Exhibit 10.22
INTEREST PURCHASE AGREEMENT
BY AND AMONG
SHENTEL CONVERGED SERVICES, INC
NTC COMMUNICATIONS, LLC
AND
THE INTERESTHOLDERS NAMED HEREIN
MADE EFFECTIVE AS OF NOVEMBER 30, 2004
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INTEREST PURCHASE AGREEMENT
THIS INTEREST PURCHASE AGREEMENT (the "Agreement") is made and entered
into this 30th day of November, 2004, by and among Shentel Converged Services,
Inc., a Virginia corporation ("Shentel") and a wholly owned subsidiary of
Shenandoah Telecommunications Company ("Shenandoah"), NTC Communications LLC, a
Virginia limited liability company (the "Company"), and the persons and entities
listed on Schedule A (each an "Interestholder" and collectively, the
"Interestholders").
BACKGROUND
A. Shentel desires to acquire and the Interestholders desire to sell, all
of the outstanding membership interests of the Company not currently owned by
Shenandoah (the "Acquisition").
NOW, THEREFORE, in consideration of the premises and of the
representations, warranties, covenants and agreements herein contained, the
parties hereto, intending to be legally bound, agree as follows:
1. THE ACQUISITION
1.1 The Purchase and Sale. At the Closing (as defined in Section 2) and
subject to and upon the terms and conditions of this Agreement, the
Interestholders agree to sell and deliver to Shentel and Shentel agrees to
purchase from the Interestholders all of the outstanding membership interests of
the Company exclusive of membership interest owned by Shenandoah (the "Company
Interests") and all outstanding warrants and options to purchase Company
Interests, free and clear of all Liens (as defined in Section 3.4).
1.2 Consideration
(a) For purposes of this Agreement, the "Consideration" shall be
equal to Ten Million Sixty Five Thousand, Four Hundred Fifty
Two Dollars and Fifty Cents $10,065,452.50.
(b) The Consideration shall be reduced at Closing by any amounts
spent or obligations incurred after October 31, 2004 which are
not (A) in the ordinary course of business (B) consistent with
past practice (exclusive of severance payments made by NTC as
disclosed in Schedule 3.24(f)) and/or (C) any amounts advanced
to or paid on behalf of NTC (at NTC's request) between the
date hereof and the Closing.
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If on the Closing Financial Certificate (as defined in Section 6.7),
the Certified Closing Balance (as defined in Section 6.7(b)) is less than the
Closing Balance on October 31, 2004 of $12,470,364 the "Target Amount"), the
Consideration to be delivered to the Interestholders may, at Shentel's election,
be reduced at the Closing, by the difference between the Target Amount and the
Certified Closing Balance set forth on the Closing Financial Certificate;
provided, however, except with respect to any amounts paid pursuant to 1.2(b)(C)
in no event shall such reduction in Consideration exceed One Million Dollars
($1,000,000) and further provided, such reduction in the Consideration shall
reduce, dollar for dollar, the amount of the Escrow Fund as provided for in
Section 1.4. The Closing Balance for any given date is the sum of (i) the cash
and (ii) accounts receivable less the sum of (x) the accounts payable; (y) the
accrued liabilities (including payroll liabilities, taxes payable, management
settlement, and deposits), and (z) debt outstanding.
1.3 Post-Closing Adjustment
(a) The Consideration shall be subject to adjustment after the
Closing Date as specified in this Section 1.3.
(b) Within one hundred twenty (120) days following the Closing Date,
Shentel shall determine the actual Closing Balance of the Company as of the
Closing Date. In the event that Shentel determines that (i) the actual Closing
Balance as of the Closing Date was less than the Certified Closing Balance,
Shentel shall deliver a written notice (the "First Adjustment Notice") to the
Interestholders' Representative, as defined in Section 1.6, setting forth (i)
the determination made by Shentel's accountant of the Actual Closing Balance
(the "Actual Closing Balance"), (ii) the amount of the Consideration that would
have been payable at Closing pursuant to Section 1.2 had the Actual Closing
Balance been reflected on the Closing Financial Certificate instead of the
Certified Closing Balance, (iii) the amount by which the Consideration would
have been reduced at Closing had the Actual Closing Balance been used in the
calculations pursuant to Section 1.2 (the "Consideration Adjustment"); provided,
however, in no event shall such Consideration Adjustment exceeds the remaining
balance of the Escrow Fund (as defined in Section 1.4) and further provided,
such Consideration Adjustment shall reduce, dollar for dollar, the amount of the
Escrow Fund as provided for in Section 1.4.
(c) The Interestholders' Representative shall have fifteen (15) days
from the receipt of the First Adjustment Notice to notify Shentel if the
Interestholders dispute such First Adjustment Notice. If Shentel has not
received notice of such a dispute within such 15-day period, Shentel shall be
entitled to receive such amount of Consideration Adjustment from the Escrow Fund
(as defined in Section 1.4). If, however, the Interestholders' Representative
has delivered notice of such a dispute to Shentel within such 15-day period,
then the parties shall first meet to resolve the dispute. If after 30 days (or
such longer period as the parties may agree), the parties are unable to resolve
the dispute, Shentel and the Interestholder Representative shall select an
independent accounting firm that has not represented any of the parties hereto
within the preceding two (2) years to review the financial condition of the
Company as of the Closing Date to determine the
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amount, if any, of the Consideration Adjustment. Such independent accounting
firm shall be confirmed by the Interestholders' Representative and Shentel
within three (3) days of its selection, unless there is an actual conflict of
interest. The independent accounting firm shall be directed to consider only
those agreements, contracts, commitments or other documents (or summaries
thereof) that were either (i) delivered or made available to Shentel in
connection with the transactions contemplated hereby, or (ii) reviewed by
Shentel during the course of the post-closing audit. The independent accounting
firm shall make its determination of the Consideration Adjustment within thirty
(30) days of its selection. The determination of the independent accounting firm
shall be final and binding on the parties hereto, and upon such determination,
Shentel shall be entitled to receive from the Escrow Fund the amount of the
Consideration Adjustment. The costs of the independent accounting firm shall be
borne by the party (either Shentel or from the Escrow Fund in the case of the
Interestholders as a group) whose determination of the Company's Actual Closing
Balance at Closing was further from the determination of the independent
accounting firm, or equally by Shentel and the Interestholders in the event that
the determination by the independent accounting firm is equidistant between the
Certified Closing Balance and the Actual Closing Balance.
1.4 Escrow Fund
(a) Upon the Closing, Shentel shall deliver, or shall cause to be
delivered, directly to Xxxxxx Xxxxxxxxx PC, as escrow agent (the "Escrow
Agent"), $1,000,000 (or such lesser amount as provided in Section 1.2) of the
cash comprising the Consideration, as such may be adjusted pursuant to Sections
1.2 and 1.3, to be held in an escrow fund (collectively with all interest and
earnings thereon, the "Escrow Fund") pursuant to the terms set forth herein and
in the Escrow Agreement (as defined in Section 6.11).
(b) The Escrow Fund shall be available to satisfy any post-Closing
adjustment to the Consideration pursuant to Section 1.3 and any indemnification
obligations of the Interestholders pursuant to Article 8 until the date which is
six months after the Closing Date (the "Release Date") unless there is a pending
claim, in which case, the Release Date shall be deferred until such date that
the claim has been finally resolved. Promptly following the Release Date,
Shentel shall sign the Release Certificate (as defined in the Escrow Agreement)
for the release to the Interestholders of the amount remaining in the Escrow
Fund on the Release Date less an amount equal to (i) the estimated hold-back,
and (ii) any pending claim for indemnification made by any Indemnified Party (as
defined in Article 8).
(c) As promptly as possible following the final resolution of all
claims for indemnification made by a Indemnified Party pending as of the Release
Date and the final resolution of the post-closing Audit as provided in Section
1.4, Shentel and the Interestholders shall deliver to the Escrow Agent a Release
Certificate providing delivery instructions to be followed by the Escrow Agent
in paying out the remaining Escrow Funds, if any, and terminating the escrow and
the Escrow Agreement.
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1.5 Transfer of Interests
(a) Shentel to Provide Consideration. In exchange for all of the
outstanding membership interests (including warrants and options to purchase
membership interests) of the Company held by the Interestholders, Shentel shall
cause to be made available to the Interestholders, the Consideration, as
adjusted pursuant to Section 1.2, and Section 1.3 Each Interestholder shall
transfer their entire membership interest, and associated rights (including but
not limited to any pre-emptive rights) along with any and all rights, warrants
and options to acquire (whether vested or unvested) additional membership
interests. The consideration shall be divided among the Interestholders in
accordance with Schedule 1.5(a); provided that the consideration paid with
respect to (i) any unexercised warrant or option shall be reduced by the
exercise price and (ii) with respect to any restricted unit grants shall be
reduced by deferred purchase price due to the Company with respect to such
restricted unit grants.
(b) Delivery Requirements. At the Closing, the Interestholders shall
deliver any and all documents necessary to convey full title and interest in the
Company to Shentel. The Interestholders shall promptly cure any deficiencies
with respect to the documents of conveyance.
1.6 Interestholders' Representative
(a) Each holder of Company Interests by signing this Agreement
designates Xxxx Xxxxxxx or, in the event that Xxxx Xxxxxxx is unable or
unwilling to serve, Xxxxx Xxxxx to be the Interestholders' Representative for
purposes of this Agreement. The Interestholders shall be bound by any and all
actions taken by the Interestholders' Representative on their behalf.
(b) Shentel shall be entitled to rely upon any communication or
writings given or executed by the Interestholders' Representative. All notices
to be sent to Interestholders pursuant to this Agreement may be addressed to the
Interestholders' Representative and any notice so sent shall be deemed notice to
all of the Interestholders hereunder. The Interestholders hereby consent and
agree that the Interestholders' Representative is authorized to accept notice on
behalf of the Interestholders pursuant hereto.
(c) The Interestholders' Representative is hereby appointed and
constituted the true and lawful attorney-in-fact of each Interestholder, with
full power in his name and on his behalf to act according to the terms of this
Agreement in the absolute discretion of the Interestholders' Representative; and
in general to do all things and to perform all acts including, without
limitation, executing and delivering all agreements, certificates, receipts,
instructions and other instruments contemplated by or deemed advisable in
connection with this Agreement. This power of attorney and all authority hereby
conferred is granted subject to the interest of the other Interestholders
hereunder and in consideration of the mutual covenants and agreements made
herein, and shall be irrevocable and shall not be terminated by any act of any
Interestholder, by operation of law, whether by such Interestholder's death or
any other event.
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1.7 Accounting Terms. Except as otherwise expressly provided herein or in
the Schedules, all accounting terms used in this Agreement shall be interpreted,
and all financial statements, Schedules, certificates and reports as to
financial matters required to be delivered hereunder shall be prepared, in
accordance with generally accepted accounting principles ("GAAP") consistently
applied.
2. CLOSING
The consummation of the Acquisition and the other transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of Xxxxxx Xxxxxxxxx PC on or before November 30, 2004, providing that all
conditions to Closing shall have been satisfied or waived, or at such other time
and date as Shentel, the Company and the Interestholders may mutually agree,
which date shall be referred to as the "Closing Date."
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE INTERESTHOLDERS
To induce Shentel to enter into this Agreement and consummate the
transactions contemplated hereby, each of the Company and the Interestholders,
jointly and severally, represents and warrants to Shentel as follows (for
purposes of this Agreement, the phrases "knowledge of the Company" or the
"Company's knowledge," or words of similar import, mean the knowledge of the
managers, officers and directors of the Company, including facts of which the
managers, officers and directors, in the reasonably prudent exercise of their
duties, should be aware; provided, that with respect to Sections 3.2(b)(c) and
(d) and Sections 3.3(b) and (d), such phrases shall also include the knowledge
of each individual Interestholder):
3.1 Due Organization.
(a) The Company is a limited liability company duly organized,
validly existing and is in good standing under the laws of the jurisdiction of
its organization and is duly authorized and qualified to do business under all
applicable laws, regulations, ordinances and orders of public authorities to
own, operate and lease its properties and to carry on its business in the places
and in the manner as now conducted. Schedule 3.1 hereto contains a list of all
jurisdictions in which the Company is authorized or qualified to do business.
(b) The Company is qualified to do business in any foreign
jurisdictions in which it is required to be so qualified. The Company is in good
standing as a foreign company in each jurisdiction in which it does business.
(c) The Company has delivered to Shentel true, complete and correct
copies of the Articles of Organization and Operating Agreement and other
applicable organizational documents of the Company as in effect as of the date
hereof. Such Articles of Organization and Operating Agreement and other
applicable organizational
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documents are collectively referred to as the "Organizational Documents." The
Company is not in violation of its Organizational Documents.
(d) The minute books of the Company has been made available to
Shentel and are correct and, except as set forth in Schedule 3.1, complete in
all material respects.
3.2 Authorization; Validity.
(a) The Company has all requisite power and authority to enter into
and perform its obligations pursuant to the terms of this Agreement. The Company
has the full legal right, power and authority to enter into this Agreement and
the transactions contemplated hereby.
(b) Each Interestholder has the full legal right and authority to
enter into this Agreement and the transactions contemplated hereby.
(c) The execution and delivery of this Agreement by the Company and
the performance by the Company of the transactions contemplated herein have been
duly and validly authorized by the Managers of the Company and the
Interestholders and this Agreement has been duly and validly authorized by all
necessary action.
(d) This Agreement is a legal, valid and binding obligation of the
Company and each Interestholder, enforceable in accordance with its terms;
except to the extent that enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, receivership, moratorium and other
similar laws relating to or affecting the rights and remedies of creditors
generally and by general principles of equity.
