EXHIBIT 2.2
STOCK PURCHASE AGREEMENT
DATED OCTOBER 15 , 1998
BY AND AMONG
RURAL CELLULAR CORPORATION
(PURCHASER)
AND
XXXXXX X. XXXXXXXX, XXXXX X. XXXXXXXX, XXXXXX X. XXXXXXXX,
XXX X. XXXXXXXX, XXXXX X. XXXXXXXX AND THE XXXXXX X.
XXXXXXXX IRREVOCABLE TRUST U/A JULY 22, 1996
(SHAREHOLDERS)
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TABLE OF CONTENTS
PAGE
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ARTICLE 1: DEFINITIONS.........................................................................................2
ARTICLE 2: PURCHASE OF STOCK; PURCHASE PRICE...................................................................9
2.1 Purchase and Sale of Stock..............................................................................9
2.2 Purchase Price..........................................................................................9
2.3 Payment of Purchase Price on the Date of Closing.......................................................10
2.4 Payments of Purchase Price after the Date of Closing...................................................11
2.5 Determination of Purchase Price Adjustments; Closing Balance Sheet; Final Payment......................11
ARTICLE 3: REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS.....................................................13
3.1 Due Incorporation......................................................................................14
3.2 Capitalization.........................................................................................14
3.3 Due Authorization......................................................................................14
3.4 No Breach..............................................................................................14
3.5 Clear Title............................................................................................15
3.6 Condition of Assets....................................................................................15
3.7 Litigation.............................................................................................15
3.8 Labor Matters..........................................................................................15
3.9 Taxes..................................................................................................15
3.10 Employee Benefits......................................................................................16
3.11 [THIS SECTION INTENTIONALLY OMITTED]...................................................................17
3.12 Financial Statements...................................................................................18
3.13 Absence of Certain Developments........................................................................18
3.14 Intellectual Property..................................................................................20
3.15 Compliance with Laws...................................................................................20
3.16 Operating Contracts....................................................................................20
3.17 Real Estate............................................................................................20
3.18 Accounts Receivable....................................................................................23
3.19 Books and Records; Bank Accounts.......................................................................23
3.20 Employees..............................................................................................23
3.21 Licenses and Permits...................................................................................23
3.22 Other Material Contracts and Obligations...............................................................23
3.23 Subsidiaries...........................................................................................24
3.24 Insurance..............................................................................................24
3.25 Brokers................................................................................................24
3.26 Relationship with Related Persons......................................................................24
3.27 Hazardous Materials....................................................................................25
3.28 Other Environmental Matters............................................................................25
3.29 Debt Instruments.......................................................................................26
3.30 Dissolution of GLCLP and Glacial DBS...................................................................26
3.31 Year 2000 Compliance...................................................................................26
3.32 Customers and Suppliers................................................................................27
3.33 CGSA...................................................................................................27
3.34 Network................................................................................................27
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ARTICLE 4: REPRESENTATIONS AND WARRANTIES OF PURCHASER........................................................27
4.1 Due Incorporation......................................................................................27
4.2 Due Authorization......................................................................................27
4.3 No Breach..............................................................................................27
4.4 Investment Representations.............................................................................28
4.5 Brokers................................................................................................28
ARTICLE 5: PERFORMANCE PENDING CLOSING........................................................................28
5.1 Access to Information..................................................................................28
5.2 Conduct of Business....................................................................................28
5.3 Encumbrances...........................................................................................28
5.4 Pay Increases..........................................................................................29
5.5 Restrictions on New Contracts..........................................................................29
5.6 Preservation of Business...............................................................................29
5.7 Payment and Performance of Obligations.................................................................29
5.8 Restrictions on Sale of Assets.........................................................................29
5.9 Prompt Notice..........................................................................................29
5.10 Consents...............................................................................................29
5.11 Copies of Documents....................................................................................29
5.12 No Solicitation of Other Offers........................................................................29
5.13 Accounts Receivable and Payable........................................................................30
5.14 Inventory..............................................................................................30
5.15 Insurance..............................................................................................30
5.16 Filing Reports and Making Payments.....................................................................30
5.17 Capital Expenditures...................................................................................30
5.18 Monthly Financials.....................................................................................30
5.19 Title Review...........................................................................................30
5.20 Litigation.............................................................................................30
5.21 Notification of Inaccuracy.............................................................................31
5.22 Valley Sale............................................................................................31
5.23 Employment Matters.....................................................................................32
5.24 Amendment of 401(k)....................................................................................32
ARTICLE 6: MUTUAL COVENANTS AND CONDITIONS PRECEDENT TO OBLIGATIONS...........................................32
6.1 Proceedings............................................................................................32
6.2 Consents and Approvals.................................................................................32
6.3 Valley Sale............................................................................................32
ARTICLE 7: CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS....................................................32
7.1 Accuracy of Representations and Warranties.............................................................32
7.2 Compliance with Covenants and Agreements...............................................................33
7.3 No Material Adverse Change.............................................................................33
7.4 Approval by Counsel....................................................................................33
7.5 Legal Opinion..........................................................................................33
7.6 Resignation of Directors and Officers..................................................................33
7.7 Corporate Action.......................................................................................33
7.8 [THIS SECTION INTENTIONALLY OMITTED.]..................................................................33
7.9 Environmental Audit....................................................................................33
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7.10 Title Matters; Surveys.................................................................................34
7.11 Pending FCC Application................................................................................35
7.12 Due Diligence..........................................................................................35
ARTICLE 8: CONDITIONS PRECEDENT TO SHAREHOLDERS'OBLIGATIONS...................................................35
8.1 Accuracy of Representations and Warranties.............................................................35
8.2 Compliance with Covenants and Agreements...............................................................35
8.3 Approval by Counsel....................................................................................35
8.4 Legal Opinion..........................................................................................35
8.5 Delivery of Purchase Price and Other Consideration.....................................................35
8.6 Pending Fee Application................................................................................35
ARTICLE 9: INDEMNIFICATION....................................................................................35
9.1 Indemnification by Certain Shareholders................................................................35
9.2 Indemnification by Purchaser...........................................................................36
9.3 Procedure for Indemnification..........................................................................37
9.4 Dispute Resolution.....................................................................................38
ARTICLE 10: CLOSING...........................................................................................39
10.1 Date of Closing........................................................................................39
10.2 Documents to be Delivered by Shareholders..............................................................40
10.3 Documents to be Delivered by Purchaser.................................................................41
ARTICLE 11: PERFORMANCE FOLLOWING THE DATE OF CLOSING.........................................................42
11.1 Further Acts and Assurances............................................................................42
11.2 Non-Competition Agreement..............................................................................42
11.3 Non-Solicitation Agreement.............................................................................42
11.4 Confidential Information...............................................................................42
11.5 Reasonableness of Covenants............................................................................43
11.6 Injunctive Relief......................................................................................43
11.7 Blue Pencil Doctrine...................................................................................43
11.8 Name of Company........................................................................................43
11.9 Employee Retention.....................................................................................43
11.10 Tax Matters............................................................................................44
ARTICLE 12: TERMINATION.......................................................................................45
12.1 Termination............................................................................................45
12.2 Return of Documents and Nondisclosure..................................................................46
ARTICLE 13: MISCELLANEOUS.....................................................................................46
13.1 Survival of Representations and Warranties.............................................................46
13.2 Preservation of and Access to Records..................................................................46
13.3 Cooperation............................................................................................46
13.4 Public Announcements...................................................................................47
13.5 Notices................................................................................................47
13.6 Entire Agreement.......................................................................................47
13.7 Remedies...............................................................................................47
13.8 Amendments.............................................................................................47
13.9 Successors and Assigns.................................................................................48
13.10 Costs..................................................................................................48
13.11 Governing Law..........................................................................................48
13.12 Counterparts...........................................................................................48
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13.13 Headings...............................................................................................48
13.14 Scope of Agreement.....................................................................................48
13.15 Number and Gender......................................................................................48
13.16 Severability...........................................................................................48
13.17 Parties in Interest....................................................................................48
13.18 Waiver.................................................................................................49
13.19 Forum and Jurisdiction.................................................................................49
13.20 Construction...........................................................................................49
13.21 Payment Agent..........................................................................................49
13.22 Supplementation of Schedules...........................................................................49
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is made and entered
into as of the 15th day of October, 1998, by and among Rural Cellular
Corporation, a Minnesota corporation (the "Purchaser"), and Xxxxxx X.
Xxxxxxxx, Xxxxx X. Xxxxxxxx, Xxxxxx X. Xxxxxxxx, Xxx X. Xxxxxxxx, Xxxxx X.
Xxxxxxxx, and the Xxxxxx X. Xxxxxxxx Irrevocable Trust U/A July 22, 1996
(individually a "Shareholder" and collectively the "Shareholders").
RECITALS
A. The Shareholders are the owners of all of the issued and
outstanding shares of each class and series of capital stock (collectively
the "Stock") of RGI Group, Inc., a Minnesota corporation (the "Company").
B. The Company is engaged by and through its division known as
Glacial Lakes Cellular 2000 in the business of providing cellular radio
telephone services (the "Business") to end users in Market 637B-South Dakota
4 -- Xxxxxxxx, South Dakota, pursuant to a license issued by the United States
Federal Communications Commission (the "FCC").
C. The Company owns all of the issued and outstanding stock of
Valley Telephone Company, a Minnesota corporation ("Valley"), which is
engaged in the businesses of providing local exchange telephone services,
long distance access, the sale of internet access, DirecTV DBS and related
telecommunications services in and around Browns Valley, Minnesota, and West
Browns Valley, South Dakota, pursuant to licenses issued by the Minnesota
Public Utilities Commission and the South Dakota Public Utilities Commission,
respectively.
D. The Company intends to sell all of the stock in Valley (the
"Valley Sale") prior to the Closing.
E. Prior to December 30, 1997, the Company was the general partner
and owner of approximately seventy-six percent (76%) of the interests in
Glacial Lake Cellular Limited Partnership, a South Dakota limited partnership
("GLCLP"). On December 30, 1997, the Company acquired the remaining
approximately twenty-four percent (24%) interest in GLCLP.
F. During 1997, the Company sold substantially all of the assets of
its subsidiary, Glacial Lakes DBS, Inc., a South Dakota corporation ("Glacial
DBS").
G. The Company owns all of the issued and outstanding stock of
Xxxxxxxx Finance Corporation, a Minnesota corporation ("RFC"), which is
engaged in no business other than borrowing money used to finance the Company
and Valley.
AGREEMENT
In consideration of the foregoing recitals and the mutual promises
contained in this Agreement, Purchaser and the Shareholders agree as follows:
ARTICLE 1: DEFINITIONS
For purposes of this Agreement, the following terms have the
meanings specified:
"AAA RULES" - has the meaning set forth in Section 9.4(b) of this
Agreement.
"ACQUISITION PROPOSAL" - means any proposal relating to the possible
acquisition of the Company whether by way of merger, purchase of capital stock
of the Company representing fifty percent (50%) or
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more of the voting power or equity of the Company, purchase of all or
substantially all of the assets of the Company, or otherwise.
"AFFILIATE" - when used in reference to a specified Person, means
any Person that, directly or indirectly, through one or more intermediaries,
controls, or is controlled by, or is under common control with the specified
Person.
"AGREEMENT" - has the meaning set forth in the introductory
paragraph hereof.
"APPLICABLE LAWS" - means any and all laws, ordinances,
constitutions, regulations, statutes, treaties, rules, codes, licenses,
certificates, franchises, permits, requirements and Injunctions adopted,
enacted, implemented, promulgated, issued, entered or deemed applicable by or
under the authority of any Governmental Body having jurisdiction over a
specified Person or any of such Person's properties or assets.
"AUDIT" - has the meaning set forth in Section 7.9 of this Agreement.
"AUDITOR" - has the meaning set forth in Section 2.5(a) of this
Agreement.
"BALANCE SHEET" - has the meaning set forth in Section 3.12 of this
Agreement.
"BALANCE SHEET DATE" - has the meaning set forth in Section 3.12 of
this Agreement.
"BANK" - has the meaning set forth in Section 2.2(c) of this
Agreement.
"BASKET AMOUNT" - has the meaning set forth in Section 9.1(a) of
this Agreement.
"BENEFIT PLAN" - means any and all bonus, stock option, restricted
stock, stock purchase, stock appreciation, phantom stock, profit
participation, profit-sharing, deferred compensation, severance, pension,
retirement, disability, medical, dental, health, life or dental insurance,
death benefit, incentive, welfare and/or other benefit, compensation and/or
retirement plan, policy, arrangement and/or Contract maintained, sponsored or
participated in by the Company.
"BUSINESS" - has the meaning set forth in the recitals to this
Agreement.
"CLOSING" - has the meaning set forth in Section 10.1 of this
Agreement.
"CLOSING BALANCE SHEET" - has the meaning set forth in Section
2.5(a)(i) of this Agreement.
"CLOSING CERTIFICATE" - has the meaning set forth in Section
2.5(a)(i) of this Agreement.
"CODE" - means the Internal Revenue Code of 1986, as amended, or any
successor law and regulations issued by the IRS pursuant to the Internal
Revenue Code or any successor law.
"COMPANY" - has the meaning set forth in the Recitals; provided,
however, that the term, "Company" as used in Sections 3.9, 3.10, 3.12, 3.13,
3.24, 3.27, 3.28 and 5.20, and in the definition of "Knowledge," includes the
Company, Valley, RFC, Glacial DBS and GLCLP.
"COMPANY INCOME TAX LIABILITY"- means the actual aggregate income
Taxes set forth as "Tax Due" (federal) or "Amount Due" (state), as shown on
the Company's consolidated state and federal income Tax Returns, for the 1998
Tax year and the stub period, if any, ending on the Date of Closing.
"COMPETING BUSINESS" - has the meaning set forth in Section 3.26 of
this Agreement.
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"CONFIDENTIAL INFORMATION" - means any information or compilation of
information not generally known to the public or the industry or which the
Company has not disclosed to third parties without a written obligation of
confidentiality, which is proprietary to the Company, relating to the
Company's procedures, techniques, methods, concepts, ideas, affairs,
products, processes and services, including, but not limited to, information
relating to marketing, merchandising, selling, research, development,
manufacturing, purchasing, accounting, engineering, financing, costs,
customers, plans, pricing, billing, needs of customers and products and
services used by customers, all lists of customers and their addresses,
prospects, sales calls, products, services, prices and the like as well as
any specifications, formulas, plans, drawings, accounts or sales records,
sales brochures, code books, manuals, trade secrets, knowledge, know-how,
pricing strategies, operating costs, sales margins, methods of operations,
invoices or statements and the like.
"CONSOLIDATED TAX ENTITIES" - has the meaning set forth in Section
3.9 of this Agreement.
"CONTRACT" - means any agreement, lease, license, contract,
obligation, promise, commitment, arrangements, understanding or undertaking,
instrument, document (whether written or oral and whether express or implied)
of any type, nature or description that is legally binding. As used herein,
the word "Contract" shall be limited in scope if modified by an adjective
specifying the type of contract to which this Agreement or a Section hereof
refers.
"CONVERTIBLE SECURITIES" - means any and all securities convertible
or exchangeable for (i) any shares of capital stock of the Company,
including, without limitation, common stock, or (ii) any Debt Securities.
"DATE OF CLOSING" - has the meaning set forth in Section 10.1 hereof.
"DEBT INSTRUMENT" - has the meaning set forth in Section 3.29 of
this Agreement.
"DEBT SECURITIES" - means any and all indebtedness issued by or on
behalf of the Company which constitutes a security under the Securities Act
of 1933, as amended, except for indebtedness reflected in the financial
statements of the Company described on SCHEDULE 3.12 hereto.
"DEFERRED COMPENSATION AGREEMENTS" - means all of the following:
Letter Agreement between the Company and Xxxx Xxxxxxx dated July 22, 1996,
Letter Agreement between the Company and Xxx Xxxx dated October 1, 1993, as
amended on October 1, 1998; Letter Agreement between the Company and Max Tite
dated October 1, 1993, as amended on October 1, 1998; and Letter Agreement
between the Company and Xxxx Xxxxx dated July 15, 1996.
"DEFERRED COMPENSATION AMOUNT" - means the amount payable by the
Company pursuant to the Deferred Compensation Agreements.
"DISCLOSE" - means to reveal, deliver, divulge, disclose, publish,
copy, communicate, show or otherwise make known or available to any other
Person, or in any way to copy, any of the Company's Confidential Information.
"EASEMENTS" - has the meaning set forth in Section 3.17 of this
Agreement.
"EMPLOYEE RETENTION AMOUNT" - has the meaning set forth in Section
11.9(b) of this Agreement.
"ENCUMBRANCE" - means and includes:
(i) with respect to any personal property, any intangible
property or any property other than real property, any security or
other property interest or right, claim, lien, pledge, option, charge,
security interest, contingent or conditional sale, or other title claim
or retention agreement
4
or lease or use agreement in the nature thereof whether voluntarily
incurred or arising by operation of law, and including any agreement
to grant or submit to any of the foregoing in the future; and
(ii) with respect to any real property (whether and including
Owned Real Estate or Leased Real Estate), any mortgage, lien, easement,
interest, right-of-way, condemnation or eminent domain proceeding,
encroachment, any building, use or other form of restriction,
encumbrance or other claim (including adverse or prescriptive) or right
of third parties (including Governmental Bodies), any lease or
sublease, boundary dispute, and agreements with respect to any real
property including: purchase, sale, right of first refusal, option,
construction, building or property service, maintenance, property
management, conditional or contingent sale, use or occupancy, franchise
or concession, whether voluntarily incurred or arising by operation of
law, and including any agreement to grant or submit to any of the
foregoing in the future.
"ENVIRONMENTAL AUDIT FIRM" - has the meaning set forth in Section
7.9 of this Agreement.
"ENVIRONMENTAL LAWS" - means any and all Applicable Laws (i)
regulating the use, treatment, generation, transportation, storage, control
or disposal of any Hazardous Material, including, but not limited to, the
Comprehensive Environmental Response, Compensation and Liability Act (42
U.S.C. Section 9601 ET SEQ.) ("CERCLA"), the Resource Conservation and
Recovery Act (42 U.S.C. Section 6901 ET SEQ.), the Hazardous Materials
Transportation Act (49 U.S.C. Section 1801 ET SEQ.), the Federal Water
Pollution Control Act (33 U.S.C. Section 1251 ET SEQ.), the Clean Water Act
(33 U.S.C. Section 1251 ET SEQ.), the Clean Air Act (42 U.S.C. Section 7401
ET SEQ.), the Toxic Substances Control Act (15 U.S.C. Section 2601 ET SEQ.),
the Minnesota Environmental Response and Liability Act (Minn. Stat. Ch.
115B), and the Minnesota Petroleum Tank Release Cleanup Act (Minn. Stat. Ch.
115C), and/or (ii) relating to the protection, preservation or conservation
of the environment and public or worker health and safety, all as existing,
defined or interpreted as of the Date of Closing.
"ERISA" - means the Employee Retirement Income Security Act of 1974,
as amended.
"FINAL ORDER" - has the meaning set forth in Section 6.2 of this
Agreement.
"FCC" - has the meaning set forth in the recitals to this Agreement.
"GAAP" - means generally accepted accounting principles in the
United States.
"GLCLP" - has the meaning set forth in the recitals to this
Agreement.
"GLACIAL DBS" - has the meaning set forth in the recitals to this
Agreement.
"GOVERNMENTAL BODY" - any:
(i) nation, state, county, city, town, village, district
or other jurisdiction of any nature;
(ii) federal, state, local, municipal, foreign or other
government;
(iii) governmental or quasi-governmental authority of any
nature (including any governmental agency, branch, board, commission,
department, instrumentality, office or other entity, and any court or
other tribunal);
(iv) multi-national organization or body; and/or
(v) body exercising, or entitled or purporting to
exercise, any administrative, executive, judicial, legislative, police,
regulatory or taxing authority or power of any nature.
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"HAZARDOUS MATERIALS" - any and all (i) dangerous, toxic or
hazardous pollutants, contaminants, chemicals, wastes, materials or
substances listed or identified in, or directly or indirectly regulated by,
any Environmental Law, and (ii) any of the following, whether or not included
in the foregoing: polychlorinated biphenyls, asbestos in any form or
condition, urea-formaldehyde, petroleum, including crude oil or any fraction
thereof, natural gas, natural gas liquids, liquified natural gas, synthetic
gas usable for fuel or mixtures thereof, nuclear fuels or materials, chemical
wastes, radioactive materials, explosives and known possible carcinogens.
"INDEMNIFIED PARTY" - has the meaning set forth in Section 9.3 of
this Agreement.
"INDEMNIFYING PARTY" - has the meaning set forth in Section 9.3 of
this Agreement.
"INDEPENDENT ACCOUNTANTS" - has the meaning set forth in Section
2.5(f) of this Agreement.
"INJUNCTION" - means any and all writs, rulings, awards, directives,
injunctions (whether temporary, preliminary or permanent), judgments, decrees
or orders (whether executive, judicial or otherwise) adopted, enacted,
implemented, promulgated, issued, entered or deemed applicable by or under
the authority of any Governmental Body.
