STOCK PURCHASE AGREEMENT
AMONG
COMPASS TELECOMMUNICATIONS, INC.
ADVANCED COMMUNICATIONS GROUP, INC.,
XXXXX LONG DISTANCE SERVICE, INC.,
FIRSTEL, INC.,
TELECOM RESOURCES, INC.
AND
VALU-LINE OF LONGVIEW, INC.
Dated as of July 14, 1999
TABLE OF CONTENTS
ARTICLE I DEFINITIONS. . . . . . . . . . . . . . . . .1
1.1 Definitions . . . . . . . . . . . . . . . .1
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ARTICLE II SALE AND PURCHASE OF SHARES. . . . . . . . .8
2.1 Sale and Purchase. . . . . . . . . . . . . .8
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2.2 Payment of Purchase Price. . . . . . . . . .8
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2.3 Purchase Price Adjustment. . . . . . . . . .8
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ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER . 9
3.1 Due Incorporation. . . . . . . . . . . . . 9
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3.2 Due Authorization. . . . . . . . . . . . . 10
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3.3 Consents and Approvals; Authority Relative
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to this Agreement. . . . . . . . . . . . . 10
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3.4 Capitalization.. . . . . . . . . . . . . . 11
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3.5 Combined Management Report . . . . . . . . 12
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3.6 No Adverse Effects or Changes. . . . . . . 12
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3.7 Properties . . . . . . . . . . . . . . . . 14
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3.8 Condition and Sufficiency of Assets. . . . 14
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3.9 Computer System. . . . . . . . . . . . . . 15
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3.10 Real Property. . . . . . . . . . . . . . . 15
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3.11 Personal Property. . . . . . . . . . . . . 17
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3.12 Accounts Receivable and Advances . . . . . 17
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3.13 Intellectual Property. . . . . . . . . . . 17
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3.14 Contracts. . . . . . . . . . . . . . . . . 18
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3.15 Telecommunication Authorizations . . . . . 20
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3.16 Insurance. . . . . . . . . . . . . . . . . 20
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3.17 Employee Benefit Plans and Employment
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Agreements . . . . . . . . . . . . . . . . 20
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3.18 Employment and Labor Matters . . . . . . . 23
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3.19 Capital Improvements . . . . . . . . . . . 23
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3.20 Taxes. . . . . . . . . . . . . . . . . . . 24
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3.21 No Defaults or Violations. . . . . . . . . 25
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3.22 Environmental Matters. . . . . . . . . . . 25
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3.23 Litigation . . . . . . . . . . . . . . . . 26
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3.24 Bank Accounts. . . . . . . . . . . . . . . 27
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3.25 Customers and Suppliers. . . . . . . . . . 27
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3.26 Claims Against Officers and Directors. . . 27
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3.27 No Other Agreement . . . . . . . . . . . . 27
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3.28 Brokers. . . . . . . . . . . . . . . . . . 27
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3.29 Accuracy of Statements . . . . . . . . . . 27
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3.30 Due Diligence Materials. . . . . . . . . . 28
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i
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER. . 28
4.1 Due Incorporation. . . . . . . . . . . . . 28
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4.2 Due Authorization. . . . . . . . . . . . . 28
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4.3 Consents and Approvals; Authority Relative
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to This Agreement. . . . . . . . . . . . . 28
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4.4 Investment Intent. . . . . . . . . . . . . 29
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4.5 Foreign Carrier Affiliation. . . . . . . . 29
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4.6 Buyer Capitalization . . . . . . . . . . . 29
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4.7 Accuracy of Statements . . . . . . . . . . 29
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ARTICLE V COVENANTS. . . . . . . . . . . . . . . . . 29
5.1 Implementing Agreement . . . . . . . . . . 29
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5.2 Seller Telecommunication Assets
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Conveyance . . . . . . . . . . . . . . . . 29
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5.3 Telecommunication Subsidiary Assumption of
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Liability. . . . . . . . . . . . . . . . . 29
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5.4 Access to Information and Facilities . . . 30
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5.5 Consents and Approvals.. . . . . . . . . . 30
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5.6 Resignation of Officers and Directors. . . 31
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5.7 Use of Name. . . . . . . . . . . . . . . . 31
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5.8 Preservation of Business . . . . . . . . . 31
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5.9 Supplemental Information . . . . . . . . . 34
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5.10 Exclusivity. . . . . . . . . . . . . . . . 34
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5.11 Interim Financial Statements . . . . . . . 35
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5.12 Tax Indemnity. . . . . . . . . . . . . . . 35
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5.13 Inter-Company Agreemtns. . . . . . . . . . 36
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5.14 Excluded Liabilities . . . . . . . . . . . 36
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5.15 Tax Matters. . . . . . . . . . . . . . . . 36
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5.16 338(h)(10) election. . . . . . . . . . . . 36
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5.17 Employment and Employee Benefit Matters. . 37
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5.18 Buyer Capitalization . . . . . . . . . . . 38
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5.19 Sales Support Agreement. . . . . . . . . . 38
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5.20 Advertising Agreement. . . . . . . . . . . 38
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5.21 Transitional Services Agreement. . . . . . 38
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5.22 Consulting Agreement . . . . . . . . . . . 38
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5.23 Telecommunication Services Agreement . . . 38
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5.24 Seller Reimbursements. . . . . . . . . . . 38
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5.25 Severance Payments.. . . . . . . . . . . . 39
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5.26 Non-Competition. . . . . . . . . . . . . . 39
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ARTICLE VI CONDITIONS PRECEDENT TO OBLIGATIONS OF
BUYER. . . . . . . . . . . . . . . . . . . 40
6.1 Warranties True as of Both Present Date
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and Closing Date . . . . . . . . . . . . . 40
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6.2 Compliance with Agreements and Covenants . 40
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6.3 Consents and Approvals . . . . . . . . . . 40
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6.4 Seller Telecommunication Assets
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Conveyance . . . . . . . . . . . . . . . . 40
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6.5 Expiration of HSR Waiting Period . . . . . 41
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6.6 Documents. . . . . . . . . . . . . . . . . 41
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6.7 Telecommunication Subsidiary Material
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Adverse Change . . . . . . . . . . . . . . 41
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ii
6.8 Actions or Proceedings . . . . . . . . . . 41
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6.9 Excluded Liabilities . . . . . . . . . . . 41
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ARTICLE VII CONDITIONS PRECEDENT TO OBLIGATIONS OF
SELLER . . . . . . . . . . . . . . . . . . 41