3.3 No Conflicts. The execution, delivery and performance of this
Agreement, the consummation of the transactions contemplated hereby, and the
fulfillment of the terms hereof will not:
(a) conflict with, or result in a breach or violation of, any of the
Organizational Documents;
(b) except as set forth in Schedule 3.3(b), conflict with, or result
in a default (or would constitute a default but for any requirement of notice or
lapse of time or both) under, any document, agreement or other instrument to
which the Company, or any Interestholder is a party or by which the Company, or
any Interestholder is bound, or result in the creation or imposition of any
lien, charge or encumbrance on any of the Company's properties pursuant to (i)
any law or regulation to which the Company, or any Interestholder or any of
their respective property is subject, or (ii) any judgment, order or decree to
which the Company, any of its subsidiaries or any Interestholder is bound or any
of their respective property is subject;
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(c) except as set forth on Schedule 3.3 (c), result in termination
or any impairment of any permit, license, franchise, contractual right or other
authorization of the Company or any of its subsidiaries; or
(d) violate any law, order, judgment, rule, regulation, decree or
ordinance to which the Company, or any Interestholder is subject or by which the
Company, or any Interestholder is bound including, without limitation, the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 0000 (xxx "XXX Xxx"), together
with all rules and regulations promulgated thereunder.
3.4 Capital Structure of the Company.
(a) The capital structure of the Company consists of the membership
interests in the amounts set forth in Schedule 3.4. Except for units held by
Shenandoah, all of the membership interests are owned of record by the
Interestholders listed on Schedule A free and clear of all Liens (defined
below), duly authorized and validly issued and not subject to requirements to
make any capital contributions that have not previously been made.
(b) All of the issued and outstanding ownership interests and other
securities of the Company were offered, issued, sold and delivered by such
entity in compliance with all applicable state and federal laws concerning the
issuance of securities. Further, none of such securities were issued in
violation of any preemptive rights.
(c) Except as set forth in Schedule 3.4, there are no agreements or
trusts with respect to any of the outstanding ownership interests of the
Company.
(d) For purposes of this Agreement, "Lien" means any mortgage,
security interest, pledge, hypothecation, assignment, deposit arrangement,
encumbrance, lien (statutory or otherwise), charge, preference, priority or
other security agreement, option, warrant, attachment, right of first refusal,
preemptive, conversion, put, call or other claim or right, restriction on
transfer (other than restrictions imposed by federal and state securities laws),
or preferential arrangement of any kind or nature whatsoever (including any
restriction on the transfer of any assets, any conditional sale or other title
retention agreement, any financing lease involving substantially the same
economic effect as any of the foregoing and the filing of any financing
statement under the Uniform Commercial Code or comparable law of any
jurisdiction).
3.5 Transactions in Membership Interests. Except as set forth on Schedule
3.5, no option, warrant, call, subscription right, conversion right or other
contract or commitment of any kind exists of any character, written or oral,
which may obligate the Company to issue, sell or otherwise become outstanding
any membership units or other ownership interests. The Company has no obligation
(contingent or otherwise) to purchase, redeem or otherwise acquire any of its
equity securities or any interests therein or to pay a dividend or make any
distributions in respect thereof. As a result of the Acquisition, Shentel
together with Shenandoah will be the record or beneficial owner of all ownership
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interests in the Company and all rights to acquire other ownership interests in
the Company, free and clear of all Liens.
3.6 Subsidiaries, Stock, and Notes.
(a) The Company has no subsidiaries. For purposes of this Agreement,
the term "subsidiaries" means any and all corporations, partnerships, joint
ventures, associations, limited liability companies and other entities
controlled by the Company, directly or indirectly, through one or more
intermediaries.
(b) Except as set forth on Schedule 3.6(b), the Company does not
presently own, of record or beneficially, or control, directly or indirectly,
any capital stock, securities convertible into capital stock or any other equity
interest in any corporation, association or business entity, nor is the Company,
directly or indirectly, a participant in any joint venture, partnership or other
noncorporate entity.
(c) Except as set forth on Schedule 3.8(d), there are no promissory
notes that have been issued to, or are held by, the Company.
3.7 Complete Copies of Materials. The Company has delivered to Shentel
true and complete copies of each agreement, contract, commitment or other
document (or summaries thereof) that is referred to in the Schedules or that has
been requested by Shentel.
3.8 Company Financial Conditions.
(a) The Company's consolidated tangible net worth (assets less
liabilities), (i) as of the end of its most recent fiscal year was not less than
$1,292,499, and (ii) as of the Closing, will not be less than $1,266,243.
(b) The Company's consolidated net revenues for (i) its most recent
fiscal year were not less than $8,230,303, and (ii) the 3-month period ended
November 30, 2004 will not be less than $2,825,070.
(c) The Company's Actual EBITDA for (i) its most recent fiscal year
were not less than $1,446,152, and (ii) the 2-month period ended October 31,
2004 will not be less than $531,316.
(d) The Company's consolidated total outstanding long-term and
short-term indebtedness to banks, the Interestholders, former members, and other
financial institutions and creditors as of the Closing (in each case including
the current portions of such indebtedness, but excluding trade payables and
other ordinary course accounts payable) shall not exceed $11,327,466. Schedule
3.8(d) contains a complete list of all such indebtedness including capital
leases including the amount outstanding as of August 31, 2004 and as of the
Closing Date.
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3.9 Financial Statements. Schedule 3.9 includes (a) true, complete and
correct copies of the Company's audited consolidated balance sheet as of August
31, 2004 (the end of its most recent completed fiscal year), and consolidated
income statement for the year ended August 31, 2004 (collectively, the "Company
Financial Statements"). The Company Financial Statements have been prepared in
accordance with GAAP consistently applied. Each unaudited consolidated balance
sheet included in the Company Financial Statements presents fairly the financial
condition of the Company as of the date indicated thereon, and each of the
consolidated income statements included in the Company Financial Statements
presents fairly the results of its operations for the periods indicated thereon.
Since the dates of the Company Financial Statements, there have been no material
changes in the Company's accounting policies other than as requested by Shentel
to conform the Company's accounting policies to GAAP.
3.10 Liabilities and Obligations.
(a) The Company is not liable for or subject to any liabilities
except for:
(i) those liabilities reflected on the Balance Sheet and not
previously paid or discharged;
(ii) those liabilities arising in the ordinary course of its
business consistent with past practice under any contract, commitment or
agreement specifically disclosed on any Schedule to this Agreement or not
required to be disclosed thereon because of the term or amount involved or
otherwise; and
(iii) those liabilities incurred since October 31, 2004 in the
ordinary course of business consistent with past practice, which liabilities are
not, individually or in the aggregate, material to the Company and its
subsidiaries, taken as a whole.
(b) The Company has delivered to Shentel, in the case of those
liabilities which are not fixed or are contested, a reasonable estimate of the
maximum amount which may be payable.
(c) Schedule 3.10(c) also includes a summary description of all
plans or projects involving the opening of new operations, expansion of any
existing operations or the acquisition of any real property or existing
business, to which management of the Company or any of its subsidiaries, has
made or committed to make any material expenditure in the two-year period prior
to the date of this Agreement, which if pursued by the Company or any of its
subsidiaries would require additional material expenditures of capital.
(d) For purposes of this Section 3.10, the term "liabilities" shall
include without limitation any direct or indirect liability, indebtedness,
guaranty, endorsement, claim, loss, damage, deficiency, cost, expense,
obligation or responsibility, either accrued,
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absolute, contingent, mature, immature or otherwise and whether known or
unknown, fixed or unfixed, xxxxxx or inchoate, liquidated or unliquidated,
secured or unsecured.
3.11 Books and Records. The Company has made and kept books and records
and accounts, which, in reasonable detail, accurately and fairly reflect the
activities of the Company. The Company has not engaged in any transaction,
maintained any bank account, or used any corporate funds except for
transactions, bank accounts, and funds which have been and are reflected in its
normally maintained books and records.
3.12 Bank Accounts; Powers of Attorney. Schedule 3.12 sets forth a
complete and accurate list as of the date of this Agreement, of:
(a) the name of each financial institution in which the Company or
any of its subsidiaries has any account or safe deposit box;
(b) the names in which the accounts or safe deposit boxes are held;
(c) the type of account and account numbers;
(d) the name of each person authorized to draw thereon or have
access thereto; and
(e) the name of each person, corporation, firm or other entity
holding a general or special power of attorney from the Company and a
description of the terms of such power.
3.13 Accounts and Notes Receivable. The Company has delivered to Shentel a
complete and accurate list, as of a date not more than five (5) business days
prior to the date hereof, of the accounts and notes receivable of the Company
(including, without limitation, receivables from and advances to employees
(which include, without limitation, those shown on Schedule 3.6), which includes
an aging of all accounts and notes receivable showing amounts due in 30-day
aging categories (collectively, the "Accounts Receivable"). On the Closing Date,
the Company will deliver to Shentel a complete and accurate list, as of November
22, 2004, but in no event a date more than ten (10) business days prior to the
Closing Date, of the Accounts Receivable. All Accounts Receivable represent
valid obligations arising from sales actually made or services actually
performed. The Accounts Receivable are current and collectible net of any
respective reserves shown on the Company's books and records (which reserves are
adequate and calculated consistent with past practice). Subject to such
reserves, each of the Accounts Receivable will be collected in full, without any
set-off, within one hundred twenty (120) days after the day on which it first
became due and payable (other than financial assistance segment receivables
which will be collected in full, without any set-off, within one hundred twenty
(120) days after the contract date). There is no contest, claim, or right of
set-off, other than rebates and returns in the ordinary course of business,
under any contract with any obligor of an Account Receivable relating to the
amount or validity of such Account Receivable.
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3.14 Permits. The Company owns or holds all licenses, franchises, permits
and other governmental authorizations, including without limitation permits,
titles (including without limitation motor vehicle titles and current
registrations), , licenses and franchises necessary for the continued operation
of its respective businesses, as it is currently being conducted (the
"Permits"). The Permits are valid, and the Company has not received any notice
that any governmental authority intends to modify, cancel, terminate or fail to
renew any Permit. No present or former officer, manager, member or employee of
the Company or any affiliate thereof, or any other person, firm, corporation or
other entity, owns or has any proprietary, financial or other interest (direct
or indirect) in any Permits. The Company has conducted and is conducting its
business in compliance with the requirements, standards, criteria and conditions
set forth in the Permits and other applicable orders, approvals, variances,
rules and regulations and is not in violation of any of the foregoing. The
transactions contemplated by this Agreement will not result in a default under,
or a breach or violation of, the rights and benefits afforded to the Company by
any Permit so as to have a material adverse effect on the Company.
3.15 Real Property.
(a) For purposes of this Agreement, "Real Property" means all
interests in real property including, without limitation, fee estates,
leaseholds and subleaseholds, purchase options, easements, licenses, rights to
access, and rights of way, and all buildings and other improvements thereon,
owned or used by the Company, together with any additions thereto or
replacements thereof.
(b) Schedule 3.15(b) contains a complete and accurate description of
all Real Property (including street address, legal description (where known),
owner, and Company's use thereof) and, to the Company's knowledge, any claims,
liabilities, security interests, mortgages, liens, pledges, conditions, charges,
covenants, easements, restrictions, encroachments, leases, or encumbrances of
any nature thereon ("Encumbrances"). The Real Property listed on Schedule
3.15(b) includes all interests in real property necessary to conduct the
business and operations of the Company.
(c) Except as set forth in Schedule 3.15(c):
(i) The Company has good and valid leasehold title to the Real
Property.
(ii) The Company has good and valid rights of ingress and
egress to and from all Real Property from and to the public street systems for
all usual street, road and utility purposes.
(iii) To the Company's knowledge, the Real Property and all
present uses and operations of the Real Property by the Company comply with all
applicable statutes, rules, regulations, ordinances, orders, writs, injunctions,
judgments, decrees, awards or restrictions of any government entity having
jurisdiction over any portion of the Real Property (including, without
limitation, applicable statutes, rules, regulations, orders and restrictions
relating to zoning, land use, safety, health, employment and employment
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practices and access by the handicapped) (collectively, "Laws"), covenants,
conditions, restrictions, easements, disposition agreements and similar matters
affecting the Real Property. The Company has obtained all approvals of
governmental authorities (including certificates of use and occupancy, licenses
and permits) required in connection with the construction, ownership, use,
occupation and operation of the Real Property leased by it.
(iv) To the Company's knowledge, the conduct of the Company's
business does not violates any restrictive covenant or encroaches on any
property owned by others or any easement, right of way or other Encumbrance or
restriction affecting such Real Property in any respect. The Real Property and
its continued use, occupancy and operation as used, occupied and operated by the
Company in the conduct of the Company's business does not constitute a
nonconforming use and is not the subject of a special use permit under any
applicable Law.
(v) There are no pending or, to the Company's knowledge,
threatened condemnation, fire, health, safety, building, zoning or other land
use regulatory proceedings, lawsuits or administrative actions relating to any
portion of the Real Property or any other matters which do or may adversely
effect the current use, occupancy or value thereof by the Company, nor has the
Company or any of the Interestholders received notice of any pending or
threatened special assessment proceedings affecting any portion of the Real
Property.
(vi) All oral or written leases, subleases, licenses,
concession agreements or other use or occupancy agreements pursuant to which the
Company leases from any other party any real property, including all amendments,
renewals, extensions, modifications or supplements to any of the foregoing or
substitutions for any of the foregoing (collectively, the "Leases") are valid
and in full force and effect. The Company has provided Shentel with true and
complete copies of all of the Leases, all amendments, renewals, extensions,
modifications or supplements thereto, and all material correspondence related
thereto, including all correspondence pursuant to which any party to any of the
Leases declared a default thereunder or provided notice of the exercise of any
operation granted to such party under such Lease. The Leases and the Company's
interests thereunder are free of all Liens except as provided to the contrary
herein.
(vii) None of the Leases requires the consent or approval of
any party thereto in connection with the consummation of the transactions
contemplated hereby.
3.16 Personal Property.
(a) Schedule 3.16(a) sets forth a complete and accurate list of all
personal property included on the Balance Sheet and all other personal property
owned or leased by the Company with a current book value in excess of $5,000
both (i) as of the Balance Sheet Date and (ii) acquired since the Balance Sheet
Date, including in each case true, complete and correct copies of leases for
material equipment and an indication as to which assets are currently owned, or
were formerly owned, by any Interestholder or business or personal affiliates of
any Interestholder or of the Company.
13
(b) The Company currently owns or leases all personal property
necessary to conduct its businesses and operations as they are currently being
conducted.