"INTELLECTUAL PROPERTY" - means any and all (i) inventions (whether
patentable or unpatentable and whether or not reduced to practice), all
improvements thereto, and all patents, patent applications and patent
disclosures, together with all reissuances, continuations, continuations in
part, revisions, extensions and reexaminations thereof; (ii) trademarks,
service marks, trade dress, logos, trade names, assumed names and corporate
names, together with all translations, adaptations, derivations and
combinations thereof and including all goodwill associated therewith, and all
applications, registrations and renewals in connection therewith; (iii)
copyrightable works, all copyrights and all applications, registrations and
renewals in connection therewith; (iv) mask works and all applications,
registrations and renewals in connection therewith; (v) trade secrets and
confidential business information (including ideas, research and development,
know-how, technology, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information and business and
marketing plans and proposals); (vi) computer software (including data and
related software program documentation in computer-readable and hard-copy
forms); (vii) other intellectual property and proprietary rights of any kind,
nature or description; and (viii) copies of tangible and embodiments thereof
(in whatever form or medium).
"IRS" - means the United States Internal Revenue Service.
"KNOWLEDGE" or "BEST KNOWLEDGE" - an individual will be deemed to
have "Knowledge" or "knowledge" of a particular fact or other matter if such
individual is actually aware of such fact or other matter; provided, however,
that Knowledge by one Shareholder of a particular fact or other matter shall
be deemed knowledge by all of the Shareholders, and that each Shareholder
shall be deemed to have Knowledge of all matters regarding the Company of
which the Company's directors, officers, or any of the following employees
have Knowledge: Xxxxxx X. Xxxxxxxx, Xxxx Xxxxxxxx, Xxx Xxxxxxxx, Xxx Xxxx,
Xxxxxxx Xxxxx, Xxxxx Xxxxxx, and Xxxxx Xxxx.
"LEASED REAL ESTATE" - has the meaning set forth in Section 3.17
hereof.
"LIABILITY" or "LIABILITIES" - means any and all debts, liabilities
and/or obligations of any type, nature or description (whether known or
unknown, asserted or unasserted, secured or unsecured, absolute or
contingent, accrued or unaccrued, liquidated or unliquidated and whether due
or to become due).
"LOSS" OR "LOSSES" - has the meaning set forth in Section 9.1 of
this Agreement.
"MANAGEMENT FEE" - has the meaning set forth in Section 5.22(c) of
this Agreement.
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"MATERIAL ADVERSE EFFECT" or "MATERIAL ADVERSE CHANGE"- means, in
connection with any Person, any event, change or effect that is materially
adverse, individually or in the aggregate, to the condition (financial or
otherwise), properties, assets, Liabilities, revenues, income, business,
operations, results of operations or prospects of such Person, taken as a
whole.
"OPERATING CONTRACTS" - has the meaning set forth in Section 3.16 of
this Agreement.
"ORDINARY COURSE OF BUSINESS" - means an action taken by a Person
only if:
(i) such action is consistent with the past practices of such
Person and is taken in the ordinary course of the normal day-to-day
operations of such Person; and
(ii) such action is not required to be authorized by the board
of directors of such Person (or by any Person or group of Persons
constituting a governing body of a Person exercising similar
authority).
"OWNED REAL ESTATE" - has the meaning set forth in Section 3.17
hereof.
"PCB'S" - has the meaning set forth in Section 3.28(g) of this
Agreement.
"PAYMENT AGENT" - means Xxxxxxxx Shareholder Representative
Corporation, a Minnesota corporation.
"PERMITTED ENCUMBRANCES" - has the meaning set forth in Section
3.17(d) of this Agreement.
"PERSON" - means any individual, corporation (including any
non-profit corporation), general, limited or limited liability partnership,
limited liability company, joint venture, estate, trust, association,
organization, or other entity or Governmental Body.
"PROCEEDING" - means any suit, litigation, arbitration, hearing,
audit, investigation or other action (whether civil, criminal, administrative
or investigative) commenced, brought, conducted, or heard by or before, or
otherwise involving, any Governmental Body or arbitrator.
"PURCHASER" - has the meaning set forth in the introductory
paragraph hereof.
"PURCHASE PRICE" - has the meaning set forth in Section 2.2 of this
Agreement.
"PURCHASE PRICE ADJUSTMENTS" - has the meaning set forth in Section
2.2 of this Agreement.
"QUALIFIED EMPLOYEE" - has the meaning set forth in Section 11.9(b)
of this Agreement.
"REAL ESTATE" - has the meaning set forth in Section 3.17(b) of this
Agreement.
"RELATED PERSON" - means, with respect to a particular individual,
(i) each other member of such individual's Family (as
hereafter defined); and
(ii) any Affiliate of one or more members of such
individual's Family.
With respect to a specified Person other than an individual:
(i) any Affiliate of such specified Person; and
(ii) each Person that serves as a director, governor,
officer, manager, general partner, executor or trustee of such
specified Person (or in a similar capacity). For purposes of this
7
definition, the "FAMILY" of an individual includes (i) such
individual, (ii) the individual's spouse, (iii) any lineal ancestor
or lineal descendant of the individual, or (iv) a trust for the benefit
of any of the foregoing.
"RELEASE" - has the meaning set forth in Section 10.2(i) of this
Agreement.
"RESPONSE PERIOD" - has the meaning set forth in Section 2.5(e) of
this Agreement.
"RETENTION AGREEMENT" has the meaning set forth in Section 11.9(b)
of this Agreement.
"RFC" - has the meaning set forth in the recitals to this Agreement.
"RIGHTS" shall mean any and all outstanding subscriptions, warrants,
options, or other arrangements or commitments obligating or which may
obligate (with or without notice or passage of time or both) the Company to
issue or dispose of any securities of the Company including, without
limitation, Convertible Securities, and Debt Securities.
"SCHEDULES" - has the meaning set forth in the introductory
paragraph to Article 3 of this Agreement.
"SHAREHOLDER" or "SHAREHOLDERS" - has the meaning set forth in the
introductory paragraph hereof.
"STOCK" - has the meaning set forth in the recitals to this
Agreement.
"SUPPLEMENT" - has the meaning set forth in Section 13.22 of this
Agreement.
"TAX" or "TAXES" - means any and all net income, gross income, gross
revenue, gross receipts, net receipts, ad valorem, franchise, profits,
transfer, sales, use, social security, employment, unemployment, disability,
license, withholding, payroll, privilege, excise, value-added, severance,
stamp, occupation, property, customs, duties, real estate and/or other taxes,
assessments, levies, fees or charges of any kind whatsoever imposed by any
Governmental Body, together with any interest or penalty relating thereto.
"TAX RETURN" - means any return, declaration, report, claim for
refund or information return or statement relating to Taxes, including
without limitation any schedule or attachment thereto, any amendment thereof,
and any estimated report or statement.
"THREATENED" - a claim, Proceeding, dispute, action, or other matter
will be deemed to have been "Threatened" if any demand or statement has been
made in writing, or any notice has been given in writing that would lead a
reasonably prudent Person to conclude that such a claim, Proceeding, dispute,
action, or other matter will, with substantial certainty, be asserted,
commenced, taken or otherwise pursued in the future; provided, however, that
the foregoing shall not include customer billing disputes in the Ordinary
Course of Business.
"TRANSITION PERIOD" - has the meaning set forth in Section 11.9(a)
of this Agreement.
"USE" - means to appropriate any of the Company's Confidential
Information for the benefit of oneself or any other Person other than the
Company.
"VALLEY" - has the meaning set forth in the recitals to this
Agreement.
"VALLEY EMPLOYEES" - has the meaning set forth in Section 5.22(d) of
this Agreement.
"VALLEY SALE" - has the meaning set forth in the recitals to this
Agreement.
8
"VALLEY SALE CLOSING DATE" - means the date on which the Valley Sale
is consummated by a closing.
"VALLEY SALE DOCUMENTS" - has the meaning set forth in Section
5.22(a) of this Agreement.
"VALLEY SALE EXPENSES" - means expenses paid or incurred by the
Company which arise from or in connection with the Valley Sale, which
expenses are (i) the Valley Sale Tax Holdback (ii) attorney's, accountants or
other professional fees incurred in connection with the Valley Sale, (iii)
sales, use or other transfer Taxes (but excluding income Taxes) incurred
solely as a result of the Valley Sale, (iv) fees of financial advisors in
connection with the Valley Sale, which includes one-half of the fee paid to
Xxxx Xxxxxxxx, and (v) any other direct, out of pocket expenses. Valley Sale
Expenses shall not include costs related to the use of Company or Valley
facilities and equipment and the time expended by executives and other
employees of the Company or Valley in connection with the Valley Sale.
"VALLEY SALE NET PROCEEDS" - means the Valley Sale Proceeds, less
(i) Valley Sale Expenses, (ii) amounts paid by the Company with Valley Sale
Proceeds for: (a) reduction of long term debt to the Bank and (b) reduction
of debt to any Shareholder, (iii) any amount paid by the Company prior to the
Closing of the Deferred Compensation Amount, and (iv) any portion of the
Indemnification Holdback (as defined by the Valley Sale Stock Purchase
Agreement) that is not directly transferred to the Company.
"VALLEY SALE PROCEEDS" - means the "Purchase Price" (as defined in
the Valley Sale Stock Purchase Agreement) (a) increased or decreased by the
final adjustment specified in Sections 2.2(b) and 2.8 of the Valley Sale
Stock Purchase Agreement, if any, without reduction for the "Indemnification
Holdback" (as defined in the Valley Sale Stock Purchase Agreement) and the
Valley Sale Tax Holdback.
"VALLEY SALE STOCK PURCHASE AGREEMENT" - means the September 1, 1998
Stock Purchase Agreement between Valley and Park Region Mutual Telephone
Company.
"VALLEY SALE TAX HOLDBACK" - means the "Tax Holdback," as defined in
the Valley Sale Stock Purchase Agreement.
"WORKING CAPITAL ADJUSTMENT" - has the meaning set forth in Section
2.2(e) of this Agreement.
ARTICLE 2: PURCHASE OF STOCK; PURCHASE PRICE
2.1 PURCHASE AND SALE OF STOCK. In reliance upon the
representations, warranties and covenants contained in this Agreement on the
Date of Closing, Purchaser agrees to purchase the Stock from the
Shareholders, and the Shareholders agree to sell, assign, transfer and
deliver the Stock to Purchaser on the terms and conditions set forth in this
Agreement.
2.2 PURCHASE PRICE. The purchase price for the Stock (the
"Purchase Price") shall be the aggregate of Eleven Million Nine Hundred
Thousand and 00/100 Dollars ($11,900,000) plus or minus, as indicated, the
sum of the following adjustments (collectively, the "Purchase Price
Adjustments").
(a) less sixty percent (60%) of the Employee Retention Amount
set forth in Schedule 11.9 hereof, plus sixty percent (60%) of any
Employee Retention Amount not paid by the Company to Qualified
Employees that, in accordance with Section 11.9 hereof, shall be
remitted to the Shareholders.
(b) less sixty percent (60%) of any Deferred Compensation
Amount that is payable by the Company after the Date of Closing and is
set forth on the Closing Balance Sheet. No later than five (5) business
days prior to the Date of Closing, Shareholder shall provide Purchaser
with SCHEDULE 2.2(b) hereof, which Schedule shall set forth the
Deferred Compensation Amount, itemized to show the estimated (or
actual, if available) amount owing to each recipient of a Deferred
Compensation Amount.
9
(c) less principal payments, if any, made on debt owed by the
Company or RFC to St. Xxxx Bank for Cooperatives (the "Bank") after
January 1, 1998 and prior to or at Closing, except for (i) regularly
scheduled principal payments during such period, and (ii) unscheduled
(or accelerated) principal payments made from sale proceeds of the
Company's Glacial DBS sale transaction or from Valley Sale Proceeds.
(d) less the amount of all long term debt and long term
liabilities shown on the Closing Balance Sheet after any payment to the
Bank pursuant to Section 2.2(c) of this Agreement (the "Long Term
Obligations"). The estimated amount of the Long Term Obligations shall
be jointly agreed upon between Shareholders and Purchaser in good faith
prior to the Closing, and the amount of the Long Term Obligations
determined shall be withheld from the amount payable at Closing and
reconciled after the Date of Closing in accordance with Section 2.5
hereof.
(e) less the amount, if any, by which current liabilities exceed
current assets on the Closing Balance Sheet (the "Working Capital
Adjustment"). The composition of, and adjustments required under this
Agreement to, current assets and current liabilities for purposes of
preparation of the Closing Balance Sheet is set forth in Section 2.5
hereof. The estimated amount of the Working Capital Adjustment shall
be jointly agreed upon between Shareholders and Purchaser in good faith
prior to the Closing and the estimated Working Capital Adjustment so
determined shall be withheld from the amount payable to Shareholders
at Closing and reconciled after the Date of Closing in accordance with
Section 2.5 hereof.
(f) plus the Valley Sale Net Proceeds. The estimated amount of the
Valley Net Proceeds shall be jointly agreed upon between the
Shareholders and Purchaser in good faith prior to the Closing, and the
amount of the Valley Sale Net Proceeds so determined will be added to
the amount payable at Closing and reconciled after Date of Closing in
accordance with Section 2.5 hereof.
(g) plus $33,897, but only if the escrow from the Glacial DBS sale
has not been paid to the Company at or prior to the Date of Closing.
(h) less the Company Income Tax Liability. The estimated amount of
the Company Income Tax Liability shall be jointly agreed upon between
Shareholders and Purchaser in good faith prior to the Closing and the
estimated Company Income Tax Liability so determined shall be withheld
from the amount payable to Shareholders at Closing and reconciled after
the Date of Closing in accordance with Section 2.5 hereof.
(i) plus the amount, if any, of any refund of any income Taxes
prepaid by the Company to which the Company is entitled with respect to
the Company's combined state and federal income Taxes for the 1998 Tax
year and the stub period ending on the Date of Closing, except any such
refund received by the Company at or prior to the Closing.
(j) plus the excess portion, if any, of the Valley Sale Tax
Holdback disbursed to the Company in accordance with the Valley Sale
Stock Purchase Agreement.
2.3 PAYMENT OF PURCHASE PRICE ON THE DATE OF CLOSING. The Purchase
Price to be paid on the Date of Closing shall be $11,900,000 plus or minus, as
applicable, the sum of (a) a reduction for the Employee Retention Amount
described in Section 2.2(a), (b) a reduction, if any, for the Deferred
Compensation Amount set forth in Section 2.2(b), (c) a reduction ,if any, for
the principal payments (subject to exceptions) set forth in Section 2.2(c), (d)
a reduction, if any, for the Long Term Obligations estimated in accordance with
Section 2.2(d), (e) a reduction, if any, for the estimate by which current
liabilities exceed current assets on the Closing Balance Sheet in accordance
with Section 2.2(e) and computed in accordance with Section 2.5, (f) an increase
for the amount, if any, of the Valley Sale Net Proceeds estimated in accordance
with Section 2.2(f), (g) an increase for the amount, if any, required to be paid
in accordance with Section 2.2(g), and (h) a reduction, if any, of the Company
Income Tax Liability estimated in accordance with Section 2.2(h). The Purchase
Price Adjustment set forth in Section 2.2(i) shall be paid by Purchaser causing
the Company to transfer to the Payment Agent the Tax refund, if any, specified
in said Section 2.2(i). Upon the Closing, the Company shall be deemed, without
the requirement of further documentation, to have assigned said Tax refund to
the Shareholders. The Purchase Price Adjustment set forth in Section 2.2(j)
shall, immediately at the time of disbursement, be paid by Purchaser to the
Payment Agent. The Purchase Price shall be paid directly to the Payment Agent
and shall be for all purposes deemed payment to the Shareholders. All payments
to the Shareholders pursuant to this
10
Agreement shall be made by certified or bank cashier's check, or by wire
transfer of immediately available funds to accounts designated by the Payment
Agent.
2.4 PAYMENTS OF PURCHASE PRICE AFTER THE DATE OF CLOSING. The
Purchase Price Adjustment set forth in Section 2.2(i) shall be paid by
Purchaser causing the Company to transfer to the Payment Agent the Tax
refund, if any, specified in said Section 2.2(i). Upon the Closing, the
Company shall be deemed, without the requirement of further documentation, to
have assigned said Tax refund to the Shareholders. The Purchase Price
Adjustment set forth in Section 2.2(j) shall, immediately at the time of
disbursement, be paid by Purchaser to the Payment Agent. The Purchase Price
shall be paid directly to the Payment Agent and shall be for all purposes
deemed payment to the Shareholders. All payments to the Shareholders pursuant
to this Agreement shall be made by certified or bank cashier's check, or by
wire transfer of immediately available funds to accounts designated by the
Payment Agent.
2.5 DETERMINATION OF PURCHASE PRICE ADJUSTMENTS; CLOSING BALANCE
SHEET; FINAL PAYMENT.
(a) Promptly following the Date of Closing (but in any event
within ninety (90) days after the Date of Closing), the Shareholders
shall cause to be prepared and delivered to the Purchaser a
certification (the "Closing Certificate") prepared by an auditor (the
"Auditor") selected by the Shareholders in their sole discretion. The
Closing Certificate shall include:
(i) A closing balance sheet
(the "Closing Balance Sheet") prepared in accordance with
Section 2.5(b) of this Agreement;
(ii) The following itemized
calculations and reconciliations of estimated Purchase Price
Adjustments:
(1) The amount, if any, estimated and
deducted from the Purchase Price paid on the Date of
Closing for Long Term Obligations shall be subtracted
from the actual Long Term Obligations existing on the
Date of Closing. If the amount of the actual Long
Term Obligations existing on the Date of Closing (i)
exceeds the estimated amount, the Purchase Price is
reduced and such amount shall be an amount due to
Purchaser, or (ii) is less than the estimated amount,
the Purchase Price is increased and such amount shall
be an amount due to the Shareholders.
(2) The amount, if any, estimated and
deducted from the Purchase Price, by which current
liabilities exceed current assets on the Date of
Closing shall be subtracted from the actual amount by
which current liabilities exceed current assets on
the Closing Balance Sheet. If the actual amount of
such excess current liabilities over current assets
(i) exceeds the estimated amount, the Purchase Price
is reduced and such amount shall be an amount due to
Purchaser, or (ii) is less than or equal to the
estimated amount, the Purchase Price shall be
increased (but not if the estimated amount was $0 on
the Date of Closing) and such amount shall be an
amount due to the Shareholders.
(3) The amount, if any, estimated and by
which the Purchase Price was increased for the Valley
Net Sale Proceeds shall be subtracted from the actual
Valley Net Sale Proceeds computed by the Auditors
(for which an itemized calculation shall be made by
the Auditors as a schedule to the Closing
Certificate). If the amount of the actual Valley Net
Sale Proceeds (i) exceeds the estimated amount, the
Purchase Price is increased and such amount shall be
an amount due to the Shareholders, or (ii) is less
than the estimated amount, the Purchase Price is
reduced and such amount shall be an amount due to
Purchaser.
(4) The amount, if any, estimated and
deducted from the Purchase Price paid on the Date of
Closing for the Company Income Tax Liability shall
be subtracted from the actual Company Income Tax
Liability computed by the Auditors (for which an
itemized calculation shall be made by the Auditors
as a schedule to the Closing Certificate). If the
amount of the actual Company Income Tax Liability
(i) exceeds the estimated amount, the Purchase Price
is reduced and such amount shall be an amount due to
the Purchaser or (ii) is less
11
than the estimated amount, the Purchase Price shall
be increased and such amount shall be an amount due
to the Shareholders.
(iii) The foregoing increases or decreases to the
Purchase Price shall be summarized and computed in the
aggregate as either an amount (i) due to Purchaser, or (ii)
due to the Shareholders, with interest thereon computed in
accordance with Section 2.5(g)
(iv) Copies of all supplementary documents, work
papers, and other data relating to the Closing Certificate;
and
(v) Such other supplementary evidence as
Purchaser may require either prior to or after delivery of the
Closing Certificate.
(b) In connection with the preparation of the Closing Balance
Sheet and all other matters arising under the Closing Certificate,
Purchaser shall afford the Shareholders and their representatives
complete access to the books, records, personnel and facilities of or
pertaining to the Company to permit the Auditor to review such
information as is necessary or desirable to prepare the Closing Balance
Sheet and all other statements arising under the Closing Certificate.
(c) The itemized calculations required by Section 2.5(a)(ii)
shall be presented and calculated in accordance with EXHIBIT B-2
hereto.
(d) The Closing Balance Sheet shall consist of the opinion of
the Auditor, substantially in the form of Exhibit B-1 hereto, based on
an audit of the balance sheet of the Company as of the close of
business on the Date of Closing in accordance with GAAP consistently
applied by the Company (including any change in accounting methods or
principles disclosed in any Schedule or Supplement) and without giving
effect to the consummation of the transactions contemplated hereby. The
Auditor's statement on the Closing Balance Sheet shall be unqualified,
except for the modifications to GAAP mandated by this Agreement for the
proper presentation and calculation of the matters required to be
included with and in the Closing Certificate. The expense of the
preparation of the Closing Balance Sheet by the auditor shall be borne
by the Shareholders. The parties hereby acknowledge and agree that,
regardless of whether it is otherwise required by GAAP, or whether it
is inconsistent with the past accounting practices of the Company, the
Closing Balance Sheet shall not contain accruals for the expenses
associated with the preparation of the Closing Balance Sheet.