7.1 Shareholder Approval . . . . . . . . . . . 41
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7.2 Warranties True as of Both Present Date
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and Closing Date . . . . . . . . . . . . . 41
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7.3 Compliance with Agreements and Covenants . 41
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7.4 Expiration of HSR Waiting Period . . . . . 41
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7.5 Documents. . . . . . . . . . . . . . . . . 42
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7.6 Actions or Proceedings . . . . . . . . . . 42
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7.7 Employee Benefits. . . . . . . . . . . . . 42
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ARTICLE VIII CLOSING . . . . . . . . . . . . . . . . . 42
8.1 Closing. . . . . . . . . . . . . . . . . . 42
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8.2 Deliveries by Seller . . . . . . . . . . . 42
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8.3 Deliveries by Buyer. . . . . . . . . . . . 43
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ARTICLE IXX TERMINATION. . . . . . . . . . . . . . . . 44
9.1 Termination. . . . . . . . . . . . . . . . 44
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9.2 Effect of Termination. . . . . . . . . . . 44
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ARTICLE X INDEMNIFICATION. . . . . . . . . . . . . . 45
10.1 Survival . . . . . . . . . . . . . . . . . 45
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10.2 Limits on Indemnification. . . . . . . . . 45
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10.3 Indemnification by Seller. . . . . . . . . 45
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10.4 Indemnification by Buyer . . . . . . . . . 46
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10.5 Claims . . . . . . . . . . . . . . . . . . 46
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10.6 Notice of Third-Party Claims; Assumption
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of Defense . . . . . . . . . . . . . . . . 47
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10.7 Settlement or Compromise . . . . . . . . . 47
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10.8 Failure of Indemnifying Person to Act. . . 48
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10.9 Tax Character. . . . . . . . . . . . . . . 48
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ARTICLE XI MISCELLANEOUS. . . . . . . . . . . . . . . 48
11.1 Expenses . . . . . . . . . . . . . . . . . 48
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11.2 Amendment. . . . . . . . . . . . . . . . . 48
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11.3 Notices. . . . . . . . . . . . . . . . . . 48
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11.4 Waivers. . . . . . . . . . . . . . . . . . 49
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11.5 Counterparts . . . . . . . . . . . . . . . 49
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11.6 Interpretation . . . . . . . . . . . . . . 49
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11.7 Applicable Law . . . . . . . . . . . . . . 50
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11.8 Assignment . . . . . . . . . . . . . . . . 50
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11.9 No Third-Party Beneficiaries . . . . . . . 50
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11.10 Publicity. . . . . . . . . . . . . . . . . 50
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iii
11.11 Liquidated Damages . . . . . . . . . . . . 50
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11.12 Effect of Investigation. . . . . . . . . . 51
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11.13 Further Assurances . . . . . . . . . . . . 51
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11.14 Severability . . . . . . . . . . . . . . . 51
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11.15 Remedies Cumulative. . . . . . . . . . . . 51
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11.16 Entire Understanding . . . . . . . . . . . 51
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11.17 Jurisdiction of Disputes; Waiver of Jury
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Trial. . . . . . . . . . . . . . . . . . . 51
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iv
STOCK PURCHASE AGREEMENT
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THIS STOCK PURCHASE AGREEMENT (the "Agreement") is made as of
July 14, 1999 among COMPASS TELECOMMUNICATIONS, Inc. a Delaware corporation
("Buyer"), and XXXXX LONG DISTANCE SERVICE, INC., a Kansas corporation,
FIRSTEL, INC., a South Dakota corporation, TELECOM RESOURCES, INC., a Texas
corporation, VALU-LINE OF LONGVIEW, INC., a Texas corporation, and ADVANCED
COMMUNICATIONS GROUP, INC., a Delaware corporation (the "Seller").
P R E A M B L E:
WHEREAS, Buyer wishes to purchase from Seller and Seller wishes to
sell to Buyer all of the outstanding Telecommunication Subsidiary Shares
(as hereinafter defined) of the Telecommunication Subsidiaries (as
hereinafter defined) of the Seller; and
WHEREAS, the Board of Directors of Seller has (i) determined that
the sale of the Telecommunication Subsidiary Shares is fair to the
shareholders of Seller common stock and is in the best interests of such
shareholders and (ii) approved and adopted this Agreement and the
transactions contemplated hereby and recommended approval and adoption of
this Agreement by the shareholders of the Seller.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants, agreements and warranties herein contained, the parties agree as
follows:
ARTICLE I.
DEFINITIONS
1.1 Definitions. The following terms shall have the following
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meanings for the purposes of this Agreement:
"Accumulated Depreciation" shall mean the aggregate amount shown as
such on the applicable combining balance sheet of the Telecommunication
Subsidiaries, determined in a manner consistent with Seller's past practice
in preparing the Combined Management Reports.
"Acquisition Proposal" means any inquiry offer, or proposal
regarding any of the following (other than the transactions contemplated by
this Agreement) and involving the Telecommunication Subsidiaries: Any
merger, reorganization, consolidation, share exchange, recapitalization,
business combination, liquidation, dissolution, or other similar
transaction involving, or, any sale, lease, exchange, mortgage, pledge,
transfer or other disposition of, all or any significant portion of the
assets or ten percent (10%) or more of the Telecommunication Subsidiaries
Shares, in a single transaction or series of related transactions which
could reasonably be expected to interfere with the completion of the
transactions contemplated herein.
1
"Advertising Agreement" shall mean that agreement to be negotiated
between the Parties and which will incorporate the principle terms
identified in Exhibit C.
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"Affiliate" means, with respect to any specified Person, (1) any
other Person which, directly or indirectly, owns or controls, is under
common ownership or control with, or is owned or controlled by, such
specified Person, (2) any other Person which is a director, officer or
partner or is, directly or indirectly, the beneficial owner of ten percent
(10%) or more of any class of its equity securities of the specified Person
or a Person described in clause (1) of this paragraph, (3) another Person
of which the specified Person is a director, officer or partner or is,
directly or indirectly, the beneficial owner of ten percent (10%) or more
of any class of equity securities, or (4) any relative or spouse of the
specified Person or any of the foregoing Persons.
"Business Day" means any day of the year other than (i) any Saturday
or Sunday or (ii) any other day on which commercial banks located in New
York City are generally closed for business.
"Buyer Confidential Information" means all confidential information
concerning Buyer or their Affiliates, excluding any information which
Seller can demonstrate (1) was previously known by Seller without any
obligation to hold it in confidence; (2) was received from a third party
free to disclose such information without restriction; (3) was
independently developed by Seller without the use of Buyer's Confidential
Information; (4) was approved for release by written authorization of
Buyer, but only to the extent of such authorization; (5) is required by law
or regulation to be disclosed, but only to the extent and for the purposes
of such required disclosure; (6) is disclosed in response to a valid order
of a court or other governmental body of the United States or any political
subdivision thereof, but only to the extent of and for the purposes of such
order, and only if Seller first notifies Buyer of the order to permit Buyer
to seek an appropriate protection order; or (7) is or becomes available to
the public through no breach of this Agreement.
"Closing" means the consummation of the transactions contemplated
herein.
"Closing Date" means the date on which the Closing occurs.
