less the Deposit), in the
manner specified in Section 3.1.
(b) A legal opinion from Xxxxxxx Xxxxxxx, Buyer's
Corporate Counsel, dated as of the Closing Date and in the
form of Schedule 8.3(b).
(c) Buyer's Closing Certificate.
ARTICLE 9. REPRESENTATIONS AND WARRANTIES
9.1 Representations and Warranties of Seller. Seller
________________________________________
represents and warrants to Buyer as follows:
9.1.1 Authorization and Effect of Agreement. Seller
_____________________________________
has the requisite corporate power and authority to
execute and deliver this Agreement and to fulfill its
obligations under this Agreement. The execution and
delivery by Seller of this Agreement and the fulfillment
of its obligations under this Agreement have been duly
authorized by all necessary corporate action on the part
of Seller. This Agreement has been duly executed and
delivered by Seller and, assuming the due execution and
delivery of this Agreement by Buyer, constitutes a valid
and binding obligation of Seller.
9.1.2 No Restrictions Against Sale of the
___________________________________
Purchased Property. The execution and delivery of this
__________________
Agreement by Seller does not, and the fulfillment by
-28-
Seller of its obligations under this Agreement will not
conflict with or violate any provision of its certificate
of incorporation or bylaws or, subject to obtaining the
approvals and consents referred to in Article 5, conflict
with, violate or result in the breach of any provision
of any Material Contract other than any such conflict,
violation or breach that would not have a material
adverse effect on the Business or on the Purchased Property.
9.1.3 Consents and Approvals of Governmental
______________________________________
Authorities. No consent, approval, order or authorization
___________
of, or registration, declaration or filing with, any court
or governmental agency, authority or instrumentality
("Governmental Authority") is required to be obtained or
made by or with respect to Seller or in connection with
the execution and delivery of this Agreement by Seller
or the fulfillment by Seller of its obligations under this
Agreement, except (i) the filings and approvals described
in Article 5, (ii) as described in Schedule 9.1.3, and
(iii) such of the foregoing, which if not obtained or
made would not have a material adverse effect on the
Business or the Purchased Property.
9.1.4 No Violation of Law, Except as indicated in
___________________
Schedule 9.1.4, the execution and delivery of this
Agreement and the fulfillment by Seller of its
obligations under this Agreement will not violate any
applicable statute, ordinance, rule, regulation or common
law obligation (collectively, "Law"), except where such
violation would not have a material adverse effect on the
Business or the Purchased Property.
9.1.5 Corporate Organization. Seller is a
______________________
corporation duly organized, validly existing and in
good standing under the laws of the state of Wisconsin
and is duly qualified to conduct business in Michigan;
it has full power and authority, corporate
-29-
and otherwise, to own its properties and to carry on
the Business as it is now being conducted in Michigan
and to own, or hold under lease the Purchased Property;
it holds valid licenses, permits or other operating
authority adequate for the conduct of the Business and
no such license, permit or other operating authority is
presently the subject of any dispute which, if resolved
adversely to Seller, would have a material adverse effect
on the Business.
9.1.6 Brokers. Seller has not paid or become
_______
obligated to pay any fee or commission to any broker,
finder, investment banker or other intermediary in
connection with the transactions contemplated by this
Agreement in such a manner as to give rise to a valid
claim against Buyer for any broker's or finder's fees
or similar fees or expenses.
9.1.7 Assumed Liabilities. Seller is not in
___________________
default with respect to any of its pre-Closing liabilities
that will become Buyer's Assumed Liabilities at Closing or
the performance, observance or fulfillment of any covenant
or condition relating thereto, and no event has occurred
and is continuing that constitutes a breach or default
thereunder or that would constitute such a breach or
default with the giving of notice or lapse of time, or both.
9.1.8 Title to Purchased Property. Seller
___________________________
represents that the only creditors that have a material
security interest, lien or other interest in or
encumbrances on any of the Purchased Property are the
Bondholders listed on Schedule 9.1.8-1 (the "Bondholders").
Set forth on Schedule 9.1.8-2 is the address and a
general description of each item of Real Property
included in the Purchased Property. Seller has title to
all of the Purchased Property (except for the Real
Property Interests or other interests that
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are not interests in fee), free and clear of all liens,
charges or encumbrances January 14, 1997 of any kind,
except for (i) the liens and encumbrances shown and
disclosed on Schedule 9.1.8-2, (ii) current real and
personal property taxes and other statutory liens
covering amounts not yet due and payable, and (iii)
such other imperfections of title and encumbrances,
if any, as do not interfere in any material respect
with the present use of the item of Purchased Property
to which such imperfection or encumbrance relates. No
condemnation proceeding is pending or, to the knowledge
of Seller, threatened with respect to any part of the
Purchased Property.
9.1.9 Leases. Seller has set forth on
______
Schedule 9.1.9 a list of all the Leases. Each of the
Leases is enforceable in accordance with its terms, and
except as otherwise disclosed in Schedule 9.1.9, there is
not under any Lease any material default or a material
breach of covenant by Seller.
9.1.10 Tangible Assets. All of the tangible
_______________
Purchased Property is in substantially good operating
condition and repair, normal wear and tear excepted.
Except as set forth on Schedule 9.1.10, Seller has not
received any written notice within the past twelve (12)
months of a violation of any ordinances, regulations or
building, zoning and other similar laws with respect to
such assets that would have a material adverse effect
on the Business. EXCEPT AS EXPRESSLY PROVIDED IN THIS
SECTION 9.1.10, SELLER MAKES NO REPRESENTATIONS OR
WARRANTIES, EXPRESS OR IMPLIED, AS TO THE CONDITION OR
FITNESS OF THE TANGIBLE PURCHASED PROPERTY AND HEREBY
DISCLAIMS ANY WARRANTY OF MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE.
-31-
9.1.11 No Adverse Change. Except as disclosed
_________________
in Schedule 9.1.11, since December 31, 1995, there has
not been (i) any material adverse change in the Business,
other than changes in the ordinary course of business or
resulting from general economic conditions or industry wide
developments not reasonably within Sellers control; (ii)
any damage, destruction or loss that would have a material
adverse effect on the Business; (iii) any increase in
compensation payable or to become payable by Seller to
any of its Employees or agents, other than normal merit
or promotional increases; or (iv) any amendment or
termination by Seller of any Material Contract, agreement
or license except (x) any amendment or termination in
the ordinary course of business, (y) any termination of
licenses or other rights to use any Intellectual Property
(including, but not limited to, any rights in respect of
Marks currently used in the Business) to the extent that
such licenses or other rights differ in any respect from
those to be granted to Buyer pursuant to Section 11.1.1,
and (z) any amendment or termination described on
Schedule 9.1.11.
9.1.12 Contracts. Except for the instruments
_________
specifically described in Schedule 9.1.12(a) (the
"Material Contracts"), Seller is not a party to or
subject to any of the following contracts affecting the
Business: (i) any written employment contract with any
employee; (ii) any plan, contract or arrangement providing
for bonuses, pensions, options, deferred compensation,
retirement payments, profit sharing, or the like; (iii)
any agreement with any labor union; (iv) any agreement
for the purchase or disposition of any material, equipment,
supplies, inventory or service, except individual purchase
orders and contracts in amounts less than twenty-five
thousand dollars ($25,000); (v) any other agreements
which are to be assigned not of the type covered
-32-
by any of the foregoing items of this Section 9.1.12
requiring payments by Seller in excess of twenty-five
thousand dollars ($25,000) per annum on or after the
Closing Date. Seller has delivered to Buyer true and
correct copies of all agreements and instruments listed
in Schedule 9.1.12(a). Seller is not in default in the
performance of any term or condition contained in any
Contract, except for any default that would not have a
material adverse effect on the Business. Material
Contracts do not include the contracts shown on
Schedule 9.1.12(b), which lists (i) all Contracts for
the provision of telephone service at public pay
telephone locations and (ii) all other written Contracts
(except for agreements with subscribers or customers that
did not involve, during 1995, aggregate payments to Seller
of more than twenty-five thousand dollars ($25,0001).
Seller shall not be required to obtain the consent
of any party to the Contracts shown on Schedule 9.1.12(b)
but Seller shall assign all its interest in such Contracts
to Buyer.
9.1.13 Insurance. The Purchased Property of
_________
an insurable nature and of a character usually insured
by companies carrying on similar businesses is insured
under insurance policies or self insured in such amounts
and against such losses or casualties as is (i) usual
in such companies and (ii) required under any of the
Contracts or Leases. On the Closing Date, the coverage
under the insurance policies and programs applicable to
the Purchased Property will be terminated, and Buyer
will be responsible for providing all insurance coverage
for the Purchased Property. Following the Closing,
Seller shall be responsible for and shall pay any
additional premiums that might be required by an
insurance company for insurance coverage prior to the
Closing relating to the Purchased Property and shall be
entitled to any refunds or dividends due from such
companies relating to such coverage. All Claims that
relate to the operation
-33-
of the Purchased Property prior to the Closing shall
remain the sole responsibility of Seller.
9.1.14 Taxes. Except as disclosed on Schedule
_____
9.1.14, (i) all Tax Returns required to be filed by Seller
on or before the Closing Date with respect to the Business
or the Purchased Property have or will have been filed, and
all taxes shown as due and payable on such Tax Returns have
been or will be paid by Seller when required by law; (ii) no
deficiencies for any taxes, assessments or other governmental
charges have been asserted in writing or assessed against
Seller with respect to the Business that remain unpaid and
that individually or in the aggregate are material to the
Business; (iii) Seller has withheld all required federal,
state and local payroll taxes and has remitted all amounts
required to be remitted to the appropriate taxing
authorities; (iv) there are no tax liens upon any of the
Purchased Property except for statutory liens covering taxes
not yet due and payable; (v) none of the Purchased Property
is tax exempt use property within the meaning of Section
168(h) of the IRC and none of the Purchased Property is
property that is or will be required to be treated as being
owned by another person pursuant to the provisions of
Section 168(f(8) of the Internal Revenue Code of 1954, as
amended and in effect immediately prior to the enactment
of the Tax Reform Act of 1986; and (vi) Seller is not a
"foreign person" within the meaning of Section 1445(b)(2)
of the [RC and shall provide an appropriate affidavit for
purposes of Section 1445(b)(2) of the IRC.