In furtherance of the foregoing, the Closing Balance Sheet
prepared by the Auditor shall be adjusted to reflect the following
adjustments to and/or departures from GAAP (as GAAP is applied in a
manner consistent with the Company's past accounting practices):
(i) All intercompany eliminations and adjustments
shall be made by the debiting or crediting the intercompany
account and debiting or crediting the corresponding
intercompany account.
(ii) Any amount payable to any Shareholder shall be
eliminated with a debit to the applicable liability account(s)
and a credit to the retained earnings.
(iii) Any amount payable to the Bank shall be
eliminated by a debit to the applicable liability account(s)
and a credit to retained earnings.
(iv) Any amount payable as a Deferred Compensation
Account shall be eliminated by a debit to the applicable
liability account(s) and a credit to retained earnings.
(v) The Indemnification Holdback (as defined in
the Valley Sale Stock Purchase Agreement) shall be eliminated
as an asset by a credit to the Indemnification Holdback
amount and a debit to retained earnings.
(vi) An amount for accrued bonuses payable in 1999
for 1998 (if any),vacation pay and sick pay, if not already
accrued on the Closing Balance Sheet, shall be accrued by a
debit to retained earnings and a credit to the applicable
current liability account(s) in the amount(s) as specified
in SCHEDULE 3.20.
(vii) Any amount for prepaid income Taxes shall be
eliminated as an asset by a credit to the applicable current
asset account and a debit to retained earnings.
12
(viii) Any amount for accrued income Taxes shall be
eliminated as a liability by a debit to the accrued income
Taxes account and a credit to retained earnings.
(ix) Any amount for the Valley Sale Tax Holdback
shall be eliminated as an asset by a credit to the Valley Sale
Tax Holdback amount and a debit to retained earnings.
(x) Any amount deducted from the Purchase Price
pursuant to Section 2.2(c) shall be adjusted by a debit to
cash and a credit to retained earnings.
(e) If Purchaser concludes that any matter reported in
the Closing Certificate is not accurate, Purchaser shall, within thirty
(30) days after their receipt of the Closing Certificate (the "Response
Period"), deliver to the Shareholders a written statement setting forth
a specific description of each of its objections and each of any
discrepancies believed to exist. If no notice of any objections or
discrepancies is given within the Response Period, then the
calculations set forth in the Closing Certificate shall be controlling
for all purposes of this Agreement, and Purchaser or the Shareholders,
as the case may be, shall pay the other the amount which they are
obligated to pay in accordance with the Closing Certificate pursuant to
SECTION 2.5 (G) below.
(f) Purchaser and the Shareholders shall use good faith
efforts to jointly resolve the properly noticed objections and
discrepancies within fifteen (15) days of the receipt of the written
statement of objections and discrepancies, which resolution, if
achieved, shall be fully and completely binding upon all parties to
this Agreement and not subject to further review, appeal, or dispute.
If Purchaser and the Shareholders are unable to resolve the objections
and discrepancies to their mutual satisfaction within such fifteen (15)
day period, then the matter shall be submitted to a mutually acceptable
accounting firm of national reputation with experience in the cellular
radio telephone industry (the "Independent Accountants"). In submitting
a dispute to the Independent Accountants, each of the parties shall
concurrently furnish, at its own expense, to the Independent
Accountants and the other party such documents and information as the
Independent Accountants may request. Each party may also furnish to the
Independent Accountants such other information and documents as it
deems relevant, with the appropriate copies and notification being
concurrently given to the other party. Neither party shall have or
conduct any communication, either written or oral, with the Independent
Accountants without the other party either being present or receiving a
concurrent copy of any written communication. The Independent
Accountants may conduct a conference concerning the objections and
disagreements between the Shareholders and Purchaser, at which
conference each party shall have the right to (i) present its
documents, materials and other evidence (previously provided to the
Independent Accountants and the other party) and (ii) to have present
its or their advisors, accountants and/or counsel. The Independent
Accountants shall promptly (but not to exceed thirty (30) days from the
date of engagement of the Independent Accountants) render a decision on
the issues presented, and such decision shall be final and binding on
the parties.
(g) Within five (5) days of the earlier to occur of
(i) any failure to object to the Closing Certificate within the
Response Period, or (ii) receipt of the Independent Accountant's
decision with respect to such dispute, if Purchaser is deemed to owe
an amount to the Shareholders, Purchaser shall pay such amount to the
Shareholders, and if the Shareholders are determined to owe an amount
to Purchaser, the Shareholders shall pay such amount to Purchaser. All
amounts owed by Purchaser or the Shareholders to the other in
accordance with this SECTION 2.5 shall be paid by certified or bank
cashier's check or by wire transfer of immediately available funds with
interest computed thereon from the Date of Closing at the prime rate
charged on the date the payment becomes due by US Bank National
Association, Minneapolis, Minnesota.
ARTICLE 3: REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS
As an inducement to Purchaser to enter into this Agreement and to
consummate the transactions contemplated hereby, Shareholders represent and
warrant to Purchaser that each and all of the following (as modified by the
Schedules to this Agreement (the "Schedules") and any Supplement delivered by
Seller
13
pursuant to Section 13.22 of this Agreement) are true and correct as of the
date of this Agreement and will be true and correct as of the Date of Closing:
3.1 DUE INCORPORATION. The Company and RFC are corporations duly
organized, validly existing and in good standing under the laws of the State
of Minnesota. The Company has all requisite power and authority, corporate
and otherwise, to own, operate and lease its properties and assets and to
conduct the Business as it is now being conducted. The Company and RFC are
duly qualified to transact business as a foreign corporation and are in good
standing under the laws of every state or jurisdiction in which the nature of
their activities or of their properties owned, leased or operated makes such
qualification necessary and in which the failure to be so qualified could
reasonably be expected to have a Material Adverse Effect on the Company or
RFC.
3.2 CAPITALIZATION. The authorized capital stock of the Company
consists solely of 20,000 shares of Class A Common Voting Stock, $.01 par
value per share, 1,980,000 shares of Class B Common Nonvoting Stock, $.01 par
value per share, of which 10,000 shares of Class A Common Voting Stock and
990,000 shares of Class B Common Nonvoting Stock are issued and outstanding
on the date hereof and owned beneficially and of record as indicated in
EXHIBIT A, free and clear of all liens and encumbrances. Nothing in this
Agreement shall prevent the Shareholders from gifting the Stock among
themselves in accordance with an annual gifting program. None of the Stock
has been issued in violation of the rights of any Person. Except as set forth
on SCHEDULE 3.2 hereto, as of the date hereof, (i) there are no Convertible
Securities or Debt Securities outstanding; (ii) there are no Rights
outstanding; and (iii) there are no shareholder agreements or other
agreements, understandings or commitments relating to the rights of the
Shareholders to vote or dispose of the Stock.
3.3 DUE AUTHORIZATION. The execution, delivery and performance of
this Agreement, including the documents, instruments and agreements to be
executed and/or delivered by the Shareholders pursuant to this Agreement, and
the consummation of the transactions contemplated hereby and thereby have
been duly and validly authorized by all necessary action on the part of the
Shareholders. This Agreement and the documents, instruments and agreements to
be executed and/or delivered by the Shareholders pursuant to this Agreement
have been or will be on or before the Date of Closing duly and validly
authorized, executed and delivered by the Shareholders and the obligations of
the Shareholders hereunder and thereunder are or will be upon such execution
and delivery valid, legally binding and enforceable against Shareholders in
accordance with their respective terms, except as such enforcement may be
limited by applicable bankruptcy, reorganization, insolvency, moratorium or
other similar laws presently or hereafter in effect affecting the enforcement
of creditors' rights generally and by general principles of equity
(regardless of whether such enforceability is considered in a proceeding at
law or in equity), including, among others, limitations on the availability
of equitable remedies.
3.4 NO BREACH. The Shareholders have full power and authority to
sell, assign, transfer, convey and deliver to Purchaser the Stock to be sold
hereunder and to otherwise perform their respective obligations under this
Agreement and the documents, instruments and agreements to be executed and/or
delivered by the Shareholders pursuant hereto. The execution and delivery of
this Agreement, including the documents, instruments and agreements to be
executed and/or delivered by the Shareholders pursuant to this Agreement, and
the consummation of the transactions contemplated hereby and thereby will
not: (i) violate any provision of the Articles of Incorporation or Bylaws (or
comparable governing documents or instruments) of the Company; (ii) violate
any Applicable Laws or Injunction applicable to the Company or any
Shareholder; (iii) except as provided in SCHEDULE 3.4 hereto, require any
filing with, permit from, authorization, consent or approval of, or the
giving of any notice to, any Person; (iv) except as provided in SCHEDULE 3.4
hereto, result in a violation or breach of, or constitute (with or without
due notice or lapse of time or both) a default (or give another party any
rights of termination, cancellation or acceleration) under any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, license,
franchise, permit (including, but not limited to, any permits, approvals or
authorizations of the FCC or any other Governmental Body), lease or other
Contract to which the Company and/or any Shareholder is a party, or by which
they or any of their properties or assets may be bound; or (v) result in the
creation or imposition of any Encumbrance on any of the properties or assets
of the Company or any Shareholder.
14
3.5 CLEAR TITLE. Except as otherwise set forth on SCHEDULE 3.5
hereto, on the Date of Closing, the Company and RFC will hold good, valid and
marketable title to all of their non-Real Estate properties and assets and a
valid leasehold interest in all Leased Real Estate and all leased non-Real
Estate properties and assets. Such properties and assets and leasehold
interests are free and clear of any and all Encumbrances of any kind, nature
and description whatsoever.
3.6 CONDITION OF ASSETS. Except as set forth in SCHEDULE 3.6 hereto,
all of the Company's and RFC's properties and assets (i) have in all material
respects been properly maintained, (ii) are in all material respects in good
operation condition and repair, subject only to ordinary wear and tear, (iii)
are usable and fit for their intended purpose, and (iv) are all the assets
used to operate the Company's Business as currently conducted.
3.7 LITIGATION. Except as described in SCHEDULE 3.7 hereto,
there is no pending Proceeding:
(a) that has been commenced by or served upon the Company or
RFC, or of which the Company or RFC have Knowledge (other than any
Proceeding which generally affects the business of all Persons
conducting business similar to the Company or RFC and in which Company
or RFC is not a named defendant); or
(b) to the Company's or RFC's Knowledge, that challenges, or
that will have, without substantial certainty, the effect of
preventing, delaying, making illegal, or otherwise interfering with,
any of the transactions contemplated hereby.
To the Knowledge of the Shareholders, no such Proceeding has been Threatened.
Except as provided in SCHEDULE 3.7 hereto, to Shareholders' Knowledge, the
Company and RFC are not parties to or subject to the provisions of any
Injunction which could, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on the Company or RFC or impair
the ability of the Shareholders to consummate the transactions contemplated
hereby.
3.8 LABOR MATTERS. The Company and RFC have never been a party to
any collective bargaining agreement or other labor Contract. There has never
been, and there is not presently pending or existing, and to the
Shareholders' Knowledge there is not Threatened, (i) any strike, slowdown,
walkout, picketing, work stoppage, labor arbitration or other Proceeding in
respect of the grievance of any employee, (ii) any application or complaint
filed by any employee or union with the National Labor Relations Board, or
any comparable Governmental Body, (iii) any organizational activity or other
labor dispute against or affecting the Company or RFC, and no application for
certification of a collective bargaining agreement is pending or, to the
Shareholders' Knowledge, is Threatened. There is no lockout of any employees
by the Company and no such action is contemplated by the Company or RFC.
Except as set forth in SCHEDULE 3.8 hereto, there is no allegation, charge,
complaint or Proceeding pending or, to Shareholders' Knowledge, Threatened by
any Person against the Company or RFC or any of their current or former
officers, directors or employees relating to employment, equal employment
opportunity, discrimination, harassment, wrongful discharge, unfair labor
practices, immigration, wages, hours, benefits, collective bargaining, the
payment of social security or similar taxes, occupational safety and health
or plant closing.
3.9 TAXES. The Company, as RGI Group, Inc., has filed consolidated
federal income taxes which included Valley, RFC and Glacial DBS
(collectively, the "Consolidated Tax Entities").
(a) GENERAL TAX MATTERS. Except as set forth in Schedule 3.9,
with respect to the Company, (a) all Tax Returns and all similar
filings required to be filed before the Date of Closing by the Company
with respect to any Taxes have been timely filed with the appropriate
Governmental Body in all jurisdictions in which such Tax Returns are
required to be filed, all such Tax Returns correctly reflect the
Liability of the Company for Taxes for the periods, properties or
events covered thereby, and are correct and complete in all material
respects; (b) all Taxes shown as payable on the Tax Returns filed by
the Company prior to the Date of Closing, all Taxes due and payable by
the Company prior to the Date of Closing (whether or not shown on any
Tax Return) and all Taxes accruable with respect to events occurring
prior to the Date of Closing,
15
whether disputed or not, will either have been paid in full prior to
the Date of Closing, or an adequate accrual in accordance with GAAP
will be provided with respect thereto on the Closing Balance Sheet
including, but not limited to, any and all taxes relating to the
Valley Sale; (c) no deficiency in respect of any Taxes which has
been assessed against the Company remains unpaid and there are no
unassessed Tax deficiencies or any audits or to the Shareholders'
Knowledge investigations pending Threatened against the Company with
respect to any Taxes; (d) there is in effect no extension for the
filing of any Tax Return and the Company has not extended or waived
the application of any statute of limitations of any jurisdiction
regarding the assessment or collection of any Taxes; (e) no claim
has ever been made by any tax authority in a jurisdiction in
which the Company does not file Tax Returns that the Company is or
may be subject to taxation by that jurisdiction; (f) there are no
Encumbrances for Taxes upon any asset of the Company except for
Encumbrances for current Taxes not yet due and payable; (g) to the
Shareholders' Knowledge no issues have been raised in any examination
by any Tax authority with respect to the Company which, by application
of similar principles, could with substantial certainty be expected to
result in a proposed deficiency for any other period not so examined;
(h) the Company is not a party to any Tax allocation or sharing
agreement or otherwise under any obligation to indemnify any Person
with respect to any Taxes, except for an unwritten arrangement among
the Consolidated Tax Entities; (i) there are no requests for rulings in
respect of any Taxes pending between the Company and any Tax authority;
and (j) the Company has timely made all deposits required by law to be
made with respect to sales and use Taxes and employees' withholding and
other employment Taxes.
(b) DISPUTED CLAIMS AND TAX RETURNS. SCHEDULE 3.9 lists all
material disputes or claims concerning any Tax Liability of the Company
claimed or raised by any authority as to which any Shareholder has
Knowledge. SCHEDULE 3.9 lists all federal, state, local, and foreign
income Tax Returns filed with respect to the Company for taxable
periods ended on or after December 31, 1995; indicates those Tax
Returns that have been audited; and indicates those Tax Returns that
currently are the subject of audit; and includes a list of all federal
income Tax Returns, examination reports, and statements of deficiencies
assessed against or agreed to by the Company since January 1, 1993,
each of which has been provided to Purchaser.
(c) S CORPORATION STATUS. None of the Consolidated Tax
Entities have ever been a validly electing S corporation within the
meaning of Sections 1361 and 1362 of the Code.
3.10 EMPLOYEE BENEFITS.
(a) BENEFIT PLANS. Except as described in SCHEDULE 3.10
hereto, the Company does not maintain or contribute to any Benefit
Plans. Without limiting the generality of the foregoing provision of
this Section, except as described in SCHEDULE 3.10 hereto, there are no
pension plans, welfare plans or employee benefit plans qualified under
Section 401(a) of the Code to which the Company is required to
contribute. Except for the Deferred Compensation Agreements, and as
described in SCHEDULE 3.10 hereto, the Company does not and will not
have any unfunded Liability for services rendered prior to the Date of
Closing under any Benefit Plans. The Company is not in any material
default under any Benefit Plan. Except as set forth in Schedule 3.10,
neither the Company, nor any entity now or formerly part of a
controlled group with the Company, within the meaning of Section
412(c)(11)(B)(ii) of the Code, maintains or has ever maintained a
"defined benefit plan," as defined in Section 3(35) of ERISA, that is
subject to Section 412 of the Code and Section 302 of ERISA. Except as
set forth in SCHEDULE 3.10 hereto, neither the Company nor any of its
"subsidiaries" contributes to or has any Liability (including but not
limited to withdrawal Liability) with respect to any multi-employer
plan (as defined in Section 4064(a) of ERISA or Section 4001(a)(3) of
ERISA). Other than claims for benefits in ordinary course, there are no
actions, suits, disputes, arbitrations or other material claims pending
or, to Shareholders' Knowledge, Threatened with respect to any Benefit
Plan. For purposes of this Section, "subsidiaries" shall include all
corporations and all trades or businesses (whether or not incorporated)
which may be liable for any income tax, loss of tax deduction, excise
taxes,
16
penalties or other similar consequences under ERISA (as hereinafter
defined) or under the Code by reason of its ownership affiliation
with the Company.
(b) OTHER PLANS. The Shareholders and the Company have made
available to the Purchaser information relating to deferred
compensation, incentive compensation and other fringe benefit plans, if
any, sponsored or maintained by the Company. Except for (i) the
Deferred Compensation Agreements, (ii) the Retention Agreements, (iii)
as pursuant to the Benefit Plans or (iv) as otherwise set forth in
SCHEDULE 3.10, there are no present or former employees of the Company
who are entitled to (i) any pensions or other benefits to be paid after
termination of employment, including termination on account of
disability (except as otherwise required under Section 601 of ERISA) or
(ii) deferred compensation payments.
(c) DOCUMENTS. The Shareholders have made available to the
Purchaser the following documents, as they may have been amended to the
date hereof, embodying or relating to each Benefit Plan listed in
SCHEDULE 3.10 hereto: (i) all written plan documents for each such
Benefit Plan, including all amendments to each such Benefit Plan, any
related trust agreements, group annuity contracts, insurance policies
or other funding agreements or arrangements; (ii) the most recent
determination letter received from the Internal Revenue Service, if
any, as to the qualified status of any such Benefit Plan under Section
401(a) of the Code; (iii) the current summary plan description, if any,
for each such Benefit Plan; and (iv) the most recent annual
return/report on form 5500, 5500-C or 5500-R, if any, for each such
Benefit Plan.
(d) PROHIBITED TRANSACTIONS. The Company has not, nor, to the
Shareholders' Knowledge, has any other "disqualified person" or "party
in interest", as defined in Section 4975(e)(2) of the Code and Section
3(14) of ERISA, respectively, engaged in a "prohibited transaction," as
such term is defined in Section 4975 of the Code and Section 406 of
ERISA, with respect to any Benefit Plan listed on SCHEDULE 3.10 hereto
subject to ERISA, which could reasonably be expected to subject the
Company to a material tax or penalty on prohibited transactions imposed
by either Section 502(i) of ERISA or Section 4975 of the Code. The
execution and delivery by the Shareholders of this Agreement and the
consummation of the transactions contemplated hereby will not (i)
involve any prohibited transaction within the meaning of Section 406 of
ERISA or Section 4975 of the Code with respect to any Benefit Plan
listed on SCHEDULE 3.10 hereto, or (ii) accelerate the payment of any
benefits under any Benefit Plan listed on SCHEDULE 3.10 hereto.
(e) FIDUCIARY DUTY. Neither the Company, nor, to Shareholders'
Knowledge, any other fiduciary of any Benefit Plan listed on SCHEDULE
3.10 hereto engaged in any transaction with respect to such Benefit
Plan or failed to act in a manner with respect to such Benefit Plan
which could reasonably be expected to subject the Company to any
material Liability for a breach of fiduciary duty under ERISA or any
other applicable law.
(f) COBRA. The Company has complied in all material respects
with the coverage continuation requirements of Sections 601 through 609
of ERISA, Section 5980B of the Code, and the requirements of any
similar state law regarding continued insurance coverage, and the
Company has incurred no material Liability with respect to its failure
to offer or provide continued coverage in accordance with the foregoing
requirements, nor is there any suit pending, or to the Shareholders'
Knowledge, Threatened, with respect to such requirements.
(g) TRIGGERING OF OBLIGATION AND OTHER BINDING COMMITMENTS.
Except for the claims arising under the Deferred Compensation
Agreements, the Retention Agreements, or as set forth in SCHEDULE 3.10,
the consummation of the transactions described in this Agreement, in
and of themselves, will not entitle any current or former employee of
the Company to severance pay, unemployment compensation or any other
payment, or accelerate the time of payment or vesting, or increase the
amount of compensation due to any such employee or former employee.