(c) All of the trucks and other material, machinery and equipment of
the Company including those listed on Schedule 3.16(a), are in good working
order and condition, ordinary wear and tear excepted. All leases set forth on
Schedule 3.16(a) are in full force and effect and constitute valid and binding
agreements of the Company, and the Company is not in breach of any of their
terms. All fixed assets used by the Company that are material to the operation
of its businesses are either owned by the Company or leased under an agreement
listed on Schedule 3.16(a).
3.17 Intellectual Property.
(a) The Company is the true and lawful owner of, or is licensed or
otherwise possesses legally enforceable rights to use, the registered and
unregistered Marks listed on Schedule 3.17(a). Such schedule lists (i) all of
the Marks registered in the United States Patent and Trademark Office ("PTO") or
the equivalent thereof in any state of the United States or in any foreign
country, and (ii) all of the unregistered Marks and domain names, that the
Company now owns or uses in connection with its businesses. Except with respect
to those Marks shown as licensed on Schedule 3.17(a), the Company owns all of
the registered and unregistered trademarks, service marks, trade names and
domain names that it uses. The Marks listed on Schedule 3.17(a) will not cease
to be valid rights of the Company by reason of the execution, delivery and
performance of this Agreement or the consummation of the transactions
contemplated hereby. For purposes of this Section 3.17, the term "Xxxx" shall
mean all right, title and interest in and to any United States or foreign
trademarks, service marks, trade names and domain names now held by the Company,
including any registration or application for registration of any trademarks and
services marks in the PTO or the equivalent thereof in any state of the United
States or in any foreign country, as well as any unregistered marks used by the
Company and any trade dress (including logos, designs, company names, business
names, fictitious names and other business identifiers) used by the Company in
the United States or any foreign country.
(b) The Company is the true and lawful owner of, or is licensed or
otherwise possesses legally enforceable rights to use, all rights in the Patents
listed on Schedule 3.17(b) (i) and in the Copyright registrations listed on
Schedule 3.17(b) (ii). Such Patents and Copyrights constitute all of the Patents
and Copyrights (other than those Patents and Copyrights covered in licenses for
off the shelf software and equipment) that the Company or the applicable
subsidiary, as the case may be, now owns or is licensed to use. The Company owns
or is licensed to practice under all patents and copyright registrations that
the Company now owns or uses in connection with its businesses. For purposes of
this Section 3.17, the term "Patent" shall mean any United States or foreign
patent to which the Company has title as of the date of this Agreement, as well
as any application for a United States or foreign patent made by the Company;
the term "Copyright" shall mean any United States or foreign copyright owned by
the Company or
14
any of its subsidiaries as of the date of this Agreement, including any
registration of copyrights, in the United States Copyright Office or the
equivalent thereof in any foreign county, as well as any application for a
United States or foreign copyright registration made by the Company.
(c) The Company is the true and lawful owner of, or is licensed or
otherwise possesses legally enforceable rights to use, all rights in the trade
secrets, franchises, or similar rights (collectively, "Other Rights") listed on
Schedule 3.17(c). Those Other Rights constitute all of the Other Rights that the
Company is licensed to use. The Company owns or is licensed to practice under
all trade secrets, franchises or similar rights that it owns, uses or practices
under.
(d) The Marks, Patents, Copyrights, and Other Rights listed on
Schedules 3.17(a), 3.17(b)(i), 3.17(b)(ii), and 3.17(c) are referred to
collectively herein as the "Intellectual Property." The Intellectual Property
owned by the Company is referred to herein collectively as the "Company
Intellectual Property." All other Intellectual Property is referred to herein
collectively as the "Third Party Intellectual Property." Except as indicated on
Schedule 3.17(d), the Company has no obligations to compensate any person for
the use of any Intellectual Property nor has the Company granted to any person
any license, option or other rights to use in any manner any Intellectual
Property, whether requiring the payment of royalties or not.
(e) The Company will not, as a result of the execution and delivery
of this Agreement by the Company or the performance of the Company's obligations
hereunder, be in violation of any Third Party Intellectual Property license,
sublicense or agreement described in Schedule 3.17(a), (b), or (c). No claims
with respect to the Company Intellectual Property or Third Party Intellectual
Property are currently pending or, to the knowledge of the Company, are
threatened by any person, nor, to the Company's knowledge, do any grounds for
any claims exist: (i) to the effect that the manufacture, sale, licensing or use
of any product as now used, sold or licensed or proposed for use, sale or
license by the Company infringes on any copyright, patent, trademark, service
xxxx or trade secret; (ii) against the use by the Company of any trademarks,
trade names, trade secrets, copyrights, patents, technology, know-how or
computer software programs and applications used in its business as currently
conducted by it; (iii) challenging the ownership, validity or effectiveness of
any of the Company Intellectual Property or other trade secret material to the
Company; or (iv) challenging the Company's license or legally enforceable right
to use of the Third Party Intellectual Property. To the Company's knowledge,
there is no unauthorized use, infringement or misappropriation of any of the
Company Intellectual Property by any third party. The Company (x) has not been
sued or charged in writing as a defendant in any claim, suit, action or
proceeding which involves a claim or infringement of trade secrets, any patents,
trademarks, service marks, or copyrights and which has not been finally
terminated or been informed or notified by any third party that the Company may
be engaged in such infringement or (y) has no knowledge of any infringement
liability with respect to, or infringement by, the Company of any trade secret,
patent, trademark, service xxxx, or copyright of another.
15
3.18 Significant Customers; Material Contracts and Commitments.
(a) Schedule 3.18(a) sets forth a complete and accurate list of all
Significant Suppliers. For purposes of this Agreement, ""Significant Suppliers"
are the suppliers who supplied $10,000 or more in products or services to the
Company during the twelve (12) months ending August 31, 2004.
(b) Schedule 3.18(b) contains a complete and accurate list of all
contracts, commitments, leases, instruments, agreements, licenses or permits,
written or oral, to which the Company is a party or by which it or its
properties are bound (including without limitation contracts with property
owners and managers, customers, , joint venture or partnership agreements,
contracts with any labor organizations, employment agreements, consulting
agreements, loan agreements, indemnity or guaranty agreements, bonds, mortgages,
options to purchase land, liens, pledges or other security agreements) (i) to
which the Company and any affiliate thereof or any officer, director,
shareholder, manager or member of the Company are parties; (ii) that may give
rise to obligations or liabilities exceeding, during the current term thereof,
$5,000, or (iii) that may generate revenues or income exceeding, during the
current term thereof, $5,000 (collectively, the "Material Contracts"). The
Company has delivered to Shentel true, complete and correct copies of the
Material Contracts.
(c) Except to the extent set forth on Schedule 3.18(c) (i) none of
the Company's contracts with property owners or managers have been canceled or
substantially reduced or, to the knowledge of the Company, the subject of an
attempt or threat to cancel or substantially reduce, any purchases from the
Company, (ii) none of the Company's Significant Suppliers has canceled or
substantially reduced or, to the knowledge of the Company, is currently
attempting to cancel or substantially reduce, the supply of products or services
to the Company, (iii) the Company has complied with all of its commitments and
obligations and is not in default under any of the Material Contracts, and no
notice of default has been received with respect to any thereof, (iv) there are
no Material Contracts that were not negotiated at arm's length and (v) there are
no Material Contracts which contain any provisions granting the supplier any
rights of first or last refusal, exclusivity, pre-emptive or similar rights. The
Company has received no material customer complaints concerning its products
and/or services.
(d) Each Material Contract is valid and binding on the Company, and
is in full force and effect and is not subject to any default thereunder by any
party obligated to the pursuant thereto. Except as specifically identified on
Schedule 3.18(d)(1) (the "Unobtained Consents"), the Company will obtain prior
to the Closing Date all necessary consents, waivers and approvals of parties to
any Material Contracts that are required in connection with any of the
transactions contemplated hereby, or are required by any governmental agency or
other third party in order that any such Material Contract remain in effect
without modification after the Acquisition and without giving rise to any right
to termination, cancellation or acceleration or loss of any right or benefit
("Third Party Consents"). All Third Party Consents are listed on Schedule
3.18(d) (2). To the extent that the Company has failed to obtain any Third Party
Consent in advance of the Closing
16
Date, the failure of the Company to obtain such Third Party Consent and the
failure of the Company to obtain the Unobtained Consents, will not, individually
or in the aggregate, have a material adverse effect on the business or
operations of the Company and its subsidiaries, taken as a whole, after the
Closing Date.
(e) The outstanding balance on all loans or credit agreements either
(i) between the Company and any Person in which any of the interestholders owns
a material interest, or (ii) guaranteed by the Company of any Person in which
any of the Interestholders owns material interest, are set forth in Schedule
3.18(e).
(f) Except as set forth on Schedule 3.18(f) there are no coupons,
discount certificates, rebates, credit voucher or similar documents outstanding
which would entitle a customer or prospective customer to purchase any goods or
services from the Company at a [discounted price] or receive a credit to be
applied against prior purchases of goods or services from the Company. Except as
set forth on Schedule 3.18(f), as of the date of this Agreement, there are no
promotional prices, special offers, special incentive financing, marketing
incentives or similar offers or programs currently in effect.
(g) Except as set forth on Schedule 3.18(g), there are no contracts
between the Company and any current officer, Interestholder or any of their
affiliates.
3.19 Government Contracts.
(a) Except as set forth on Schedule 3.19, the Company is not a party
to any government contracts.
(b) The Company has not been suspended or debarred from bidding on
contracts or subcontracts for any agency or instrumentality of the United States
Government or any state or local government, nor, to the knowledge of the
Company, has any suspension or debarment action been threatened or commenced.
There is no valid basis for the Company's or any of its subsidiaries' suspension
or debarment from bidding on contracts or subcontracts for any agency of the
United States Government or any state or local government.
(c) Except as set forth in Schedule 3.19, the Company has not been,
nor is it now being, audited, or investigated by any government agency, or the
inspector general or auditor general or similar functionary of any agency or
instrumentality, nor, to the knowledge of the Company, has such audit or
investigation been threatened.
(d) The Company has no disputes pending before a contracting office
of, nor any current claim (other than the Accounts Receivable) pending against,
any agency or instrumentality of the United States Government or any state or
local government, relating to a contract.
17
(e) The Company has not with respect to any government contract,
received a cure notice advising it that it is or was in default or would, if it
failed to take remedial action, be in default under such contract.
(f) The Company has not submitted any inaccurate, untruthful, or
misleading cost or pricing data, certification, bid, proposal, report, claim, or
any other information relating to a contract to any agency or instrumentality of
the United States Government or any state or local government.
(g) No employee, agent, consultant, representative, or affiliate of
the Company or any of its subsidiaries is in receipt or possession of any
competitor or government proprietary or procurement sensitive information
related to the Company's or any of its subsidiaries' business under
circumstances where there is reason to believe that such receipt or possession
is unlawful or unauthorized.
(h) Each of the Company's government contracts has been issued,
awarded or novated to the Company or the applicable subsidiary, as the case may
be, in the Company's or such subsidiary's name.
3.20 Inventory. The inventory of the Company consists of raw materials and
supplies, manufactured and purchased parts, goods in process and finished goods,
all of which is merchantable and fit for the purposes for which it was procured
or manufactured, and none of which is slow- moving, obsolete, damaged, or
defective, subject to a GAAP reserve for inventory set forth on the face of the
October 30, 2004 Balance Sheet (rather than in any notes thereto) as adjusted
for the passage of time through the Closing Date in accordance with the past
custom and practice of the Company.
3.21 Insurance. Schedule 3.21 sets forth a complete and accurate list, as
of the Balance Sheet Date, of all insurance policies carried by the Company and
all insurance loss runs or workmen's compensation claims received for the past
two (2) policy years. The Company has delivered to Shentel true, complete and
correct copies of all current insurance policies, all of which are in full force
and effect. All premiums payable under all such policies have been paid and the
Company is otherwise in full compliance with the terms of such policies. There
have been no threatened terminations of, or material premium increases with
respect to, any of such policies.
3.22 Environmental Matters.
(a) Hazardous Material. Other than as set forth on Schedule 3.22(a),
no underground storage tanks and no amount of any substance that has been
designated by any Governmental Entity or by applicable federal, state, local or
other applicable law to be radioactive, toxic, hazardous or otherwise a danger
to health or the environment, including, without limitation, PCBs, asbestos,
petroleum, urea-formaldehyde and all substances listed as hazardous substances
pursuant to the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended, or defined as a
18
hazardous waste pursuant to the United States Resource Conservation and Recovery
Act of 1976, as amended, and the regulations promulgated pursuant to said laws,
but excluding office and janitorial supplies properly and safely maintained (a
"Hazardous Material"), are present in, on or under any property, including the
land and the improvements, ground water and surface water thereof, that the
Company or any of its subsidiaries has at any time owned, operated, occupied or
leased. Schedule 3.22(a) identifies all underground and aboveground storage
tanks, and the capacity, age, and contents of such tanks, located on Real
Property owned or leased by the Company.
(b) Hazardous Materials Activities. The Company has not transported,
stored, used, manufactured, disposed of or released, or exposed its employees or
others to, Hazardous Materials in violation of any law in effect on or before
the Closing Date, nor has the Company disposed of, transported, sold, or
manufactured any product containing a Hazardous Material (collectively, "Company
Hazardous Materials Activities") in violation of any rule, regulation, treaty or
statute promulgated by any Governmental Entity in effect prior to or as of the
date hereof to prohibit, regulate or control Hazardous Materials or any
Hazardous Material Activity.
(c) Permits. The Company currently holds all environmental
approvals, permits, licenses, clearances and consents (the "Environmental
Permits") necessary for the conduct of the Company's Hazardous Material
Activities and other business of the Company as such activities and business are
currently being conducted. All Environmental Permits are in full force and
effect. The Company (A) is in compliance in all material respects with all terms
and conditions of the Environmental Permits and (B) is in compliance in all
material respects with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and timetables
contained in the laws of all Governmental Entities relating to pollution or
protection of the environment or contained in any regulation, code, plan, order,
decree, judgment, notice or demand letter issued, entered, promulgated or
approved thereunder. To the Company's knowledge, there are no circumstances that
may prevent or interfere with such compliance in the future. Schedule 3.22(c)
includes a listing and description of all Environmental Permits currently held
by the Company.