"Closing Date Current Assets" shall mean the current assets of the
Telecommunication Subsidiaries as set forth on the Closing Date Statement.
"Closing Date Current Liabilities" shall mean the current
liabilities of the Telecommunication Subsidiaries as set forth on the
Closing Date Statement.
"Closing Date Statement" shall mean a statement of the Closing Date
Current Assets, Closing Date Current Liabilities and Property, Plant and
Equipment and other assets and liabilities of the Telecommunication
Subsidiaries as of the Closing Date prepared in accordance with the
Principles and Procedures attached hereto as Exhibit G and in the form of
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Exhibit B hereto.
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"Code" shall mean the United States Internal Revenue Code of 1986,
as amended.
"Combined Management Reports" shall have the meaning set forth in
Section 3.5 hereof.
2
"Commission" means those certain state utility regulatory
commissions and the FCC under whose respective authorities the Seller and
the Telecommunication Subsidiaries have received Telecommunication
Authorizations to offer telecommunication services.
"Computer System" means all computer hardware and software and
related materials used by the Telecommunication Subsidiaries in their
respective businesses.
"Consideration" has the meaning set forth in Section 2.2.
"Contract" means any contract, lease, commitment, understanding,
sales order, purchase order, agreement, indenture, mortgage, note, bond,
right, warrant, instrument, plan, permit or license, whether written or
oral, which is intended or purports to be binding and enforceable.
"Dollars" or numbers preceded by the symbol "$" means amounts in
United States Dollars.
"Environmental Law" shall mean any Law which relates to or otherwise
imposes liability or standards of conduct concerning discharges, emissions,
releases or threatened releases of noises, odors or any pollutants,
contaminants or hazardous or toxic wastes, substances or materials, whether
as matter or energy, into ambient air, water, or land, or otherwise
relating to the manufacture, processing, generation, distribution, use,
treatment, storage, disposal, cleanup, transport or handling of pollutants,
contaminants, or hazardous or toxic wastes, substances or materials,
including the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, the Superfund Amendments and
Reauthorization Act of 1986, as amended, the Resource Conservation and
Recovery Act of 1976, as amended, the Toxic Substances Control Act of 1976,
as amended, the Federal Water Pollution Control Act Amendments of 1972, the
Clean Water Act of 1977, any so-called "Superfund" or "Superlien Law"
including those already referred to in this definition as amended, and any
other Law of any Governmental Authority having a similar subject matter in
effect as of the Execution Date.
"Environmental Permit" shall mean any permit, license, approval,
consent or other authorization required by or pursuant to any applicable
Environmental Law.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Affiliate" shall mean, with respect to any Person, each
corporation, trade or business that is, along with such Person, part of the
same controlled group of corporations, trades or businesses under common
control within the meaning of sections 414(b) or (c) of the Code.
"Execution Date" means (i) the date this Agreement is signed by the
parties hereto and (ii) for purposes of bringing down the representations
and warranties to the Closing Date, the Closing Date.
"FCC" means the Federal Communication Commission.
"Xxxxx" means Xxxxx Long Distance Service, Inc., a Kansas
corporation, sometimes referred to individually hereinafter as a
Telecommunication Subsidiary, and with each other Telecommunication
Subsidiary as the Telecommunication Subsidiaries.
3
"FirsTel" means FirsTel Services, Inc, a South Dakota corporation,
sometimes referred to individually hereinafter as a Telecommunication
Subsidiary, and with each other Telecommunication Subsidiary as the
Telecommunication Subsidiaries.
"Governmental Authority" means the government of the United States
or any state or political subdivision thereof and any entity, body or
authority exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"Hazardous Substance" means any material or substance which, as of
the Execution Date (i) constitutes a hazardous substance, toxic substance
or pollutant (as such terms are defined by or pursuant to any applicable
Environmental Law) or (ii) is regulated or controlled as a hazardous
substance, toxic substance, pollutant or other regulated or controlled
material, substance or matter pursuant to any applicable Environmental Law.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder.
"Indemnified Person" means the Person or Persons entitled to, or
claiming a right to, indemnification.
"Indemnifying Person" means the Person or Persons claimed by the
Indemnified Person to be obligated to provide indemnification.
"Intellectual Property" means any and all trademarks, trade names,
service marks, patents, copyrights (including any registrations,
applications, licenses or rights relating to any of the foregoing),
technology, trade secrets, inventions, know-how, designs, computer
programs, processes, formulas and all other intangible assets, properties
and rights. The "Telecommunication Subsidiary Intellectual Property" shall
mean any and all Intellectual Property used by the Telecommunication
Subsidiaries in the conduct of their businesses.
"Interim Financial Statements" shall mean any financial statements
made available to Buyer pursuant to Section 5.11.
"Law" means any law, statute, regulation, ordinance, rule, order,
decree, judgment, consent decree, settlement agreement, term or condition
made a part of any Telecommunication Authorization or governmental
requirement enacted, promulgated, entered into, agreed or imposed by any
Governmental Authority.
"Leased Property" means all real property and interests in real
property leased by the Telecommunication Subsidiaries.
"Lien" means any mortgage, lien (except for any lien for Taxes not
yet due and payable), charge, restriction, pledge, security interest,
option, lease or sublease, claim, right of any third party, easement,
encroachment or encumbrance.
4
"Loss" or "Losses" means any and all liabilities, losses, costs,
claims, damages, penalties and expenses (including attorneys' fees and
expenses and costs of investigation and litigation). In the event any of
the foregoing are indemnifiable hereunder, the terms "Loss" and "Losses"
shall include any and all attorneys' fees and expenses and costs of
investigation and litigation incurred by the Indemnified Person in
enforcing such indemnity. No Loss shall be reduced by reason of tax
benefits allegedly enjoyed as a result of such Loss by any Indemnified
Party. Without limitation, "Loss" and "Losses" shall include fees and
disbursements of counsel incurred by any Indemnified Party in an action or
proceeding between the Indemnifying Party and the Indemnified Party or
between the Indemnified Party and any third party or otherwise.
"Owned Property" means all real property and interests in real
property owned in fee by the Telecommunication Subsidiaries.
"Person" means any individual, corporation, proprietorship, firm,
partnership, limited partnership, trust, association or other entity,
including a government or government department, agency or instrumentality.
"Property, Plant & Equipment" shall mean, as of any given time, the
aggregate book value of the Telecommunication Subsidiaries' plant, property
and equipment exclusive of Accumulated Depreciation and impairment
reserves, determined on a combined basis in a manner consistent with
Seller's past practices and to the presentation in the Combined Management
Report, Exhibit A, which amount as of May 31, 1999 was $38,447,188.
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"Preliminary Current Assets" shall mean the current assets of the
Telecommunication Subsidiaries as set forth in column h, the Pro Forma
Telecommunication column, of the Preliminary Statement.