9.1.15 No Material Claims. Except as disclosed
__________________
in Schedule 9.1.15 or with respect to Taxes, there are no
claims, actions, lawsuits or legal proceedings pending, or,
to the knowledge of Seller, threatened against or affecting
Seller or its
-34-
properties that in Seller's opinion, if determined
adversely to Seller, would reasonably be expected to
have a material adverse effect on the Business.
9.1.16 Tariffs: FCC Licenses.
_____________________
(a) The regulatory tariffs applicable
to the Business stand in full force and effect on the date
of this Agreement in accordance with all terms, and there
is no outstanding notice of cancellation or termination or,
to Seller's knowledge, any threatened cancellation or
termination in connection therewith, nor is the Seller
subject to any restrictions or conditions applicable to
its regulatory tariffs that limit or would limit the
operation of the Business (other than restrictions or
conditions generally applicable to tariffs of that type).
Each such tariff has been duly and validly approved by
Seller's regulatory agency. Seller is not in material
default under the terms and conditions of any such
tariff, and there is no basis for any claim of default
by Seller in any material respect under any such tariff.
Except as disclosed on Schedule 9.1.16, there are no
applications by Seller or complaints or petitions by
others or proceedings pending or threatened before the
state regulatory authority relating to the Business or
its operations or the regulatory tariffs. To the
knowledge of Seller, there are no material violations
by subscribers or others under any such tariff. A true
and correct copy of each tariff applicable to the
Business has been delivered to Buyer.
(b) Listed on Schedule 9.1.16 are
the FCC Licenses held by Seller and used in the
operation of the Business. Each such FCC License is in
full force and effect on the date of this Agreement in
accordance with its terms, and there is no outstanding
notice of cancellation or termination or, to Seller's
knowledge, any threatened cancellation or termination
in connection therewith, nor are any of such FCC
-35-
Licenses subject to any restrictions or conditions that
limit the operation of the Business (other than restrictions
or conditions generally applicable to licenses of that type).
Subject to the Communications Act of 1934, as amended, and
the regulations thereunder, the FCC Licenses are free from
all security interests, liens, claims, or encumbrances of
any nature whatsoever. There are no applications by Seller
or complaints or petitions by others or proceedings pending
or threatened before the FCC relating to the Business or the
FCC Licenses that, in Seller's opinion, would reasonably be
expected to have a material adverse impact on the Business.
9.1.17 Employee Matters.
________________
(a) Schedule 9.1.17(a) lists (and
identifies the sponsor of) each material Employee Pension
Benefit Plan," as that term is defined in Section 3(2)
of ERISA, each material "Employee Welfare Benefit Plan,"
as that term is defined in Section 3(l) of ERISA (such
plans being hereinafter referred to collectively as the
'ERISA Plans), and each other material retirement, pension,
profit-sharing, money purchase, deferred compensation,
incentive compensation, bonus, stock option, stock
purchase, severance pay, unemployment benefit, vacation
pay, savings, medical, dental, post-retirement medical,
accident, disability, weekly income, salary continuation,
health, life or other insurance, fringe benefit, or other
employee benefit plan, program, agreement, or arrangement
maintained or contributed to by Seller or its Affiliates
in respect of or for the benefit of any employee of Seller
who is to be employed by Buyer in accordance with Article
12 ("Employee") or former employee, excluding any such
plan, program, agreement, or arrangement maintained or
contributed to solely in respect of or for the benefit
of Employees or former employees employed or formerly
-36-
employed by Seller outside of the United States, as of
the date hereof (collectively, together with the EISA
Plans, referred to hereinafter as the "Plans").
Schedule 9.1.17(a) also includes a list of each
material written employment, severance, termination or
similar-type agreement between Seller and its Affiliates
and any Employee (the "Employment Agreements"). Except
as otherwise disclosed on Schedule 9.1.17(a), the
execution and delivery of this Agreement by Seller
and the performance of this Agreement by Seller will
not directly result now or at any time in the future
in (i) the payment to any Employee of any severance,
termination, or similar-type payments or benefits or
(ii) any "parachute payment" (as such term is defined
in Section 28OG of the IRC) being made to any Employee.
(b) Except as set forth on
Schedule 9.1.17(b):
(i) Neither Seller nor any of
its Affiliates, any of the ERISA Plans, any trust created
thereunder, or any trustee or administrator thereof, has
engaged in any transaction as a result of which Seller
could be subject to any material liability pursuant to
Section 409 of ERISA or to either a civil penalty assessed
pursuant to Section 502(i) of ERISA or a tax imposed
pursuant to Section 4975 of the IRC; and
(ii) Since the effective date of
ERISA, no material liability under Title IV of ERISA has
been incurred or is reasonably expected to be incurred
by Seller (other than liability for premiums due to the
PBGC), unless such liability has been, or prior to the
Closing Date will be, satisfied in full.
(c) Except as set forth on
Schedule 9.1.17(c), with respect to the ERISA Plans
other than those ERISA Plans identified on
Schedule 9.1.17(a) as "multiemployer plans":
-37-
(i) the PBGC has not instituted
proceedings to terminate any Plan that is subject to
Title IV of ERISA (the "Retirement Plans");
(ii) none of the ERISA Plans has
incurred an "accumulated funding deficiency" (as defined
in Section 302 of ERISA and Section 412 of the IRC),
whether or not waived, as of the last day of the most
recent fiscal year of each of the ERISA Plans ended prior
to the date of this Agreement;
(iii) each of the ERISA Plans has been
operated and administered in all material respects in
accordance with its provisions and with all applicable laws;
(iv) each of the ERISA Plans that is
intended to be "qualified" within the meaning of
Section 401(a) of the IRC and, to the extent applicable,
Section 401(k) of the IRC, has been determined by the IRS
to be so qualified, and nothing has occurred since the date
of the most recent such determination (other than the
effective date of certain amendments to the IRC, the remedial
amendment period for which has not yet expired) that would
adversely affect the qualified status of any of such ERISA
Plans; and
(v) there are no pending material claims
by or on behalf of any of the ERISA Plans, by any employee
or beneficiary covered under any such ERISA Plan, or otherwise
Involving any such ERISA Plan (other than routine claims for
benefits and routine expenses).
(d) Except as set forth on Schedule 9.1.17(d),
none of the ERISA Plans is a "multiemployer plan," as that
term is defined in Section 3(37) of ERISA, and with
respect to any such multiemployer plans (as so defined)
listed in
-38-
Schedule 9.1.17(d), Seller has not made or incurred a
"complete withdrawal" or a "partial withdrawal" as such
terms are respectively defined in Sections 4203 and 4205
of ERISA that would result in the incurrence of a material
liability by Seller.
(e) Except as set forth on Schedule 91.17(e),
(i) none of the Employees are represented by a labor union
or labor organization and (ii) Seller is not subject to any
collective bargaining agreement covering any Employee. There
are currently no strikes, slowdowns, work stoppages or
lockouts by or with respect to any Employee covered by
collective bargaining agreements. Except as set forth on
Schedule 9.1.17(e), to the best knowledge of Seller,
during the twelve (12) months preceding the date of this
Agreement there have not been any union organizational
campaigns by or directed at Employees.
(f) Seller will make available to Buyer,
prior to the Closing Date, a list of those Employees that
Seller believes to have participated in the health or
dependent care reimbursement accounts of Seller, together
with the elections made prior to the Closing Date with
respect to such accounts through the Closing Date.
9.1.18 Schedules of Telephone Plant. Seller has
____________________________
set forth on Schedule 9.1.18 true and correct copies of schedules
of its Michigan regulated net Telephone Plant as of
December 31, 1995.
9.1.19 Access Lines and Minutes of Use. Seller has set
_______________________________
forth in Schedule 9.1.19 true and correct copies of schedules of
the number of access lines as of December 31, 1995, and minutes of
use for the 10-month period ending October 31, 1995, associated
with the Purchased Property.
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9.2 Representations and Warranties of Buyer. Buyer represents
_______________________________________
and warrants to Seller as follows:
9.2.1 Corporate Organization. Buyer is a corporation
______________________
duly organized, validly existing and in good standing under the laws
of the state of Michigan and has the requisite corporate power and
authority to own, lease or otherwise hold the assets owned, leased
or held by it.
9.2.2 Authorization and Effect of Agreement. Buyer has
_____________________________________
the requisite corporate power and authority to execute and deliver
this Agreement, to carry on the Business as presently conducted and
to fulfill all other obligations of Buyer under this Agreement.
The execution and delivery by Buyer of this Agreement and the
fulfillment by it of its obligations under this Agreement have
been duly authorized by all necessary corporate action on the
part of Buyer. Buyer has the requisite legal capacity to
purchase, own and hold the Purchased Property upon the
consummation of the Sale. This Agreement has been duly executed
and delivered by Buyer and, assuming the due execution and
delivery of this Agreement by Seller, constitutes a valid and
binding obligation of Buyer.