(d) Environmental Liabilities. No action, proceeding, revocation
proceeding, amendment procedure, writ, injunction or claim is pending, or to the
knowledge of the Company, threatened concerning any Environmental Permit,
Hazardous Material or any Company Hazardous Materials Activity of the Company.
There are no past or present actions, activities, circumstances, conditions,
events, or incidents that could involve the Company (or any person or entity
whose liability the Company has retained or assumed, either by contract or
operation of law) in any environmental litigation, or impose upon the Company
(or any person or entity whose liability the Company or any of its subsidiaries
has retained or assumed, either by contract or operation of law) any
environmental liability including, without limitation, common law tort
liability.
19
3.23 Labor and Employment Matters. With respect to employees of and
service providers to the Company:
(a) For purposes of this Section 3.23 and Section 3.24, the phrases
"Company's knowledge," "to the knowledge of the Company" or words of similar
import include the knowledge of anyone responsible for the Company's human
resources activities.
(b) To the Company's knowledge, the Company is and has been in
compliance in all material respects with all applicable laws respecting
employment and employment practices, terms and conditions of employment and
wages and hours, including without limitation any such laws respecting
employment discrimination, workers' compensation, family and medical leave, the
Immigration Reform and Control Act, and occupational safety and health
requirements, and has not and is not engaged in any unfair labor practice;
(c) there is not now, nor within the past three (3) years has there
been, any unfair labor practice complaint against the Company pending or, to the
Company's knowledge, threatened, before the National Labor Relations Board or
any other comparable authority;
(d) Except as disclosed in Schedule 3.23, there is not now, nor
within the past three (3) years has there been, any labor strike, slowdown or
stoppage actually pending or, to the Company's knowledge, threatened, against or
directly affecting the Company;
(e) to the Company's knowledge, no labor representation organization
effort exists nor has there been any such activity within the past three (3)
years;
(f) no grievance or arbitration proceeding arising out of or under
collective bargaining agreements is pending and, to the Company's knowledge, no
claims therefore exist or have been threatened;
(g) the employees of the Company are not and have never been
represented by any labor union, and no collective bargaining agreement is
binding and in force against the Company or currently being negotiated by the
Company; and
(h) all persons classified by the Company as independent contractors
do satisfy and have satisfied the requirements of law to be so classified, and
the Company and its subsidiaries have fully and accurately reported their
compensation on IRS Forms 1099 when required to do so.
3.24 Employee Benefit Plans.
(a) Definitions.
(i) "Benefit Arrangement" means any benefit arrangement,
obligation, custom, or practice, whether or not legally enforceable, to provide
benefits, other than
20
salary or commissions, as compensation for services rendered, to present or
former managers, employees, agents, or independent contractors, other than any
obligation, arrangement, custom or practice that is an Employee Benefit Plan,
including, without limitation, employment agreements, severance agreements,
executive compensation arrangements, incentive programs or arrangements, sick
leave, vacation pay, severance pay policies, plant closing benefits, salary
continuation for disability, consulting, or other compensation arrangements,
workers' compensation, retirement, deferred compensation, bonus, stock option or
purchase, hospitalization, medical insurance, life insurance, tuition
reimbursement or scholarship programs, any plans subject to Section 125 of the
Code, and any plans providing benefits or payments in the event of a change of
control, change in ownership, or sale of a substantial portion (including all or
substantially all) of the assets of any business or portion thereof, in each
case with respect to any present or former employees, managers, or agents.
(ii) "Company Benefit Arrangement" means any Benefit
Arrangement sponsored or maintained by the Company or with respect to which the
Company has or may have any liability (whether actual, contingent, with respect
to any of its assets or otherwise) as of the Closing Date, in each case with
respect to any present or former managers, employees, or agents of the Company
or any of its subsidiaries.
(iii) "Company Plan" means, as of the Closing Date, any
Employee Benefit Plan for which the Company is the "plan sponsor" (as defined in
Section 3(16) (B) of ERISA) or any Employee Benefit Plan maintained by the
Company or to which the Company is obligated to make payments, in each case with
respect to any present or former employees of the Company.
(iv) "Employee Benefit Plan" has the meaning given in Section
3(3) of ERISA.
(v) "ERISA" means the Employee Retirement Income Security Act
of 1974, as amended, and all regulations and rules issued thereunder, or any
successor law.
(vi) "ERISA Affiliate" means any person that, together with
the Company, would be or was at any time treated as a single employer under
Section 414 of the Code or Section 4001 of ERISA and any general partnership of
which the Company is or has been a general partner.
(vii) "Multiemployer Plan" means any Employee Benefit Plan
described in Section 3(37) of ERISA.
(viii) "Qualified Plan" means any Employee Benefit Plan that
meets, purports to meet, or is intended to meet the requirements of Section
401(a) of the Code. (ix) "Welfare Plan" means any Employee Benefit Plan
described in Section 3(1) of ERISA.
21
(b) Schedule 3.24(b) contains a complete and accurate list of all
Company Plans and Company Benefit Arrangements. Schedule 3.24(b) specifically
identifies all Company Plans (if any) that are Qualified Plans.
(c) With respect, as applicable, to Employee Benefit Plans and
Benefit Arrangements:
(i) true, correct, and complete copies of all the following
documents with respect to each Company Plan and Company Benefit Arrangement, to
the extent applicable, have been delivered to Shentel: (A) all documents
constituting the Company Plans and Company Benefit Arrangements, including but
not limited to, trust agreements, insurance policies, service agreements, and
formal and informal amendments thereto; (B) the most recent Forms 5500 or
5500C/R and any financial statements attached thereto and those for the prior
three (3) years; (C) the last Internal Revenue Service determination letter, the
last IRS determination letter that covered the qualification of the entire plan
(if different), and the materials submitted by the Company or any of its
subsidiaries to obtain those letters; (D) the most recent summary plan
description; (E) the most recent written descriptions of all non-written
agreements relating to any such plan or arrangement; (F) all reports submitted
within the four (4) years preceding the date of this Agreement by third-party
administrators, actuaries, investment managers, consultants, or other
independent contractors; (G) all notices that were given within the three (3)
years preceding the date of this Agreement by the IRS, Department of Labor, or
any other governmental agency or entity with respect to any plan or arrangement;
and (H) employee manuals or handbooks containing personnel or employee relations
policies;
(ii) Except as listed on Schedule 3.24(c) (ii) the Company has
never maintained or contributed to a Qualified Plan. The Plans listed on
Schedule 3.24(c) (ii) qualifies under Section 401(a) of the Code, and any trusts
maintained pursuant thereto are exempt from federal income taxation under
Section 501 of the Code, and nothing has occurred with respect to the design or
operation of any Qualified Plans that could cause the loss of such qualification
or exemption or the imposition of any liability, lien, penalty, or tax under
ERISA or the Code;
(iii) The Company has never sponsored, maintained, nor had any
obligation to sponsor or maintain, or had any liability (whether actual or
contingent, with respect to any of its assets or otherwise) with respect to any
Employee Benefit Plan subject to Section 302 of ERISA or Section 412 of the Code
or Title IV of ERISA (including any Multiemployer Plan);
(iv) Each Company Plan and each Company Benefit Arrangement
has been maintained in accordance with its constituent documents and with all
applicable provisions of the Code, ERISA and other laws, including federal and
state securities laws;
(v) There are no pending claims or lawsuits by, against, or
relating to any Employee Benefit Plans or
22
Benefit Arrangements that are not Company Plans or Company Benefit Arrangements
that would, if successful, result in liability of the Company, or any
Interestholder, and no claims or lawsuits have been asserted, instituted or, to
the knowledge of the Company, threatened by, against, or relating to any Company
Plan or Company Benefit Arrangement, against the assets of any trust or other
funding arrangement under any such Company Plan, by or against the Company or
any of its subsidiaries with respect to any Company Plan or Company Benefit
Arrangement, or by or against the plan administrator or any fiduciary of any
Company Plan or Company Benefit Arrangement, and the Company does not have
knowledge of any fact that could form the basis for any such claim or lawsuit.
The Company Plans and Company Benefit Arrangements are not presently under audit
or examination (nor has notice been received of a potential audit or
examination) by the IRS, the Department of Labor, or any other governmental
agency or entity, and no matters are pending with respect to the Company 401(k)
Plan, under the IRS's Voluntary Compliance Resolution program, its Closing
Agreement Program, or other similar programs;
(vi) No Company Plan or Company Benefit Arrangement contains
any provision or is subject to any law that would prohibit the transactions
contemplated by this Agreement or that would give rise to any vesting of
benefits, severance, termination, or other payments or liabilities as a result
of the transactions contemplated by this Agreement;
(vii) With respect to each Company Plan, there has occurred no
non- exempt "prohibited transaction" (within the meaning of Section 4975 of the
Code) or transaction prohibited by Section 406 of ERISA or breach of any
fiduciary duty described in Section 404 of ERISA that would, if successful,
result in any liability for the Company, or any Interestholder, member, officer,
director, manager, or employee of the Company or any of its subsidiaries;
(viii) All reporting, disclosure, and notice requirements of
ERISA and the Code have been fully and completely satisfied with respect to each
Company Plan and each Company Benefit Arrangement;
(ix) All amendments and actions required to bring the Company
Benefit Plans into conformity with the applicable provisions of ERISA, the Code,
and other applicable laws have been made or taken except to the extent such
amendments or actions (A) are not required by law to be made or taken until
after the Closing Date and (B) are disclosed on Schedule 3.24(c);
(x) payment has been made of all amounts that the Company or
any of its subsidiaries is required to pay as contributions to the Company
Benefit Plans as of the last day of the most recent fiscal year of each of the
plans ended before the date of this Agreement; all benefits accrued under any
unfunded Company Plan or Company Benefit Arrangement will have been paid,
accrued, or otherwise adequately reserved in accordance with GAAP as of the
Balance Sheet Date; and all monies withheld from employee paychecks with respect
to Company Plans have been transferred to the appropriate plan within 30 days of
such withholding;
23
(xi) The Company has not prepaid or prefunded any Welfare Plan
through a trust, reserve, premium stabilization, or similar account, nor does it
provide benefits through a voluntary employee beneficiary association as defined
in Section 501(c)(9);
(xii) No statement, either written or oral, has been made by
the Company to any person with regard to any Company Plan or Company Benefit
Arrangement that was not in accordance with the Company Plan or Company Benefit
Arrangement and that could have an adverse economic consequence to the Company;
(xiii) The Company has no liability (whether actual,
contingent, with respect to any of its assets or otherwise) with respect to any
Employee Benefit Plan or Benefit Arrangement that is not a Company Benefit
Arrangement or with respect to any Employee Benefit Plan sponsored or maintained
(or which has been or should have been sponsored or maintained) by any ERISA
Affiliate;
(xiv) All group health plans of the Company, and its
affiliates have been operated in material compliance with the requirements of
Sections 4980B (and its predecessor) and 5000 of the Code, and the Company has
provided, or will have provide before the Closing Date, to individuals entitled
thereto all required notices and coverage pursuant to Section 4980B with respect
to any "qualifying event" (as defined therein) occurring before or on the
Closing Date;
(xv) No employee or former employee of the Company or any of
its subsidiaries or beneficiary of any such employee or former employee is, by
reason of such employee's or former employee's employment, entitled to receive
any benefits, including, without limitation, death or medical benefits (whether
or not insured) beyond retirement or other termination of employment as
described in Statement of Financial Accounting Standards No. 106, other than (i)
death or retirement benefits under a Qualified Plan, (ii) deferred compensation
benefits accrued as liabilities on the Closing Statement or (iii) continuation
coverage mandated under Section 4980B of the Code or other applicable law.
(d) Schedule 3.24(d) hereto contains the most recent quarterly
listing of workers' compensation claims and a schedule of workers' compensation
claims of the Company for the last three (3) fiscal years.
(e) Schedule 3.24(e) hereto sets forth an accurate list, as of the
date hereof, of all employees of the Company, all officers, directors and
managers, and lists all employment agreements with such employees, officers,
directors and managers and the rate of compensation (and the portions thereof
attributable to salary, bonus, and other compensation respectively) of each such
person as of (a) the Balance Sheet Date and (b) the date hereof.
24
(f) Except as disclosed on Schedule 3.24(f), the Company has not
declared or paid any bonus compensation in contemplation of the transactions
contemplated by this Agreement.
(g) Except as set forth on Schedule 3.24(g), there are no Contingent
Deferred Sales Charges ("CDSC's") or similar surrender fees, asset charges or
other penalties that will become payable as a result of the termination of any
Company Plan or Company Benefit Arrangement or the merger of the assets of such
Company Plan or Company Benefit Arrangement into a plan or benefit arrangement
of Shentel.
3.25 Taxes.
(a) (i) The Company has timely filed all Tax Returns due on or
before the Closing Date, and all such Tax Returns are true, correct, and
complete in all respects.
(ii) The Company has paid in full on a timely basis all Taxes
owed by it, whether or not shown on any Tax Return.
(iii) The amount of each of the Company's liability for unpaid
Taxes as of the Balance Sheet Date did not exceed the amount of the current
liability accruals for Taxes (excluding reserves for deferred Taxes) shown on
the Interim Balance Sheet, and the amount of the Company's liability for unpaid
Taxes for all periods or portions thereof ending on or before the Closing Date
will not exceed the amount of the current liability accruals for Taxes
(excluding reserves for deferred Taxes) as such accruals are reflected on the
books and records of the Company on the Closing Date.
(iv) Except as set forth on Schedule 3.25, there are no
ongoing examinations or claims against the Company for Taxes, and no notice of
any audit, examination, or claim for Taxes, whether pending or threatened, has
been received.
(v) The Company has a taxable year ended on December 31st, in
each year commencing at the inception of the respective company.
(vi) The Company currently utilizes the cash method of
accounting for income Tax purposes and such method of accounting has not changed
since the date of organization. The Company has not agreed to, and is not and
will not be required to, make any adjustments under Code Section 481(a) as a
result of a change in accounting methods.
(vii) The Company has withheld and paid over to the proper
governmental authorities all Taxes required to have been withheld and paid over,
and complied with all information reporting and backup withholding requirements,
including maintenance of required records with respect thereto, in connection
with amounts paid to any employee, independent contractor, creditor, or other
third party.