"Preliminary Current Liabilities" shall mean the current liabilities
of the Telecommunication Subsidiaries as set forth in column h, the Pro
Forma Telecommunication column, of the Preliminary Statement.
"Preliminary Statement" as of the day immediately prior to the
Closing Date, shall mean the balance sheet/financial statements of Seller
and the Telecommunication Subsidiaries as of the most recently completed
month-end for which such financial statements are available (but in any
event as of a month-end no more than forty (40) days prior to such date),
prepared in a manner consistent with the Combined Management Report,
Section 3.5 hereof and the past practices of the Seller and the
Telecommunication Subsidiaries in the form of Exhibit B attached hereto.
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"Related Agreement" means any Contract which is or is to be entered
into at the Closing or otherwise pursuant to this Agreement, including,
without limitation, the Advertising Agreement, Transitional Services
Agreement, Consulting Agreement, the Xxxx of Sale, Assignment and
Assumption Agreement and the Sales Force Agreement. The Related Agreements
executed by a specified Person shall be referred to as "such Person's
Related Agreements," "its Related Agreements" or another similar
expression.
5
"Seller Confidential Information" means all confidential information
concerning the Seller or its Affiliates, excluding any information which
Buyer can demonstrate (1) was previously known by Buyer without any
obligation to hold it in confidence; (2) was received from a third party
free to disclose such information without restriction; (3) was
independently developed by Buyer without the use of Seller's Confidential
Information; (4) was approved for release by written authorization of
Seller, but only to the extent of such authorization; (5) is required by
law or regulation to be disclosed, but only to the extent and for the
purposes of such required disclosure; (6) is disclosed in response to a
valid order of a court or other governmental body of the U.S. or any
political subdivision thereof, but only to the extent of and for the
purposes of such order, and only if Buyer first notifies Seller of the
order to permit Seller to seek an appropriate protection order; or (7) is
or becomes available to the public through no breach of this Agreement.
"Seller Telecommunication Assets" means, those (a) trade receivables
due from customers for services provided including billed and unbilled
amounts, (b) other receivables due from third parties relating to
telecommunication activities, (c) inventory of telecommunications equipment
and supplies, (d) prepayments and deposits for services or other purchases
relating to telecommunication operations, (e) Property Plant and Equipment
and other assets relating to the telecommunication operations, including
but not limited to the Kinnet IRU and the Xxxxx Advertising Agreement, (f)
certain office equipment, (g) certain Telecommunications Authorizations and
(h) related reserves for doubtful accounts, depreciation and amortization,
in each case, as of the Closing Date.
"Seller Telecommunication Liabilities" means, those Liens, accrued
liabilities, trade payables, equipment leases, vehicle leases, sales office
and administrative office leases, capital leases, switch leases, and any
and all other obligations pursuant to a Contract to pay, provide security
for, guaranty, or otherwise be responsible for any sum, in each case,
arising out of, in any way connected with, or related to the operations of
each Telecommunication Subsidiary in each case, as of the Closing Date.
"Subsidiaries" means any Person 50.1% or more of the voting power of
which is controlled by another Person.
"Superior Proposal" means a bona fide Acquisition Proposal made by a
third Person that the Board of Directors of the Seller determines in its
good faith judgment to be more favorable to the Seller's shareholders than
the transaction contemplated herein, based upon the consideration to be
paid pursuant to the Acquisition Proposal being greater than the
Consideration by no less than ten percent (10%) and for which financing, to
the extent required, is then committed or which, in the good faith judgment
of the Board of Directors of the Seller is reasonably capable of being
obtained by such third Person.
"Tax Return" means any report, return or other information required
to be supplied to a Governmental Authority in connection with any Taxes.
"Taxes" means all taxes, charges, fees, duties, levies or other
assessments, including income, gross receipts, net proceeds, ad valorem,
turnover, real and personal property (tangible and intangible), sales, use,
franchise, excise, value added, stamp, leasing, lease, user, transfer,
fuel, excess profits, occupational, interest equalization, windfall
profits, severance, employee's income withholding, other
6
withholding, unemployment and Social Security taxes, which are imposed by
any Governmental Authority, and such term shall include any interest,
penalties or additions to tax attributable thereto.
"Telecommunication Authorization" means all orders, approvals and
consents granted by any Governmental Authority, and registrations made with
any Governmental Authority, permitting the provision of local or long
distance or international telecommunication services.
"Telecommunication Business" shall mean the telecommunication
services that each of Seller and the Telecommunication Subsidiaries provide
as of the Closing Date or are authorized to provide pursuant to the
respective Telecommunication Authorizations that each has been granted.
"Telecommunication Subsidiaries" means Xxxxx, FirsTel, TRI, and
Valu-Line and, as applicable, their Subsidiaries.
"Telecommunication Subsidiary" means Xxxxx, FirsTel, TRI, or Valu-
Line individually and, as applicable, the respective Subsidiary of each.
"Telecommunication Subsidiary Material Adverse Change" means a
change in the business, assets, liabilities, cash flows, condition
(financial or otherwise) or prospects of any one or all of the
Telecommunications Subsidiaries which is materially adverse to the
Telecommunication Subsidiaries; provided, however, that for purposes of
determining whether there shall have been any such Telecommunication
Subsidiary Material Adverse Change, (i) any adverse change resulting from
or relating to general business or economic conditions shall be disregarded
and (ii) any adverse change resulting from or relating to conditions
generally affecting the industry in which the Telecommunications
Subsidiaries compete shall be disregarded.
"Telecommunication Subsidiary Material Adverse Effect" means an
effect on the business, assets, liabilities, cash flows, condition
(financial or otherwise) or prospects of any one or all of the
Telecommunication Subsidiaries which is materially adverse to the
Telecommunications Subsidiaries; provided, however, that for purposes of
determining whether there shall have been any such Telecommunication
Subsidiary Material Adverse Effect, (i) any adverse effect resulting from
or relating to general business or economic conditions shall be disregarded
and (ii) any adverse effect resulting from or relating to conditions
generally affecting the industry in which the Telecommunications
Subsidiaries compete shall be disregarded.
"Telecommunication Subsidiary Shares" means the (a) 10,000 shares of
Common Stock, no par value per share, of Xxxxx, (the "Xxxxx Common Stock"),
(b) 1,064.14 shares of common stock, $1.00 par value per share, of FirsTel,
(the "FirsTel Common Stock"), (c) 1,000 shares of common stock, $.001 par
value per share, of TRI, (the "TRI Common Stock"), and (d) 1,000 shares of
common stock, no par value per share of Valu-Line (the "Valu-Line Common
Stock"), all of which are held of record by Seller.
"TRI" means Telecom Resources, Inc., a Texas corporation sometimes
referred to individually hereinafter as a Telecommunication Subsidiary and
with each other Telecommunication Subsidiary as the Telecommunication
Subsidiaries.