9.2.3 No Restrictions Against Purchase of the
_______________________________________
Purchased Properties. The execution and delivery of this
____________________
Agreement by Buyer do not, and the fulfillment by Buyer
of its obligations under this Agreement will not
conflict with, violate or result in the breach of
any provision of the certificate of incorporation or
bylaws of Buyer or, subject to obtaining the approvals
and consents referred to in Article 5, conflict with,
violate or result in the breach of any Contract to which
Buyer is a party. No material consent, approval, order or
authorization of, or registration, declaration or filing with,
-40-
any Governmental Authority is required to be obtained or made by
or with respect to Buyer in connection with the execution and
delivery of this Agreement by Buyer or the fulfillment by Buyer
of its obligations under this Agreement, except the filings
and approvals described in Article 5.
9.2.4 No Violation of Law. The execution and delivery of
___________________
this Agreement and the fulfillment by Buyer of its obligations
under this Agreement will not violate any Law.
9.2.5 Financial Capacity.
__________________
(a) Buyer has sufficient cash or other sources of
funds, to pay the Purchase Price in the manner specified in
Section 3.1 and all related fees and expenses. In addition, if
Buyer is relying upon any financing to be provided by third
parties in order to pay any part of the Purchase Price and
related fees and expenses, Buyer has delivered to Seller a true
and correct copy of a commitment letter from Buyer's financial
institution for such financing.
(b) Buyer has sufficient financial resources to
operate the Business after the Closing Date. Without limiting
the generality at the foregoing, Buyer has sufficient financial
resources to satisfy any applicable requirement relating to
financial capacity or capital imposed by any Governmental
Authority in any state in which the Business is conducted.
Buyer is solvent, is able to pay its debts as they become due,
and owns property that has both a fair value and a fair
saleable value in excess of the amount required to pay its
debts as they become due.
9.2.6 Brokers. Buyer has not paid or become
_______
obligated to pay any fee or commission to any broker,
finder, investment banker or other intermediary in
-41-
connection with the transactions contemplated by this
Agreement in such a manner as to give rise to a valid claim
against Seller for any broker's or finders fees or similar
fees or expenses.
9.2.7 Consents and Approvals of Governmental
______________________________________
Authority. Subject to Article 5 with respect to Regulatory
_________
Approval and FCC Consents, no consent, approval or
authorization of, or declaration, filing or registration
with, any Governmental Authority or regulatory authority
is required in connection with the execution, delivery and
performance of this Agreement by Buyer or the consummation
by Buyer of the transactions contemplated herein, except
for filings with the Federal Trade Commission and
Department of Justice pursuant to the HSR Act, if required.
ARTICLE 10. CONTINUING BUSINESS RELATIONSHIPS
10.1 Transition Agreement. The parties agree to cooperate
____________________
with each other to ensure that the transition of the ownership
of the Purchased Property proceeds with a minimum of disruption
to the services being provided to subscribers. The parties agree
that it may be necessary for Seller to assist Buyer in converting
Seller's systems and processes with respect to the Purchased
Property to Buyer's systems and processes and, until that
conversion is complete, Seller may be requested to provide some
basic customer services. If such services are necessary and
Seller agrees to provide the services, the parties shall
enter into separate agreements that will set forth the
services that Seller will provide to Buyer and the terms
and conditions for providing those services. Any such
agreements relating to the conversion of systems and processes
-42-
and relating to continuation of services (collectively
"Transition Services Agreements") shall be substantially in the
form as attached hereto as Schedule 10.1.
ARTICLE 11. ADDITIONAL COVENANTS OF THE PARTIES
11.1 Intellectual Property.
_____________________
11.1.1 No License. "Intellectual Property" means
__________
all inventions (whether patentable or not and whether or not such
inventions are described or claimed in any patent or patent
application), designs (useful or ornamental), and works subject
to copyright that may be embodied in, without exclusion,
invention disclosures, specifications, manuals, drawings, functional
or system block diagrams, flow charts, circuit diagrams, design
or user documentation, engineering notebooks, schematics, test
programs, documented procedures, documented processes, documented
flows, devices, software, or firmware, that relate to the
function, design, development, manufacture, testing, use,
operation, maintenance or repair of any product, apparatus,
article of manufacture, process, method or service.
"Intellectual Property" shall also include patents, patent
applications (including continuations, continuations-in-part,
divisions, reissues, reexamined patents and patent applications
and extensions thereof), copyrights (whether common law or
statutory, registered or unregistered), or trade secrets,
residing in the subject matter above. Buyer and Seller agree
and understand that except as expressly set forth in writing
in this agreement, Seller has granted no, and nothing shall
constitute or be construed as a, license or right to Seller
under any patent, copyright, trademark, trade secret or any
other intellectual property right now or hereafter owned,
obtained or licensable by Seller. Seller has set forth in
-43-
Schedule 11.1.1 true and correct statements of the Intellectual
Property which is associated with the Purchased Property and
will be assigned to Buyer.
11.1.2 Infringement.
____________
(a) Seller shall have no obligation to defend,
indemnify or hold harmless Buyer from any damages, costs or
expenses resulting from any obligation, proceeding or suit based
upon any claim that any activity, subsequent to the Closing Date,
engaged in by Buyer, a customer of Buyer's or anyone claiming
under Buyer constitutes direct or contributory infringement or
misuse of, or inducement to infringe, any intellectual property
right of any third party, except for that Intellectual Property
set forth in Schedule 11.1.1.
(b) Buyer shall defend, indemnify and hold
harmless Seller and its Affiliates from and against any and all
Indemnifiable Losses resulting from any obligation, proceeding or
suit based upon any claim alleging or asserting direct or
contributory infringement, or misuse or misappropriation of, or
inducement to infringe by Seller of any intellectual property
right of any third party, to the extent that such claim is
based on, or would not have arisen but for activity conducted
or engaged in, subsequent to the Closing Date, by Buyer, a
customer of Buyer's, or anyone claiming under Buyer, except for
that Intellectual Property set forth in Schedule 11.1.1.
11.1.3 Trademark Phaseout.
__________________
(a) Buyer acknowledges that Seller or its
Affiliates are the owners of certain trade names, trade dress,
trademarks, service marks, logos and related intangible property
(collectively, "Marks"), including, without limitation, the items
listed on Schedule 11.1.3 and Marks that quality as Excluded
Property under
-44-
Section 2.4(d). Buyer understands and agrees that
the Marks, or any right or license to the Marks,
are not being transferred pursuant to this Agreement.
Buyer acknowledges Seller's exclusive and proprietary rights
in the use of the Marks, and Buyer agrees that it shall not
use the Marks (or any names, marks or indicia confusingly
similar to the Marks) except as expressly set forth in this
Section 11.1.3. After the Closing, all Marks of Seller shall
be replaced by Buyer as soon as possible, but in no event
later than sixty (60) days after the Closing Date for items
with Marks affixed to them with a valid continuing use in
Buyer's conduct of the Business, including, without
limitation, buildings, vehicles, heavy equipment, hard hats.
tools, tool boxes, kits (safety and others), signs, manual
covers and notebooks. After the Closing, Buyer will not use,
and will destroy or deliver to Seller, all such items with
Marks affixed to them that have no valid continuing use in
Buyer's conduct of the Business, including items affecting
customer or employee relations or items that do not reflect
Buyer's true identity. Specific items to be destroyed or
returned include items with Marks affixed to them including,
without limitation, giveaways; order, purchase or materials
forms; requisitions; invoices; statements; time sheets/labor
reports; xxxx inserts; stationery; personalized note pads;
maps; organization charts; bulletins/releases; sales/price
literature; manuals or catalogs; report covers/folders;
program materials; and materials such as media contact
lists/cards. The sixty (60) day time period for replacement
of Marks affixed to telephone directories that were already
published or closed for publication at the Closing Date shall
be extended to the expiration date of such directories.
-45-
(b) Buyer recognizes the great value of
the goodwill associated with the Marks, and acknowledges that
the Marks and all rights therein and the goodwill pertaining
thereto belong exclusively to Seller and that the Marks have
a secondary meaning in the minds of the public.
(c) Buyer agrees that the conduct of the
Business after the Closing by Buyer using the Marks shall be
provided in accordance with all applicable federal, state and
local laws, and that the same shall not reflect adversely upon
the good name of Seller, and that the conduct of the Business
will be of a high standard and skill.
(d) Buyer acknowledges that its failure
to cease use of the Marks as provided in this Agreement, or its
improper use of the Marks, will result in immediate and
irreparable harm to Seller. Buyer acknowledges and admits that
there is no adequate remedy at law for such failure to terminate
use of the Marks, or for such improper use of the Marks. Buyer
agrees that in the event of such failure or improper use, Seller
shall be entitled to equitable relief by way of temporary
restraining order, or preliminary or permanent injunction, or
any other relief available under this Agreement.
11.1.4 Third Party Software. To the extent that
____________________
the transfer of Purchased Property by Seller to Buyer under
this Agreement results in the transfer of possession to
Buyer of software that at the Closing Date is not owned by
Seller, which software was rightfully used by Seller prior
to the Closing Date in the normal and ordinary operation of
the Business, then Seller does hereby assign to Buyer, and
Buyer accepts all rights and licenses to use such software
that Seller has the right to so assign without consent from,
or notice or payment of consideration to, any third party.
-46-
Buyer agrees that the acceptance by Buyer of such rights and
licenses includes the assumption by Buyer of obligations necessary
or incidental to the transfer of rights and licenses. Buyer
understands and agrees that except as provided above in this
Section 11.1.4, or as expressly provided elsewhere in this
Agreement or in another written agreement between Buyer and
Seller, no rights to use software are transferred to Buyer.
Buyer shall properly dispose of, and shall not use, any
software which Buyer acquires in connection with Purchased
Property and which, after the Closing Date, Buyer knows, or
reasonably should know, is not the subject of a license to
use that has been rightfully granted or transferred to Buyer.