3.11 [THIS SECTION INTENTIONALLY OMITTED]
17
3.12 FINANCIAL STATEMENTS. The Shareholders have caused the Company
to furnish true and correct copies of the financial statements identified in
SCHEDULE 3.12 hereto to Purchaser. All of said financial statements,
including any notes thereto, are true and correct in all material respects
and fairly present the financial position and condition of the Company as of
their respective dates and the results of its operations for the periods
covered in accordance with GAAP applied by the Company on a consistent basis
throughout the periods covered thereby and on a basis consistent with that of
prior years and periods; provided, however, that any interim financial
statements listed on such Schedule may not include a statement of cash flows,
are subject to year-end adjustments and lack footnotes and other required
presentation items. Except for Liabilities (i) reflected or reserved against
in the balance sheet (the "Balance Sheet") of the Company as of December 31,
1997 (the "Balance Sheet Date") or in the notes thereto, (ii) incurred in the
Ordinary Course of Business since the Balance Sheet Date (none of which
resulted from, arose out of, is related to, or was caused by any breach of
Contract, breach of warranty, tort, infringement or violation of Applicable
Laws), (iii) arising under Contracts to which the Company is a party, and/or
(iv) described on SCHEDULE 3.12 hereto, the Company does not have any
Liabilities which, individually or in the aggregate, would have a Material
Adverse Effect on the Company. The reserves for doubtful accounts reflected
in the Balance Sheet are adequate and have been calculated consistent with
past practice.
3.13 ABSENCE OF CERTAIN DEVELOPMENTS. Except for the transactions
contemplated by this Agreement, the Valley Sale, or as otherwise set forth on
SCHEDULE 3.13 hereto, since the Balance Sheet Date, the Company has conducted
the Business only in the Ordinary Course of Business and has not:
(a) Except for the Valley Sale, the transfer to Xxxxxx X.
Xxxxxxxx set forth in Section 5.8 hereof, and the Company's transfer of
its interest in Switch 2000, LLC, sold, leased, assigned or otherwise
transferred any material properties or assets, or disposed of or
permitted to lapse any rights in Intellectual Property owned or used by
the Company, other than in the Ordinary Course of Business, or
organized any new business entity or acquired any equity securities,
assets, properties, or business of any Person or any equity or
ownership interest in any business or merged with or into or
consolidated with any other Person;
(b) Suffered, sustained or incurred any material loss or
waived or released any material right or claim, whether or not in the
Ordinary Course of Business;
(c) Suffered, sustained or incurred any material damage,
destruction or casualty loss to any material properties or assets,
whether or not covered by insurance;
(d) Except for the early payment of its Debt Instruments,
engaged in any transaction not in the Ordinary Course of Business;
(e) Except for cellular phones purchased for lease to
customers, made any capital expenditure (or series of related capital
expenditures) exceeding $10,000;
(f) Subjected any of its properties or assets to any Encumbrance,
whether or not in the Ordinary Course of Business;
(g) Issued any note, bond or other debt security, created,
incurred or assumed any indebtedness for borrowed money or capitalized
lease obligation
18
or otherwise incurred any material Liability, except current
Liabilities incurred in the Ordinary Course of Business;
(h) Other than the early payment of its Debt Instruments, and
except as contemplated by this Agreement, discharged or satisfied any
Encumbrance, or paid any material Liability, other than current
Liabilities shown on the Company's balance sheet as of the Balance
Sheet Date, and current Liabilities incurred in the Ordinary Course of
Business since the Balance Sheet Date;
(i) Other than transactions not ordinarily or presently
characterized as dividends or distributions, such as payment of
professional fees, declared, set aside or paid a dividend or made any
other distribution with respect to any class or series of capital stock
of the Company, or directly or indirectly redeemed, purchased or
otherwise acquired any shares of any class or series of the Company's
capital stock;
(j) Increased the salary, wage or other compensation or level
of benefits payable or to become payable by the Company to any of its
officers, directors, employees or agents other than in the Ordinary
Course of Business;
(k) Loaned money to any Person or guaranteed any loan to or
Liability of any Person, whether or not in the Ordinary Course of
Business;
(l) Except as described in the Schedules hereto, amended or
terminated any of the Operating Contracts (as hereinafter defined),
except in the Ordinary Course of Business;
(m) Changed accounting methods or practices (including,
without limitation, any change in depreciation, amortization or cost
accounting policies or rates);
(n) Suffered, sustained or incurred any Material Adverse
Change in the properties, assets, Liabilities, revenues, income,
business, operations, results of operations or financial condition of
the Company;
(o) Received notice from any customer, supplier, vendor,
Governmental Body or any other Person which would, with substantial
certainty, give rise to or result in a Material Adverse Effect on the
Company;
(p) Delayed or postponed the payment of accounts payable or
other Liabilities outside of the Ordinary Course of Business;
(q) Entered into any employment Contract or collective
bargaining agreement, written or oral, or modified the terms of any
existing such Contract or agreement or adopted, amended, modified or
terminated any Benefit Plan for the benefit of any of the Company's
directors, officers and employees;
19
(r) Except for the name change to RGI Group, Inc., made any
change or amendment in its articles of incorporation, bylaws, or other
governing instruments;
(s) Issued or sold any securities; acquired, directly or
indirectly, by redemption or otherwise, any securities; reclassified,
split-up or otherwise changed any such equity security; or granted or
entered into any options, warrants, calls or commitments of any kind
with respect thereto; and/or
(t) Entered into any Contract to do any of the foregoing.
3.14 INTELLECTUAL PROPERTY. SCHEDULE 3.14 hereto contains a list and
description of all material Intellectual Property owned by the Company or used
by the Company in the operation of the Business. Except as set forth in
SCHEDULES 3.14, Shareholders have no Knowledge of any asserted claim to the
effect that the operation of the Business or the possession or use in the
Business of any of the Intellectual Property listed and described on SCHEDULE
3.14 hereto, infringes the intellectual property rights of any other Person.
Except as set forth in SCHEDULES 3.14, the Shareholders have no Knowledge of any
claim that any of the Intellectual Property listed and described on SCHEDULE
3.14 is invalid; and, except as provided in SCHEDULE 3.14 hereto, the Company is
not obligated under any Contract or otherwise to pay royalties, fees or other
payments with respect to any of the Intellectual Property listed and described
on SCHEDULE 3.14 hereto. Except as set forth in SCHEDULES 3.14, the consummation
of the transactions contemplated by this Agreement will not adversely affect the
use by the Company of any of the Intellectual Property listed on SCHEDULE 3.14
hereto.
3.15 COMPLIANCE WITH LAWS. The Business has been operated and the
Company is in compliance in all material respects with the requirements of all
Applicable Laws to which the Company is subject. The Company has not received
any notice of, and the Shareholders have no Knowledge of any violation of a
material nature of any Applicable Laws respecting the Company.
3.16 OPERATING CONTRACTS. Except as disclosed in SCHEDULE 3.16, and
except with respect to contracts, commitments and agreements that have been
fully performed as of the date hereof and have no further force or effect, the
Company and RFC are not a party to any oral or written Contract. All of the
Contracts listed on SCHEDULE 3.16 hereto are referred to in this Agreement as
the "OPERATING CONTRACTS". All of the Operating Contracts were made in the
Ordinary Course of Business, and, to the Shareholders' Knowledge, are valid,
binding and currently in full force and effect. The Company is not in default in
any material respect under any of the Operating Contracts, and, to the
Shareholders' Knowledge, no event has occurred which, through the passage of
time or the giving of notice, or both, would constitute a default by the Company
or give rise to a right of termination or cancellation by another party under
any of the Operating Contracts, or cause the acceleration of any Liability of
the Company, or result in the creation of any Encumbrance upon any of the
Company's properties or assets. To the Shareholders' Knowledge, no other party
is in default under any of the Operating Contracts. Except as described on
SCHEDULE 3.16 hereto, none of the Operating Contracts have been canceled,
terminated, amended or modified. Except as provided in SCHEDULE 3.4 hereto, the
consummation of the transactions contemplated hereby will not require the
consent or approval of any Person under any of the Operating Contracts.
3.17 REAL ESTATE. Schedule 3.17 contains a list of all easements under
which the Company is the benefited party (the "Easements"). With respect to each
parcel of real estate owned by the Company (the "OWNED REAL ESTATE"), and each
parcel of real estate leased by the Company (the "LEASED REAL ESTATE"):
(a) SCHEDULE 3.17 contains a complete and accurate legal
description of each parcel of Owned Real Estate and a description of
each written or oral
20
lease regarding Leased Real Estate which is not otherwise described on
SCHEDULE 3.16 hereto;
(b) Except as set forth on SCHEDULE 3.17 hereto, to the
Knowledge of Shareholders, there are no public improvements affecting
any parcel of Owned Real Estate or Leased Real Estate (collectively the
"REAL ESTATE"), including, but not limited to, water, sewer, sidewalk,
street, alley, curbing, landscaping or related improvements, which have
been commenced and/or completed and for which an assessment has not
been levied or, to Shareholders' Knowledge, which may be levied after
the date of this Agreement;
(c) Except as set forth in Schedule 3.17 hereto, there are no
deferred property Taxes or assessments with respect to the Real Estate
which may or will become due and payable as a result of the
consummation of the transaction contemplated hereby;
(d) The Company is the sole owner in fee simple title of each
parcel of Owned Real Estate and each such parcel is free and clear of
any and all Encumbrances, except (i) those Encumbrances set forth in
SCHEDULE 3.17 hereto, (ii) municipal zoning ordinances, recorded or
platted easements for public utilities and recorded building and use
restrictions and covenants, (iii) general real estate Taxes and
installments of special assessments payable in the year of Closing, and
(iv) minor survey exceptions, encumbrances, licenses, easements or
reservations of, or rights of others for, oil, gas minerals, ores or
metals, rights of way, sewers, electric lines, telegraph and telephone
lines and other similar purposes, or zoning or other restrictions on
the use of real property, minor defects in title or other similar
charges or encumbrances not interfering in any material respect with
the Ordinary Course of Business of the Company or with the use or
ownership of the Owned Real Estate (collectively the "PERMITTED
ENCUMBRANCES"). To the Shareholders' Knowledge, the Permitted
Encumbrances and those encumbrances set forth in SCHEDULES 3.17 hereto
do not individually or in the aggregate materially impair or prohibit
the Company's current use of the Owned Real Estate;
(e) Except as set forth in SCHEDULE 3.17 hereto, there are no
condemnation Proceedings pending or, to the Shareholders' Knowledge,
Threatened with respect to all or any part of any parcel of Real
Estate;
(f) To the Shareholders' Knowledge, except for the Permitted
Encumbrances and those encumbrances set forth in SCHEDULES 3.17 hereto,
there are no private restrictions, covenants, or reservations which
materially and adversely affect the use or occupancy of all or any part
of any parcel of Owned Real Estate or any of the Easements;
(g) To Shareholder's Knowledge, there are no Applicable Laws
requiring repair, alteration or correction of any existing condition on
any parcel of
21
Real Estate and, to Shareholders' Knowledge, there are no conditions
that could give rise to the same;
(h) To the Shareholders' Knowledge, except as set forth in
SCHEDULE 3.17 hereto, (a) there are no structural, mechanical or other
defects of material significance in any of the buildings, improvements,
fixtures and equipment, including the roof, heating, ventilating, air
conditioning, electrical, plumbing and sanitary disposal systems,
located on any parcel of Real Estate, and (b) all such buildings,
improvements, fixtures and equipment, including the roof, heating,
ventilating, air conditioning, electrical, plumbing and sanitary
disposal systems, will be until the Date of Closing, maintained in good
repair, working order and condition, ordinary wear and tear excepted;
(i) Except as set forth in SCHEDULE 3.17 hereto, the
improvements on each parcel of Real Estate and the Company's or RFC's
use thereof comply in all material respects with any and all building,
zoning, subdivision, traffic, parking, land use, occupancy, health and
other Applicable Laws pertaining to the Real Estate or to the
development, construction, management, use and operations of the
improvements thereon;
(j) Except as set forth in SCHEDULE 3.17 hereto, to the
Knowledge of Shareholders, the improvements located on each parcel of
Real Estate, including fences, driveways and other structures occupied,
used or claimed by the Company or RFC, are wholly within the boundary
lines of such parcels of Real Estate and such improvements and the
Company's present uses thereof do not in any material respect infringe
upon the rights of any other Person;
(k) Except as set forth in SCHEDULE 3.17 hereto, to the
Knowledge of Shareholders, no buildings, fences, driveways or other
structures of any adjoining owner encroach upon any part of any parcel
of Real Estate or any of the Easements; and
(l) Except as set forth in SCHEDULE 3.17 hereto, to the
Knowledge of Shareholders, the Company and RFC have all operating
permits necessary for the operation of the Business, and all such
permits are current, except where the failure to have any such current
operating permit in good order would not have a Material Adverse Effect
on the Company or RFC. To the Knowledge of Shareholders, except as set
forth in SCHEDULE 3.17, the Company has all easements, or access
through public utility easements, on to private property, construction
permits, highway crossing licenses and permits (and other similar
licenses and permits) and right-of-way-licenses reasonably necessary to
conduct the Business, except where the failure to have any such
easement on to private property, construction permits, highway crossing
licenses and permits (and other similar licenses and permits), and
right-of-way licenses would not have a Material Adverse Effect.
Purchaser and Shareholders recognize and agree that title commitments and
surveys provided in accordance with Section 7.10 of this Agreement covering the
Real Estate listed on SCHEDULE 7.10 hereof may contain
22
additional information regarding said Real Estate of which the Shareholders
do not have Knowledge as of the date of this Agreement, and that such
information will be included as appropriate in a Supplement to SCHEDULE 3.17;
provided, however, that information contained in the title commitments and
surveys shall remain subject to the provisions of Section 7.10 of this
Agreement.
3.18 ACCOUNTS RECEIVABLE. RFC has no accounts receivable or other right
to payment of money, other than an obligation of the Company to RFC which will
be satisfied at or prior to Closing. The Company's accounts receivable and other
rights to the payment of money represent, and on the Date of Closing will
represent, valid obligations arising from sales actually made or services
actually performed in the Ordinary Course of Business.
3.19 BOOKS AND RECORDS; BANK ACCOUNTS. All of the Company's and RFC's
books of account and other financial and corporate records relating to the
Business have been made available to Purchaser and its representatives (or will
be so made available prior to the Date of Closing). Such books of account and
records are current, complete, true and correct in all material respects. All
such books and records are consistent with the financial statements listed on
SCHEDULE 3.12 hereto. Attached hereto as part of SCHEDULE 3.19 is a list of all
of the Company's and RFC's bank accounts, security accounts and other similar
accounts, and the names of all Persons authorized to draw thereon or have access
thereto, as well as the identification of all safety deposit boxes, and the
persons authorized to have access to those boxes.
3.20 EMPLOYEES. SCHEDULE 3.20 hereto contains a list of the names,
positions, annual salary rates, hourly wage rates, severance benefits and
accrued vacation and sick leave, as of the date hereof, of all present employees
of the Company (including those on furlough, leave or layoff of any kind).
Except for the Valley Employees and Xxxxxx Xxxxxxxxxxx, and except as set forth
in SCHEDULE 3.20, none of the employees has informed the Company or any of the
Shareholders that he/she intends to terminate employment with the Company.
SCHEDULE 3.20 also sets forth a description of any written Contract, other than
the Benefit Plans described on SCHEDULE 3.10 hereto, with respect to the
conditions of employment of any of the Company's employees. RFC has never had
any employees. All employees are employed on an "at will" basis.
3.21 LICENSES AND PERMITS. Except as set forth in SCHEDULE 3.21, the
Company has obtained all material licenses, certificates, franchises and permits
of each and every Governmental Body having jurisdiction over the Company or any
of its properties or assets to operate and carry on the Business as they are now
being conducted. All such material licenses, certificates, franchises and
permits (except for construction permits, highway crossing licenses and permits
and right of way licenses) are described on SCHEDULE 3.21 hereto and are in full
force and effect. To Shareholders' Knowledge, RFC requires no licenses,
franchises, certificates or permits, other than its certificate of
incorporation.
3.22 OTHER MATERIAL CONTRACTS AND OBLIGATIONS. Except for the Operating
Contracts and the Contracts disclosed on SCHEDULE 3.22 hereto, neither the
Company nor RFC is a party to or bound by any:
(a) Dealer, distributorship or sales agency agreements,
excluding purchase orders with respect to the purchase or sale of
products or services in the Ordinary Course of Business;
(b) Advertising Contracts;
(c) Contract for capital expenditures having a remaining
balance in excess of $10,000;
(d) Leases with respect to any property, real or personal,
whether as lessor or lessee, except for any lease having a term of one
year or less or aggregate rents payable over its life of $10,000 or
less;
23
(e) Contract containing covenants by the Company or RFC not to
compete in any lines of business or with any Person;
(f) Franchise or license agreements;
(g) Except as disclosed in SCHEDULE 3.13, loan or credit
agreements, promissory notes or other evidences of indebtedness,
including all agreements or commitments for future loans, extensions of
credit or financing, excluding credit extended by the Company or RFC to
its customers;
(h) Guarantees;
(i) Contract or purchase order for the purchase of any
services, raw materials, supplies or equipment involving payments of
more than $5,000 per annum or an aggregate of more than $10,000,
excluding purchase orders for the purchase of products or services
entered into in the Ordinary Course of Business; or
(j) Contract for the sale of any properties, assets or
services involving a value estimated at more than $10,000, excluding
purchase orders for the sale of products or services in the Ordinary
Course of Business and further excluding any contract which relates to
the Valley Sale.
3.23 SUBSIDIARIES. Except as disclosed or described in this Agreement
or as set forth on SCHEDULE 3.23 hereto, the Company has no subsidiaries and
does not own any shares of stock or other securities or equity interests,
directly or indirectly, in any other Person. Except as disclosed or described in
this Agreement or as set forth on SCHEDULE 3.23 hereto, the Company is not
subject to any obligation or requirement to provide funds to, or invest in, any
such Person.
3.24 INSURANCE. The Company has maintained and will continue to
maintain until the Date of Closing the insurance described in SCHEDULE 3.24,
which insurance covers the Company's tangible real and personal property and
assets, whether owned or leased, against loss or damage by fire or other
casualty. All such insurance is in full force on the date of this Agreement and
is carried with insurers licensed in the states affected by such policies. The
Company has promptly and adequately notified the Company's insurance carriers of
any and all claims known to the Shareholders with respect to the operations,
products or services of the Company for which the Company is insured. The
Company has not been refused any insurance coverage by any insurance carrier to
which it has applied for insurance during the past three (3) years.
3.25 BROKERS. Except for the engagement of Xxxx Xxxxxxxx by the
Company, neither the Company nor the Shareholders has employed or engaged any
broker, finder, agent, banker or third party, nor have they otherwise dealt with
anyone purporting to act in the capacity of a finder or broker in connection
with the transactions contemplated hereby. No commissions, finder's fees or like
charges have been or will be incurred by the Company or the Shareholders in
connection with the execution and delivery of this Agreement or the consummation
of the transactions contemplated hereby.
3.26 RELATIONSHIP WITH RELATED PERSONS. Except as set forth in SCHEDULE
3.26 hereto, the Shareholders, directors, officers, and employees of the
Company, RFC and their Related Persons do not have any interest in any of the
properties or assets of the Company or RFC and, to the Shareholders' Knowledge,
do not own, of record or as a beneficial owner, an equity interest or any other
financial or profit interest in any Person that (i) has had business dealings or
a material financial interest in any transaction with the Company or RFC or,
(ii) has engaged or is engaged in competition with the Company
24
with respect to any line of products or services of the Company in any market
presently served by the Company (a "COMPETING BUSINESS") (except for less
than three percent (3%) of the outstanding capital stock of any Competing
Business that is publicly traded on any recognized exchange or in the
over-the-counter market). to the Knowledge of the Shareholders, and except as
set forth on SCHEDULE 3.26 hereto, no shareholder, director or officer of the
Company or RFC and none of their Related Persons is a party to any Contract
with, or has any claim or right against, the Company or RFC, other than the
rights officer and directors of the Company and RFC have with respect to
indemnification under state law. All money owed by the Company or RFC to its
shareholders, directors or officers, or their Related Persons, (other than
for salary) are for bona fide debts and are set forth in SCHEDULE 3.26 hereto.
3.27 HAZARDOUS MATERIALS. Except as set forth in SCHEDULE 3.27 hereto,
to the Knowledge of Shareholders, the Company or RFC have never generated,
transported, stored, handled, disposed of or contracted for the disposal of any
Hazardous Materials. Except as set forth in SCHEDULE 3.27 hereto, to the
Knowledge of Shareholders, no employee of the Company has, in the course and
scope of employment with the Company, been exposed to any Hazardous Materials in
such a manner as to be harmed thereby (whether such harm is now known to exist
or will be discovered in the future). Except as set forth on SCHEDULE 3.27
hereto, the Company is not listed as a potentially responsible party under
CERCLA or any comparable or similar U.S. federal or state statute, the Company
has not received notice of such a listing and the Shareholders have no Knowledge
of any facts or circumstances which could give rise to such a listing.
3.28 OTHER ENVIRONMENTAL MATTERS.
(a) Except as set forth on SCHEDULE 3.28 hereto, the Real
Estate has been operated by the Company and is in compliance in all
material respects with all Applicable Laws, including Environmental
Laws and all Applicable Laws relating to underground and/or above
ground petroleum storage tanks. To the Knowledge of the Shareholders,
except as set forth on SCHEDULE 3.28 hereto, the Company otherwise
complies in all material respects with all Environmental Laws. To the
Knowledge of the Shareholders, except as set forth on SCHEDULE 3.28
hereto, the Company has obtained or has taken appropriate steps, as
required by Environmental Laws and Applicable Laws, to obtain all
environmental, health and safety permits, consents, approvals, licenses
and other authorizations necessary for the ownership and operation of
the Business, and to the Knowledge of Shareholders, all of the permits
and other such authorizations are in good standing, and the Company is
in compliance in all material respects with such permits and other such
authorizations. Except as described in SCHEDULE 3.28 hereto, to the
Knowledge of Shareholders, the Real Estate is free of any and all
Hazardous Materials. The Real Estate is not subject to any "Super-Fund"
type Encumbrances by any Person arising from the release or threatened
release of any Hazardous Materials in, on, about or under the Real
Estate.