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(viii) Copies of (A) any Tax examinations, (B) extensions of
statutory limitations for the collection or assessment of Taxes and (C) the Tax
Returns of The Company for the last fiscal year have been delivered to Shentel.
(ix) There are (and as of immediately following the Closing
there will be) no Liens on the assets of the Company or any of its subsidiaries
relating to or attributable to Taxes.
(x) To the Company's knowledge, there is no basis for the
assertion of any claim relating or attributable to Taxes which, if adversely
determined, would result in any Lien on the assets of the Company or otherwise
have an adverse effect on the Company, or its businesses taken as a whole.
(xi) None of the Company's assets are treated as "tax exempt
use property" within the meaning of Section 168(h) of the Code.
(xii) There are no contracts, agreements, plans or
arrangements, including but not limited to the provisions of this Agreement,
covering any employee or former employee of the Company that, individually or
collectively, could give rise to the payment of any amount (or portion thereof)
that would not be deductible pursuant to Sections 280G, 404 or 162 of the Code.
(xiii) The Company has not filed any consent agreement under
Section 341(f) of the Code nor agreed to have Section 341(f)(2) of the Code
apply to any disposition of a subsection (f) asset (as defined in Section
341(f)(4) of the Code) owned by the Company.
(xiv) The Company is not now, nor has been at any time; a
party to a tax sharing, tax indemnity or tax allocation agreement, and the
Company has not assumed the tax liability of any other person under contract.
(xv) The Company is not now, nor has been at any time, a
"United States real property holding corporation" within the meaning of Section
897(c) (2) of the Code.
(xvi) The Company's tax basis in its assets for purposes of
determining its future amortization, depreciation and other federal income tax
deductions is accurately reflected on the Company's tax books and records.
(xvii) The Company has not been a member of an affiliated
group filing a consolidated federal income Tax Return and does not have any
liability for the Taxes of another person under Treas. Reg. (S) 1.1502-6 (or any
similar provision of state, local or foreign law), as a transferee or successor,
by contract or otherwise.
(b) The Company has been properly classified as a partnership for all
federal income tax purposes at all times since its formation through the date
hereof, and has not elected to be classified as an association for all federal
tax purposes.
26
(c) Each Interestholder, has filed and will have filed all required Tax
Returns and will have filed all required Tax Returns and has paid and will have
paid all Taxes arising from compensation income received from the Company
through the date of the Closing, except for those returns which are not yet due
as of the Closing, which the Interestholders shall prepare and file prior to the
appropriate due date of such returns including any extensions thereof.
(d) For purposes of this Agreement:
(i) the term "Tax" shall include any tax or similar governmental
charge, impost or levy (including without limitation income taxes, franchise
taxes, transfer taxes or fees, sales taxes, use taxes, gross receipts taxes,
value added taxes, employment taxes, excise taxes, ad valorem taxes, property
taxes, withholding taxes, payroll taxes, minimum taxes or windfall profit taxes)
together with any related penalties, fines, additions to tax or interest imposed
by the United States or any state, county, local or foreign government or
subdivision or agency thereof; and
(ii) the term "Tax Return" shall mean any return (including any
information return), report, statement, schedule, notice, form, estimate, or
declaration of estimated tax relating to or required to be filed with any
governmental authority in connection with the determination, assessment,
collection or payment of any Tax.
3.26 Conformity with Law; Litigation.
(a) To the Company's knowledge, the Company has not violated any law
or regulation or any order of any court or federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
having jurisdiction over it where such violation would have a material impact on
its finances or its ability to do business.
(b) Except as set forth on Schedule 3.26(b), there are no claims,
actions, suits or proceedings, pending or, to the knowledge of the Company,
threatened against or affecting the Company at law or in equity, or before or by
any federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality having jurisdiction over it and no
notice of any claim, action, suit or proceeding, whether pending or threatened,
has been received. There are no judgments, orders, injunctions, decrees,
stipulations or awards (whether rendered by a court or administrative agency or
by arbitration) against the Company, its properties or businesses.
3.27 Absence of Claims Against Company. No Interestholder has any claim
against the Company.
3.28 Absence of Changes. Since the Balance Sheet Date, the Company has
conducted its business in the ordinary course and, except as contemplated herein
or as set forth on Schedule 3.28, there has not been:
27
(a) any change, by itself or together with other changes, that has
affected adversely, or is likely to affect adversely, the business, operations,
affairs, prospects, properties, assets, profits or condition (financial or
otherwise) of the Company;
(b) any damage, destruction or loss (whether or not covered by
insurance) adversely affecting the properties or business of the Company;
(c) any change in the capital structure of the Company or in the
outstanding securities or any change in the membership interests or any grant of
any options, warrants, calls, conversion rights or commitments by the Company;
(d) any declaration or payment of any distribution in respect of the
ownership interests, or any direct or indirect redemption, purchase or other
acquisition of the ownership interests of the Company.
(e) any increase in the compensation, bonus, sales commissions or
fee arrangements payable or to become payable by the Company to any of its
officers, directors, managers, members, Interestholders, employees, consultants
or agents, except for ordinary and customary bonuses and salary increases for
employees in accordance with past practice, nor has the Company entered into or
amended any Company Benefit Arrangement, Company Plan, employment, severance or
other agreement relating to compensation or fringe benefits;
(f) any work interruptions, labor grievances or claims filed, or any
similar event or condition of any character, materially adversely affecting the
business or future prospects of the Company;
(g) any sale or transfer, or any agreement to sell or transfer, any
material assets property or rights of the Company to any person, including
without limitation the Interestholders and their affiliates;
(h) any cancellation, or agreement to cancel, any indebtedness or
other obligation owing to the Company, including without limitation any
indebtedness or obligation of the Interestholders and their affiliates, provided
that the Company may negotiate and adjust bills in the course of good faith
disputes with customers in a manner consistent with past practice;
(i) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of the assets, property or
rights of the Company or requiring consent of any party to the transfer and
assignment of any such assets, property or rights;
(j) any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire, any property, rights or assets outside of
the ordinary course of business of the Company;
28
(k) any waiver of any material rights or claims of the Company;
(l) any breach, amendment or termination of any material contract,
agreement, license, permit or other right to which the Company is a party;
(m) any transaction by the Company outside the ordinary course of
business;
(n) any capital commitment by the Company, either individually or in
the aggregate, exceeding $10,000;
(o) any change in accounting methods or practices (including any
change in depreciation or amortization policies or rates) by the Company or the
revaluation by the Company of any of its assets;
(p) any creation or assumption by the Company of any mortgage,
pledge, security interest or lien or other encumbrance on any asset (other than
liens arising under existing lease financing arrangements which are not material
and liens for Taxes not yet due and payable);
(q) any entry into, amendment of, relinquishment, termination or
non-renewal by the Company of any contract, lease transaction, commitment or
other right or obligation requiring aggregate payments by the Company in excess
of $5,000;
(r) any loan by the Company to any person or entity, incurring by
the Company of any indebtedness, guaranteeing by the Company of any
indebtedness, issuance or sale of any debt securities of the Company or
guaranteeing of any debt securities of others;
(s) the commencement or notice or, to the knowledge of the Company,
threat of commencement, of any lawsuit or proceeding against, or investigation
of, the Company or any of its respective affairs;
(t) any capital contribution required to be made to the Company
which has not been paid in full; or
(u) negotiation or agreement by the Company, or any officer,
director, manager, member, or employee thereof to do any of the things described
in the preceding clauses (a) through (t) (other than negotiations with Shentel
and its representatives regarding the transactions contemplated by this
Agreement).
3.29 Disclosure. All written agreements, lists, schedules, instruments,
exhibits, documents, certificates, reports, statements and other writings
furnished to Shentel pursuant hereto or in connection with this Agreement or the
transactions contemplated hereby, are and will be complete and accurate in all
material respects. No representation or warranty by the Interestholders or the
Company contained in this Agreement, in the Schedules attached hereto or in any
certificate furnished or to be furnished by the Interestholders or the Company
to Shentel in connection herewith or pursuant hereto
29
contains or will contain any untrue statement of a material fact or omits or
will omit to state any material fact necessary in order to make any statement
contained herein or therein not misleading. There is no fact known to any
Interestholder that has specific application to such Interestholder or the
Company (other than general economic or industry conditions) and that materially
adversely affects or, as far as such Interestholder can reasonably foresee,
materially threatens, the assets, business, prospects, financial condition, or
results of operations of the Company taken as a whole, that has not been set
forth in this Agreement or any Schedule hereto.
3.30 Predecessor Status; Etc. Schedule 3.30 sets forth a listing of all
legal names, trade names, fictitious names or other names (including, without
limitation, any names of divisions or operations) of the Company, and all of its
predecessor companies during the five-year period immediately preceding the
Closing. During the five-year period immediately preceding the Closing, the
Company has operated only under the names set forth on Schedule 3.30 in the
jurisdiction or a jurisdiction set forth on Schedule 3.30 and has not been a
subsidiary or division of another corporation or a part of an acquisition which
was later rescinded.
3.31 Required Governmental Filings and Consents. The execution, delivery
and performance of this Agreement and the consummation of the transactions
contemplated hereby and thereby, will not require any consent, approval,
authorization or permit of, or filing with or notification to, any governmental
or regulatory authority, domestic or foreign, except (a) for applicable
requirements, if any, of the Securities Act of 1933, as amended, the Securities
Exchange Act of 1934, as amended, state securities or Blue Sky laws, the Bylaws
of the National Association of Securities Dealers, Inc. and (b) where the
failure to obtain such consents, approvals, authorization or permits, or to make
such filings or notifications, would not prevent or delay consummation of the
Acquisition or otherwise prevent the Company from performing its obligations
under this Agreement.
4. REPRESENTATIONS OF SHENTEL
To induce the Company and the Interestholders to enter into this Agreement
and consummate the transactions contemplated hereby, Shentel represents and
warrants to the Company and the Interestholders as follows:
4.1 Due Organization. Shentel is a corporation duly organized, validly
existing and in good standing under the laws of the State of Virginia, and is
duly authorized and qualified to do business under all applicable laws,
regulations, ordinances and orders of public authorities to carry on their
respective businesses in the places and in the manner as now conducted.
4.2 Authorization; Validity of Obligations. The representatives of Shentel
executing this Agreement have all requisite corporate power and authority to
enter into and bind Shentel to the terms of this Agreement. Shentel has the full
legal right, power and corporate authority, as applicable, to enter into this
Agreement and the transactions contemplated hereby. The execution and delivery
of this Agreement by Shentel and the
30
performance by Shentel of the transactions contemplated herein have been duly
and validly authorized by the Board of Directors of Shentel, and this Agreement
has been duly and validly authorized by all necessary corporate action. This
Agreement is a legal, valid and binding obligation of Shentel enforceable in
accordance with its terms.
4.3 No Conflicts. The execution, delivery and performance of this
Agreement, the consummation of the transactions herein contemplated hereby and
the fulfillment of the terms hereof will not:
(a) conflict with, or result in a breach or violation of the
Shentel's Certificate of Incorporation or Bylaws;
(b) subject to compliance with any agreements between Shentel and
its lenders, conflict with, or result in a default (or would constitute a
default but for a requirement of notice or lapse of time or both) under any
document, agreement or other instrument to which Shentel is a party, or result
in the creation or imposition of any lien, charge or encumbrance on any of
Shentel's properties pursuant to (i) any law or regulation to which Shentel or
any of their respective property is subject, or (ii) any judgment, order or
decree to which Shentel is bound or any of their respective property is subject;
(c) result in termination or any impairment of any material permit,
license, franchise, contractual right or other authorization of Shentel; or
(d) violate any law, order, judgment, rule, regulation, decree or
ordinance to which Shentel is subject, or by which Shentel is bound, (including,
without limitation, the HSR Act, together with all rules and regulations
promulgated thereunder).
5. COVENANTS.
5.1 Tax Matters.
(a) The following provisions shall govern the allocation of
responsibility as between the Company, on the one hand, and the Interestholders,
on the other, for certain tax matters following the Closing Date:
(i) Interestholders shall prepare or cause to be prepared and
file or cause to be filed, within the time and in the manner provided by law,
all Tax Returns of the Company for all periods ending on or before the Closing
Date that are due after the Closing Date. Interestholders shall pay, or cause
the Company to pay, on or before the due date of such Tax Returns the amount of
all Taxes shown as due on such Tax Returns to the extent that such Taxes are not
reflected in the current liability accruals for Taxes (excluding reserves for
deferred Taxes) shown on the Company's books and records as of the Closing Date.
Such Returns shall be prepared and filed in accordance with applicable law and
in a manner consistent with past practices and shall be subject to review and
approval by Shentel. To the extent reasonably requested by the Interestholders
or
31
required by law, Shentel and any surviving entity shall participate in the
filing of any Tax Returns filed pursuant to this paragraph.
(ii) The surviving entity shall prepare or cause to be
prepared and file or cause to be filed any Tax Returns for Tax periods which
begin before the Closing Date and end after the Closing Date. The
Interestholders (to the extent of the unused portion of the Escrow Fund and
otherwise subject to the terms in Section 8) shall pay to the Surviving Entity
within fifteen (15) days after the date on which Taxes are paid with respect to
such periods an amount equal to the portion of such Taxes which relates to the
portion of such taxable period ending on the Closing Date to the extent such
Taxes are not reflected in the current liability accruals for Taxes (excluding
reserves for deferred Taxes) shown on the Company's books and records as of the
Closing Date. For purposes of this Section 5.1, in the case of any Taxes that
are imposed on a periodic basis and are payable for a Taxable period that
includes (but does not end on) the Closing Date, the portion of such Tax which
relates to the portion of such Taxable period ending on the Closing Date 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 Closing Date 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 or receipts be deemed equal to the amount which
would be payable if the relevant Taxable period ended on the Closing Date. Any
credits relating to a Taxable period that begins before and ends after the
Closing Date shall be taken into account as though the relevant Taxable period
ended on the Closing Date. All determinations necessary to give effect to the
foregoing allocations shall be made in a manner consistent with prior practice
of the Company.