7
"Transaction Contingency Adjustment Factor" means, an amount that
shall be an adjustment to the Purchase Price and shall be calculated as
equal to the product of $15,000 multiplied by the number of
Telecommunication Authorization Consents, required for the consummation of
the transactions contemplated hereby or the ownership and operation by
Buyer of the Telecommunication Subsidiaries as identified on Schedule
---------
3.3(a), that are not identified as material on such schedule, for which
------
Buyer has determined it has not received written evidence (reasonably
satisfactory to Buyer).
"Transition Services Agreement" means that agreement, to be entered
into among Seller and Buyer in a form substantially similar to Exhibit D.
---------
"Transition Services Period" means the thirty (30) days after the
Closing Date, unless further extended by the mutual agreement of Seller and
Buyer.
"Valu-Line" means Valu-Line of Longview, Inc., a Texas corporation
sometimes referred to individually hereinafter as a Telecommunication
Subsidiary and with each other Telecommunication Subsidiary as the
Telecommunication Subsidiaries.
ARTICLE II.
SALE AND PURCHASE OF SHARES
2.1 Sale and Purchase. Seller hereby agrees to sell to Buyer the
-----------------
Telecommunication Subsidiary Shares, which the Telecommunication Subsidiary
Shares in the aggregate represent 100% of the issued and outstanding shares
of capital stock of the Telecommunication Subsidiaries, free and clear of
all Liens, and Buyer hereby agrees to purchase all such Telecommunication
Subsidiary Shares.
2.2 Payment of Purchase Price. In consideration for the
-------------------------
Telecommunication Subsidiary Shares, Buyer shall pay to Seller Forty-Nine
Million Eight Hundred Thousand and No/100s Dollars ($49,800,000.00) less
(a) an amount, if any, by which Preliminary Current Assets are less than
Preliminary Current Liabilities (the "Initial Adjustment Amount") and (b)
an amount, if any, that shall be calculated on or immediately prior to the
Closing Date upon a determination of the applicability of the transaction
contingency adjustment factor in an amount which is equal to, the
Transaction Contingency Adjustment Factor (together, the "Consideration"),
subject to subsequent adjustment as provided in Section 2.3. The
Consideration shall be paid to Seller by means of a certified check or by
wire transfer of immediately available funds to a bank account as
designated by Seller to Buyer no later than the third Business Day prior to
the Closing Date.
2.3 Purchase Price Adjustment.
-------------------------
(a) Within fourteen (14) Business Days after the Closing Date
Current Liabilities, Closing Date Current Assets, and Property, Plant &
Equipment are finally determined in accordance with this Section 2.3 and in
accordance with the form of column "h", the Pro Forma Telecommunication
column of Exhibit B, (x) (i) if Closing Date Current Assets are less than
---------
Closing Date Current Liabilities in an amount in excess of the Initial
Adjustment Amount, Seller shall pay to Buyer the amount of such excess or
(ii) if Closing Date Current Assets are less than the Closing Date Current
Liabilities in an amount less than the Initial Adjustment Amount, Buyer
shall pay to Seller the
8
difference between the Initial Adjustment Amount and the result of Closing
Date Current Assets minus Closing Date Current Liabilities, and (y) Seller
shall pay to Buyer the amount, if any, of the decrease in Property, Plant &
Equipment (exclusive of Accumulated Depreciation and impairment reserves)
from May 31, 1999 to the Closing Date.
(b) In order to confirm the Closing Date Current Liabilities,
Closing Date Current Assets and Property, Plant & Equipment as of the
Closing Date, Buyer will cause the Closing Date Statement to be prepared in
a manner consistent with Exhibit B, using the categories set forth
---------
thereon in accordance with the Principles and Procedures set forth on
Exhibit G attached hereto, prepared as promptly as practicable after the
---------
Closing Date, but in any event within forty-five (45) days of the Closing
Date. The Closing Date Statement shall be attested to by
PriceWaterhouseCoopers, LLP, Buyer's independent public accountants. As
soon as practicable, but within sixty (60) days of receipt of the Closing
Date Statement, PriceWaterhouseCoopers, LLP will issue a preliminary
opinion on the Closing Date Statement.
Seller and its independent public accountants, Peat Marwick, shall
be entitled to review PriceWaterhouseCoopers, LLP's workpapers at the
completion of the Closing Date audit. PriceWaterhouseCoopers, LLP shall
make its Closing Date audit workpapers and its draft opinion with respect
thereto available to Seller and Peat Marwick as soon as practicable.
Within sixty (60) days after the receipt by Seller and Peat Marwick of the
Closing Date Statement and the last of PriceWaterhouseCoopers, LLP's
workpapers and its draft opinion, Seller and Peat Marwick may propose any
adjustments thereto which Seller deems to be reasonably appropriate.
PriceWaterhouseCoopers, LLP and Peat Marwick shall work together to
promptly resolve any proposed adjustments and, upon resolution of any such
adjustments, PriceWaterhouseCoopers, LLP shall issue a final opinion on the
Closing Date Statement.
In the event that any disagreement between PriceWaterhouseCoopers,
LLP and Peat Marwick is not resolved by agreement between Buyer and Seller
within thirty (30) days after the adjustments are proposed, Xxxxxx
Xxxxxxxx, LLP, independent public accountants (the "Referee"), will be
promptly engaged to render within thirty (30) days from the date of such
engagement an opinion regarding the issue or issues in dispute and such
opinion (absent manifest error) shall be binding on the parties hereto.
Buyer shall pay the fees and expenses of PriceWaterhouseCoopers, LLP
incurred in connection with this Section 2.3 and Seller shall pay the fees
and expenses of Peat Marwick. Buyer and Seller shall each pay one half of
the fees and expenses of the Referee.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer, as of the date of this
Agreement and as of the Closing Date (as if such representations and
warranties were remade on the Closing Date), as follows:
3.1 Due Incorporation. The Seller and each Telecommunication
-----------------
Subsidiary is duly organized, validly existing and in good standing under
the laws of its respective jurisdiction of organization, with
9
all requisite corporate power and authority to own, lease and operate their
respective properties and to carry on their respective businesses as they
are now being owned, leased, operated and conducted. Except where the
failure to be so qualified would have a Telecommunication Subsidiary
Material Adverse Effect on the business or properties of the
Telecommunication Subsidiaries, each Telecommunication Subsidiary is
licensed or qualified to do business and is in good standing (where the
concept of "good standing" is applicable) as a foreign corporation in each
jurisdiction where the nature of the properties owned, leased or operated
by it and the business transacted by it require such licensing or
qualification. The jurisdictions in which the Telecommunication
Subsidiaries are incorporated and licensed or qualified to do business as a
foreign corporation are set forth on Schedule 3.1. True, correct and
------------
complete copies of the Certificates of Incorporation and Bylaws, as
amended, and all minutes of all meetings (or written consents in lieu of
meetings) of the Boards of Directors (and all committees thereof) and
stockholders of the Telecommunication Subsidiaries have been made available
to Buyer. Except as set forth on Schedule 3.1, all actions taken by the
------------
Board of Directors (and all committees thereof) and stockholders of the
Telecommunication Subsidiaries after February 18, 1998 are reflected in
such minutes and consents. Except as set forth on Schedule 3.1, none of
------------
the Telecommunication Subsidiaries has any direct or indirect subsidiaries,
either wholly or partially owned, and none of the Telecommunication
Subsidiaries hold any direct or indirect economic, voting or management
interest in any Person or directly or indirectly own any security issued by
any Person.