(b) To the Knowledge of Shareholders, all of the third parties
with which the Company has arranged, engaged or contracted to accept,
treat, transport, store, dispose or remove any pollutant generated or
present at the Real Estate, or which otherwise participate or have
participated in activities or conduct related to the Real Estate or the
Business, were properly permitted at the relevant time to perform the
foregoing activities or conduct.
(c) Except as described on SCHEDULE 3.28 hereto, there are not
currently and to the Knowledge of Shareholders never have been any
xxxxx or underground and/or above ground storage tanks (whether or not
currently in use) on any parcel of Real Estate and, to the extent such
xxxxx or tanks are described in SCHEDULE 3.28, all such xxxxx and tanks
are, to the Knowledge of Shareholders, in sound condition and are not
leaking.
(d) Except as set forth on SCHEDULE 3.28 hereto, no part of
any parcel of Real Estate is now being used, nor, to the Knowledge of
Shareholders, has any parcel of Real Estate ever been used, as a
landfill, dump or other disposal, storage, transfer, treating or
handling area for any Hazardous Materials, or as a gasoline service
station or a facility for selling, dispensing, storing, transferring,
treating or handling Hazardous Materials.
25
(e) To the Knowledge of the Shareholders, and except as set
forth in SCHEDULE 3.28 hereto, the Company is not subject to any
investigation, nor has the Company received any written notification
within the past two years of any judicial or administrative proceeding,
notice, order, judgment, decree or settlement, alleging or addressing
(i) any violation of Environmental Laws or (ii) any claims or
liabilities and costs arising from the release or threatened release of
any Hazardous Materials. To the Knowledge of Shareholders, there has
been no release of any Hazardous Materials in a reportable quantity
under Environmental Laws at, to or from the Real Estate.
(f) Except as set forth in SCHEDULE 3.28 hereto, to the
Knowledge of Shareholders, there is not constructed, placed, deposited,
stored, disposed or located on the Real Estate any asbestos in any
form.
(g) Except as set forth in SCHEDULE 3.28 hereto, to the
Knowledge of Shareholders, there is not constructed, placed, deposited,
stored, disposed nor located on the Real Estate any polychlorinated
biphenyls ("PCBs") or transformers, capacitors, ballasts, or other
equipment which contain dielectric fluid containing PCBs.
(h) Except as set forth in SCHEDULE 3.28 hereto, to the
Knowledge of Shareholders, there is not constructed, placed,
deposited, stored, disposed nor located on the Real Estate any
insulating material containing urea formaldehyde.
With respect to Sections 3.27 and 3.28 of this Agreement, Purchaser recognizes
and agrees that the environmental audits to be conducted by the Environmental
Audit Firm may contain additional information regarding the matters discussed in
such Sections hereof which the Shareholders do not have Knowledge as of the date
of this Agreement, and that such information will be included as appropriate in
a Supplement to Sections 3.27 and 3.28.
3.29 DEBT INSTRUMENTS. SCHEDULE 3.29 is a true, correct and complete
list showing the names of the parties and outstanding indebtedness as of the
respective dates set forth on SCHEDULE 3.29 under all mortgages, indentures,
notes, guarantees and other obligations for or relating to borrowed money,
purchase money debt (including conditional sales contract and capital leases) or
covenants not to compete (the "Debt Instruments") for which the Company or RFC
is primarily or secondarily obligated. The Shareholders have previously
delivered to Purchaser true, complete and correct copies of each of the Debt
Instruments. Except as described in SCHEDULE 3.29, the Company and RFC have
performed all of the material obligations required to be performed by it, and
are not in material default under any of the provisions of any of the Debt
Instruments, and there has not occurred any event which, (with or without
notice, lapse of time or the happening or occurrence of any other event) would
constitute such a default.
3.30 DISSOLUTION OF GLCLP AND GLACIAL DBS. GLCLP and Glacial DBS have
been validly dissolved and completely wound up. All remaining assets of GLCLP
and Glacial DBS have been distributed to the Company, and all necessary real
estate deeds, bills of sale, assignments, consents and other documents have been
completed, obtained and/or filed.
3.31 YEAR 2000 COMPLIANCE. Schedule 3.31 contains a complete and
correct list of all assurances received by the Company regarding whether
software used in the Business, third party software, computer,
communications, electronic or other hardware or equipment, including any
imbedded software or firmware, used in the Business will correctly recognize,
calculate, sort, store, display and otherwise process data involving dates
prior to, during and after the Year 2000, and whether the operation and
functionality of the above-mentioned assets will be adversely affected by the
approach, occurrence or passing of the calendar date January 1, 2000. To the
Knowledge of the Shareholders, all such assurances are not incorrect.
26
3.32 CUSTOMERS AND SUPPLIERS. As of September 30, 1998, the Company
served, in the aggregate, approximately 6,785 cellular telephone customers. To
the Knowledge of the Shareholders, and except in the Ordinary Course of
Business, no customer, subscriber or a group of customers or subscribers of the
Company has notified the Company on or after September 30, 1998, that the
customer intends to terminate, cancel, limit or modify the customer's business
relationship with the Company, except such terminations, cancellations,
limitations or modifications as occur in the Ordinary Course of Business of the
Company. No vendor, supplier, dealer, representative or consultant of the
Company which is material to the Company's business operations has notified the
Company after September 30, 1998, that it intends to terminate, cancel, limit or
modify its business relationship with the Company in any material respect.
3.33 CGSA. A true and complete copy of map depicting the location of
each cell site and each of the licensed Cellular Geographic Service Areas
(including Situation Information Updates) of the Company is attached hereto as
SCHEDULE 3.33. All agreements relating to the coverage areas of the Company
including, but not limited to, border extensions, are listed on SCHEDULE 3.16
OR SCHEDULE 3.17.
3.34 NETWORK. A diagram and description prepared by Purchaser of all of
the communications transmissions facilities, cell sites and other components
comprising the Company's cellular networks is attached hereto as SCHEDULE
3.34. To the Knowledge of the Shareholders, this diagram and description is
true and complete.
ARTICLE 4: REPRESENTATIONS AND WARRANTIES OF PURCHASER
As an inducement for Shareholders to enter into this Agreement and
consummate the transactions contemplated hereby, Purchaser represents and
warrants to Shareholders that each and all of the following (as modified by any
Supplement delivered by Purchaser pursuant to Section 13.22 of this Agreement)
are true and correct as of the date of this Agreement and will be true and
correct as of the Date of Closing:
4.1 DUE INCORPORATION. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of Minnesota,
and has all requisite power and authority, corporate and otherwise, to own,
operate and lease its properties and assets and to conduct its business as it is
now being conducted. Purchaser is duly qualified to transact business as a
foreign corporation and is in good standing under the laws of every state or
jurisdiction in which the nature of its activities or of its properties owned,
leased or operated makes such qualification necessary and in which the failure
to be so qualified could reasonably be expected to have a Material Adverse
Effect on the Purchaser.
4.2 DUE AUTHORIZATION. The execution, delivery and performance of this
Agreement, including the documents, instruments and agreements to be executed
and/or delivered by Purchaser pursuant to this Agreement, and the consummation
of the transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action on the part of Purchaser. This
Agreement and the documents, instruments and agreements to be executed and/or
delivered by Purchaser pursuant to this Agreement have been, or will be on or
before the Date of Closing, duly and validly authorized, executed and delivered
by Purchaser and the obligations of Purchaser hereunder and thereunder are or
will be valid, legally binding and enforceable against Purchaser in accordance
with their respective terms, except as such enforcement may be limited by
applicable bankruptcy, reorganization, insolvency, moratorium or other similar
laws presently or hereafter in effect affecting the enforcement of creditors'
rights generally and by general principles of equity (regardless of whether such
enforceability is considered in a proceeding at law or in equity), including,
among others, limitations on the availability of equitable remedies.
4.3 NO BREACH. Purchaser has full power and authority, corporate and
otherwise, to purchase the Stock being purchased hereunder and to otherwise
perform its obligations under this Agreement and the documents, instruments and
agreements to be executed by the Purchaser pursuant hereto. The execution and
delivery of this Agreement, including the documents, instruments and agreements
to be executed by the Purchaser pursuant to this Agreement, and the consummation
of the transactions contemplated hereby and thereby will not: (i) violate any
provision of the Articles of Incorporation or Bylaws (or comparable governing
documents or instruments) of Purchaser; (ii) violate any Applicable Laws or
Injunction
27
applicable to the Purchaser; (iii) require any filing with, permit from,
authorization, consent or approval of, or the giving of any notice to, any
Person; (iv) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give another party
any rights of termination, cancellation or acceleration) under, any of the
terms, conditions or provisions of any note, bond, mortgage, indenture,
license, franchise, permit (including, but not limited to, any permits,
appeals or authorizations of the FCC or any other Governmental Body), lease
or other Contract to which Purchaser is a party, or by which it or any of its
assets or properties.
4.4 INVESTMENT REPRESENTATIONS . The Purchaser understands that the
Stock has not been registered under the Securities Act of 1933, as amended, or
under the securities laws of any jurisdiction, by reason of reliance upon
certain exemptions.
4.5 BROKERS. Purchaser has not employed or engaged any broker, finder,
agent, investment banker or third party nor has it otherwise dealt with anyone
purporting to act in the capacity of a finder or broker, in connection with the
transactions contemplated hereby. No commissions, finder's fees or like charges
have been or will be incurred in connection with the execution and delivery of
this Agreement or the consummation of the transactions contemplated hereby.
ARTICLE 5: PERFORMANCE PENDING CLOSING
The Shareholders covenant and agree that from and after the date of
this Agreement and until the earlier of the Date of Closing or the termination
of this Agreement in accordance with Article 12 hereof:
5.1 ACCESS TO INFORMATION. At the request of Purchaser, the
Shareholders shall, from time to time, give or cause to be given to Purchaser,
its officers, employees, counsel, accountants and other representatives, upon
reasonable notice to the Shareholders, full access during normal business hours,
without undue disruption to the Company's Business, the properties and assets
and all of the books, minute books, title papers, records, files, Contracts,
insurance policies, environmental records and reports, licenses and documents of
every character of the Company and RFC relating to the Business, and the
Shareholders shall furnish or cause to be furnished to Purchaser, its officers,
employees, counsel, accountants and other representatives all of the information
with respect to the Company and RFC and/or the Company and RFC's properties or
assets as any of them may reasonably request. Purchaser, its officers,
employees, counsel, accountants and other representatives shall have the
authority to interview, as reasonably necessary and without undue disruption to
the Company's Business, all employees, customers, vendors, suppliers and other
parties having relationships with the Company and/or RFC, and Shareholders shall
make such introductions as may be requested; provided, however, that access to
customers shall, if at all, be done in a commercially reasonably manner
consistent with the best interests of the Company and shall be subject to the
prior consent of the Company, which consent shall not be unreasonably withheld.
In addition, Purchaser may, subject to the conditions stated above, at its sole
cost and expense, at any time prior to the Date of Closing, through its
officers, employees, counsel, accountants and other representatives, conduct
such investigations and examinations of the Company and RFC's properties and
assets as it deems necessary or advisable, and the Shareholders will provide
reasonable cooperation to such Persons in such investigations.
5.2 CONDUCT OF BUSINESS. Shareholders shall cause the Company to carry
on the Business diligently, only in the Ordinary Course of Business and
substantially in the same manner as heretofore conducted and will keep and
maintain the Company's properties and assets in good and safe repair and
condition consistent with past practices. The Company shall not make any
regulatory filings with any Governmental Body, except in the Ordinary Course of
Business or with the prior written consent of Purchaser (which consent shall not
be unreasonably withheld, delayed or conditioned). The Shareholders will not
cause or permit any amendment of the Company's Articles of Incorporation or
Bylaws (or other governing instrument).
5.3 ENCUMBRANCES. Shareholders shall not, directly or indirectly,
perform or fail to perform any act which would, with substantial certainty, in
the creation or imposition of any Encumbrance on any
28
of the properties or assets of the Company or otherwise adversely affect the
marketability of the Company's title to any of its properties or assets,
outside of the Ordinary Course of Business.
5.4 PAY INCREASES. Except for payments pursuant to the Retention
Agreements, and normal increases in the Ordinary Course of Business, the
Shareholders shall not, without the prior written consent of Purchaser, permit
the Company to grant any increase in the salaries or rate of pay to any of its
employees, grant any increase in any benefits or establish, adopt, enter into,
make any new grants or awards under, or amend any collective bargaining
agreement, employment agreement or Benefit Plan for the benefit of any of its
employees.
5.5 RESTRICTIONS ON NEW CONTRACTS. Except with the prior written
consent of the Purchaser, which consent shall not be unreasonably withheld,
delayed or conditioned, the Shareholders shall not permit the Company to enter
into any Contract, incur any Liability, assume, guarantee or otherwise become
liable or responsible for any Liability of any other Person, make any loans,
advances or capital contributions to any other Person (except for extensions of
credit to its customers in the Ordinary Course of Business), or waive any right
or enter into any other transaction, in each case other than in the Ordinary
Course of Business and consistent with the Company's normal business practices.
Without limiting the foregoing, for the purposes of this Agreement, any Contract
involving the sum of $20,000 or more shall be deemed to be outside the Ordinary
Course of Business.
5.6 PRESERVATION OF BUSINESS. The Shareholders shall use reasonable
efforts to preserve the Company's business organization intact, to keep
available to Purchaser the present employees of the Company and to preserve for
Purchaser the present goodwill and relationship of the Company with its vendors,
suppliers, customers and others having business relationships with the Company.
5.7 PAYMENT AND PERFORMANCE OF OBLIGATIONS. The Shareholders will cause
the Company to timely pay and discharge all invoices, bills and other monetary
Liabilities.
5.8 RESTRICTIONS ON SALE OF ASSETS. The Shareholders shall not permit
the Company to sell, assign, transfer, lease, sublease, pledge or otherwise
encumber or dispose of any of its properties or assets, except for the sale of
inventory in the Ordinary Course of Business and at regular prices, except for
(i) the Valley Sale, (ii) the transfer of a building located in Parkers Prairie,
Minnesota to Xxxxxx X. Xxxxxxxx at a purchase price equal to the depreciated
(net book value) cost of the building, and (iii) the Company's interest in
Switch 2000, LLC.
5.9 PROMPT NOTICE. The Shareholders shall promptly notify Purchaser in
writing upon becoming aware of any of the following: (i) any claim, demand or
other Proceeding that may be brought, Threatened, asserted or commenced against
the Company, its officers or directors; (ii) any changes in the accuracy of the
representations and warranties made by Shareholders in this Agreement; (iii) any
Injunction or any complaint praying for an Injunction restraining or enjoining
the consummation of the transactions contemplated hereby; or (iv) any notice
from any Person of its intention to institute an investigation into, or
institute a Proceeding to restrain or enjoin the consummation of the
transactions contemplated hereby or to nullify or render ineffective this
Agreement or such transactions if consummated.
5.10 CONSENTS. As soon as reasonably practicable and in any event on or
before the Date of Closing, the Shareholders will use reasonable efforts to
obtain or cause to be obtained all of the consents and approvals of all Persons
necessary for the Shareholders to consummate the transactions contemplated
hereby, including the consents and approvals listed on SCHEDULE 3.4 hereto.
5.11 COPIES OF DOCUMENTS. The Shareholders agree that as soon as
reasonably possible following the execution hereof, they shall furnish or make
available to Purchaser a true, complete and accurate copy of each Operating
Contract and any additional Contract listed on SCHEDULE 3.22 hereto.
5.12 NO SOLICITATION OF OTHER OFFERS. The Shareholders will not, and
will not permit their respective representatives, investment bankers, agents and
Affiliates to, directly or indirectly, (i) solicit or
29
encourage submission of or any inquiries, proposals or offers by, (ii)
participate in any negotiations with, (iii) afford any access to the
properties, books or records of the Company to, (iv) accept or approve, or
(v) otherwise assist, facilitate or encourage, or enter into any Contract
with, any Person or group (other than Purchaser and its Affiliates, agents
and representatives), in connection with any Acquisition Proposal. In
addition, the Shareholders will not, and will not permit their respective
representatives, investment bankers, agents and Affiliates to, directly or
indirectly, make or authorize any statement, recommendation or solicitation
in support of any Acquisition Proposal made by any Person or group (other
than Purchaser). In addition, Shareholders will immediately cease any and all
existing activities, discussions or negotiations with any parties with
respect to any of the foregoing.
5.13 ACCOUNTS RECEIVABLE AND PAYABLE. Shareholders shall not cause the
Company to accelerate the collection of its accounts receivable or delay the
payments of its accounts payable or other Liabilities, in each case arising out
of the operation of the Business in a manner which would be inconsistent with
past practice.
5.14 INVENTORY. Shareholders shall cause the Company to maintain the
levels of inventory, materials and supplies used in the Business consistent with
past practice.
5.15 INSURANCE. Shareholders shall cause the Company to maintain in
full force and effect all insurance coverages for the Company's properties and
assets substantially comparable to coverages existing on the date hereof.
5.16 FILING REPORTS AND MAKING PAYMENTS. Shareholders shall cause the
Company to timely file all required reports and notices with each and every
applicable Governmental Body and timely make all payments due and owing to each
such Governmental Body, including, but not by way of limitation, any filings,
notices and/or payments required by reason of the transactions contemplated by
this Agreement.
5.17 CAPITAL EXPENDITURES. Except for stock phones to be leased to
customers, the Shareholders shall not permit the Company to make any capital
expenditures in excess of $10,000 individually or $25,000 in the aggregate
without the Purchaser's prior written consent, which consent shall not be
unreasonably withheld, delayed or conditioned.
5.18 MONTHLY FINANCIALS. Within sixty (60) days of the close of each
month after the execution of this Agreement by all parties hereto, the
Shareholders shall deliver to Purchaser a consolidated balance sheet and income
statement for the Company, RFC and Valley (until the Valley Sale is consummated
by a Closing) disclosing the financial position and results of operations of the
Company for the preceding month and year-to-date which shall be prepared on a
basis consistent with the financial statements identified on SCHEDULE 3.12
hereof and consistent with the prior months and year-to-date financial
statements.
5.19 TITLE REVIEW. As of the Date of Closing, the Purchaser shall have,
and in proceeding to close has, reviewed and approved, except for its reasonable
objections thereto described in SCHEDULE 5.19 hereof, which shall be prepared at
or prior to the Closing and after the execution date of this Agreement, the
title commitments and surveys with respect to the condition and status of the
parcels of Real Estate listed on SCHEDULE 7.10 hereof. Shareholders shall cure
and/or indemnify to the reasonable satisfaction of Purchaser, in accordance with
the provisions of Section 7.10 of this Agreement, such reasonable objections to
title which Purchaser has designated for such cure under Section 7.10 of this
Agreement.
5.20 LITIGATION. From the date hereof and through the Date of Closing,
the Shareholders will notify the Purchaser in writing of any actions or
proceedings of the type required to be described in Section 3.7 of this
Agreement, that, from the time hereof, are, to the Shareholders' Knowledge,
Threatened or commenced against the Company or against any officer, director or
employee of the Company relating to the Business or the Company.
30
5.21 NOTIFICATION OF INACCURACY. Each Shareholder agrees to promptly
notify the Purchaser in writing of any material inaccuracy made by any
Shareholder in this Agreement of which such Shareholder becomes aware prior to
the Date of Closing and which could result in a Material Adverse Effect with
respect to the Company. The Purchaser agrees to promptly notify the Shareholders
in writing of any material inaccuracy made by the Purchaser in this Agreement of
which the Purchaser becomes aware prior to the Date of Closing and which could
result in a Material Adverse Effect with respect to the Purchaser. The foregoing
shall not limit the ability of the Shareholders to Supplement the Schedules.
5.22 VALLEY SALE.
(a) The Shareholders shall use reasonable
commercial efforts to cause the Company to consummate the Valley
Sale by a closing on or prior to the Date of Closing, subject to
the rights of the Company to terminate the Valley Sale Stock
Purchase Agreement in accordance with the terms thereof and the
Company's rights thereunder. The Shareholders shall cause the
Company to provide Purchaser with each and every agreement,
document, item of due diligence material and all other information
regarding the Valley Sale (collectively the "Valley Sale
Documents") promptly after each Valley Sale Document is received or
delivered by the Company. Upon the Valley Sale Closing Date, those
Shareholders who are bound to provide indemnification pursuant to
Section 9.1 of this Agreement shall execute an agreement with the
purchaser of the stock of Valley substantially in the form of the
Agreement Regarding Indemnification attached to the Valley Sale
Stock Purchase Agreement as Exhibit C, which Agreement Regarding
Indemnification shall not be materially modified prior to or after
execution thereof without the prior consent of Purchaser, said
consent not to be unreasonably withheld, delayed or conditioned.