(iii) Shentel and the surviving entity on one hand and
Interestholders on the other hand shall (A) cooperate fully, as reasonably
requested, in connection with the preparation and filing of Tax Returns pursuant
to this Section 5.1 and any audit, litigation or other proceeding with respect
to Taxes; (B) make available to the other, as reasonably requested, all
information, records or documents with respect to Tax matters pertinent to the
Company for all periods ending prior to or including the Closing Date; and (C)
preserve information, records or documents relating Tax matters pertinent to the
Company that is in their possession or under their control until the expiration
of any applicable statute of limitations or extensions thereof.
(iv) The Interestholders shall timely pay all transfer,
documentary, sales, use, stamp, registration and other Taxes and fees arising
from or relating to the transactions contemplated by this Agreement, and the
Interestholders shall, 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. If required by applicable law,
Shentel and the surviving entity will join in the execution of any such Tax
Returns and other documentation.
32
(b) The Company and the Interestholders shall, prior to the Closing,
take no action with respect to ownership interests, or the assets or liabilities
of the Company or any of its subsidiaries, that would cause the Company or any
of its subsidiaries to be treated other than as a partnership for federal and
state income tax purposes.
(c) At Shentel's option, the Company and each Interestholder shall
make an election under Section 754 of the Code (and any corresponding election
under state, local and foreign tax law) with respect to the purchase and sale of
the interest of the Company hereunder (a "Section 754 Election") and file all
statements directed by Shentel to give effect of such election. Interestholders
shall include any income, gain, loss deduction or other tax item resulting from
the Section 754 Election on their Tax Returns to the extent permitted by
applicable law. The Interestholders shall also pay any Tax imposed on the
Company attributable to the making of the Section 754 Election, and the
Interestholders shall, to the extent of the unused portion of the Escrow Fund
and otherwise subject to the terms in Section 8) indemnify Shentel, the
Surviving Entity and their subsidiaries against any Tax or other liability
arising out of any failure to pay any such Taxes.
5.3 Employee Benefit Plans. If reasonably requested by Shentel, the
Company shall terminate any Company Plan or Company Benefit Arrangement
substantially contemporaneously with the Closing.
5.5 Cooperation.
(a) The Company, Interestholders, and Shentel shall each deliver or
cause to be delivered to the other on the Closing Date, and at such other times
and places as shall be reasonably agreed to, such instruments as the other may
reasonably request for the purpose of carrying out this Agreement. In connection
therewith, if required, the president or chief financial officer of the Company
shall execute any documentation reasonably required by Shentel's independent
public accountants (in connection with such accountant's audit of the Company
and its subsidiaries) or the NASDAQ National Market.
(b) The Interestholders, without cost (at the expense of the
requesting party to the extent it involves a material out-of-pocket expense)
shall reasonably cooperate with Shentel on and after the Closing Date in
furnishing information, evidence, testimony and other assistance in connection
with any filing obligations, actions, proceedings, arrangements or disputes of
any nature with respect to the Company for matters pertaining to all periods
prior to the Closing Date.
(c) Each party hereto shall cooperate in obtaining all consents and
approvals required under this Agreement to effect the transactions contemplated
hereby.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF SHENTEL.
The obligation of Shentel to effect the Acquisition is subject to the
satisfaction or waiver, at or before the Closing Date, of the following
conditions and deliveries:
33
6.1 Representations and Warranties; Performance of Obligations. All of the
representations and warranties of the Interestholders and the Company contained
in this Agreement shall be true, correct and complete in all material respects
on and as of the Closing Date (unless otherwise provided herein) with the same
effect as though such representations and warranties had been made on and as of
such date; all of the terms, covenants, agreements and conditions of this
Agreement to be complied with, performed or satisfied by the Company and the
Interestholders on or before the Closing Date shall have been duly complied
with, performed or satisfied; and a certificate to the foregoing effects dated
the Closing Date and signed on behalf of the Company and by each of the
Interestholders shall have been delivered to Shentel.
6.2 No Litigation. No temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other legal or regulatory restraint or provision challenging
Shentel's proposed acquisition of the Company or limiting or restricting
Shentel's conduct or operation of the business of the Company (or its own
business) following the Acquisition shall be in effect, nor shall any proceeding
brought by an administrative agency or commission or other governmental
authority or instrumentality, domestic or foreign, seeking any of the foregoing
be pending. There shall be no action, suit, claim or proceeding of any nature
pending or threatened against Shentel, Shenandoah or the Company, their
respective properties or any of their officers or directors or managers, that
could materially and adversely affect the business, assets, liabilities,
financial condition, results of operations or prospects of the Company.
6.3 No Material Adverse Change. There shall have been no material adverse
changes in the business, operations, affairs, prospects, properties, assets,
existing and potential liabilities, obligations, profits or condition (financial
or otherwise) of the Company , since the Balance Sheet Date; and Shentel shall
have received a certificate signed by the President and by the Chief Financial
Officer dated the Closing Date to such effect.
6.4 Consents and Approvals. Except as set forth on Schedule 3.18 (d), all
necessary consents of, and filings with, any governmental authority or agency or
third party, relating to the consummation by the Company and the Interestholders
of the transactions contemplated hereby, shall have been obtained and made.
6.5 Opinion of Counsel. Shentel shall have received an opinion from
counsel to the Company and the Interestholders, dated the Closing Date, in a
form reasonably satisfactory to Shentel.
6.6 Organizational Documents. Shentel shall have received (a) a copy of
the Articles of Organization of the Company certified by an appropriate
authority in the State of Virginia, (b) a copy of the Operating Agreement of the
Company certified by the Secretary of the Company, and (c) certificates of good
standing for each state in which
34
NTC is currently operating and such documents shall be in form and substance
reasonably acceptable to Shentel.
6.7 Delivery of Closing Financial Certificate. Shentel shall have received
a certificate (the "Closing Financial Certificate"), dated as of the Closing
Date, and signed on behalf of the Company, setting forth:
(a) the tangible net worth of the Company as of the last day of its
most recent fiscal year (the "Certified Year-End Net Worth," which is equal to
assets less liabilities);
(b) the Closing Balance of the Company as of the Closing Date (the
"Certified Closing Net Balance");
(c) the net revenues of the Company for the most recent fiscal year
preceding the Closing Date (the "Certified Year-End Revenues");
(d) the net revenues of the Company for the 3-month period ended on
November 30, 2004 (the "Certified Closing Revenues");
(e) the Actual EBITDA for the most recent fiscal year preceding the
Closing Date and as a percent of net revenues for such period (the "Certified
Year-End Profits");
(f) the Actual EBITDA for the 12-month period ended on October 31,
2004 and as a percent of net revenues for such period (the "Certified Closing
Profits");
(g) the Company's long-term and short-term indebtedness to banks,
the Interestholders, former members, and other financial institutions and
creditors as of the Closing (in each case including the current portions of such
indebtedness, but excluding trade payables and other ordinary course accounts
payable as of the Closing Date) (the "Certified Closing Debt");
(h) the Actual EBITDA for the 2-month period ended October 31, 2004
(the "Certified Actual Profits");
(i) a statement that all of the Company financial conditions set
forth in Section 3.8 of the Agreement are satisfied as of the Closing Date.
6.8 BIA Notes. The holders of the promissory notes issued pursuant to the
Amended and Restated Securities Purchase Agreement dated as of January 16, 2004
and Amendment No. 1 thereto dated March 12, 2004 by and among the Company, BIA
Digital Partners LP and Xxxxxx Xxxxxxxxxx (collectively "BIA") have entered into
an agreement with Shentel pursuant to which BIA has agreed to sell and Shentel
has agreed to purchase all such notes.
6.9 Unvested Options and Warrants. The Interestholders and the Company
shall have caused all outstanding Options and Warrants which have failed to vest
either prior
35
to the Closing Date or as a result of the transactions contemplated to have been
surrendered and terminated.
6.10 <>
6.11 Escrow Agreement. The Interestholders and the Escrow Agent shall have
executed and delivered an escrow agreement in a form reasonably satisfactory to
Shentel.
6.12 Agreements with Affiliates.
(a) Computer Cabling and Telephone Services, Inc. ("Computer
Cabling") has agreed to the amendment of that certain "Preferred Provider
Agreement" dated as of February 1, 2001 to eliminate the right of last bid;
(b) Computer Cabling, Xxxxxx Xxxx and Beam Family LLC (collectively
the "Beam Affiliates" and the Company have entered into an agreement, in a form
acceptable to Shentel, transferring to the Company all assets currently owned,
by the Beam Affiliates but used by the Company in the ordinary course of its
business and excluding only those assets listed on schedule 6.12(c); and
(c) The Beam Affiliates have entered into an agreement with the
Company providing for either the assignment or the granting of a perpetual,
non-revocable fully assignable and divisible license with respect to any and all
intellectual property owned by the Beam Affiliates which is or may be used or
useful in the operation of the Company's business.
6.13 Other Agreements.
Agreement, dated October 20, 2003, by and between Xxxxxx Digital
Systems, Inc. d/b/a Campus Televideo and NTC shall have been amended in a manner
satisfactory to Shentel to eliminate the provision contained therein granting
Xxxxxx Digital a right of first refusal with respect to the provision of
satellite feed programming.
6.14 Due Diligence Review. The Company shall have made such deliveries as
are called for by this Agreement. Shentel shall be fully satisfied in its sole
discretion with the results of its review of all of the Schedules, whether
delivered before or after the execution hereof, and such deliveries, and its
review of, and other due diligence investigations with respect to, the business,
operations, affairs, prospects, properties, assets, existing and potential
liabilities, obligations, profits and condition (financial or otherwise) of the
Company. Shentel shall be deemed to have waived any objection with regard to its
due diligence review if not noted in writing to the Company prior to execution
of this Agreement.
6.15 Employee Benefit Plans and Payroll Transition. Arrangements
satisfactory to Shentel and NTC have been agreed with respect to the transition
of payroll and employee health coverage post Closing.
36
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE INTERESTHOLDERS AND THE COMPANY.
The obligation of the Interestholders and the Company to effect the
Acquisition is subject to the satisfaction or waiver, at or before the Closing
Date, of the following conditions and deliveries:
7.1 Representations and Warranties; Performance of Obligations. All of the
representations and warranties of Shentel contained in this Agreement shall be
true, correct and complete on and as of the Closing Date with the same effect as
though such representations and warranties had been made as of such date; all of
the terms, covenants, agreements and conditions of this Agreement to be complied
with, performed or satisfied by Shentel on or before the Closing Date shall have
been duly complied with, performed or satisfied; and a certificate to the
foregoing effects dated the Closing Date and signed by the President or any Vice
President of Shentel shall have been delivered to the Company and the
Interestholders.
7.2 No Litigation. No temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other legal or regulatory restraint or provision challenging
Shentel's proposed acquisition of the Company and its subsidiaries, or limiting
or restricting Shentel's conduct or operation of the business of the Company (or
its own business) following the Acquisition shall be in effect, nor shall any
proceeding brought by an administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign, seeking any of
the foregoing be pending. There shall be no action, suit, claim or proceeding of
any nature pending or threatened, against Shentel or the Company or any of its
subsidiaries, their respective properties or any of their officers or directors
or managers, that could materially and adversely affect the business, assets,
liabilities, financial condition, results of operations or prospects of the
Shentel and its subsidiaries taken as a whole.
7.3 Consents and Approvals. All necessary consents of, and filings with,
any governmental authority or agency or third party relating to the consummation
by Shentel of the transactions contemplated herein, shall have been obtained and
made.
7.4 Escrow Agreement. Shentel and the Escrow Agent shall have executed and
delivered an escrow agreement in a form reasonably satisfactory to the Company.
8. INDEMNIFICATION.
8.1 General Indemnification by the Interestholders. Each Interestholder,
jointly and severally, covenants and agrees to indemnify, defend, protect and
hold harmless Shentel, and the Surviving Entity and their respective officers,
directors, managers, employees, shareholders, members, assigns, successors and
affiliates (individually, an "Indemnified Party" and collectively, "Indemnified
Parties") from, against and in respect of:
37
(a) all liabilities, losses, claims, damages, punitive damages,
causes of action, lawsuits, administrative proceedings (including informal
proceedings), investigations, audits, demands, assessments, adjustments,
judgments, settlement payments, deficiencies, penalties, fines, interest
(including interest from the date of such damages) and costs and expenses
(including without limitation reasonable attorneys' fees and disbursements of
every kind, nature and description) (collectively, "Damages") suffered,
sustained, incurred or paid by the Indemnified Parties in connection with,
resulting from or arising out of, directly or indirectly:
(i) any breach of any representation or warranty of the
Interestholders or the Company set forth in this Agreement or any schedule or
certificate, delivered by or on behalf of any Interestholder or the Company in
connection herewith; or
(ii) any nonfulfillment of any covenant or agreement by the
Interestholders or, prior to the Closing Date, the Company, under this
Agreement; or
(iii) the failure of the Company, or any Interestholder to
obtain any necessary consent of, or make any filings with, any governmental
authority or agency or third party, relating to the consummation by the Company
and the Interestholders of the transactions contemplated hereby (including
without limitation the Third Party Consents and the Unobtained Consents listed
on Schedule 3.18(d)); or
(iv) any audit or claim by the Commonwealth of Virginia or any
state in which the Company does business for taxes for all periods prior to the
Closing; or
(v) deficiencies in any Employee Benefit Plan, including the
failure to accurately file Form 5500s and any matter which could cause the
nonqualification of such plan; and
(b) any and all Damages incident to any of the foregoing or to the
enforcement of this Section 8.1.