11.2 Effect of Due Diligence and Related Matters. Buyer
___________________________________________
represents that it is a sophisticated entity that was advised
by knowledgeable counsel and financial advisors and, to the
extent it deemed necessary, other advisors in connection with
this Agreement and has conducted its own independent review
and evaluation of the Purchased Property. Accordingly, Buyer
covenants and agrees that (i) except for the representations
and warranties set forth in this Agreement, Buyer has not
relied and will not rely upon any document or written or oral
information furnished to or discovered by it or its
representatives, including, without limitation, any financial
data, (ii) there are no representations or warranties by or
on behalf of Seller or its Affiliates or representatives except
for those expressly set forth in this Agreement, and (iii) to
the fullest extent permitted by law, Buyer's rights and
obligations with respect to all of the foregoing matters will
be solely as set forth in this Agreement.
11.3 Confidentiality. Whether or not the Closing occurs,
_______________
the parties hereto and their respective officers, directors,
employees and representatives will comply with the
-47-
Confidentiality Agreement, the provisions of which are expressly
incorporated herein in their entirety by this reference.
11.4 Regulated Construction Projects and Budget. Seller has
__________________________________________
delivered to Buyer a summary of its expected construction and
other network plans ("Improvement Expenditures") through 1996
(which summary will be updated for 1997 if the Close Date extends
into 1997), which summary is attached as Schedule 11.4, and the
parties have agreed to the projected costs and the dollars to be
included in such Improvements. Seller agrees to use its best
efforts to substantially complete such plans within the projected
time schedules and such construction work shall be performed in
accordance with Seller's normal course of business and in
conformance with industry practices. All construction work that
is in progress on the Closing Date will be accounted for by
identifying and accruing all associated time reporting, material
and contractor costs, whether invoiced or not, through the
Closing Date in addition to the expenses already incurred
for Improvement Expenditures, all of which will be added on
a dollar for dollar basis to the Purchase Price. To the extent
that Seller recognizes a depreciation expense on the
Improvement Expenditures prior to the Closing Date, the
Purchase Price will be reduced by the amount of said
depreciation expense. After the Closing Date, the Buyer
shall be responsible for the completion of all projects in
progress and the costs associated with the completion of
those projects. If additional construction is required due
to unforseen circumstances or customer demand, Schedule 11.4
may be amended by Seller with the consent of Buyer, which
consent shall not be unreasonably withheld.
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11.5 Further Assurances. After the Closing, Seller will
__________________
furnish to Buyer such other instruments and information as Buyer
may reasonably request in order to convey to Buyer title to the
Purchased Property, to be delivered from time to time upon
Buyer's reasonable request.
11.6 Prorations. The following liabilities shall be
__________
prorated between Seller and Buyer: (i) utility charges
(which shall include, without limitation, water, sewer,
electricity, gas and other utility charges) with respect
to the Real Property, the property subject to the Leases
and customer owned equipment, (ii) rental charges (which
shall include, without limitation, rental charges and
other lease payments under the Leases), and (iii) real
and personal property taxes and local franchise fees or
taxes. With respect to measurement periods during which
the Closing Date occurs (all such periods of time being
hereinafter called "Proration Periods"), the liabilities
described in clauses (i) and (ii) of the preceding
sentence shall be apportioned between Seller and Buyer
as of the Closing Date, with Buyer bearing only the
expense thereof in the proportion that the number of days
remaining in the applicable Proration Period on and after
the Closing Date bears to the total number of days covered
by such Proration Period. Real and personal property taxes
shall be prorated between Buyer and Seller based on the
period the Purchased Property was owned by each respective
party during the fiscal period for which such taxes were
imposed by the taxing jurisdiction (as such fiscal period
is reflected on the xxxx rendered by such taxing
jurisdiction). Buyer and Seller shall pay or be reimbursed
for real and personal property taxes (including instances
in which such property taxes have been paid before the
Closing Date) prorated on this basis. If a payment on a
tax xxxx is due after the Closing, the party that is legally
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required to make such payment shall make such payment and
promptly forward an invoice to the other party for its pro
rata share, if any. If the other party does not pay the
invoice within thirty (30) calendar days of receipt, the
amount of such payment shall bear interest at the rate of
eight percent (8%) per annum. Similarly, all prepayments
made by Seller with respect to service or maintenance
agreements with third parties or license or other fees
payable to third parties shall be prorated on an appropriate
basis between Seller and Buyer.
11.7 Risk of Loss Prior to Closing. If any material
damage or destruction of any sort occurs prior to the
Closing to any of the tangible properties that constitute
the Purchased Property, Seller shall promptly notify Buyer
thereof (the "Casualty Notice"). If Seller or Buyer
reasonably estimates the cost to repair or replace such
damage or destruction will exceed One Million Two
Hundred Fifty Thousand dollars ($1,250,000), either
party may, by written notice to the other (the "Casualty
Termination Notice"), within thirty (30) days of the
date of delivery of the Casualty Notice, refuse to
consummate this Agreement, at which time this Agreement
shall terminate in all respects. Should such estimate
of damage or destruction not exceed One Million Two
Hundred Fifty Thousand dollars ($1,250,000) or such
Casualty Termination Notice not be made by either party,
Seller, within forty-five (45) days of the damage or
destruction, shall agree in writing, at its option,
either to (i) repair all of such damage or destruction
prior to Closing or (ii) reduce the Purchase Price by
the amount of all costs and expenses to be incurred for
the repair of the damage or destruction; provided, however,
that if the time periods pursuant to this Section continue
beyond the Closing Date,
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either Seller or Buyer may elect to Postpone the Closing until
the expiration of any such periods, which election shall be
binding upon all parties.
11.8 Cost Studies/NECA Matters.
_________________________
11.8.1 Prior to Closing. Seller agrees that, with
________________
respect to all toll revenues, settlements, pools, separations
studies or similar activities, Seller shall be responsible for
(and shall receive the benefit or suffer the burden of) any
adjustments to contributions, or receipt of funds, by Seller
resulting from any such activities that are related to the
conduct of the Business or the ownership or operation of the
Purchased Property prior to the Closing Date. Specifically,
this paragraph shall apply, but shall not be limited to, any
matters related to the National Exchange Carrier Association
("NECA") including the Universal Service Fund ("USF"), Long
Term Support ("LTS"), and Telecommunications Relay Services
funds.
11.8.2 From and After Closing.
______________________
(a) Buyer shall receive a pro rata.
share of USF funds received by Seller, under Seller's
algorithm, pursuant to FCC Rules and Regulations as stated
in Part 36.631, until such time as Buyer is permitted to
make its own filing in accordance with said FCC Rules and
Regulations, Part 36.611 or Part 36.612. The USF funds due
to Buyer shall be determined by calculating the difference
between the USF funds due to Seller prior to the Closing
and the USF funds that would be due to Seller after
excluding the investment and expenses associated with the
Purchased Property. The resulting Buyer's annual USF amount
shall be prorated in proportion to the number of months
remaining in the year from and after the Closing Date.
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(b) Notwithstanding the foregoing, Buyer's
right to receive a pro rata share of USF is conditioned upon
Buyer's payment, from and after the Closing Date, of a pro
rata share of the LTS funds owed by Seller until the next
prescribed FCC filing by all Local Exchange Carriers. Should
Buyer reenter the NECA common line pool at the time of Closing,
Seller will retain the LTS obligation until such time as NECA
submits a new LTS filing as part of the interstate
tariff-filing process. The LTS funds to be paid by Buyer to
Seller ("Buyer's LTS") shall be determined by prorating the
LTS obligation between Seller and Buyer based on the number
of access lines purchased by Buyer as compared to total
company access lines prior to the Closing. Buyer will have
the option to pay the full amount of Buyer's LTS to Seller at
Closing or monthly installments until the effective date of the
next prescribed interstate tariff filing.
11.9 Construction and Customer Deposits. Within thirty
__________________________________
(30) days after Closing, Seller agrees to transfer to Buyer the
customer deposits together with any interest accrued thereon
(collectively "Customer Deposits") and construction advances
and deposits ("Construction Advances") together with all of
Seller's obligations and rights to hold the Customer Deposits
and Construction Advances of the Business, up to the Closing
Date, and Buyer agrees to hold, disburse and retain such
deposits, advances and interest so delivered to it as if it
were Seller.
11.10 Excluded Contracts. Buyer and Seller will use
__________________
their best efforts to list on Schedule 11.10 all directories
contracts, billing and collection agreements, and other Contracts
that will not be assigned by Seller. Of the excluded Contracts
listed on Schedule 11.10, those that will require negotiation
of special provisions or a new agreement between Buyer
and third parties are indicated. Buyer's negotiation of a
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new agreement with any such third party shall not be a
condition precedent to Buyer's performance of Buyer's obligations
under this Agreement.
11.11 Access to Books and Records.
___________________________
(a) After the Closing, Seller will retain all Retained
Books and Records for a period of seven (7) years, or such longer
period as is required by applicable Law.
(b) After the Closing, upon reasonable notice, the
parties will give to the representatives, employees, counsel and
accountants of the other, access, during normal business hours,
to records relating to periods prior to or including the Closing,
and will permit such persons to examine and copy such records, in
each case to the extent reasonably requested by the other party
in connection with tax and financial reporting matters (including,
without limitation, any Tax Returns and related information),
audits, legal proceedings, governmental investigations and other
business purposes (including, without limitation, such financial
information and any receipts evidencing payment of taxes as may
be requested by Seller to substantiate any claim for tax credits
or refunds); provided, however, that nothing herein will
obligate any party to take actions that would unreasonably
disrupt the normal course of its business or violate the terms
of any Contract to which it is a party or to which it or any
of its assets is subject. Seller and Buyer will cooperate with
each other in the conduct of any Tax audit or similar
proceedings involving or otherwise relating to the Business
(or the income therefrom or assets thereof) with respect to
any Tax and each will execute and deliver such powers of
attorney and other documents as are necessary to carry out
the intent of this Section 11.11(b).