(b) If the Closing and the Valley Sale Closing Date occur in
the same calendar year, the Shareholders shall cause the Company to
take reasonable commercial efforts at the Shareholders' sole expense to
renegotiate the Valley Sale; provided, however, that Shareholders and
the Company shall not be required to reorganize the Company to achieve
said renegotiation.
(c) On or prior to the consummation of the Valley Sale by a
Closing, the Company shall collect from Valley the unpaid portion of
the management fee customarily paid by Valley to the Company (the
"Management Fee") for the period from January 1, 1998, through the
Valley Sale Closing Date. The Management Fee paid for calendar year
1998 (and calendar year 1999 if the Valley Sale Closing Date occurs in
1999) shall not exceed $560,000, prorated on an annualized basis to the
Valley Sale Closing Date. The Management Fee for all periods prior to
January 1, 1998, has been paid in full. All services provided by the
Company to Valley shall cease on the Valley Sale Closing Date except as
continued by written agreement approved by Purchaser.
(d) The following employees of the Company shall
voluntarily terminate their employment with the Company as of the
Valley Sale Closing Date (the "Valley Employees"): Xxxxxx
Xxxxxxx and Xxx Xxxxxx. The Valley Employees shall resign their
employment with the Company in writing. Such resignation shall
not affect such Valley Employees' status as a Qualified
Employee under Section 11.9 hereof or the applicable Retention
Agreement, if the applicable Valley Employee remains employed
by Valley or the purchaser of the Valley Stock for the period
required by said Valley Employee's Retention Agreement.
Xxxxxx Xxxxxxx'x resignation may be on a part time basis.
Shareholders shall be solely liable for any Liability to the Valley
Employees, whether related to the period before or after the Valley
Sale Closing Date.
(e) Prior to the Closing, and prior to any payment of
long term debt of the Company with Valley Sale Proceeds, the
Company shall use any Valley Sale Proceeds to pay the obligations
pursuant to the Deferred Compensation Agreements and the Company's
note payable to Xxxxxx X. Xxxxxxxx; provided, however, that the
obligation set forth in this Section 5.22(e) shall be limited by
the amount of the Company's available Valley Sale Proceeds.
31
5.23 EMPLOYMENT MATTERS. The Shareholders shall cause the Company to
amend its employee handbook prior to the Closing to delete any references which
indicate or suggest that the Company's employees may be terminated only for
cause, and to confirm that all its employees are employees at will. The amended
handbook shall be provided to Purchaser for its prior approval, which approval
shall not be unreasonably withheld, delayed or conditioned.
5.24 AMENDMENT OF COMPANY 401(k) PLAN. The Company may take the steps
necessary to complete, prior to the Closing, an amendment of its 401(k) plan to
eliminate the amounts paid pursuant to the Deferred Compensation Agreements and
the Retention Agreements from the amounts which are considered when determining
the Company's obligation to contribute to the 401(k) plan. If the Company does
not so amend its 401(k) plan, the adjustments to the Purchase Price for the
Employee Retention Amount and the Deferred Compensation Amount shall be
increased by the amount the Company is required to contribute to its 401(k) plan
in respect of the Employee Retention Amount and the Deferred Compensation
Amount, respectively.
ARTICLE 6: MUTUAL COVENANTS AND CONDITIONS PRECEDENT TO OBLIGATIONS
Unless waived in writing by the parties, each and every obligation of
Purchaser and Shareholders to be performed at the Closing shall be subject to
the satisfaction at or prior thereto of each and all of the following conditions
precedent:
6.1 PROCEEDINGS. There being no (i) Proceedings which have been
brought, asserted, commenced or Threatened against the Purchaser, the Company
and/or the Shareholders by any Person involving or affecting in any way the
Purchaser's, the Company's or, the Shareholders' consummation of the
transactions contemplated hereby, or (ii) Applicable Laws restraining or
enjoining or which may reasonably be expected to nullify or render ineffective
this Agreement or the consummation of the transactions contemplated hereby or
which otherwise could reasonably be expected to have a Material Adverse Effect
on the Company.
6.2 CONSENTS AND APPROVALS. Purchaser and the Shareholders shall have
received evidence, in form and substance reasonably satisfactory to counsel for
Purchaser and the Shareholders, that all material consents, waivers, releases,
authorizations, approvals, licenses, certificates, permits and franchises of all
Persons (including each and every Governmental Authority) as may be necessary to
consummate the transactions contemplated by this Agreement and for the Purchaser
to carry on and continue the operations of the Company as they are now conducted
have been obtained. All consents of the FCC shall be by Final Order; provided,
however, that if Purchaser and the Shareholders waive the condition of FCC
consent by Final Order, the parties shall consider FCC consent without Final
Order sufficient to proceed to Closing according to the other terms of this
Agreement. "FINAL ORDER" means an action or decision of the FCC as to which (i)
no request for a stay is pending, no stay is in effect, and any deadline for
filing such request that may be designated by statute or regulation has passed,
(ii) no petition for rehearing or reconsideration or application for review is
pending and the time for the filing of such petition or application has passed,
(iii) the FCC does not have the action or decision under reconsideration on its
own motion and the time within which it may effect such reconsideration has
passed and (iv) no judicial appeal is pending or in effect and any deadline for
filing any such appeal that may be designated by statute or rule has passed.
6.3 VALLEY SALE. The closing of the Valley Sale shall have been
consummated by a closing.
ARTICLE 7: CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS
Unless waived by Purchaser in writing, or deemed waived pursuant to the
terms of Section 7.9 and/or 7.10, each and every obligation of Purchaser to be
performed at the Closing shall be subject to the satisfaction at or prior
thereto of each and all of the following conditions precedent:
7.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties made by Shareholders in this Agreement, including the documents,
instruments and agreements to be
32
executed and/or delivered by Shareholders pursuant to this Agreement, shall
be true and correct in all material respects at and as of the Closing with
the same force and effect as though such representations and warranties had
been made or given at and as of the Closing.
7.2 COMPLIANCE WITH COVENANTS AND AGREEMENTS. The
Shareholders shall have performed and complied with all of their
covenants, agreements and obligations under this Agreement which
are to be performed or complied with by them at or prior to the
Closing, including the execution and/or delivery of the documents,
instruments and agreements specified in Section 10.2 hereof or in
such documents, instruments and agreements, all of which shall be
reasonably satisfactory in form and substance to counsel for
Purchaser.
7.3 NO MATERIAL ADVERSE CHANGE. As of the Date of Closing, nothing
shall have occurred which, in the reasonable judgment of Purchaser could,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Company.
7.4 APPROVAL BY COUNSEL. All actions, proceedings, instruments and
documents required of Shareholders to carry out the transactions contemplated by
this Agreement or incidental thereto and all other related legal matters shall
have been reasonably satisfactory to and approved by counsel for Purchaser, and
such counsel shall have been furnished with such certified copies of actions and
proceedings and such other instruments and documents as they shall have
reasonably requested.
7.5 LEGAL OPINION. The Purchaser shall have received one or more
opinions from the counsel for the Shareholders and the Company, dated as of the
Date of Closing, in form and substance satisfactory to the Purchaser in
Purchaser's reasonable commercial discretion.
7.6 RESIGNATION OF DIRECTORS AND OFFICERS. All directors and officers
of the Company whose resignations have been requested by the Purchaser shall
have been submitted or shall have been removed effective as of the Date of
Closing.
7.7 CORPORATE ACTION. Purchaser shall have received (a) a certificate
of the Secretary of the Company as to the incumbency and signatures of the
officers and directors, and (b) a good standing certificate of existence from
the State of Minnesota for the Company.
7.8 [THIS SECTION INTENTIONALLY OMITTED.]
7.9 ENVIRONMENTAL AUDIT. Subject to the other provisions contained in
this Section, the Shareholders shall permit Purchaser or any reasonably
qualified environmental consultant designated by Purchaser (the "ENVIRONMENTAL
AUDIT FIRM") to conduct a Phase I environmental audit, and, if reasonably
determined by the Purchaser to be necessary, a Phase II environmental audit
(collectively, the "AUDIT") of the Real Estate prior to Closing. Beginning
immediately after the execution hereof, the Environmental Audit Firm shall have
full and free access to the Real Estate during normal business hours, upon
reasonable notice; provided, however, that neither Purchaser nor the
Environmental Audit Firm shall unreasonably interfere with the normal business
operations of the Company. The Audit shall be completed as soon as practicable
and Purchaser shall, promptly upon receipt, furnish the Shareholders with a copy
of all written reports relating to the Audit provided by the Environmental Audit
Firm. In the event a written report is not requested or the report is given
orally, the Company shall have the right to request and receive a written report
and to obtain an oral report from the Environmental Audit Firm. Purchaser shall
pay all fees and expenses of the Environmental Audit Firm. The Purchaser shall
indemnify and hold the Company harmless from, against and in respect of any and
all property damage caused by the Environmental Audit Firm. Purchaser shall be
allowed twenty (20) days after receipt of the final written or oral report
related to the Audit for the examination thereof and the making and delivery of
any written objections to the condition of the Real Estate to the Shareholders
in accordance with the notice provisions of this Agreement; provided, however,
that any such objections may be made only if the Audit discloses facts or
conditions (i) that purportedly violate any Applicable Laws in any material
respect, (ii) which could reasonably be expected to have a Material Adverse
Effect on the Company, or (iii) that are inconsistent in any material respect
with the representations and warranties of Shareholders set forth herein. If no
such written objections are made
33
by the Purchaser within such twenty (20) day period, the Audit in its
entirety, shall be incorporated to the Schedules and Purchaser shall accept
any conditions disclosed in the Audit "as-is." If any such written objections
are made by Purchaser within said twenty (20) day period, Shareholders shall
use commercially reasonable efforts, at their sole cost and expense, to cure
said objections on or before December 31, 1998; provided, however, that
Shareholders shall have no obligation to cure or attempt to cure (i) the
objections as to any one (1) parcel of Real Estate if the cost of the cure as
to that parcel exceeds $50,000 or (ii) any objections whatsoever if the
aggregate cost of cure for all Real Estate exceeds $200,000, all as
reasonably estimated by the Environmental Audit Firm. If the objections are
not cured or curable within said period, the parties shall attempt to
negotiate a mutually acceptable arrangement regarding the cure of the
objections to the conditions of the Real Estate for a period of twenty (20)
days after December 31, 1998. If the objections to the condition of the Real
Estate are not cured, or curable, or reasonable arrangements made with regard
to such cure, on or before January 20, 1999, then Purchaser shall have the
right for a period of ten (10) business days after January 20, 1999 to
terminate this Agreement by giving written notice of termination to
Shareholders. In the event Purchaser elects to terminate this Agreement
pursuant to this Section 7.9, such termination shall be without liability or
any further obligation of the Shareholders to Purchaser unless Shareholders
have made a deliberately false or misleading warranty or representation with
respect to one or more of the conditions to which Purchaser objected. If
Purchaser does not exercise its right to terminate pursuant to this Section
7.9, the Audit in its entirety, shall be incorporated to the Schedules and
Purchaser shall accept such conditions "as-is."
7.10 TITLE MATTERS; SURVEYS.
(a) As soon as practicable following the execution hereof,
Shareholders shall provide to Purchaser A.L.T.A. Form 1992 title
insurance commitments from a title insurance company reasonably
acceptable to Purchaser for each parcel of Real Estate listed on
SCHEDULE 7.10 agreeing to insure title of owner or tenant, as the case
may be, in amounts reasonably satisfactory to Purchaser for each such
parcel with standard exceptions waived, together with copies of all
documents mentioned in said title insurance commitments. In each case,
the amounts purchased shall be increased as necessary to comply with
co-insurance provisions of the policies or to qualify for waivers or
"agreed-amount" endorsements. Shareholders also agree to procure for
Purchaser Owner's or Leasehold Owner's policies of title insurance, as
applicable, on A.L.T.A. Form 1992 for each parcel of Real Estate listed
on SCHEDULE 7.10. Shareholders shall bear the cost of obtaining the
title insurance commitments and Purchaser shall pay the cost of the
title insurance policies. The policies shall include waivers of the
co-insurance clause reasonably acceptable to Purchaser. Purchaser shall
be allowed twenty (20) days after receipt of complete commitments
(including copies of documents mentioned therein and surveys relating
thereto, if applicable) for the examination thereof and the making and
delivering of any written objections to the marketability of title. Any
such written objection shall be listed on SCHEDULE 5.19 prepared by
Purchaser at or prior to Closing. If no title objections are made
within such period, such objections shall be deemed to have been waived
by Purchaser. If any written objections to the marketability of title
to any parcel of Real Estate listed on SCHEDULE 7.10 are made by
Purchaser within said twenty (20) day period, Shareholders shall use
commercially reasonable efforts, at their sole cost and expense, to
cure said marketable title objections within thirty (30) days after
said objections have been raised. If title to the Real Estate is not
made marketable to Purchaser's reasonable satisfaction within such
thirty (30) day period then Purchaser shall have the right for a period
of ten (10) business days to terminate this Agreement by giving written
notice of termination to Shareholders. If the Purchaser does not
exercise its right to terminate, Purchaser shall be deemed to have
waived uncured objections to the marketability of title disclosed by
the title insurance commitments.
(b) Shareholders shall provide, at their expense, as-built
surveys of each parcel of Real Estate listed in SCHEDULE 7.10 in
accordance with requirements previously delivered to counsel for the
Shareholders. Purchaser shall have the right to make written objections
to title based upon any such survey within twenty (20) days after
delivery of a copy of the survey to Purchaser, and any such objections
to title shall be treated in the same manner as objections to title
pursuant to Section 7.10(a) of this Agreement.
34
7.11 PENDING FCC APPLICATION. The FCC shall have approved by Final
Order the Company's currently pending Phase 2 Cellular Application to serve
unserved areas in South Dakota, RSA 4.
7.12 DUE DILIGENCE. Purchaser shall be reasonably satisfied with its
investigation of the Company and the Business. This condition precedent shall be
deemed to be waived by Purchaser unless Purchaser provides to the Shareholders a
written notice terminating this Agreement due to Purchaser's reasonable
objections to the condition of the Company or the Business on or before November
1, 1998.
ARTICLE 8: CONDITIONS PRECEDENT TO SHAREHOLDERS' OBLIGATIONS
Unless waived by Shareholders in writing, each and every obligation of
Shareholders to be performed at the Closing shall be subject to the satisfaction
at or prior thereto of each and all of the following conditions precedent:
8.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties made by Purchaser in this Agreement, including the documents,
instruments and agreements to be executed and/or delivered by Purchaser pursuant
to this Agreement, shall be true and correct in all material respects at and as
of the Closing with the same force and effect as though such representations and
warranties had been made or given at and as of the Closing.
8.2 COMPLIANCE WITH COVENANTS AND AGREEMENTS. Purchaser shall have
performed and complied with all of its covenants, agreements and obligations
under this Agreement which are to be performed or complied with by it at or
prior to the Closing, including the execution and/or delivery of the documents,
instruments and agreements specified in Section 10.3 hereof or in such
documents, instruments and agreements, all of which shall be reasonably
satisfactory in form and substance to counsel for Shareholders.
8.3 APPROVAL BY COUNSEL. All actions, proceedings, instruments and
documents required of Purchaser to carry out the transactions contemplated by
this Agreement or incidental thereto and all other related legal matters shall
have been reasonably satisfactory to and approved by counsel for Shareholders,
and such counsel shall have been furnished with such certified copies of actions
and proceedings and such other instruments and documents as they shall have
reasonably requested.
8.4 LEGAL OPINION. The Shareholders shall have received an opinion from
the counsel for the Purchaser, dated as of the Date of Closing, in form and
substance satisfactory to the Shareholders in the Shareholders' reasonable
commercial discretion.
8.5 DELIVERY OF PURCHASE PRICE AND OTHER CONSIDERATION. Purchaser shall
have delivered to the Shareholders, against receipt of the certificates for the
Stock, the Purchase Price to be paid on the date of Closing determined in
accordance with Section 2.3.
8.6 PENDING FCC APPLICATION. The FCC shall have approved by Final Order
the matters described in Section 7.11 hereof.
ARTICLE 9: INDEMNIFICATION
9.1 INDEMNIFICATION BY CERTAIN SHAREHOLDERS. Xxxxxx X. Xxxxxxxx, Xxxxx
Xxxxxxxx and the Xxxxxx X. Xxxxxxxx Irrevocable Trust U/A dated July 22, 1996
jointly and severally covenant and agree to indemnify and hold Purchaser, its
officers, directors, employees, affiliates, shareholders and agents, and each of
their respective heirs, personal representatives, successors and assigns,
harmless from, against and in respect of any and all losses, costs, expenses
(including without limitation, reasonable attorneys' fees and disbursements of
counsel), Liabilities, damages, fines, penalties, charges, assessments,
judgments, settlements, claims, causes of action and other obligations of any
nature whatsoever excluding from the foregoing, however, incidental or
consequential (including lost profits) or special damages of such
35
Persons incurred directly, as opposed to such damages arising from a
third-party claim (individually a "Loss" and collectively "LOSSES") that any
of them may at any time, directly or indirectly, suffer, sustain, incur or
become subject to, arising out of, based upon or resulting from or on account
of each of the following:
(a) the breach or falsity of any representation or warranty
made by Shareholders in this Agreement, including the documents,
instruments and agreements to be executed and/or delivered by
Shareholders pursuant hereto and thereto; provided, however, that
Shareholders shall not be required to provide such indemnification for
the breach or falsity of any such representation or warranty (other
than representations or warranties contained in Sections 3.2, 3.5 or
3.9 hereof) unless and until Purchaser, its officers, directors,
employees, affiliates and shareholders shall have sustained cumulative
Losses as a result of one or more such breaches or falsities of at
least One Hundred Twenty-five Thousand and 00/100 Dollars ($125,000.00)
(the "Basket Amount"). Once the aggregate of Losses exceeds the Basket
Amount, Shareholders shall provide indemnification for all Losses
sustained as a result of such breach(es) or falsity(ies) in excess of
the Basket Amount; or
(b) the breach of any covenant or agreement made by
Shareholders in this Agreement, including the documents, instruments
and agreements to be executed and/or delivered by Shareholders pursuant
hereto or thereto; or
(c) any Loss which is related in any way to Valley, the
operation of Valley's business or to the Valley Sale; or
(d) any Loss which relates to a claim by an employee of the
Company (i) that their employment was wrongfully terminated without
cause, whether before, on or after the Date of Closing, and said claim
is based, in whole or in part, on the Company's employee handbook as it
existed on the date of this Agreement (provided, that the loss so
indemnified shall be only to the extent determined to have been
incurred as a result of the contents of the employee handbook); (ii)
for matters arising out of acts or omissions of the Company or the
Shareholders occurring prior to the Date of Closing; (iii) or for any
claim pursuant to a Retention Agreement, which exceeds the retention
bonus paid to such employee pursuant to their Retention Agreement.
9.2 INDEMNIFICATION BY PURCHASER. Purchaser covenants and agrees to
defend, indemnify and hold Shareholders, and each of their respective heirs,
personal representatives, successors and assigns, harmless from, against and in
respect of any and all Losses that any of them may at any time, directly or
indirectly, suffer, sustain, incur or become subject to, arising out of, based
upon or resulting from or on account of each or both of the following:
(a) the breach or falsity of any representation or warranty
made by Purchaser in this Agreement, including the documents,
instruments and agreements to be executed and/or delivered by Purchaser
pursuant hereto and thereto; or
36
(b) the breach of any covenant or agreement made by Purchaser in this
Agreement, including the documents, instruments and agreements to be
executed and/or delivered by Purchaser pursuant hereto or thereto; or
(c) any Loss arising from the performance of the Audit described
in Section 7.9 hereof.
9.3 PROCEDURE FOR INDEMNIFICATION. In the event a party intends to seek
indemnification pursuant to the provisions of Sections 9.1 or 9.2 hereof (the
"INDEMNIFIED PARTY"), the Indemnified Party shall promptly give notice hereunder
to the other party (the "INDEMNIFYING PARTY") after obtaining written notice of
any claim, investigation, or the service of a summons or other initial or
continuing legal or administrative process or Proceeding in any action
instituted against the Indemnified Party as to which recovery or other action
may be sought against the Indemnified Party because of the indemnification
provided for in Section 9.1 or 9.2 hereof, and, if such indemnity shall arise
from the claim of a third party, the Indemnified Party shall permit the
Indemnifying Party to assume the defense of any such claim and any litigation
resulting from such claim; PROVIDED, HOWEVER, that the Indemnified Party shall
not be required to permit such an assumption of the defense of any claim or
Proceeding which, if not first paid, discharged or otherwise complied with,
would with substantial certainty result in a material interruption or disruption
of the business of the Indemnified Party, taken as a whole, or any material part
thereof. Notwithstanding the foregoing, the right to indemnification hereunder
shall not be affected by any failure of the Indemnified Party to give such
notice (or by delay by the Indemnified Party in giving such notice) unless, and
then only to the extent that, the rights and remedies of the Indemnifying Party
shall have been prejudiced as a result of the failure to give, or delay in
giving, such notice. Failure by the Indemnifying Party to notify the Indemnified
Party of its election to defend any such claim or action by a third party within
twenty (20) days after notice thereof shall have been given to the Indemnifying
Party shall be deemed a waiver by the Indemnifying Party of its right to defend
such claim or action.