8.2 Limitation and Expiration. Notwithstanding the above:
(a) there shall be no liability for indemnification under Section
8.1 unless the aggregate amount of Damages for all claims exceeds $ 100,000 (the
"Indemnification Threshold") however, that the Indemnification Threshold shall
not apply to (i) adjustments to the Consideration as set forth in Section 1.2
(ii) Damages arising out of any breaches of the covenants of the Interestholders
set forth in Section 5.1 of or representations and warranties made in Sections
3.4 (capital structure of the Company), or 3.5 (transactions in membership
interests; accounting treatment)., In addition, the parties agree that with
respect to Damages arising out of a single claim, the first $5,000 in Damages
shall be excluded from indemnification and that for the purpose of this
limitation that a group or series of similar or related claims shall be treated
as a single claim for the purpose of this exclusion
38
(b) (i) the aggregate amount of the Company's and the
Interestholders' liability under this Article 8 shall not exceed the unused
portion of the Escrow Fund ; (ii) provided that with respect to a claim arising
out of a breach by an individual Interestholder of Section 3.2(b), 3.2(d),
3.3(b), 3.3(d), 3.4(c), 3.27 and Article 9, in each instance as it relates to
their individual membership interest the individual Interestholders' liability
under this Article 8 shall not exceed the Consideration paid to such
Interestholder with respect to the membership interest. Except for claims under
(ii) liability will be joint and several and shall be applied pro rata;
(c) the indemnification obligations under this Article 8, or under
any certificate or writing furnished in connection herewith, shall terminate at
the date that is the later of clause (i) or (ii) of this Section 8.2(c):
(i), twelve (12) months after the Effective Time (the "First
Anniversary"); or
(ii) the final resolution of claims or demands pending as of
the relevant date described in clause (i) of this Section 8.2(c) (such claims
referred to as "Pending Claims").
8.3 Indemnification Procedures. All claims or demands for indemnification
under this Article 8 ("Claims") shall be asserted and resolved as follows:
(a) In the event that any Indemnified Party has a Claim against any
party obligated to provide indemnification pursuant to Section 8.1 hereof (the
"Indemnifying Party") which does not involve a Claim being asserted against or
sought to be collected by a third party, the Indemnified Party shall with
reasonable promptness notify the Interestholders' Representative of such Claim,
specifying the nature of such Claim and the amount or the estimated amount
thereof to the extent then feasible (the "Claim Notice"). If the
Interestholders' Representative does not notify the Indemnified Party within
fifteen (15) days after the date of delivery of the Claim Notice that the
Indemnifying Party disputes such Claim, with a detailed statement of the basis
of such position, the amount of such Claim shall be conclusively deemed a
liability of the Indemnifying Party hereunder. In case an objection is made in
writing in accordance with this Section 8.3(a), the Indemnified Party shall
respond in a written statement to the objection within fifteen (15) days and,
for sixty (60) days thereafter, attempt in good faith to agree upon the rights
of the respective parties with respect to each of such Claims (and, if the
parties should so agree, a memorandum setting forth such agreement shall be
prepared and signed by both parties). Either Shentel or the Interestholders'
Representative may, in their sole discretion, submit the resolution of the Claim
to expedited, binding arbitration pursuant to Section 8.7.
(b) (i) In the event that any Claim for which the Indemnifying Party
would be liable to an Indemnified Party hereunder is asserted against an
Indemnified Party by a third party (a "Third Party Claim"), the Indemnified
Party shall deliver a Claim Notice to
39
the Interestholders' Representative within five (5) days receipt thereof. The
Interestholders' Representative shall have fifteen (15) days from the date of
delivery of the Claim Notice (the "Notice Period") to notify the Indemnified
Party (A) whether the Indemnifying Party disputes liability to the Indemnified
Party hereunder with respect to the Third Party Claim, and, if so, the basis for
such a dispute, and (B) if such party does not dispute liability, whether or not
the Indemnifying Party desires, at the sole cost and expense of the Indemnifying
Party, to defend against the Third Party Claim, provided that the Indemnified
Party is hereby authorized (but not obligated), prior to and during the Notice
Period, to file any motion, answer or other pleading and to take any other
action which the Indemnified Party shall deem necessary or appropriate to
protect the Indemnified Party's interests.
(ii) In the event that Interestholders' Representative timely
notifies the Indemnified Party within the Notice Period that the Indemnifying
Party does not dispute the Indemnifying Party's obligation to indemnify with
respect to the Third Party Claim, the Indemnifying Party shall defend the
Indemnified Party against such Third Party Claim by appropriate proceedings,
provided that, unless the Indemnified Party otherwise agrees in writing, the
Indemnifying Party may not settle any Third Party Claim (in whole or in part) if
such settlement does not include a complete and unconditional release of the
Indemnified Party. If the Indemnified Party desires to participate in, but not
control, any such defense or settlement the Indemnified Party may do so at its
sole cost and expense. If the Indemnifying Party elects not to defend the
Indemnified Party against a Third Party Claim, whether by failure of such party
to give the Indemnified Party timely notice as provided herein or otherwise,
then the Indemnified Party, without waiving any rights against such party, may
settle or defend against such Third Party Claim in the Indemnified Party's sole
discretion and the Indemnified Party shall be entitled to recover from the
Indemnifying Party) the amount of any settlement or judgment and, on an ongoing
basis, all indemnifiable costs and expenses of the Indemnified Party with
respect thereto, including interest from the date such costs and expenses were
incurred.
(iii) If at any time, in the reasonable opinion of the
Indemnified Party, notice of which shall be given in writing to the
Interestholders' Representative, any Third Party Claim seeks material
prospective relief which could have an adverse effect on any Indemnified Party
or the Surviving Entity or any subsidiary, the Indemnified Party shall have the
right to control or assume (as the case may be) the defense of any such Third
Party Claim and the amount of any judgment or settlement and the reasonable
costs and expenses of defense shall be included as part of the indemnification
obligations of the Indemnifying Party hereunder. If the Indemnified Party elects
to exercise such right, the Indemnifying Party shall have the right to
participate in, but not control, the defense of such Third Party Claim at the
sole cost and expense of the Indemnifying Party.
(c) Nothing herein shall be deemed to prevent the Indemnified Party
from making a Claim, and an Indemnified Party may make a Claim hereunder, for
potential or contingent Damages provided the Claim Notice sets forth the
specific basis for any such potential or contingent claim or demand to the
extent then feasible and the Indemnified Party has reasonable grounds to believe
that such Claim may be made.
40
(d) Subject to the provisions of Section 8.2, the Indemnified
Party's failure to give reasonably prompt notice as required by this Section 8.3
of any actual, threatened or possible claim or demand which may give rise to a
right of indemnification hereunder shall not relieve the Indemnifying Party of
any liability which the Indemnifying Party may have to the Indemnified Party
unless the failure to give such notice materially and adversely prejudiced the
Indemnifying Party.
(e) The parties will make appropriate adjustments for any Tax
benefits, Tax detriments or insurance proceeds in determining the amount of any
indemnification obligation under this Article 8, provided that no Indemnified
Party shall be obligated to continue pursuing any payment pursuant to the terms
of any insurance policy.
8.4 Claims Against the Escrow Fund. The parties agree and acknowledge that
any and all Claims for Damages made against the Interestholders by a Indemnified
Party pursuant to Sections 8.1 and 8.2 on or prior to the Release Date shall be
applied, upon final resolution of any such Claim (regardless when such
resolution actually occurs) pursuant to Section 8.3, against the Escrow Fund. As
promptly as possible following resolution of any such Claim, the Interestholders
shall deliver to the Escrow Agent a Release Certificate signed by the
Interestholders' Representative (as provided in the Escrow Agreement) providing
delivery instructions to be followed by the Escrow Agent in paying out all or
part of the Escrow Fund with respect to the Claim, including any applicable wire
transfer instructions of the payee or an address to where a check should be
sent. Upon receipt of such Release Certificate, the Escrow Agent shall deliver
pursuant to such instructions out of the Escrow Fund, within two Business Days
(as defined below), an amount or amounts as indicated in the Release
Certificate. The Escrow Agent shall be entitled to conclusively rely on such
Release Certificate and shall make such distributions from the Escrow Fund only
in accordance with the terms thereof. For purposes of this Section 8.4 "Business
Day" shall mean any day that is not a Saturday or Sunday or a day on which banks
are required or permitted by law or executive order to be closed in the
Commonwealth of Virginia.
8.5 Survival of Representations Warranties and Covenants. All
representations, warranties and covenants made by the Company, the
Interestholders, and Shentel in or pursuant to this Agreement or in any document
delivered pursuant hereto shall be deemed to have been made on the date of this
Agreement (except as otherwise provided herein) and, if a Closing occurs, as of
the Closing Date. The representations of the Company and the Interestholders
will survive the Closing and will remain in effect until, and will expire upon,
the termination of the indemnification obligations as provided in Section 8.2.
The representations of Shentel will survive the Closing and will remain in
effect until, and will expire upon the First Anniversary.
8.6 Exclusive Remedy. Indemnification provided in this Section 8 shall
constitute the exclusive remedy with respect to breach of the representations,
warranties, covenants and agreements contained in this Agreement, or based
directly or indirectly on any rights or obligations established by this
Agreement, whether any claims or causes of action
41
asserted with respect to such matters are brought in contract, tort or any other
legal theory whatsoever; provided, however, that nothing herein shall limit any
right to seek injunctive relief
8.7 Arbitration.
(a) Claims submitted to arbitration under this Section 8.7
("Arbitrated Disputes") shall be resolved by binding arbitration administered by
the American Arbitration Association ("AAA") in Virginia and, except as
expressly provided in this Agreement, shall be conducted in accordance with the
Expedited Procedures under the Commercial Arbitration Rules of the AAA, as such
rules may be amended from time to time (the "Rules"). The hearing locale shall
be Virginia. A single, neutral arbitrator (the "Arbitrator") shall be appointed
by the AAA, within five (5) days after an Arbitrated Dispute is submitted for
arbitration under this Section 8.7, to preside over the arbitration and resolve
the Arbitrated Dispute. The Arbitrator shall be selected from the AAA's
Commercial Panel, and shall be qualified to practice law in at least one
jurisdiction in the United States and have expertise in the interpretation of
commercial contracts. The parties shall have three (3) days to object in writing
to the appointment of the Arbitrator, the sole basis for such objection being an
actual conflict of interest. The AAA, in its sole discretion, shall determine
within three (3) days the validity of any objection to the appointment of the
Arbitrator based on an actual conflict of interest.
(b) The Arbitrator's decision (the "Decision") shall be binding, and
the prevailing party may enforce the Decision in any court of competent
jurisdiction.
(c) The parties shall use their best efforts to cooperate with each
other in causing the arbitration to be held in as efficient and expeditious a
manner as practicable, including but not limited to, providing such documents
and making available such of their personnel as the Arbitrator may request, so
that the Decision may be reached timely. The Arbitrator shall take into account
the parties' stated goal of expedited proceedings in determining whether to
authorize discovery and, if so, the scope of permissible discovery and other
hearing and pre-hearing procedures.
(d) The authority of the Arbitrator shall be limited to deciding
liability for, and the proper amount of, a Claim, and the Arbitrator shall have
no authority to award punitive damages. The Arbitrator shall have such powers
and establish such procedures as are provided for in the Rules, so long as such
powers and procedures are consistent with this Section 8.7 and are necessary to
resolve the Arbitrated Dispute within the time periods specified in this
Agreement. The Arbitrator shall render a Decision within thirty (30) days after
being appointed to serve as Arbitrator (or such shorter period of time, to the
extent reasonable or practicable, as may be appropriate to conform to the
expiration of indemnities set forth in Section 8.2(c)(i)(2) or (3)), unless the
parties otherwise agree in writing or the Arbitrator makes a finding that a
party has carried the burden of showing good cause for a longer period;
provided, however, that in no event may the Arbitrator, without the consent of
both the Interestholders' Representative and Shentel, extend the
42
time for rendering a Decision or otherwise delay a Decision to a date that is
later than the First Anniversary.
9. NONCOMPETITION.
9.1. Prohibited Activities.
(a) No Key Employee of the Company will, for a period of four (4)
years following the Closing Date, for any reason whatsoever, directly or
indirectly, for himself, herself or on behalf of or in conjunction with any
other person, persons, company, partnership, corporation or business of whatever
nature:
(i) engage, as an officer, director, shareholder, member,
owner, partner, member, joint venturer, or in a managerial capacity, whether as
an employee, independent contractor, consultant or adviser, or as a sales
representative, in any business selling any products or services in direct
competition with the Company, within one hundred (100) miles of anywhere where
the Company conducts business as of the Closing Date or is in discussions to
conduct business (as set forth on Schedule 9.1) (the "Territory");
(ii) call upon any person who is, at that time, an employee of
the Company or Shentel in a managerial capacity for the purpose or with the
intent of enticing such employee away from or out of the employ of the Company;
(iii) call upon any person who is or entity that is, at that
time, or that has been, within one year prior to that time, a customer of the
Company or the property owner or manager (including any employee or affiliate)
of any property served by the Company within the Territory for the purpose of
soliciting or selling products or services in competition with the Company
within the Territory; or
(iv) call upon any prospective customer or acquisition
candidate that was, to the knowledge of such Key Employee, either called upon by
the Company as a prospective customer or acquisition candidate or was the
subject of a market or acquisition analysis by the Company. Each Key Employee,
to the extent lacking the knowledge described in the preceding sentence, shall
immediately cease all contact with such prospective customer or acquisition
candidate upon being informed that the Company had called upon such candidate or
made a market or acquisition analysis thereof.
(b) No Interestholder or Director of the Company will, for a period of two
years following the Closing Date, for any reason whatsoever, directly or
indirectly, for himself, herself or on behalf of or in conjunction with any
other person, persons, company, partnership, corporation or business of whatever
nature
43
(i) call upon any person who is, at that time, an employee of
the Company or Shentel in a managerial capacity for the purpose or with the
intent of enticing such employee away from or out of the employ of the Company;
(ii) call upon any person who is or entity that is, at that
time, or that has been, within one year prior to that time, a customer of the
Company or the property owner or manager (including any employee or affiliate)
of any property served by the Company within the Territory for the purpose of
soliciting or selling products or services in competition with the Company
within the Territory;
(c) Notwithstanding the above, the foregoing covenant shall not be
deemed to prohibit any Interestholder, Director, Officer or Key Employee from
acquiring as a passive minority investment (in which such individual has no
direct or indirect day-to-day operational/managerial responsibility or
authority) of equity or debt in a competing business. For purposes of this
Article 9, the term "Company" includes NTC, Shentel and all subsidiaries of
Shentel (including without limitation the Company and any companies the Company
has resolved to acquire). For the purposes of this Article 9, a Key Employee
shall be those individuals listed on Schedule 9.