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11.12 Purchase Price Allocation. Buyer and Seller shall
_________________________
allocate the Purchase Price and the Assumed Liabilities to the
Purchased Property (the "Allocation") consistent with
Schedule 11.12. Buyer and Seller shall file and shall cause
their respective Affiliates to file all Tax Returns
(including, without limitation, those returns and forms
required under Section 1060 of the IRC) consistent with
Schedule 11.12, unless otherwise required because of a
change of applicable law.
11.13 Real Property Transfers. Within sixty (60) days
_______________________
of the date of this Agreement, Seller shall deliver to Buyer
copies of all existing title insurance policies covering
the Real Property. Thereafter, no later than sixty (60) days
before the Closing Date, Seller shall deliver (at its
expense) to Buyer a preliminary title binder (on a
standard form), issued by a title insurance company reasonably
acceptable to Buyer, with respect to all Real Property included
in the Purchased Property and in which Seller purports to own
fee title. Such title binders shall be reasonably
satisfactory to counsel, subject to the standard exceptions
set forth in the following sentence, for Buyer. Such title
binders shall reflect that, upon consummation of the sale
contemplated by this Agreement, Buyer will be vested with
good, fee simple, indefeasible and insurable title to such
Real Property, subject only to (i) inchoate liens for
current taxes and assessments not yet delinquent, (ii)
standard utility easements, covenants and restrictions of
record that do not individually or in the aggregate
materially interfere with the operation of the present
Business on the Real Property affected thereby, (iii)
existing zoning or similar laws or ordinances that do
not interfere with the operation of the Business and
(iv) leases (collectively, the "Permitted Exceptions").
If a preliminary title binder indicates an exception
other than a Permitted Exception, Seller
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shall, at its expense, cause such exception to be removed
on or before the Closing Date. With respect to each parcel
of Real Property covered by a preliminary title binder, the
amount of title insurance provided by Seller shall be the
real estate valuation amount shown on Seller's continuous
property records. Seller shall also deliver to Buyer (at
Seller's expense and on or prior to the Closing Date) a
certified current survey. By no later than forty-five (45)
days after the Closing Date, Seller shall deliver to Buyer
a final title insurance policy paid for by Seller covering
the Real Property included in the preliminary title binder.
11.14 Bulk Sales Laws. Seller and Buyer waive compliance
______________
with applicable laws under any version of Article 6 of the
Uniform Commercial Code adopted by any state or any similar
law relating to the sale of inventory, equipment or other
assets in bulk in connection with the sale of the
Purchased Property.
11.15 Prepaid Non-regulated Maintenance Agreements and
________________________________________________
Warranty Reserves. Within thirty (30) days following Closing,
_________________
Seller shall pay to Buyer an amount equal to the pro rata
portion of all prepaid but unearned revenues from Seller's
customers for all non-regulated maintenance agreements and
manufacturer warranties outstanding as of the Closing Date.
11.16 Non-regulated Construction Work in Progress.
___________________________________________
Seller has delivered to Buyer a summary of its nonregulated
activities, which summary is attached as Schedule 11.16
and will be updated to the Closing Date. All nonregulated
construction work from the date of the execution of this
Agreement through the Closing Date will be accounted for
by identifying and accruing all associated time reporting,
material and construction costs, whether invoiced
or not, through the Closing Date. Within 45 days
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following the Closing, Buyer shall pay to Seller an amount
equal to the expenditures by Seller for nonregulated
construction work in progress (net of advances) up to and
including Closing Date. After the Closing Date, the Buyer
shall be responsible for the completion of all nonregulated
construction work in progress and the costs associated with
completion of those projects. In the event the estimated
construction costs for the nonregulated construction exceeds
$25,000, Seller shall obtain the consent of the Buyer,
which consent shall not be unreasonably withheld.
11.17 Vehicle Registration. Buyer agrees to use its best
____________________
efforts to file promptly the appropriate vehicle title
applications and registrations to change the name of the
titled owner on each vehicle title certificate and change
the motor vehicle registration (with respect to license
plate information) on each vehicle being transferred to
Buyer from Seller pursuant to this Agreement. Buyer agrees
that it shall remove and destroy Seller's existing license
plates from all vehicles received upon the earlier of
receipt of new license plates or sixty (60) days
following Closing.
11.18 Telephone Directories Change Over. Within ninety
_________________________________
(90) days, but not earlier than thirty (30) days, following
the date of this Agreement, Buyer agrees to meet with Seller
for the purpose of mutually determining the method for changing
over to Buyer's directories for the Purchased Exchanges. Such
meeting(s) shall be held at Seller's address set forth in
Section 17.1 unless otherwise agreed by the parties.
ARTICLE 12. EMPLOYEES AND EMPLOYEE MATTERS
12.1 Employee Transfer Agreement. The parties have
___________________________
addressed the transfer of employees and employee benefits
matters in a separate agreement, entitled
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Employee Transfer Agreement, which is incorporated into
this Agreement as Schedule 12.1.
ARTICLE 13. INDEMNIFICATION
13.1 Survival of Representations, Warranties and Covenants.
_____________________________________________________
(a) The representations and warranties contained in
Sections 9.1.6 and 9.2.6 will survive the Closing and remain in
full force and effect indefinitely. Each of the other
representations and warranties contained in Article 9 will
terminate, without further action, on the date twelve (12) months
following the Closing Date, except for Section 9.1.10, which shall
terminate six (6) months following the Closing Date. Any claim
for indemnification with respect to any alleged breach of any
representation or warranty not asserted by notice given as
herein provided that specifically identifies a particular
breach and the underlying facts relating thereto, which notice
is given within the applicable period of survival for such
representation or warranty, may not be pursued and is irrevocably
waived after such time. Without limiting the generality or
effect of the foregoing, no claim for indemnification with
respect to any representation or warranty will be deemed to have
been properly made except to the extent it is based upon a
Third Party Claim made or brought, or to the extent of
Indemnifiable Losses actually incurred by an Indemnitee, prior
to the expiration of the survival period for such representation
or warranty.
(b) Unless a specified period is set forth in this
Agreement, in which event such specified period will control, the
covenants contained in this Article 13, and in Articles 10, 11, 12,
14, 16 and 17, will survive the Closing and remain in effect
-57-
indefinitely, or in the case of Section 11.14, will
survive for the applicable statute of limitations. All other
covenants contained in this Agreement will terminate, without
further action, upon the occurrence of the Closing and any
claim for an alleged breach of any such covenant may not be
pursued, and is irrevocably waived, upon the occurrence of
the Closing.
13.2 Limitations on Liability.
________________________
(a) For purposes of this Agreement, (i)
"Indemnification Payment" means any amount of Indemnifiable
Losses required to be paid pursuant to this Agreement, (ii)
"Indemnitee" means any person or entity entitled to
indemnification under this Agreement, (iii) "Indemnifying
Party" means any person or entity required to provide
indemnification under this Agreement, and (iv) "Indemnifiable
Losses" means any losses, liabilities, damages and expenses
and any claims, demands or suits by any person or entity,
including, without limitation, any Governmental Authority,
and costs and expenses actually incurred in connection with
any actions, suits, demands, assessments, judgments and
settlements and reasonable attorneys' fees and expenses,
in any such case (x) reduced by the amount of insurance
proceeds recovered from any person or entity and any tax
benefits to the Indemnitee as a result of the Indemnifiable
Losses involved and (y) provided that the underlying
liability or obligation is not the result of any action
taken or omitted to be taken by any Indemnitee. For
purposes of this 13.2(a), the amount of any tax benefits
to the Indemnitee shall be deemed to be equal to the
reduction in the federal, state and local income or
franchise taxes determined on the basis of the maximum
tax rates in effect for the taxable period when payment is
made by the Indemnifying Party (regardless of whether such
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reduction results in an actual reduction in the federal,
state or local income or franchise taxes of the Indemnitee).
(b) Notwithstanding anything to the contrary
contained in this Agreement, if the Closing occurs, (i) no
claim for indemnification may be asserted under Section 13.3(a)(i)
with respect to any matter discovered by or known to Buyer on
or before the Closing Date and (ii) no claim for indemnification
may be asserted under Section 13.3(b)(i) with respect to any
matter discovered by or known to Seller on or before
the Closing Date.
(c) As between Seller and any Affiliate of Seller,
on the one hand, and Buyer and any Affiliate of Buyer, on the
other hand, the rights and obligations set forth in this
Article 13 will be the exclusive rights and obligations
with respect to the liabilities and obligations referred to
in Section 13.3, and any breach of the representations,
warranties or covenants referred to in Section 13.3. Without
limiting the foregoing, as a material inducement to entering
into this Agreement, to the fullest extent permitted by law,
each of the parties waives any claim or cause of action that
it otherwise might assert, including, without limitation, under
the common law or federal or state securities, trade
regulation or other laws, by reason of the liabilities and
obligations, and any breach of the representations, warranties
or covenants referred to in Section 13.3, except for claims or
causes of action brought under and subject to the terms and
conditions of this Article 13.