If the Indemnifying Party assumes the defense of such claim,
investigation or Proceeding resulting therefrom, the obligations of the
Indemnifying Party hereunder as to such claim, investigation or Proceeding shall
include taking all steps necessary in the defense or settlement of such claim,
investigation or Proceeding and holding the Indemnified Party harmless from and
against any and all damages caused by or arising out of any settlement approved
by the Indemnifying Party or any judgment entered in connection with such claim,
investigation or Proceeding, except where, and only to the extent that, the
Indemnifying Party has been prejudiced by the actions or omissions of the
Indemnified Party. The Indemnifying Party shall not, in the defense of such
claim or any Proceeding resulting therefrom, consent to entry of any judgment
(other than a judgment of dismissal on the merits without costs) except with the
written consent of the Indemnified Party (which consent shall not be
unreasonably withheld, delayed or conditioned) or enter into any settlement
(except with the written consent of the Indemnified Party)(which consent shall
not be unreasonably withheld, delayed or conditioned) unless (i) there is no
finding or admission of any violation of law and no material effect on any
claims that could reasonably be expected to be made against the Indemnified
Party (ii) the sole relief provided is monetary damages that are paid in full
for Losses which are applied against the BASKET AMOUNT and (iii) the settlement
shall include the giving by the claimant or the plaintiff to the Indemnified
Party a release from all Liability in respect to such claim or litigation.
If the Indemnifying Party assumes the defense of such claim,
investigation or Proceeding resulting therefrom, the Indemnified Party shall be
entitled to participate in the defense of the claim, but solely by observation
and comment to the Indemnifying Party, and the counsel selected by the
Indemnified Party shall not appear on its behalf in any Proceeding arising
hereunder. The Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it to participate in its defense unless any of
the following shall apply: (i) the employment of such counsel shall have been
authorized in writing by the Indemnifying Party; or (ii) the Indemnifying
Party's legal counsel shall advise the Indemnifying Party in writing, with a
copy to the Indemnified Party, that there is a conflict of interest that would
make it inappropriate under applicable standards of professional conduct to have
common counsel. If clause (i) or (ii) in the immediately preceding sentence is
applicable, then the Indemnified Party may employ separate
37
counsel at the expense of the Indemnifying Party to represent the Indemnified
Party, but in no event shall the Indemnifying Party be obligated to pay the
costs and expenses of more than one such separate counsel for any one
complaint, claim, action or Proceeding in any one jurisdiction.
If the Indemnifying Party does not assume the defense of any such claim
by a third party or litigation resulting therefrom after receipt of notice from
the Indemnified Party, the Indemnified Party may defend against such claim or
litigation in such manner as it reasonably deems appropriate, and unless the
Indemnifying Party shall deposit with the Indemnified Party a sum equivalent to
the total amount demanded in such claim or litigation plus the Indemnified
Party's estimate of the cost (including attorneys' fees) of defending the same,
the Indemnified Party may settle such claim or Proceeding on such terms as it
may reasonably deem appropriate and the Indemnifying Party shall, subject to its
defenses and the applicability of any remaining threshold loss amount provided
for in Section 9.1(a) hereof, promptly reimburse the Indemnified Party for the
amount of such settlement and for all reasonable costs (including attorneys'
fees), expenses and damages incurred by the Indemnified Party in connection with
the defense against or settlement of such claim, investigation or litigation, or
if any such claim or litigation is not so settled, the Indemnifying Party shall,
subject to its defenses and the applicability of any remaining BASKET AMOUNT
provided for in Section 9.1(a) hereof, promptly reimburse the Indemnified Party
for the amount of any final nonappealable judgment rendered with respect to any
claim by a third party in such litigation and for all costs (including
attorneys' fees), expenses and damage incurred by the Indemnified Party in
connection with the defense against such claim or litigation, whether or not
resulting from, arising out of, or incurred with respect to, the act of a third
party.
Any Loss under this Article 9: (a) shall be computed net of (x) any
actual income tax benefit resulting therefrom to the Indemnified Party and (y)
any insurance coverage with respect thereto, (b) shall be increased to the
extent necessary to indemnify and hold harmless the Indemnified Party from any
actual amount of Liability for Taxes incurred and paid which is attributable to
a previous income tax deduction which is disallowed or the receipt of the
indemnity payment with respect to such claim; provided, further, that, in all
cases, the timing of the receipt or realization of any insurance proceeds or
income tax benefits shall be taken into account in determining the amount of
reduction of claims, (c) shall be based upon the actual dollar amount of the
proposed Loss, without use of any multiplier, and (d) except for Losses related
to title to the Stock or to Taxes shall be limited to and shall not exceed in
the aggregate for all Losses, one-half (1/2) of the Purchase Price.
Each party shall cooperate in good faith and in all respects with each
Indemnifying Party and its representatives (including without limitation its
counsel) in the investigation, negotiation, settlement, trial and/or defense of
any Proceedings (and any appeal arising therefrom) or any claim. The parties
shall cooperate with the other in any notifications to and information requests
of any insurers. No individual representative of any Person, or their respective
Affiliates shall be personally liable for any Loss under this Agreement, except
as specifically agreed to by said individual representative.
9.4 DISPUTE RESOLUTION In the event a dispute arises under this
Agreement, except with respect TO SECTION 2.5, such disputes shall be resolved
in the manner set forth in this SECTION 9.4.
(a) If a dispute arises under this Agreement, including any
question regarding the existence, validity, interpretation or
termination hereof, which is not described as an exception in this
SECTION 9.4, Purchaser and the Shareholders may invoke the dispute
resolution procedure set forth in this SECTION 9.4 by giving written
notice to the other party. The parties shall enter into discussions
concerning this dispute. If the dispute is not resolved as a result of
such discussion in ten (10) days, an attempt will be made to resolve
the matter by a formal nonbinding mediation with an independent neutral
mediator agreed to by the parties. If the parties cannot agree on a
mediator within a period of ten (10) days after expiration of the ten
(10) day period for resolution by discussion, then either party may
apply to any court of competent jurisdiction for appointment of a
mediator, which appointment shall be binding and nonappealable. Upon
commencement of the mediation process, the parties shall promptly
communicate with respect to a procedure and schedule for the conduct of
the proceeding and for the exchange of documents and other
38
information related to the dispute. The mediation process shall be
deemed ended if the dispute has not been resolved within thirty (30)
days after appointment of the mediator.
(b) All claims, disputes or other matters in question between
the parties to this Agreement arising out of or relating to this
Agreement which are not resolved by mediation in accordance with
SECTION 9.4(a) within thirty (30) days after appointment of mediator
shall be submitted for, subject to and decided by arbitration in
accordance with the Commercial Arbitration Rules of the American
Arbitration Association currently in effect as of the date of this
Agreement ("AAA Rules"), except to the extent those rules are
inconsistent with this SECTION 9.4. Any arbitration must be held in
Minneapolis, Minnesota by a single arbitrator mutually selected by the
parties hereto or, if the parties hereto cannot agree on the
appointment of such arbitrator within ten (10) days following the date
notice of the dispute is given by a party to the adverse party, an
arbitrator selected according to the AAA Rules. The arbitrator's award
shall be final, conclusive and binding upon all parties to this
Agreement, and judgment may be entered upon it in accordance with the
Federal Arbitration Act any court of general jurisdiction in Minnesota,
or in any United States District Court having jurisdiction in
Minnesota. The arbitrator shall be required to provide in writing to
the parties the basis for the award or order of such arbitrator, and a
court reporter shall record all hearings (unless otherwise agreed to by
the parties), with such record constituting the official transcript of
such proceedings. Shareholders and Purchaser specifically desire this
Arbitration clause to be governed by the United States Federal
Arbitration Act, and not by the arbitration laws of any state.
(c) Shareholders and Purchaser agree and consent that any
legal action, suit or proceeding seeking to enforce this Section 9.4 or
to confirm or contest any arbitration award shall be instituted and
adjudicated solely and exclusively in any court of general jurisdiction
in Minnesota, or in the United States District Court having
jurisdiction in Minnesota and Shareholders and Purchaser agree that
venue will be proper in such courts and waive any objection which they
may have now or hereafter to the venue of any such suit, action or
proceeding in such courts, and irrevocably consents and agrees to the
jurisdiction of said courts in any such suit, action or proceeding.
Shareholders and Purchaser further agree to accept and acknowledge
service of any and all process which may be served in any such suit,
action or proceeding in said courts, and also agree that service of
process or notice upon them shall be deemed in every respect effective
service of process or notice upon them, in any suit, action, proceeding
or arbitration demand, if given or made: (i) according to applicable
law; (ii) according to the AAA Rules; (iii) by a person over the age of
eighteen who personally serves such notice or service of process on
Shareholders or Purchaser, as the case may be; or (iv) by certified
mail, return receipt requested, mailed to Shareholders or Purchaser, as
the case may be, at their respective addresses set forth in this
Agreement.
(d) In the event of arbitration filed or instituted between
the parties pursuant to this Section 9.4, the prevailing party will be
entitled to receive from the adverse party all costs, damages and
expenses, including reasonable attorney's fees, incurred by the
prevailing party in connection with that action or proceeding whether
or not the controversy is reduced to judgment or award. The prevailing
party will be that party who is determined by the arbitrator to have
prevailed on the major disputed issues.
ARTICLE 10: CLOSING
10.1 DATE OF CLOSING. Subject to the satisfaction or waiver of the
conditions precedent contained in Articles 6, 7 and 8 hereof, the closing of the
transactions contemplated by this Agreement (the "CLOSING") shall be held at a
mutually agreed upon time on the first day of the month which is at least ten
(10) business days after (i) all consents and approvals required to consummate
the transactions contemplated hereby have been received from the FCC and (ii)
all other conditions to the Closing have been duly satisfied or waived in
writing, at the offices of Xxxx & Xxxxxxx, A Professional Association, 4800
Norwest Center, 00 Xxxxx Xxxxxxx Xxxxxx, Xxxxxxxxxxx, Xxxxxxxxx, 00000, and
shall be as of the opening of business on such day. Such date is referred to in
this Agreement as the "DATE OF CLOSING."
39
10.2 DOCUMENTS TO BE DELIVERED BY SHAREHOLDERS. At the Closing,
Shareholders shall execute, where necessary or appropriate, and deliver to
Purchaser each and all of the following:
(a) A certificate in the form of Exhibit C hereto signed by
Shareholders, and dated as of the Date of Closing, to the effect that
the representations and warranties made by Shareholders in this
Agreement (as modified by the Schedules and any Supplements) and in any
document, instrument and/or agreement to be executed and/or delivered
by Shareholders pursuant to this Agreement are true and correct in all
material respects at and as of the Closing and Shareholders have
performed and complied with all of their covenants, agreements and
obligations under this Agreement which are to be performed and complied
with by Shareholders at or prior to the Closing;
(b) The certificates evidencing the Stock duly endorsed by the
Shareholders in blank or accompanied by assignments separate from
certificate duly endorsed in blank;
(c) The minute book and stock book for the Company, RFC, GLCLP
and Glacial DBS;
(d) If there have been any improvements constructed or repairs
of existing improvements made with respect to any parcel of Real Estate
within the last six months, or if any work has been done or labor or
materials furnished with respect to any parcel of Real Estate, the
Shareholders agree to deliver, and to cause the Company to deliver, to
Purchaser on or prior to the Date of Closing such affidavits and other
documents, including lien waivers for any such work in a form
sufficient to permit the title company issuing the title insurance
policy called for hereunder to delete all mechanic's liens exceptions;
(e) The Company's Affidavits for each parcel of Real Estate in
a form sufficient to permit the title insurance company to delete the
exceptions to title relating to parties in possession;
(f) Any other document or certificate that the title insurance
company may reasonably require to issue the title insurance policies on
the Real Estate in the form required by Section 7.10(a) hereof;
(g) Duly executed written opinion letters by Xxxxxx and
Xxxxxx, Professional Association, counsel for Shareholders and the
Company, and by the Company's counsel for FCC matters dated as of the
Date of Closing, addressed to Purchaser and its lenders, as
contemplated by Section 7.5 of this Agreement;
(h) Duly executed resignations of all of the officers and
directors of the Company, and the resignations as employees of Xxxxxx
X. Xxxxxxxx and Xxxxx X. Xxxxxxxx, all effective as of the Date of
Closing;
(i) A Mutual Release in the form of Exhibit D hereto
duly executed by the Shareholders (the "Release");
40
(i) [THIS SUBSECTION INTENTIONALLY OMITTED.]
(k) A Satisfaction of Debt in the form of Exhibit E to this
Agreement executed by each of Xxx Xxxx, C. Max Tite, Xxxxx Xxxx,
Xxxxxxx X. Xxxxx and Xxxx Xxxxxxx with respect to their respective
Deferred Compensation Agreements.
(l) Assignment, Assumption and Consent Agreements in the form
of Exhibit F regarding the Company's debts to Xxx Xxxx and the Jung
Girls Partnership, whereby Xxxxxx X. Xxxxxxxx assumes the Company's
debts to Xxx Xxxx and the Jung Girls Partnership and the Company is
released from any Liability with respect to such debts;
(m) Such other documents and items as are reasonably necessary
or appropriate to effect the consummation of the transactions
contemplated hereby or which may be customary under local law; and
(n) [THIS SUBSECTION INTENTIONALLY OMITTED.]
(o) A certificate of the trustee(s) of the Xxxxxx X. Xxxxxxxx
Irrevocable Trust in the form of Exhibit G to this Agreement.
10.3 DOCUMENTS TO BE DELIVERED BY PURCHASER. At the Closing, Purchaser
shall execute, where necessary or appropriate, and deliver to Shareholders each
and all of the following:
(a) Payment of the Purchase Price by the method and
determined in accordance with Section 2.3 hereof;
(b) A certificate in the form of Exhibit H hereto signed by a
duly authorized officer of Purchaser, and dated as of the Date of
Closing, to the effect that the representations and warranties made by
Purchaser in this Agreement and in any document, instrument and/or
agreement to be executed and/or delivered by Purchaser pursuant to this
Agreement are true and correct in all material respects at and as of
the Closing and the Purchaser has performed and complied with all of
its covenants, agreements and obligations under this Agreement which
are to be performed and complied with by Purchaser on or prior to the
Closing;
(c) A copy certified by the Secretary of Purchaser of the duly
adopted resolutions of the Board of Directors of Purchaser approving
this Agreement and authorizing the execution and delivery of this
Agreement, including the documents, instruments and agreements to be
executed and/or delivered by the Purchaser pursuant hereto, and the
consummation of the transactions contemplated hereby and thereby;
(d) A duly executed written opinion letter by Xxxx & Xxxxxxx,
a Professional Association, counsel for Purchaser, dated as of the Date
of Closing, addressed to the Shareholders, as contemplated by Section
8.4 of this Agreement;
41
(e) The Release duly executed by the Purchaser and the Company;
and
(f) Such other documents and items as are reasonably necessary
or appropriate to effect the consummation of the transactions
contemplated hereby or which may be customary under local law.
ARTICLE 11: PERFORMANCE FOLLOWING THE DATE OF CLOSING
The following covenants and agreements are to be performed after the
Closing by the parties and shall continue in effect for the periods
respectively indicated or, where no indication is made, until performed:
11.1 FURTHER ACTS AND ASSURANCES. The parties agree that, at any
time and from time to time, on and after the Date of Closing, upon the
reasonable request of the other party, they will do or cause to be done all
such further acts and things and execute, acknowledge and deliver, or cause
to be executed, acknowledged and delivered any and all papers, documents,
instruments, agreements, assignments, transfers, assurances and conveyances
as may be necessary or desirable to carry out and give effect to the
provisions and intent of this Agreement. In addition, from and after the Date
of Closing, the Purchaser will afford to the Shareholders and their
attorneys, accountants and other representatives access, during normal
business hours, to such personnel, books and records relating to the Company
as may reasonably be required in connection with the preparation of financial
information or the filing of Tax Returns and will cooperate in all reasonable
respects in connection with claims and Proceeding asserted by or against
third parties, relating to or arising from the transactions contemplated
hereby.
11.2 NON-COMPETITION AGREEMENT. During the period of thirty-six
months (36) months from and after the Date of Closing, Xxxxxx X. Xxxxxxxx
covenants and agrees that he will not, without the Purchaser's prior written
consent, directly or indirectly, or individually or collectively within the
States of Minnesota and South Dakota lend any material credit, advice or
assistance, or engage in any activity or act in any manner, including but not
limited to, as an individual, owner, sole proprietor, founder, associate,
promoter, partner, joint venturer, shareholder other than as a less than five
percent (5%) shareholder of a publicly traded corporation, officer, director
(other than as a director of Purchaser, Midwest Telephone and other Persons
with whom Xx. Xxxxxxxx is presently affiliated), trustee, manager, employer,
employee, licensor, licensee, principal, agent, salesman, broker,
representative, consultant, advisor, investor or otherwise for the purpose of
establishing, operating or managing any business or entity that is engaged in
activities competitive with the present Business of the Company.
11.3 NON-SOLICITATION AGREEMENT. During the period of thirty-six
(36) months from and after the Date of Closing, Xxxxxx X. Xxxxxxxx covenants
and agrees that he will not, whether for his own account or for the account
of any other Person, directly or indirectly interfere with the Company's
relationship with or endeavor to divert or entice away from the Company any
Person who or which at any time during the term of the Shareholders' prior
employment by or affiliation with the Company is an employee, vendor,
supplier or customer of the Company. The foregoing shall not apply to (i)
employees, vendors, suppliers or customers who do not, at the time of any
solicitation, have a relationship with the Company in such capacity; (ii) the
services of Xxxxxxx X. Xxxxx for the purpose of providing financial and
accounting services on behalf of the Shareholders or Payment Agent in
connection with the preparation of the Closing Balance Sheet or other
requirements of this Agreement; or (iii) any Xxxxxxxx family member.
11.4 CONFIDENTIAL INFORMATION. The Shareholders understand and
agree that the Business of the Company is based upon specialized work and
that as officers, directors, employees or shareholders of the Company they
received, had access to and/or contributed to Confidential Information.
Except as may be necessary or desirable (i) for defense of a Loss or
conducting or participating in a proceeding in accordance with Sections 9.1,
9.3 or 9.4 hereof, (ii) in enforcing a Shareholder's rights under this
Agreement, (iii) for the purpose of filing any report with any Governmental
Body, (iv) in connection with advice sought from an attorney, accountant or
similar professional, or (v) in connection with their continued individual
employment by the Company or employment by or position with Purchaser, the
Shareholders agree that at
42
all times from and after the Date of Closing, they shall keep secret all such
Confidential Information and that they will not directly or indirectly Use or
Disclose the same to any Person without first obtaining the written consent
of the Purchaser. At any time the Purchaser may so request, the Shareholders
shall turn over to the Purchaser all Confidential Information compiled by or
delivered to the Shareholders, including copies thereof, in their possession,
it being agreed that the same and all information contained therein are at
all times the exclusive property of the Company.
11.5 REASONABLENESS OF COVENANTS. The Shareholders acknowledge and
agree that the geographic scope and period of duration of the restrictive
covenants contained in Sections 11.2, 11.3 and 11.4 of this Agreement are
both fair and reasonable and that the interests sought to be protected by the
Purchaser and Company are legitimate business interests entitled to be
protected. The Shareholders further acknowledge and agree that the Purchaser
would not have purchased the Shareholders' Stock in the Company pursuant to
this Agreement unless the Shareholders agreed to the covenants contained in
such Sections.
11.6 INJUNCTIVE RELIEF. The parties agree that the remedy of
damages at law for the breach by any party of any of the covenants contained
in Sections 11.2, 11.3, 11.4 or 11.9 is an inadequate remedy. In recognition
of the irreparable harm that a violation by the Company or either party of
any of the covenants, agreements or obligations arising under Sections 11.2,
11.3, 11.4 or 11.9 would cause the Company or the other party, each party
agrees that in addition to any other remedies or relief afforded by law, an
Injunction against an actual or threatened violation or violations may be
issued against them and every other Person concerned thereby, it being the
understanding of the parties that both damages and Injunction shall be proper
modes of relief and are not to be considered alternative remedies.
11.7 BLUE PENCIL DOCTRINE. In the event that any of the restrictive
covenants contained in this Article shall be found by a court of competent
jurisdiction to be unreasonable by reason of its extending for too great a
period of time or over too great a geographic area or by reason of its being
too extensive in any other respect, then such restrictive covenant shall be
deemed modified to the minimum extent necessary to make it reasonable and
enforceable under the circumstances.
11.8 NAME OF COMPANY. The Shareholders, their successors and
assigns, have the right to use the name, "Xxxxxxxx Group."
11.9 EMPLOYEE RETENTION.
(a) The Purchaser shall employ, or cause the Company to
continue the employment of all employees of the Company who are listed
on SCHEDULE 11.9 of this Agreement who continue to be employees of the
Company as of the Date of Closing (other than Xxxxxx X. Xxxxxxxx, Xxxxx
X. Xxxxxxxx or Xxxxxx Xxxxxxxxxxx) without interruption after the Date
of Closing until three (3) months to the day after the Date of Closing
(the "Transition Period").