9.2. Confidentiality. Each Interestholder recognizes that by reason of his
or her ownership of the Company and his or her employment by the Company, he or
she has acquired confidential information and trade secrets concerning the
operation of the Company and its subsidiaries, the use or disclosure of which
could cause the Company or its affiliates or subsidiaries substantial loss and
damages that could not be readily calculated and for which no remedy at law
would be adequate. Accordingly, each Interestholder covenants and agrees with
the Company and Shentel that he or she will not at any time, except in
performance of Interestholder's obligations to the Company with the prior
written consent of Shentel, directly or indirectly, disclose any secret or
confidential information that he or she may learn or has learned by reason of
his or her ownership of the Company or his or her employment by the Company, or
any of its subsidiaries and affiliates, or use any such information in a manner
detrimental to the interests of the Company or Shentel, unless (i) such
information becomes known to the public generally through no fault of any
Interestholder, (ii)disclosure is required by law or the order of any
governmental authority under color of law, or (iii) the disclosing party
reasonably believes that such disclosure is required in connection with the
defense of a lawsuit against the disclosing party, provided, that prior to
disclosing any information pursuant to clause (i), (ii) or (iii) above, the
Interestholder (as applicable) shall give prior written notice thereof to
Shentel and provide Shentel with the opportunity to contest such disclosure and
shall cooperate with efforts to prevent such disclosure. The term "confidential
information" includes, without limitation, information not previously disclosed
to the public or to the trade by the Company's or Shentel's management with
respect to the Company's or Shentel's, or any of their affiliates' or
subsidiaries', products, facilities, and methods, trade secrets and other
intellectual property, software, source code, systems, procedures, manuals,
confidential reports, product price lists, customer lists, financial information
(including the revenues, costs, or profits associated with any
44
of the Company's or its subsidiaries' products), business plans, prospects, or
opportunities but shall exclude any information already in the public domain.
9.3. Damages. Because of the difficulty of measuring economic losses to
Shentel as a result of a breach of the foregoing covenant, and because of the
immediate and irreparable damage that could be caused to Shentel for which it
would have no other adequate remedy, each Interestholder agrees that the
foregoing covenant may be enforced by Shentel in the event of breach by such
Interestholder, by injunctions and restraining orders.
9.4. Reasonable Restraint. The parties agree that the foregoing covenants
in this Article 9 impose a reasonable restraint on each Interestholder in light
of the activities and business of the Company and Shentel on the date of the
execution of this Agreement, assuming the completion of the transactions
contemplated hereby, and the current plans of Shentel; but it is also the intent
of Shentel and each Interestholder that such covenants be construed and enforced
in accordance with the changing activities and business of the Company and
Shentel throughout the term of this covenant. The parties further agree that so
long as a Interestholder is not an employee of the Company, in the event a
Interestholder shall enter into a business or pursue other activities not in
competition with Shentel or similar activities or business in locations the
operation of which, under such circumstances, does not violate Section 9.1(a) or
the terms of any employment agreement with Shentel, such Interestholder shall
not be chargeable with a violation of this Article 9 if Shentel shall thereafter
enter the same, similar or a competitive (a) business, (b) course of activities
or (c) location, as applicable. The Interestholders acknowledge that a portion
of the consideration paid pursuant to Section 1.2 is being paid in consideration
of these covenants and each of the Interestholders expressly represents and
warrants that the consideration is full and adequate to support the
enforceability of the terms of this Article 9 and further acknowledge that
Shentel would not have entered into this Agreement except for the Interestholder
entering into the covenants contained in this Article 9.
9.5. Severability; Reformation. The covenants in this Article 9 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest extent which the
court deems reasonable, and the Agreement shall thereby be reformed.
9.6. Independent Covenant. All of the covenants in this Article 9 shall be
construed as an agreement independent of any other provision in this Agreement,
and the existence of any claim or cause of action of any Interestholder,
Director or Officer against Shentel, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by Shentel of such
covenants. The parties expressly acknowledge that the terms and conditions of
this Article 9 are independent of the terms and conditions of any other
agreements including, but not limited to, any employment agreements entered into
in connection with this Agreement. It is specifically agreed that the period of
four (4) years stated at the beginning of this Article 9 during which the
agreements and covenants
45
of the Interestholder, Director or Officer made in this Article 9 shall be
effective, shall be computed by excluding from such computation any time during
which the Interestholder, Director or Officer is found by a court of competent
jurisdiction to have been in violation of any provision of this Article 9. The
covenants contained in Article 9 shall not be affected by any breach of any
other provision hereof by any party hereto and shall have no effect if the
transactions contemplated by this Agreement are not consummated.
9.7. Materiality. The Company and each Interestholder, hereby agree that
the covenants set forth in this Article 9 are a material and substantial part of
the transactions contemplated by this Agreement, supported by adequate
consideration.
9.8. Additional Documents. The Company and each Interestholder hereby
agree to execute such additional documents as may be necessary to carryout and
enforce the covenants contained in this Article 9 and to cause the directors and
officers of the Company to execute such additional documents as may be necessary
to cause each of the covenants of this Article 9 to apply fully to such director
or officer.
10. GENERAL
10.1 Successors and Assigns. This Agreement and the rights of the parties
hereunder may not be assigned (except by operation of law and except in the case
of Shentel, to a subsidiary of Shentel) and shall be binding upon and shall
inure to the benefit of the parties hereto, the successors of Shentel, and the
heirs and legal representatives of the Interestholders.
10.2 Entire Agreement; Amendment; Waiver. This Agreement sets forth the
entire understanding of the parties hereto with respect to the transactions
contemplated hereby. Each of the Schedules to this Agreement is incorporated
herein by this reference and expressly made a part hereof. Any and all previous
agreements and understandings between or among the parties regarding the subject
matter hereof, whether written or oral, are superseded by this Agreement. This
Agreement shall not be amended or modified except by a written instrument duly
executed by each of the parties hereto. Any extension or waiver by any party of
any provision hereto shall be valid only if set forth in an instrument in
writing and signed on behalf of such party.
10.3 Counterparts. This Agreement may be executed in any number of
counterparts and any party hereto may execute any such counterpart, each of
which when executed and delivered shall be deemed to be an original, and all of
which counterparts taken together shall constitute but one and the same
instrument.
10.4 Brokers and Agents. Shentel and the Company and each Interestholder
(as a group) each represents and warrants to the other that it has not employed
any broker or agent in connection with the transactions contemplated by this
Agreement and agrees to indemnify the other against all losses, damages or
expenses relating to or arising out of claims for fees or commission of any
broker or agent employed or alleged to have been employed by such party.
46
10.5 Expenses. Shentel has and will pay the fees, expenses and
disbursements of Shentel and their agents, representatives, accountant and
counsel incurred in connection with the subject matter of this Agreement. The
Interestholders (and not the Company) have and will pay the fees, expenses and
disbursements of the Interestholders, and their agents, representatives,
financial advisers, accountants and counsel incurred in connection with the
subject matter of this Agreement.
10.6 Specific Performance; Remedies. Each party hereto acknowledges that
the other parties will be irreparably harmed and that there will be no adequate
remedy at law for any violation by any of them of any of the covenants or
agreements contained in this Agreement. It is accordingly agreed that, in
addition to any other remedies which may be available upon the breach of any
such covenants or agreements, each party hereto shall have the right to obtain
injunctive relief to restrain a breach or threatened breach of, or otherwise to
obtain specific performance of, the other parties, covenants and agreements
contained in this Agreement.
10.7 Notices. Any notice, request, claim, demand, waiver, consent,
approval or other communication which is required or permitted hereunder shall
be in writing and shall be deemed given if delivered personally or sent by
telefax (with confirmation of receipt), by registered or certified mail, postage
prepaid, or by recognized courier service, as follows:
If to Shentel, or the Surviving Entity to:
Shentel Converged Services, Inc. Company
000 Xxxxxxx Xxx
Xxx 000
Xxxxxxxx, XX 00000
Attention: Xxxxxxxxxxx X. Xxxxxx, President
with a required copy to:
Shenandoah Telecommunications Company
000 Xxxxxxx Xxx
Xxx 000
Xxxxxxxx, XX 00000
Attention: Xxxxxxxx Xxxxxxx, General Counsel
If to any Interestholder to:
Xxxx Xxxxxxx
Xxxx Street Partners
0000 Xxxx Xxxx Xxxxxx, Xxxxx 000
Xxxxxxxx, XX 00000
47
with a required copy to:
Xxxxxxx X. Xxxxxxx
Xxxxxx Xxxxxxxxx PC
000 X. Xxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
or to such other address as the person to who notice is to be given may have
specified in a notice duly given to the sender as provided herein. Such notice,
request, claim, demand, waiver, consent, approval or other communication shall
be deemed to have been given as of the date so delivered, faxed, mailed or
dispatched and, if given by any other means, shall be deemed given only when
actually received by the addressees.
10.8 Governing Law. This Agreement shall be governed by and construed,
interpreted and enforced in accordance with the laws of Virginia. Any disputes
arising out of, in connection with or with respect to this Agreement, the
subject matter hereof, the performance or non-performance of any obligation
hereunder, or any of the transactions contemplated hereby shall be adjudicated
in a court of competent civil jurisdiction sitting in Virginia and nowhere else.
Each of the parties hereto hereby irrevocably submits to the jurisdiction of
such court for the purposes of any suit, civil action or other proceeding
arising out of, in connection with or with respect to this Agreement, the
subject matter hereof, the performance or non-performance of any obligation
hereunder, or any of the transactions contemplated hereby (collectively,
"Suit"). Each of the parties hereto hereby waives and agrees not to assert by
way of motion, as a defense or otherwise in any such Suit, any claim that it is
not subject to the jurisdiction of the above courts, that such Suit is brought
in an inconvenient forum, or that the venue of such Suit is improper.
10.9 Severability. If any provision of this Agreement or the application
thereof to any person or circumstances is held invalid or unenforceable in any
jurisdiction, the remainder hereof, and the application of such provision to
such person or circumstances in any other jurisdiction, shall not be affected
thereby, and to this end the provisions of this Agreement shall be severable.
The preceding sentence is in addition to and not in place of the severability
provisions in Section 9.5.
10.10 Absence of Third Party Beneficiary Rights. No provision of this
Agreement is intended, nor will any provision be interpreted, to provide or to
create any third party beneficiary rights or any other rights of any kind in any
client, customer, affiliate, shareholder, member, employee or partner of any
party hereto or any other person or entity.
10.11 Mutual Drafting. This Agreement is the mutual product of the parties
hereto, and each provision hereof has been subject to the mutual consultation,
negotiation and agreement of each of the parties, and shall not be construed for
or against any party hereto.
48
10.12 Further Representations. Each party to this Agreement acknowledges
and represents that it has been represented by its own legal counsel in
connection with the transactions contemplated by this Agreement, with the
opportunity to seek advice as to its legal rights from such counsel. Each party
further represents that it is being independently advised as to the tax
consequences of the transactions contemplated by this Agreement and is not
relying on any representation or statements made by the other party as to such
tax consequence
49
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
PURCHASER
SHENTEL CONVERGED SERVICES, INC.
By: ________________________________
Name: ________________________________
Title: ________________________________
COMPANY
NTC COMMUNICATIONS, LLC
By: ________________________________
Name: ________________________________
Title: ________________________________
50
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
INTEREST HOLDERS
H. XXXXXXXX XXXXX
By: ________________________________
Name: ________________________________
Title: ________________________________
THE XXXXX FAMILY TRUST U/A
By: ________________________________
Name: ________________________________
Title: ________________________________
JRB CORPORATION OF LYNCHBURG, INC.
By: ________________________________
Name: ________________________________
Title: ________________________________
XXXX X. XXXXXXX
By: ________________________________
Name: ________________________________
Title: ________________________________
NANTUCKET ASSOCIATES, LP
By: ________________________________
Name: ________________________________
Title: ________________________________
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TIGER AIR, L.L.C.
By: ________________________________
Name: ________________________________
Title: ________________________________
XXXXXX X. XXXXXXXXXX
By: ________________________________
Name: ________________________________
Title: ________________________________
XXXX X. XXXXXX
By: ________________________________
Name: ________________________________
Title: ________________________________
FRENCH FAMILY INVESTMENTS
By: ________________________________
Name: ________________________________
Title: ________________________________
XXXXXX X. XXXXXXXX TRUST
By: ________________________________
Name: ________________________________
Title: ________________________________
XXXXXXXXXXX X. XXXXXX
By: ________________________________
Name: ________________________________
Title: ________________________________
XXXX X. XXXXXXXXX
By: ________________________________
Name: ________________________________
Title: ________________________________
XXXX X. XXXXXXXXX
By: ________________________________
Name: ________________________________
Title: ________________________________
52
CMD MANAGEMENT COMPANY, L.L.C. (XXXXXXX XXXXX)
By: ________________________________
Name: ________________________________
Title: ________________________________
XXX X. XXXXXXXX, XXX
By: ________________________________
Name: ________________________________
Title: ________________________________
XXXXXX X. XXXXX
By: ________________________________
Name: ________________________________
Title: ________________________________
XXXXXXX X. XXXXX
By: ________________________________
Name: ________________________________
Title: ________________________________
XXXXXX X. XXXX
By: ________________________________
Name: ________________________________
Title: ________________________________
XXXXXXX C.Q. XXXX
By: ________________________________
Name: ________________________________
Title: ________________________________
53
BIA DIGITAL PARTNERS
By: ________________________________
Name: ________________________________
Title: ________________________________
XXX XXXXXXXX
By: ________________________________
Name: ________________________________
Title: ________________________________
54
SCHEDULE A
Name
H. Xxxxxxxx Xxxxx
The Xxxxx Family Trust U/A
JRB, Inc.
Xxxx X. Xxxxxxx
Nantucket Associates, LP
Tiger Air, LLC
Xxxxxx X. Xxxxxxxxxx
Xxxx X. Xxxxxx
French Family Investments
Xxxxxx X. Xxxxxxxx Trust
Xxxxxxxxxxx X. Xxxxxx
Xxxx X. Xxxxxxxxx and Xxxx X. Xxxxxxxxx
CMD Management Company, LLC (Xxxxxxx Xxxxx)
Xxx X. Xxxxxxxx, XXX
Xxxxxx X. Xxxxx
Xxxxxxx X. Xxxxx
Xxxxxx X. Xxxx
Xxxxxxx C.Q. Xxxx
BIA Digital Partners
Xxx Xxxxxxxx
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