(d) Notwithstanding any other provision of this
Agreement or of any applicable Law, no Indemnitee will be
entitled to make a claim against an Indemnifying Party under
Sections 13.3(a)(i) or 13.3(b)(i) until:
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(i) the aggregate amount of Indemnifiable
Losses incurred by the Indemnitee for any individual
occurrence giving rise to such Indemnifiable Losses exceeds
Twelve Thousand Five Hundred dollars ($12,500), in which event
(subject to the other provisions of this Section 13.2), such
Indemnitee may assert its right to indemnification for its
Indemnifiable Losses for that occurrence; and
(ii) the aggregate amount of claims that may
be asserted for such Indemnifiable Losses pursuant to
Section 13.2(d)(i) exceeds One Hundred Thousand dollars ($100,000),
but only to the extent such amount, if any, (a) exceeds One
Hundred Thousand dollars ($100,000) and (b) is less than the
amount set forth in Section 13.2(e).
(e) Notwithstanding any other provision of this
Agreement, the indemnification obligations of Seller under
Section 13.3(a)(i) (except with respect to indemnification for
inaccuracies of the representations contained in Sections 9.1.1
through 9.1.6) or the indemnification obligation of Buyer under
Section 13.3(b)(i) will not exceed the amount of Nine Hundred
Fifty Thousand dollars ($950,000) respectively, after subtracting
the floor amount specified in Section 13.2(d)(ii)(a).
(f) No indemnifying Party shall be liable to or
obligated to indemnify any Indemnitee hereunder for any
consequential, special, multiple, punitive or exemplary damages
including, but not limited to, damages arising from loss or
interruption of business, profits, business opportunities or
goodwill, loss of use of facilities, loss of capital, claims
of customers, or any cost or expense related thereto, except
to the extent such damages have been recovered by a third
person and are the
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subject of a Third Party Claim for which indemnification is
available under the express terms of this Section 13.
13.3 Indemnification.
_______________
(a) Subject to the other sections of this Article 13,
Seller will indemnify, defend and hold harmless Buyer and its
Affiliates, directors, officers, agents and representatives from
all Indemnifiable Losses relating to, resulting from or arising
out of (i) a breach by Seller of any of the representations and
warranties contained in Section 9.1 of this Agreement and (ii) a
breach by Seller of any covenant of Seller contained in this
Agreement, which covenant requires performance by Seller at or
after the Closing.
(b) Subject to the other sections of this Article 13,
Buyer will indemnify, defend and hold harmless Seller and its
Affiliates, directors, officers, agents and representatives from
all Indemnifiable Losses relating to, resulting from or arising
out of (i) a breach by Buyer of any of the representations or
warranties contained in Section 9.2 of this Agreement and (ii)
a breach by Buyer of any covenant of Buyer contained in this
Agreement, which covenant requires performance by Buyer at or
after the Closing.
(c) The indemnification obligations contained in
Article 14 with respect to Environmental Liabilities are to be
governed by Article 14 and are not limited or governed by the
provisions of this Article 13.
(d) Payments made under this Section 13.3 and
under Article 14 shall be treated by Buyer and Seller as
purchase price adjustments and Buyer and Seller shall file all
Tax Returns consistent with such treatment. Notwithstanding
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anything to the contrary contained herein, Buyer shall not be
indemnified or reimbursed for any tax consequences arising from
receipt of an indemnity payment including without limitation
any adjustments to the basis of any asset resulting from an
adjustment to the purchase price or any additional or reduced
taxes resulting from any such basis adjustment.
13.4 Defense of Claims.
_________________
(a) If any Indemnitee receives notice of the
assertion of any claim or of the commencement of any action
or proceeding by any entity that is not a party to this Agreement
or an Affiliate of such a party (a "Third Party Claim") against
such Indemnitee, with respect to which an Indemnifying Party is
obligated to provide indemnification under this Agreement, the
Indemnitee will give such Indemnifying Party reasonably prompt
written notice thereof, but in any event not later than ten (10)
calendar days after receipt of notice of such Third Party Claim;
provided, however, that the failure of the Indemnitee to notify
the Indemnifying Party shall only relieve the Indemnifying Party
from its obligation to indemnify the Indemnitee pursuant to this
Article 13 to the extent that the Indemnifying Party is
materially prejudiced by such failure (whether as a result of
the forfeiture of substantive rights or defenses or otherwise).
Upon receipt of notification of a Third Party Claim, the
Indemnifying Party shall be entitled, upon written notice to the
Indemnitee, to assume the investigation and defense thereof with
counsel reasonably satisfactory to the Indemnitee. Whether or
not the Indemnifying Party elects to assume the investigation
and defense of any Third Party Claim, the Indemnitee shall have
the right to employ separate counsel and to participate in the
investigation and defense thereof; provided, however, that the
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Indemnitee shall pay the fees and disbursements of such separate
counsel unless (i) the employment of such separate counsel has
been specifically authorized in writing by the Indemnifying Party,
(ii) the Indemnifying Party has failed to assume the defense of
such Third Party Claim within reasonable time after receipt of
notice thereof with counsel reasonably satisfactory to such
Indemnitee or (iii) the named parties to the proceeding in
which such claim, demand, action or cause of action has been
asserted include both the Indemnifying Party and such Indemnitee
and, in the reasonable judgment of counsel to such Indemnitee,
there exists one or more defenses that may be available to the
Indemnitee that are in conflict with those available to the
Indemnifying Party. Notwithstanding the foregoing, the
Indemnifying Party shall not be liable for the fees and
disbursements of more than one counsel for all Indemnified
Parties in connection with any one proceeding or any similar
or related proceedings arising from the same general
allegations or circumstances. Without the prior written
consent of the Indemnitee, the Indemnifying Party will not
enter into any settlement of any Third Party Claim that would
lead to liability or create any financial or other obligation
on the part of the Indemnitee unless such settlement includes
as an unconditional term thereof the release of the Indemnitee
from all liability in respect of such Third Party Claim.
(b) Any claim by an Indemnitee on account of an
Indemnifiable Loss that does not result from a Third Party
Claim (a "Direct Claim") will be asserted by giving the
Indemnifying Party reasonably prompt written notice thereof,
but in any event not later than thirty (30) calendar days
after the incurrence thereof, and the Indemnifying Party will
have a period of thirty (30) calendar days within which to
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respond in writing to such Direct Claim. If the Indemnifying
Party does not so respond within such thirty (30) calendar day
period, the Indemnifying Party will be deemed to have rejected
such claim, in which event the Indemnitee will be free to
pursue such remedies as may be available to the Indemnitee on
the terms and subject to the provisions of this Article 13.
(c) If after the making of any Indemnification
Payment the amount of the Indemnifiable Loss to which such
payment relates is reduced by recovery, settlement or otherwise
under any insurance coverage, or pursuant to any claim, recovery,
settlement or payment by or against any other entity, the
amount of such reduction (less any costs, expenses, premiums
or taxes incurred in connection therewith) will promptly be
repaid by the Indemnitee to the Indemnifying Party. Upon
making any Indemnification Payment, the Indemnifying Party
will, to the extent of such Indemnification Payment, be
subrogated to all rights of the Indemnitee against any third
party that is not an Affiliate of the Indemnitee in respect
of the Indemnifiable Loss to which the Indemnification
Payment relates; provided that (i) the Indemnifying Party
shall then be in compliance with its obligations under this
Agreement in respect of such Indemnifiable Loss and (ii)
until the Indemnitee recovers full payment of its Indemnifiable
Loss, all claims of the Indemnifying Party against any such
third party on account of said Indemnification Payment will be
subrogated and subordinated in right of payment to the
Indemnitee's rights against such third party. Without
limiting the generality or effect of any other provision of
this Article 13, each such Indemnitee and Indemnifying Party
will duly execute upon request all instruments reasonably
necessary to evidence and perfect the above-described
subrogation and subordination rights.
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ARTICLE 14. ENVIRONMENTAL MATTERS
14.1 Seller's Representations and Warranties. Except as
_______________________________________
set forth in Schedule 14.1(a) and Schedule 14.1(b), to the
knowledge of Seller:
(a) Seller's operation of the Business and the
Purchased Property has been and is presently in substantial
compliance with Existing Environmental Requirements, except
where noncompliance would not have a material adverse effect
on the Business. Buyer and Seller agree to make a good faith
effort to list all noncompliance in Schedule 14.1(a).
(b) Seller has obtained or filed for all
necessary environmental permits, authorizations and licenses
required to operate the Business or the Purchased Property,
except where failure to obtain or file such permits,
authorizations and licenses would not have a material adverse
effect on the Business. Buyer and Seller have made a good
faith effort to set forth all failures to file in
Schedule 14.1(b).
(c) Seller has set forth all UST's in
Schedule 14.1(c).
14.1.1 Treatment of Data. All information collected
_________________
and generated as a result of the environmental audit will be
subject to the terms and conditions of the Confidentiality
Agreement.
14.1.2 Phase I Reviews. Buyer may conduct the usual
_______________
Phase I environmental assessment activities of the Purchased
Property. Phase I environmental assessment activities shall not
include any sampling or intrusive testing.
(a) Buyer shall give Seller at least three (3)
business days' notice prior to any entry onto the Purchased
Property.
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(b) If Buyer enters the Purchased Property, a
representative of Seller may be, but is not required to be, present
during such entry on the Purchased Property.
(c) All activities of Buyer regarding environmental
due diligence shall be conducted to minimize any inconveniences or
interruption of the normal use and enjoyment of Seller's Business
and the Purchased Property.
14.1.3 Phase 11 Reviews. Buyer may conduct the usual
________________
Phase II environmental assessment activities of the Purchased
Property (including, but not limited to, the taking and analysis
of soil, surface water and groundwater samples, testing of
buildings, drilling xxxxx, taking soil borings, and excavating)
provided that such Phase II assessment activities are conducted
in accordance with this Section 14.1.