(b) Xxxxxx Xxxxxxxxxxx and any other employee of the Company
listed on SCHEDULE 11.9 who meets the requirements set forth in their
applicable retention/transition letter (the "Retention Agreements")
executed with the Company (a "Qualified Employee") shall be paid a
retention bonus in accordance and in the amount provided by with the
terms of the applicable Retention Agreement. Whether such requirements
are met shall be determined in the reasonable discretion of the
Shareholders, based on the terms of the Retention Agreements. The
employee retention amount (the "Employee Retention Amount") is equal
to all
43
amounts paid by the Company pursuant to the Retention Agreements
for the nine (9) month retention payment obligation and all of
the Company's other expenses related to said payments as set forth
in SCHEDULE 11.9. The portion, if any, of the Employee
Retention Amount not paid by the Company to Qualified Employees
shall be paid to the Shareholders by Purchaser after the liability
for Employee Retention Amount payments has been finally determined.
(c) Notwithstanding the foregoing, the Company from and after
the Date of Closing, and without triggering an obligation pursuant to
any Retention Agreement, may terminate the employment of Company
employees for objective occurrences constituting "cause," according to
the normal employment policies and practices of Purchaser or the
Company for all employees similarly situated. Notwithstanding any
provision in this Agreement to the contrary, all Company employees
shall remain at-will employees of the Company. Except for reasonable
changes in duties, all Company employees, except for Xxxxxx Xxxxxxxxxxx
and the Valley Employees, shall continue to be employed by the Company
during the Transition Period on substantially the same terms and
conditions as they are employed by the Company as of the Date of
Closing. Purchaser shall cause the Company to provide the Company's
employees the Benefit Plans and other employee benefits that are
provided to Purchaser's employees from time to time; provided, however,
that Purchaser may choose to continue the Company's 401(k) plan, as
amended, after the Closing in lieu of providing Purchaser's 401(k) plan
to the Company's employees. Purchaser shall credit all Company
employees, for the purpose of medical, dental, health and life
insurance, Purchaser's 401(k) plan, and paid time off with all of their
prior service/employment time with the Company. Nothing in this Section
11.9 is intended to create, or shall create or confer, any rights or
remedies upon any Person other than the Purchaser or the Shareholders
and their respective successors and assigns, nor shall this Section
11.9 create any right of employment for any employee of the Company.
The Shareholders shall have the right to seek an Injunction, without
the necessity of posting bond, to cause the Company and the Purchaser
to comply with the provisions of this Section.
11.10 TAX MATTERS. The following provisions shall govern the
allocation of responsibility as between the Purchaser and each Shareholder
for certain tax matters following the Date of Closing:
(a) TAX PERIODS BEGINNING BEFORE AND ENDING ON OR BEFORE THE
DATE OF CLOSING. The Shareholders shall prepare or cause to be prepared
and file or cause to be filed any federal or state income Tax Returns
of the Company for Tax periods which begin before the Date of Closing
and end on or before the Date of Closing. The Shareholders shall permit
the Purchaser to review and comment upon each such Tax Return described
in the preceding sentence prior to filing. Purchaser shall cause a
Company officer to sign the Tax Returns prepared by the Shareholders.
(b) TAX PERIODS BEGINNING BEFORE AND ENDING AFTER THE DATE OF
CLOSING. The Purchaser shall prepare or cause to be prepared and file
or cause to be filed any federal or state Tax Returns of the Company
for Tax periods which begin before the Date of Closing and end after
the Date of Closing. The Purchaser shall permit the Shareholders to
review and comment upon each such Tax Return described in the preceding
sentence prior to filing. For purposes of this Section 11.10(b) and
Section 11.10(a), in the case of any Taxes that are imposed on a
periodic basis and are payable for a taxable period that includes the
Date of Closing, the portion of such Tax which relates to the portion
of such taxable period ending on the day immediately prior to the Date
of Closing shall (x) in the case of any Taxes other than Taxes based
upon or related to income or receipts, be deemed to be the amount of
such Tax for the entire taxable period multiplied by a fraction the
numerator of which is the number of days in the taxable period ending
on the day immediately prior to the Date of Closing and the denominator
of which is the number of days in the entire taxable period, and (y) in
the case of any Tax based upon or related to income
44
or receipts be deemed equal to the amount which would be payable if the
relevant taxable period ended on the Date of Closing. Any credits
relating to a taxable period that begins before and ends after the day
immediately prior to the Date of Closing shall be taken into account as
though the relevant taxable period ended on the Date of Closing. All
determinations necessary to give effect to the foregoing allocations
shall be made in a manner consistent with prior practice of the
Company.
(c) COOPERATION ON TAX MATTERS.
(i) The Purchaser, the Company and each Shareholder
shall cooperate fully, as and to the extent reasonably
requested by the other party, in connection with the filing of
Tax Returns pursuant to this Section and any Proceeding with
respect to Taxes. Such cooperation shall include the retention
and (upon the other party's request) the provision of records
and information which are reasonably necessary to any such
Proceeding and making employees available on a mutually
convenient basis to provide additional information and
explanation of any material provided hereunder. The Purchaser
shall cause the Company to agree, and each Shareholder agrees
(A) to retain all books and records with respect to Tax
matters pertinent to the Company relating to any taxable
period beginning before the Date of Closing until the
expiration of the statute of limitations (and, to the extent
notified by the Purchaser or any Shareholder, any extensions
thereof) of the respective taxable periods, and to abide by
all record retention agreements entered into with any taxing
authority, and (B) to give the other party reasonable written
notice prior to transferring, destroying or discarding any
such books and records and, if the other party so requests,
the Company or the Shareholder, as the case may be, shall
allow the other party to take possession of such books and
records.
(ii) The Purchaser and each Shareholder further
agree, upon request, to use reasonable efforts to obtain any
certificate or other document from any Governmental Body or
any other Person as may be necessary to mitigate, reduce or
eliminate any Tax that could be imposed (including, but not
limited to, Tax with respect to the transactions contemplated
hereby).
(d) CERTAIN TAXES. All transfer, documentary, sales, use,
stamp, registration and other such Taxes and fees (including any
penalties and interest) payable to the State of Minnesota or the State
of South Dakota which are incurred by Shareholders in connection with
this Agreement shall be paid by the Shareholders when due, and the
Shareholders will, at their own expense, file all necessary Tax Returns
and other documentation with respect to all such transfer, documentary,
sales, use, stamp, registration and other Taxes and fees, and, if
required by applicable law, the Purchaser will, and will cause its
Affiliates to, join in the execution of any such Tax Returns and other
documentation.
ARTICLE 12: TERMINATION
12.1 TERMINATION. This Agreement may be terminated and the
transactions contemplated herein may be abandoned after the date of this
Agreement, but not later than the Closing:
(a) by mutual written consent of all parties hereto;
(b) by Purchaser or Shareholders if any of the conditions
provided for in Article 6 of this Agreement have not been met and have
not been waived in writing by the party seeking to terminate on or
before the Date of Closing;
(c) by Purchaser if any of the conditions provided for in
Article 7 of this Agreement have not been met and have not been waived
or deemed waived in
45
accordance with the provisions of this Agreement in writing by
Purchaser on or before the Date of Closing;
(d) by Shareholders if any of the conditions provided for in
Article 8 of this Agreement have not been met and have not been waived
in writing by Shareholders on or before the Date of Closing;
(e) by either Purchaser or Shareholders if the Closing shall
not have occurred on or before March 31, 1999; and
(f) by a party who objects to a Supplement pursuant to SECTION
13.22.
In the event of termination or abandonment by any party as provided in this
Section 12.1, written notice shall forthwith be given to the other party and,
except as otherwise provided herein, each party shall pay its own expenses
incident to preparation or consummation of this Agreement and the
transactions contemplated hereunder and neither party shall have any
Liability to the other hereunder except such Liability as may arise as a
result of a breach hereof.
12.2 RETURN OF DOCUMENTS AND NONDISCLOSURE. If this Agreement is
terminated for any reason pursuant to Section 12.1 hereto, each party and its
counsel shall return all documents and materials which shall have been
furnished by or on behalf of the other party, and all copies thereof, and
each party hereby covenants that it will not Use or Disclose to any Person
any Confidential Information about the other party or any information about
the transactions contemplated hereby, except insofar as may be necessary to
comply with the requirements of any Governmental Body or Order or to assert
its rights hereunder.
ARTICLE 13: MISCELLANEOUS
13.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties of the parties contained in this Agreement and
in any Exhibit, Schedule, certificate, instrument or document delivered by or
on behalf of any of the parties hereto pursuant to this Agreement and the
transactions contemplated hereby shall survive the Closing of the
transactions contemplated hereby and any investigation made by the parties or
their agents for a period of two (2) years after the Closing, after which no
claim for indemnification for any misrepresentation, or for the breach of any
representation or warranty under this Agreement, may be brought, and no
action with respect thereto may be commenced, and no party shall have any
Liability or obligation with respect thereto, unless (i) the Indemnified
Party gave written notice to the Indemnifying Party specifying with
particularity the misrepresentation or a breach of representation or warranty
claimed on or before the expiration of such period; (ii) the claim relates to
a breach of any representation or warranty contained in Section 3.9, in which
case the right to indemnification shall survive until the expiration of the
applicable statute of limitations for each and any of the Taxes; or (iii) the
claim relates to any representation or warranty in SECTIONS 3.2 OR 3.5.
13.2 PRESERVATION OF AND ACCESS TO RECORDS. The Purchaser shall
preserve or cause the Company to preserve all books and records of the
Company for a period of six (6) years after the Date of Closing; provided,
however, Purchaser may destroy any part or parts of such records upon
obtaining written consent of Shareholders for such destruction, which consent
shall not be unreasonably withheld. Such records shall be made available to
Shareholders and their representatives at all reasonable times during normal
business hours of the Company during said six-year period with the right at
their expense to make abstracts from and copies thereof.
13.3 COOPERATION. The parties hereto shall cooperate with each
other in all respects, including using commercially reasonable efforts to
assist each other in satisfying the conditions precedent to their respective
obligations under this Agreement, to the end that the transactions
contemplated hereby will be consummated.
46
13.4 PUBLIC ANNOUNCEMENTS. The timing and content of all public
announcements relating to the execution of this Agreement and the
consummation of the transactions contemplated hereby shall be approved by
both Purchaser and Shareholders prior to the release of such public
announcements, and each party agrees to cooperate with the other party as
appropriate to comply with all Applicable Laws. Subsequent to the date of
receipt of all consents and approvals of each Governmental Body necessary to
consummate this transaction, Purchaser may make such announcements and/or
advertisements as Purchaser, in its sole discretion, deems necessary.
13.5 NOTICES. All notices, demands and other communications
provided for hereunder shall be in writing and shall be given by personal
delivery, via facsimile transmission (receipt telephonically confirmed), by
nationally recognized overnight courier (prepaid), or by certified or
registered first class mail, postage prepaid, return receipt requested, sent
to each party, at its/his address as set forth below or at such other address
or in such other manner as may be designated by such party in written notice
to each of the other parties. All such notices, demands and communications
shall be effective when personally delivered, one (1) business day after
delivery to the overnight courier, upon telephone confirmation of facsimile
transmission or upon receipt after dispatch by mail to the party to whom the
same is so given or made:
If to Purchaser: Rural Cellular Corporation
P. O. Xxx 0000
Xxxxxxxxxx, XX 00000
Attn.: Xxxxxxx Xxxxxxxx, CEO
With a copy to: Xxx X. Xxxxxxx, Esq.
Xxxx & Xxxxxxx, A Professional Association
0000 Xxxxxxx Xxxxxx, 00 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000
If to Shareholders: Xxxxxx X. Xxxxxxxx
X.X. Xxx 00
Xxxxx Xxxxxxx 00
Xxxxxxx Xxxxxxx, XX 00000
With a copy to: Xxxxxxx X. Xxxxxx, Esq.
Xxxxxx and Xxxxxx, Professional Association
2400 IDS Center
00 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000
13.6 ENTIRE AGREEMENT. This Agreement, including the documents,
instruments, and agreements to be executed by the parties pursuant hereto,
contains the entire agreement of the parties hereto and supersedes all prior
or contemporaneous agreements and understandings, oral or written, between
the parties hereto with respect to the subject matter hereof.
13.7 REMEDIES. The respective indemnification obligations of the
parties set forth in Article 9 of this Agreement are the exclusive remedies
of the parties and their successors, assigns, heirs, beneficiaries or others
seeking to claim by, through, or on behalf of a party, under this Agreement,
and no other remedy or remedies, whether arising under any Applicable Law,
common law or otherwise, may be used, asserted or prosecuted in connection
with this Agreement and any transaction, occurrence, or omission arising
from, in connection with or otherwise based upon this Agreement; provided,
however, that all equitable remedies, except rescission, shall remain
available.
13.8 AMENDMENTS. No purported amendment, modification or waiver of
any provision of this Agreement or any of the documents, instruments or
agreements to be executed by the parties pursuant
47
hereto shall be effective unless in a writing specifically referring to this
Agreement and signed by all of the parties hereto.
13.9 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective heirs,
personal representatives, successors and permitted assigns, but except as
hereinafter provided in this Section, nothing in this Agreement is to be
construed as an authorization or right of any party to assign its rights or
delegate its duties under this Agreement without the prior written consent of
the other parties hereto. In their sole discretion (i) Purchaser may assign
its rights in and/or delegate its duties under this Agreement to an Affiliate
of the Purchaser and (ii) at or after the Closing, Shareholders may assign
their rights and duties to the Payment Agent. In the event of such an
assignment of rights and/or delegation of duties, all references to the
Purchaser or any Shareholder, as applicable to the assignment in this
Agreement shall also be deemed to be references to the Person to which this
Agreement is assigned; provided that no such assignment and/or delegation
shall relieve the assignor of any of its duties or obligations hereunder.
13.10 COSTS. Except as otherwise provided in this Agreement, each
party hereto shall pay their own costs and expenses incurred in connection
with negotiating and preparing this Agreement and consummating the
transactions contemplated hereby, including but not limited to fees and
disbursements of their attorneys, accountants and investment bankers.
13.11 GOVERNING LAW. This Agreement, including the documents,
instruments and agreements to be executed and/or delivered by the parties
pursuant hereto, shall be construed, governed by and enforced in accordance
with the internal laws of the State of Minnesota, without giving effect to
the principles of comity or conflicts of laws thereof.
13.12 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same Agreement.
13.13 HEADINGS. The headings of the articles, sections and
subsections of this Agreement are intended for the convenience of the parties
only and shall in no way be held to explain, modify, construe, limit, amplify
or aid in the interpretation of the provisions hereof. The terms "this
Agreement," "hereof," "herein," "hereunder," "hereto" and similar expressions
refer to this Agreement as a whole and not to any particular article,
section, subsection or other portion hereof and include the Schedules and
Exhibits hereto and any document, instrument or agreement executed and/or
delivered by the parties pursuant hereto.
13.14 SCOPE OF AGREEMENT. Unless the context otherwise requires,
all references in this Agreement or in any Schedule or Exhibit hereto, to the
assets, properties, operations, business, financial statements, employees,
books and records, accounts receivable, accounts payable, Contracts or other
attributes of the business of the Company shall mean such items or attributes
as they are used in, apply to, or relate to the Business of the Company.
13.15 NUMBER AND GENDER. Unless the context otherwise requires,
words importing the singular number shall include the plural and vice versa
and words importing the use of any gender shall include all genders.
13.16 SEVERABILITY. In the event that any provision of this
Agreement is declared or held by any court of competent jurisdiction to be
invalid or unenforceable, such provision shall be severable from, and such
invalidity or unenforceability shall not be construed to have any effect on,
the remaining provisions of this Agreement, unless such invalid or
unenforceable provision goes to the essence of this Agreement, in which case
the entire Agreement may be declared invalid and not binding upon any of the
parties.
13.17 PARTIES IN INTEREST. Nothing expressed or implied in this
Agreement is intended or shall be construed to confer any rights or remedies
under or by reason of this Agreement upon any Person other than Purchaser and
Shareholders and their respective heirs, personal representatives, successors
and
48
permitted assigns. Nothing in this Agreement is intended to relieve or
discharge the Liabilities of any third Person to Purchaser or Shareholders.
13.18 WAIVER. The terms, conditions, warranties, representations and
indemnities contained in this Agreement, including the documents, instruments
and agreements executed and/or delivered by the parties pursuant hereto, may
be waived only by a written instrument executed by the party waiving
compliance. Any such waiver shall only be effective in the specific instance
and for the specific purpose for which it was given and shall not be deemed a
waiver of any other provision hereof or of the same breach or default upon
any recurrence thereof. No failure on the part of a party hereto to exercise
and no delay in exercising any right hereunder shall operate as a waiver
thereof nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any other
right.
13.19 FORUM AND JURISDICTION. Except as required by Section 9.4
hereof, the parties agree that the forum for any controversy arising under
this Agreement shall be in the federal and state courts of the State of
Minnesota and all parties consent to the personal jurisdiction of the federal
and state courts of the State of Minnesota for such purposes.
13.20 CONSTRUCTION. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be
construed as if drafted jointly by the parties and no presumption or burden
of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any of the provisions of this Agreement. The word "including"
shall mean including without limitation. The parties intend that each
representation, warranty and covenant contained herein shall have independent
significance. If any party has breached any representation, warranty or
covenant contained herein in any respect, the fact that there exists another
representation, warranty or covenant relating to the same subject matter
(regardless of the relative levels of specificity) which the party has not
breached shall not detract from or mitigate the fact that the party is in
breach of the first representation, warranty or covenant.
13.21 PAYMENT AGENT. Payment Agent is hereby appointed by and for
each Shareholder as their sole authorized agent with authority, without
limitation, (i) to receive and remit the Purchase Price under this Agreement;
(ii) to pursue, defend, compromise or otherwise make all decisions regarding
indemnification pursuant to Article 9 of this Agreement; (iii) to calculate
amounts due to and from Shareholders pursuant to this Agreement; (iv) to make
or consent to all estimates for Tax Liabilities, holdbacks from amounts to be
paid at Closing or otherwise required by this Agreement to be made by the
parties; and (v) to otherwise take such acts or actions, or omit to take
action, or make each and every decision which may be taken or made by any
Shareholder pursuant to or arising from or in connection with this Agreement.
Any action or failure to act taken (or not taken) by the Payment Agent shall
constitute a decision of each Shareholder and shall be final, binding and
conclusive upon them. Purchaser may rely upon any decision, act, consent or
instruction of the Payment Agent as being the decision, act, consent or
instruction of each and all of the Shareholders. Purchaser is hereby relieved
from any Liability to any person for any acts done by Purchaser in accordance
with any decision, act, consent or instruction of the Payment Agent. Payment
Agent agrees to indemnify and hold harmless Purchaser from and against any
Liabilities Purchaser may incur as a result.
13.22 SUPPLEMENTATION OF SCHEDULES. Shareholders or Purchaser may
elect to deliver a supplement ("Supplement") to one or more of the Schedules
and previously delivered to the other in accordance with the procedures set
forth in this Section 13.22 as follows:
(a) Prior to the Date of Closing, any and all Supplements must
be in writing and must be delivered to the other party before the date
that is five (5) business days prior to the scheduled Date of Closing.
The other party shall be given the opportunity during the five (5)
business days following the delivery of the proposed Supplement to
consider that Supplement. If the recipient does not object to the
contents of the Supplement within such period, the Schedule in question
shall be deemed amended by the Supplement. If the recipient objects to
a proposed Supplement, the sole remedy of such objecting party shall be
termination of this Agreement in
49
accordance SECTION 12.1(f) of this Agreement, provided that this
limitation of remedies shall only apply if the Supplement was prepared
in connection with Sections 3.17, 3.28, 5.19, 7.9 or 7.10 of this
Agreement, or was made necessary by a change in circumstance from the
date of this Agreement to the date of the proposed Supplement; and
(b) Any and all Supplements within five (5) business days prior
to the scheduled Date of Closing must be in writing and delivered to
the other party pursuant to SECTION 13.5 of this Agreement, and will
only be deemed to amend a Schedule with the written consent of the
recipient of the Supplement.
50
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by duly authorized representations as of the day, month and year
first above written.
PURCHASER:
RURAL CELLULAR
CORPORATION
By
--------------------------------
Its
-----------------------------
BY SIGNING THIS AGREEMENT, SHAREHOLDERS ACKNOWLEDGE THAT THEY HAVE READ SECTION
13.21 OF THIS AGREEMENT, AND THAT THEY HAVE APPOINTED XXXXXXXX SHAREHOLDER
REPRESENTATIVE CORPORATION AS THEIR SOLE AUTHORIZED AGENT WITH AUTHORITY
AS SET FORTH IN SECTION 13.21.
SHAREHOLDERS:
-----------------------------------
XXXXXX X. XXXXXXXX
-----------------------------------
XXXXX X. XXXXXXXX
-----------------------------------
XXXXXX X. XXXXXXXX
-----------------------------------
XXX X. XXXXXXXX
-----------------------------------
XXXXX X. XXXXXXXX
XXXXXX X. XXXXXXXX IRREVOCABLE TRUST
U/A DATED JULY 22, 1996
BY
---------------------------------
XXXXX X. XXXXXXXX, SOLE TRUSTEE
51