3.2 Due Authorization. The Seller and the Telecommunication
-----------------
Subsidiaries have full power and authority to enter into this Agreement and
each of them has full power and authority to enter into the Related
Agreements to which each is a party and to consummate the transactions
contemplated hereby and thereby. The Seller and the Telecommunication
Subsidiaries have duly and validly executed and delivered this Agreement
and each of them has duly and validly executed and delivered (or prior to
or at the Closing will duly and validly execute and deliver) their
respective Related Agreements. This Agreement constitutes legal, valid and
binding obligations of the Seller and the Telecommunication Subsidiaries
and each Related Agreement upon execution and delivery by the parties
signatory thereto will constitute legal, valid and binding obligations of
the signatories thereof, in each case, enforceable in accordance with their
respective terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, moratorium, reorganization or similar
laws in effect which affect the enforcement of creditors' rights generally
and by equitable limitations on the availability of specific remedies.
3.3 Consents and Approvals; Authority Relative to this Agreement.
------------------------------------------------------------
(a) Except as set forth on Schedule 3.3(a), no Telecommunication
---------------
Authorization, consent, permit, authorization or approval of, filing or
registration with, or cooperation from, any Governmental Authority or any
other Person not a party to this Agreement (individually and collectively a
"Consent") is necessary in connection with the execution, delivery and
performance by the Seller and the Telecommunication Subsidiaries of this
Agreement, the Related Agreements or the consummation of the transactions
contemplated hereby or thereby.
(b) Except as set forth on Schedule 3.3(b), the execution,
---------------
delivery and performance by the Seller and the Telecommunication
Subsidiaries of this Agreement and their respective Related Agreements does
not and will not, and the consummation of the transactions contemplated
hereby and
10
thereby does not and will not, (i) violate any Law; (ii) violate or
conflict with, result in a breach or termination of, constitute a default
or give any third party any additional right (including a termination
right) under, permit cancellation of, result in the creation of any Lien
upon any of the assets or properties of the Seller or the Telecommunication
Subsidiaries under, or result in or constitute a circumstance which, with
or without notice or lapse of time or both, would constitute any of the
foregoing under, any Contract to which the Seller or any of the
Telecommunication Subsidiaries is a party or by which the Seller or any
Telecommunication Subsidiaries or any of their assets or properties are
bound; (iii) permit the acceleration of the maturity of any indebtedness of
any Seller or of the Telecommunication Subsidiaries or indebtedness secured
by their assets or properties; or (iv) violate or conflict with any
provision of any of the certificates of incorporation, charters, bylaws or
similar organizational instruments of each of the Seller or any of the
Telecommunication Subsidiaries, except in the case of clauses (i), (ii),
and/or (iii) above, as would not have a Telecommunication Subsidiary
Material Adverse Effect or a material adverse effect on the business,
operations, assets, liabilities, results of operations, cash flows,
condition (financial or otherwise) or prospects of the Seller.
3.4 Capitalization.
--------------
(a) The authorized capital stock of each of the Telecommunication
Subsidiaries consists of the shares of common stock, having the respective
par values per share, and number of shares of each of which are currently
issued and outstanding as set forth on Schedule 3.4. All of such
------------
Telecommunication Subsidiaries Shares (i) are validly issued, fully paid
and non-assessable and (ii) are, and when issued were, free of preemptive
rights. Seller owns, or as of the Closing will own, (legally and
beneficially) all of such Telecommunication Subsidiaries Shares, free and
clear of any and all Liens. Except as set forth in Schedule 3.4, there
------------
are no shares of capital stock of the Telecommunication Subsidiaries held
in the treasury of any Telecommunication Subsidiary and no shares of
capital stock of any Telecommunication Subsidiary are currently reserved
for issuance for any purpose or upon the occurrence of any event or
condition.
(b) Except as set forth in Schedule 3.4, there are no shares of
------------
capital stock or other securities (whether or not such securities have
voting rights) of the Telecommunication Subsidiaries issued or outstanding
or any subscriptions, options, warrants, calls, rights, convertible
securities or other agreements or commitments of any character obligating,
or obligating either or any of Seller, the Telecommunication Subsidiaries
or any of their Affiliates to issue, transfer or sell, or cause the
issuance, transfer or sale of, any shares of capital stock or other
securities (whether or not such securities have voting rights) of the
Telecommunication Subsidiaries. Except as set forth in Schedule 3.4,
------------
there are no outstanding contractual obligations of either Seller or any of
the Telecommunication Subsidiaries which relate to the purchase, sale,
issuance, repurchase, redemption, acquisition, transfer, disposition,
holding or voting of any shares of capital stock or other securities of the
Telecommunication Subsidiaries. Except (i) as set forth on Schedule 3.4
------------
and (ii) for Seller's rights as a holder of Telecommunication Subsidiary
Shares, no Person has any right to participate in, or receive any payment
based on any amount relating to, the revenue, income, value or net worth of
the Telecommunication Subsidiaries or any component or portion thereof, or
any increase or decrease in any of the foregoing.
(c) The assignments, endorsements, stock powers and other
instruments of transfer delivered by Seller to Buyer at the Closing will be
sufficient to transfer such Seller's entire interest, legal and beneficial,
in the Telecommunication Subsidiary Shares. Seller has, and on the Closing
Date will have,
11
full power and authority to convey good title to all of the
Telecommunication Subsidiary Shares, and upon transfer to Buyer of the
certificates representing such Telecommunication Subsidiary Shares, Buyer
will receive good title to such Telecommunication Subsidiary Shares, free
and clear of all Liens.