(a) If Buyer desires to perform sampling or
intrusive testing at a site included in the Purchased Property,
Buyer must notify Seller of its desire at least five (5)
business days in advance of the proposed date of such sampling or
testing and provide a description of the scope of work regarding
such sampling or intrusive testing.
(b) Buyer shall provide Seller with copies
of field data, field reports, laboratory analyses, logs,
laboratory reports and other material or information regarding
the sampling or intrusive testing ("Environmental Data") within
three (3) business days of Buyer's receipt of such data and
shall promptly provide Seller with "matched" or "paired"
samples, in accordance with standard sampling and testing
protocols, that are obtained during the sampling or intrusive
testing of a particular site; provided, however, that Seller
shall have no obligation to Buyer to take any action whatsoever
regarding such samples.
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14.1.4 Indemnity for Due Diligence Activities.
______________________________________
Buyer hereby agrees to indemnify and hold harmless Seller,
Seller's Affiliates and their respective officers, directors,
employees, agents, successors and assigns from and against
any and all claims, liabilities, damages, losses, orders,
penalties, fines, costs, charges and expenses (including
attorneys' fees and disbursements, and costs of experts and
expert witnesses) with respect to persons or property arising
out of or in connection with the entry of Buyer or its
environmental consultant(s) onto the Purchased Property and
resulting from an act or omission of Buyer or its environmental
consultant(s) provided that Buyer shall not be liable for any
Environmental Liabilities incurred by any such party
discovered by the environmental due diligence performed by
Buyer or its environmental consultant(s). In addition, in
the event the transaction contemplated herein with regard
to any portion of the Purchased Property does not Close, Buyer
agrees to restore such portion of the Purchased Property to
the condition which existed prior to Buyer's inspections and
testing thereof to the extent such portion of the Purchased
Property was damaged by such inspections and testing.
14.1.5 Environmental Assessment Costs. If the
______________________________
environmental audit report states that further assessment,
investigation or remediation is required or advised, then
such assessment, investigation and remediation shall be
performed and completed in accordance with Environmental
Requirements prior to Closing and at Seller's sole cost
and expense.
14.2 Indemnification for Environmental Matters.
_________________________________________
14.2.1 Sole Remedy and Release. It is the
_______________________
intent of each party to this Agreement that the indemnification
provided under this Section 14.2 shall be the sole
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remedy for resolving disputes regarding environmental matters,
including but not limited to, Environmental Liabilities related
to the Business or the Purchased Property. Each party to this
Agreement hereby waives and releases the other party from any
and all liability under any other cause of action at law or
in equity concerning these matters, whether raised pursuant to
(i) Environmental Requirements, (ii) any other applicable
federal, state or local statute, ordinance, rule or regulation,
or (iii) common law.
14.2.2 Indemnification of Buyer. Seller agrees
________________________
to indemnify and hold harmless Buyer, its Affiliates and their
respective officers, directors, employees, agents, successors
and assigns from and against any and all Environmental
Liabilities under Existing Environmental Requirements arising
from acts or omissions occurring prior to the Closing Date on
the Purchased Property. Indemnification under this
Section 14.2.2 shall only be provided for claims for which
Buyer provides notice pursuant to the procedures of
Section 14.2.5 within one (1) year of the Closing Date.
14.2.3 Indemnification of Seller. Buyer agrees
_________________________
to indemnity and hold harmless Seller, its Affiliates and their
respective officers, directors, employees, agents, successors
and assigns from and against any and all Environmental
Liabilities arising from acts or omissions occurring after
the Closing Date on the Purchased Property. Indemnification
under this Section 14.2.3 shall only be provided for claims
for which Seller provides notice pursuant to the procedures
of Section 14.2.5. The indemnification provided for under
this Section 14.2.3 shall survive the Closing.
14.2.4 Assumption of Environmental Liabilities.
_______________________________________
As at the Closing Date, Buyer assumes all Environmental
Liabilities related to the Purchased Property, except
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for those liabilities subject to indemnification by Seller
in accordance with Sections 14.2.2 and 14.2.7.
14.2.5 Notice. Either party seeking
______
indemnification under this Article 14 must give written notice
to the other party. Any such written notice by one party must
include information sufficient to inform the other party of,
and allow such other party to confirm the nature of the claim,
and any activities required to address the claim, in sufficient
detail for the indemnifying party to confirm all costs
incurred by the indemnified party under Section 14.2.2 or
Section 14.2.3, as applicable.
14.2.6 Actual Damages. Any indemnifiable claim
______________
under this Article 14 shall be limited to actual damages that
have been incurred and shall not include consequential
damages. Any indemnifiable claim under this Article 14 shall
also be reduced to account for any insurance, storage tank fund,
or other proceeds received by the party to be indemnified.
14.2.7 Limitations on Indemnification.
______________________________
Notwithstanding any other provision of this Agreement, this Article
14, or any applicable Law, neither party shall be entitled to
make a claim against the other party for Environmental
Liabilities under this Article 14 until the aggregate amount of
costs for indemnifiable environmental matters incurred by the
party to be indemnified exceeds One Hundred Thousand dollars
($100,000) and then only to the extent of such excess, if any.
Further, notwithstanding any other provision of this Agreement,
this Article 14, or any applicable law, the indemnification
obligations of Seller under Section 14.2.2 shall not exceed the
aggregate amount of Nine Hundred Fifty Thousand dollars
($950,000).
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14.3 Facilities Issues. Within thirty (30) days of the
_________________
date hereof, Seller will provide to Buyer copies of all surveys
and reports in Seller's possession concerning the existence or
possible existence of asbestos or materials containing asbestos
relating to any of the Real Property. The parties further agree
that, if Seller discloses the existence or suspected existence
of materials containing asbestos with respect to a given parcel
of Real Property and the asbestos does not exceed applicable
limits, if Buyer desires to make renovations or structural
changes to the property after Closing (which changes require
the removal of asbestos), the removal will be at the expense
of Buyer. If the asbestos does exceed applicable limits, then
the asbestos will be removed at Seller's sole cost and expense.
ARTICLE 15. TERMINATION
15.1 Termination Rights. This Agreement may be terminated
__________________
at any time prior to the Closing Date:
(a) at any time by mutual written consent of
the parties;
(b) by Seller or Buyer, as applicable, if there
has been a material misrepresentation, breach of covenant or breach
of warranty on the part of the other party in their respective
representations, warranties and covenants set forth in this
Agreement;
(c) by Buyer if any of the conditions provided in
Section 7.1 of this Agreement have not been met at the Closing Date
and have not been waived by Buyer;
(d) by either party on the date two (2) years from
the execution of this Agreement; or
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(e) by Seller if any of the conditions provided in
Section 7.2 of this Agreement have not been met at the Closing Date
and have not been waived by Seller; provided, however, that a party
shall not be entitled to exercise any right of termination
pursuant to subsection (c), (d) or (e) above if such party shall
not have performed diligently and in good faith the obligations
required to be performed by such party hereunder prior to the
date of termination.
15.2 Effect of Termination.
_____________________
(a) If this Agreement is terminated pursuant to
Section 11.7 or Section 15.1(a), this Agreement shall be of no
further force and effect and there shall be no further
liability hereunder (except the obligation of confidentiality
under the Confidentiality Agreement) on the part of either
party or their respective Affiliates, directors, officers,
shareholders, agents or other representatives. Upon such a
termination, Seller shall promptly refund the Deposit to Buyer
and shall pay to Buyer an additional amount (the "Interest
Amount") equal to the interest that would have been accrued
on the Deposit during the period beginning on receipt by
Seller of the Deposit and ending on the date of termination
hereof if the Deposit had borne interest at a rate per annum
of six percent (6%).
(b) If this Agreement is terminated by Buyer
pursuant to Section 15.1(b) or (c), this Agreement shall
be of no further force and effect and there shall be no
further liability hereunder (except the obligation of
confidentiality under the Confidentiality Agreement) on the
part of either party or their respective Affiliates,
directors, officers, shareholders, agents or other
representatives; provided, however, that no such termination
shall relieve Seller of liability for any claims, damages or
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losses suffered by Buyer as a result of the negligent or
willful failure of Seller to perform any obligations required
to be performed by it hereunder on or prior to the date of
termination. Upon such a termination, Seller shall promptly
refund the Deposit to Buyer and shall pay to Buyer the
Interest Amount.
(c) If this Agreement is terminated by Seller
pursuant to Section 15.1(b) or (d), this Agreement shall be
of no further force and effect and there shall be no further
liability hereunder (except the obligation of confidentiality
under the Confidentiality Agreement) on the part of either
party or their respective Affiliates, directors, officers,
shareholders, agents or other representatives; provided,
however, that no such termination shall relieve Buyer of
liability for any claims, damages or losses suffered by
Seller as a result of the negligent or willful failure of
Buyer to perform any obligations required to be performed
by it hereunder on or prior to the date of termination.
Notwithstanding anything to the contrary in Sections 13.2(d)
or (e), which provisions shall not apply to this Article 15,
upon such a termination, Seller shall be entitled to retain
the Deposit as reimbursement for a portion of its out-of-pocket
expenses incurred in connection with this Agreement and the
transactions contemplated thereby. The retention of the Deposit
by Seller is not intended to be the sole or exclusive remedy
available to Seller upon such a termination, it being understood
and agreed that Buyer shall be liable to Seller for the full
amount of any surviving claims, damages and losses suffered
by Seller to the extent that the same exceed the amount of
the Deposit.
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(d) Notwithstanding anything to the contrary
contained herein, the provisions of this Section 15.2 and of
Sections 17.1, 17.2, 17.3, 17.8, 17.11, 17.13 and Article 16
shall survive any termination of this Agreement.