3.5 Combined Management Reports. Attached hereto as Exhibit A
--------------------------- ---------
is a copy of the unaudited balance sheet and statement of income and
related reports of the Seller as of May 31, 1999 (collectively, the
"Combined Management Reports"). Except as set forth on Schedule 3.5,
----------------------------- ------------
the Combined Management Reports present fairly the financial position,
assets and liabilities of the Seller and the Telecommunication
Subsidiaries, as applicable, as of the dates thereof and the revenues,
expenses, and results of the operation of the Telecommunication
Subsidiaries and the Seller for the periods covered thereby and changes in
the financial position of the Telecommunication Subsidiaries and the Seller
with respect to the dates thereof and the periods covered thereby, in each
case in conformity with the past accounting practices of the Seller and the
Telecommunication Subsidiaries, as applicable, consistently applied during
such periods and in conformity with GAAP, except for the following
exceptions (i) the absence of any statements of retained earnings or cash
flows; (ii) the absence of notes to the Combined Management Reports; (iii)
the nature of the presentation of the combining statement of income and
combining balance sheet and other reports (such statements may not present
a complete statement as required by GAAP or may be supplemental information
not required by GAAP); (iv) no allocation has been made for shared
resources among different entities and divisions (v) the telecom operations
and related assets and liabilities have not been presented as discontinued
operations and assets held for sale; (vi) the discontinuance of deferring
line acquisition cost and amortizing previously deferred amounts; (vii) the
write-off of certain intangible assets, including but not limited to,
goodwill, customer lists and deferred line costs; and (viii) the
discontinuance of expense recognition relating to the above changes.
Except as set forth on Schedule 3.5 attached hereto or in the balance
------------
sheets and notes thereto included in the Combined Management Reports, there
are no liabilities, debts, claims or obligations (including "off-balance
sheet" liabilities, debts, claims or obligations), whether accrued,
absolute, contingent or otherwise, whether due or to become due, for which
the Seller or the Telecommunication Subsidiaries are or were liable which
could materially and adversely affect the business or operation of the
Seller or the Telecommunication Subsidiaries or any of the assets of the
Telecommunication Subsidiaries or any of the right of the Seller therein or
thereto.) Except as set forth on Schedules 3.5, 3.7, 3.11 or 5.14
-------------- ---- ---- ----
or in the "Total Telecom" column of the Combined Management Reports, none
of the Telecommunication Subsidiaries will have any indebtedness for
borrowed money to any third party or to any Affiliate. The Combined
Management Reports are in accordance with the books and records of the
Seller and each Telecommunication Subsidiary, as applicable, and do not
reflect any transactions which are not bona fide transactions and do not
contain any untrue statement of a material fact or omit to state any
material fact necessary to make the statements contained therein, in light
of the circumstances in which they were made, not misleading.
3.6 No Adverse Effects or Changes. Except as set forth
-----------------------------
on Schedule 3.6, since May 31, 1999 until the Execution Date, the
------------
Telecommunication Subsidiaries have conducted their respective businesses
and operations in all respects only in the ordinary course and consistent
with past practices. Without limiting the foregoing, except as set forth
on Schedule 3.6, since May 31, 1999 until the Execution Date, the
------------
Telecommunication Subsidiaries have not:
(a) suffered any Telecommunication Subsidiary Material Adverse
Change;
12
(b) suffered any material damage, destruction or Loss to any of
its assets or properties (whether or not covered by insurance);
(c) incurred any obligation or entered into any Contract which
either (i) required a payment by any party in excess of, or a series of
payments which in the aggregate exceed, $50,000 or provides for the
delivery of goods or performance of services, or any combination thereof,
having a value in excess of $50,000, or (ii) has a term of, or requires the
performance of any obligations by any Telecommunication Subsidiary over a
period in excess of, six months and is not terminable within 90 (ninety)
days without payment of a termination fee or similar payment in excess of
$25,000;
(d) taken any action or entered into or authorized any Contract or
transaction other than in the ordinary course of business and consistent
with past practice, including, without limitation, the licensing of
products or software to third parties;
(e) sold, transferred, conveyed, assigned or otherwise disposed of
any of its assets or properties, except sales of inventory in the ordinary
course of business and consistent with past practice;
(f) waived, released or canceled any claims against third parties
for debts owing to it for amounts in excess of $25,000, or any rights which
have a value in excess of $25,000;
(g) made any material changes in its accounting systems, policies,
principles or practices;
(h) entered into, authorized or permitted any transaction with
Seller or any Affiliate of Seller;
(i) authorized for issuance, issued, sold, delivered or agreed or
committed to issue, sell or deliver (whether through the issuance or
granting of options, warrants, convertible or exchangeable securities,
commitments, subscriptions, rights to purchase or otherwise) any shares of
its capital stock or any other securities, or amended any of the terms of
any such securities;
(j) split, combined, or reclassified any shares of its capital
stock, declared, set aside or paid any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect
of its capital stock, or redeemed or otherwise acquired any of its
securities.
(k) made any borrowing, incurred any debt (other than trade
payables in the ordinary course of business and consistent with past
practice), or assumed, guaranteed, endorsed (except for the negotiation or
collection of negotiable instruments in transactions in the ordinary course
of business and consistent with past practice) or otherwise become liable
(whether directly, contingently or otherwise) for the obligations of any
other Person, or made any payment or repayment in respect of any
indebtedness (other than trade payables and accrued expenses in the
ordinary course of business and consistent with past practice);
(l) made any loans, advances or capital contributions to, or
investments in, any other Person;
13
(m) entered into, adopted, amended or terminated any bonus, profit
sharing, compensation, termination, stock option, stock appreciation right,
restricted stock, performance unit, pension, retirement, deferred
compensation, employment, severance or other employee benefit agreements,
trusts, plans, funds or other arrangements for the benefit or welfare of
any director, officer, consultant or employee, or increased in any manner
the compensation or fringe benefits of any director, officer, consultant or
employee or paid any benefit not required by any existing plan and
arrangement or entered into any contract, agreement, commitment or
arrangement to do any of the foregoing;
(n) except for capital expenditures contemplated by clause (o),
acquired, leased or encumbered any assets outside the ordinary course of
business or any assets which are material to the Telecommunication
Subsidiaries;
(o) authorized or made any capital expenditures which individually
or in the aggregate are in excess of $50,000;
(p) made any Tax election (other than routine elections made on
Tax Returns filed in the ordinary course of business consistent with past
practice that will not, in the aggregate have a Telecommunication
Subsidiary Material Adverse Effect on the taxable income or loss of the
Telecommunication Subsidiaries for any taxable year ending after the
Closing Date) or settled or compromised any federal, state, local or
foreign Tax liability, or waived or extended the statute of limitations in
respect of any such Taxes;
(q) paid any amount, performed any obligation or agreed to pay any
amount or perform any obligation, in settlement or compromise of any suits
or claims of liability against the Telecommunication Subsidiaries or any
of their respective directors, officers, employees or agents;
(r) terminated or materially modified, amended or otherwise
altered or changed any of the terms or provisions of any Contract, or paid
any amount in excess of $25,000 not required by Law or by any Contract;
(s) agreed, whether orally or in writing to do any of the
foregoing; or
(t) written up any accounts receivable or other asset previously
written down or written off.