ARTICLE 16. DISPUTE RESOLUTION
16.1 Exclusive Remedy. Subject to Section 16.5,
________________
the parties agree to resolve disputes arising out of this
Agreement without litigation. Accordingly, except as provided
in Section 16.5, or in the case of a suit to compel compliance
with this dispute resolution process, the parties agree to use
the following alternative dispute resolution procedure as their
sole remedy with respect to any controversy or claim arising
out of or relating to this Agreement or its breach.
16.2 Dispute Resolution Process. At the written
__________________________
request of a party, each party shall appoint a knowledgeable,
responsible representative to meet and negotiate in good faith
to resolve any dispute arising under this Agreement. The
discussions shall be left to the discretion of the
representatives. Upon agreement, the representatives may
utilize other alternative dispute resolution procedures
such as mediation to assist in the negotiations. Discussions
and correspondence among the parties' representatives for
purposes of these negotiations shall be treated as
confidential information developed for purposes of settlement,
exempt from discovery and production, and without the
concurrence of both parties shall not be admissible in the
arbitration described below or in any lawsuit. Documents
identified in or provided with such communications, which are
not prepared for purposes of the negotiations, are not
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so exempted and may, if otherwise admissible, be admitted in
evidence in the arbitration.
16.3 Arbitration. Subject to Section 16.5, if
___________
negotiations between the representatives of the parties do
not resolve the dispute within sixty (60) days of the initial
written request, the dispute shall be submitted to binding
arbitration by a single arbitrator pursuant to the Commercial
Arbitration Rules of the American Arbitration Association.
Either party may demand such arbitration in accordance with
the procedures set out in those rules. The arbitration
hearing shall be commenced within sixty (60) days of the
demand for arbitration and the arbitration shall be held
in, Chicago, Illinois. The arbitrator shall control the
scheduling (so as to process the matter expeditiously) and
any discovery. The parties may submit written briefs. The
arbitrator shall rule on the dispute by issuing a written
opinion within thirty (30) days after the close of hearings.
The times specified in this Section 16.3 may be extended upon
mutual agreement of the parties or by the arbitrator upon a
showing of good cause. Judgment upon the award rendered by
the arbitrator may be entered in any court having
jurisdiction.
16.4 Costs and Attorneys' Fees, Each party shall bear
_________________________
its own costs and attorneys' fees associated with these
procedures. A party seeking discovery shall reimburse the
responding party the cost of production of documents
(including search time and reproduction time costs). The
parties shall equally share the fees of the arbitration and
the arbitrator.
16.5 Certain Limitations. The provisions of this
___________________
Article 16 with respect to the resolution of disputes without
litigation shall not apply to any dispute, controversy or
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claim arising out of the provisions of Section 11.1 or the
Confidentiality Agreement, it being understood and agreed that
in the event of a breach by either party of the provisions of
Section 11.1 or the Confidentiality Agreement, the other party
shall be entitled to proceed to protect and enforce its rights
by an action at law, a suit in equity or other appropriate
proceeding, whether for specific enforcement of any agreement
contained in Section 11.1 or the Confidentiality Agreement or
in aid of the exercise of any power granted by Section 11.1
or the Confidentiality Agreement or by law or otherwise.
ARTICLE 17. MISCELLANEOUS
17.1 Notices. All notices and other communications
_______
required or permitted hereunder shall be in writing and,
unless otherwise provided in this Agreement, will be deemed
to have been given when delivered in person or dispatched by
electronic facsimile transfer (confirmed in writing by
certified mail, concurrently dispatched) or one business day
after having been dispatched for next-day delivery by a
nationally recognized overnight courier service to the
appropriate party at the address specified below.
(a) If to Buyer, to:
Xxxxx Xxxxxxx
Pacific Telecom, Inc.
000 Xxxxxxxx
Xxxxxxxxx, XX 00000
Phone No.: 360/000-0000
Facsimile No.: 360/905-7876
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With a copy to:
Xxxxxxx Xxxxxxx, Esq.
Pacific Telecom, Inc.
000 Xxxxxxxx
Xxxxxxxxx, XX 00000
Phone No.: 360/000-0000
Facsimile No.: 360/905-5953
(b) If to Seller, to:
Xxxxx Xxxxx
000 Xxxxxx Xxxxx, XXX00X00
Xxxxxx, XX 00000-0000
Facsimile No.: (000) 000-0000
With a copy to:
Xxxxxxx X. Xxxxxx
GTE Telephone Operations
000 Xxxxxx Xxxxx, XXX00X00
Xxxxxx, XX 00000-0000
Facsimile No.: (000) 000-0000
or to such other address or addresses as any such party may
from time to time designate for itself by like notice.
17.2 Press Releases. The parties shall consult with
______________
each other in preparing any press release, public announcement,
news media response or other form of release of information
concerning this Agreement or the transactions contemplated
hereby that is intended to provide such information to the
news media or the public (a "Press Release"). Neither party
shall issue or cause the publication of any such Press Release
without the prior written consent of the other party;
provided, however, that nothing herein will prohibit either
party from issuing or causing publication of any such
Press Release to the extent that such action is required
by applicable Law or the rules of any national stock exchange
applicable to such party or its Affiliates, in which case
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the party wishing to make such disclosure will, if practicable
under the circumstances, notify the other party of the proposed
time of issuance of such Press Release and consult with and
allow the other party reasonable time to comment on such Press
Release in advance of its issuance.
17.3 Expenses. Except as otherwise expressly provided
________
herein, each party will pay any expenses (including, without
limitation, attorneys' fees) incurred by it incident to this
Agreement and in consummating the transactions provided
for herein.
17.4 Successors and Assigns. This Agreement will be
______________________
binding upon and inure to the benefit of the parties hereto
and their respective successors and permitted assigns, but
is not assignable or delegable by any party without the
prior written consent of the other party: provided, that
Seller may assign this Agreement to an Affiliate of Seller
without the consent of Buyer.
17.5 Amendments. This Agreement may be amended or
__________
modified only by a subsequent writing signed by authorized
representatives of both parties.
17.6 Captions. The captions set forth in this
________
Agreement are for convenience only and shall not be
considered as part of this Agreement, nor as in any way
limiting or amplifying the terms and provisions hereof.
17.7 Entire Agreement. The term "this Agreement"
________________
shall mean collectively this document, the Schedules hereto,
and any agreements expressly incorporated herein. This Agreement
supersedes and revokes any prior discussions and representations,
other agreements, commitments, arrangements or understandings of
any sort whatsoever, whether oral or written, that may have
been made or entered into by the parties relating to the
matters contemplated hereby. This Agreement constitutes the
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entire agreement by and among the parties, and there are no
representations, warranties, agreements, commitments,
arrangements or understandings except as expressly set forth
herein.
17.8 Waiver. Except as otherwise expressly provided in
______
this Agreement, neither the failure nor any delay on the part of
any party to exercise any right, power or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial
exercise or waiver of any such right, power or privilege preclude
any other or further exercise thereof, or the exercise of any
other right, power or privilege available to each party at law
or in equity.
17.9 Third Parties. Except as expressly provided herein,
_____________
nothing contained in this Agreement is intended to confer upon
any person, other than the parties and their successors and
permitted assigns, any rights or remedies under or by reason
of this Agreement.
17.10 Counterparts. This Agreement may be executed in
____________
two or more counterparts, any or all of which shall constitute
one and the same instrument.
17.11 Governing Law. This Agreement shall in all respects
_____________
be governed by and construed in accordance with the internal
laws of the State of Texas (except that no effect shall be
given to any conflicts of law principles of the State of Texas
that would require the application of the laws of any
other jurisdiction).
17.12 Further Assurances. From time to time, as and when
__________________
requested by one of the parties, the other party will execute
and deliver, or cause to be executed and delivered, all such
documents and instruments as may be reasonably necessary to
consummate and make effective the transactions contemplated
by this Agreement.
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17.13 Certain Interpretive Matters and Definitions.
____________________________________________
(a) Unless the context otherwise requires, (i) all
references to Sections, Articles or Schedules are to Sections,
Articles or Schedules of or to this Agreement, (ii) each term
defined in this Agreement has the meaning so assigned to it,
(iii) each accounting term not otherwise defined in this
Agreement has the meaning assigned to it in accordance with
GAAP, (iv) all references to the "knowledge of Seller" will be
deemed to refer to the actual knowledge of the Executive
Officers of Seller, (v) all references to Seller's
"best efforts" and references of like import will be deemed
to refer to the best efforts of Seller in accordance with
reasonable commercial practice and without the incurrence
of unreasonable expense, and (vi) as used in this Agreement,
"material adverse effect" and "material adverse change"
shall be interpreted as referring to a change or effect
that has a significant impact on the Business as a whole.
(b) No provision of this Agreement will be
interpreted in favor of, or against, either of the parties
by reason of the extent to which any such party or its
counsel participated in the drafting thereof or by reason
of the extent to which any such provision is inconsistent
with any prior draft of such provision or of this Agreement.
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IN WITNESS WHEREOF, the parties, acting through their duly
authorized agents, have caused this Agreement to be duly
executed and delivered as of the date first above written.
GTE NORTH INCORPORATED PTI COMMUNICATIONS OF
MICHIGAN, INC.
By: XXXX XXXXXXX By: XXXXX X. XXXXXXX
___________________ _______________________________
Name: Xxxx Xxxxxxx Name: Xxxxx X. Xxxxxxx
________________
Title: Vice President - Title: Executive Vice President and
Strategy & Technology Chief Financial Officer
Planning
PACIFIC TELECOM, INC.
By: XXXXX X. XXXXXXX
_____________________________
Name: Xxxxx X. Xxxxxxx
Title: Executive Vice President and
Chief Financial Officer