3.7 Properties. Except as set forth on Schedule 3.7, the
---------- ------------
Telecommunication Subsidiaries have good and valid record title to, and are
the lawful owners of, all of the tangible and intangible assets, properties
and rights used in connection with their respective businesses and all of
the tangible and intangible assets, properties and rights reflected in the
Combined Management Reports or Schedule 3.10 or 3.11 (other than assets
------------- ----
leased under the leases set forth in Schedule 3.10 or 3.11 and assets
------------- ----
disposed of in the ordinary course of business since the date of the
Combined Management Reports), free and clear of any Lien.
3.8 Condition and Sufficiency of Assets. Except as set forth on
-----------------------------------
Schedule 3.8, all of the tangible assets and properties of the
------------
Telecommunication Subsidiaries with a value over $10,000, whether real or
personal, owned or leased, are free from defects other than such non-
material defects as do not interfere with the intended use thereof in the
conduct of normal operations. Immediately after the Closing, the
Telecommunication Subsidiaries shall own or have a right to use
14
all the assets, properties, rights, know-how, key personnel, processes and
ability which are required for or currently used in connection with the
operation of their respective businesses as they are currently conducted.
Such assets, properties and rights, except for changes in the ordinary
course of business together with the Seller Telecommunications Assets, were
sufficient to produce the income of the Telecommunication Business for the
five (5) month period ended May 31, 1999 as shown on the Combined
Management Reports. Except as set forth on Schedule 3.8 or disclosed on
------------
the Combined Management Reports, the Telecommunication Subsidiaries have
not had any liabilities that are not directly related to, and that did not
arise directly out of, the business of the Telecommunication Subsidiaries.
3.9 Computer System. The Telecommunication Subsidiaries have
---------------
undertaken studies of the resources required to cause the Computer System
to be capable of appropriately processing dates beginning with the year
2000 ("Year 2000 Compliant"). Seller has no reason to believe, based upon
reasonable inquiry and opinions of appropriate employees of the
Telecommunication Subsidiaries that the Computer System cannot be made Year
2000 Compliant before December 31, 1999 for an expenditure of less than
Five Hundred Thousand and No/100 Dollars $500,000.00. The use of Computer
System by the Telecommunication Subsidiaries (including any software
modifications) has not resulted in the termination of any maintenance,
service or support agreement relating to any part of the Computer System or
any reduction in the services provided to the Telecommunication
Subsidiaries, warranties available to the Telecommunication Subsidiaries or
rights of the Telecommunication Subsidiaries thereunder which would have a
Telecommunication Subsidiary Material Adverse Effect.
3.10 Real Property.
-------------
(a) Schedule 3.10(a) sets forth a complete list of all real
----------------
property and interests in real property owned in fee by the
Telecommunication Subsidiaries (individually, an "Owned Property") and all
real property and interests in real property leased by the
Telecommunication Subsidiaries (individually, a "Leased Property") pursuant
to real property leases (the "Real Property Leases"). The
Telecommunication Subsidiaries have (i) good and insurable fee title to all
Owned Property and (ii) good and valid title to the leasehold estates in
all Leased Property (an Owned Property or Leased Property being sometimes
referred to herein, individually, as a "Telecommunication Subsidiary
Property" and, collectively, as "Telecommunication Subsidiary Properties"),
in each case free and clear of all Liens, except (i) such as are set forth
in Schedule 3.10(a), (ii) mechanics', carriers', workmen's, repairmen's
----------------
or other like Liens arising or incurred in the ordinary course of business
that individually or in the aggregate would not have a Telecommunication
Subsidiary Material Adverse Effect and (iii) other immaterial imperfections
of title or encumbrances, if any, which, individually or in the aggregate,
would not have a Telecommunication Subsidiary Material Adverse Effect. The
Telecommunication Subsidiary Properties constitute all of the land held or
used by the Telecommunication Subsidiaries in the conduct of their
businesses. Seller has made available to Buyer true, accurate and complete
copies of the Real Property Leases together with copies of all reports (if
any in the possession of Seller or the Telecommunication Subsidiaries as of
and after February 18, 1998) of any engineers, environmental consultants or
other consultants in its possession relating to the Telecommunication
Subsidiary Properties.
(b) The activities carried on in all buildings, plants,
facilities, installations, fixtures and other structures or improvements
included as part of, or located on any Telecommunication Subsidiary
15
Property, and the buildings, plants, facilities, installations, fixtures
and other structures or improvements on such properties with respect to the
Owned Property, and to the knowledge of Seller and the Telecommunication
Subsidiaries with respect to the Leased Property, are not in violation of,
or in conflict with, any applicable zoning, environmental or health
regulations or ordinance or any other similar Law that individually or in
the aggregate would have a Telecommunication Subsidiary Material Adverse
Effect. Except as set forth on Schedule 3.10(b), and (a) to the knowledge
----------------
of Seller and the Telecommunication Subsidiaries, with respect to the Owned
Property since the purchase of the Owned Property and (b) to the knowledge
of Seller and the Telecommunication Subsidiaries with respect to the Leased
Property of each, no asbestos, asbestos-containing materials, PCB compounds
or other pollutants, contaminants or Hazardous Substances have been used
in, on, or are otherwise located on, any Telecommunication Subsidiary
Property.
(c) To the knowledge of Seller or the Telecommunication
Subsidiaries, none of the Telecommunication Subsidiary Properties relies on
or regularly makes use of access to the nearest public road or right-of-way
over land owned by others, except where such access is by means of one or
more valid recorded easements. To the knowledge of Seller or the
Telecommunication Subsidiaries, all covenants or other restrictions (if
any) to which any of the Telecommunication Subsidiary Properties is subject
are being in all respects properly performed and observed and none of the
Telecommunication Subsidiaries has received any notice of violation (or
claimed violation) thereof.
(d) Except as set forth on Schedule 3.10(d), there is no
----------------
pending, or to the knowledge of Seller or the Telecommunication
Subsidiaries threatened or proposed proceeding or governmental action to
modify the zoning classification of, or to condemn or take by the power of
eminent domain (or to purchase in lieu thereof), or to classify as a
landmark, or to impose special assessments on, or otherwise to take or
restrict in any way the right to use, develop or alter, all or any of the
Telecommunication Subsidiary Properties.
(e) Except as set forth on Schedule 3.10(e), all of the Real
----------------
Property Leases are in full force and effect, valid and enforceable in
accordance with their respective terms, except as such enforceability may
be limited by applicable bankruptcy, insolvency, moratorium, reorganization
or similar laws in effect which affect the enforcement of creditors' rights
generally and by equitable limitations on the availability of specific
remedies. None of the Real Property Leases have been amended or modified
except as set forth on Schedule 3.10(e).
----------------
(f) The Telecommunication Subsidiaries have not received any
notice of any, and, to the knowledge of Seller or the Telecommunication
Subsidiaries, there exists no, dispute, claim, event of default or event
which constitutes or would constitute (with notice or lapse of time or
both) a default under any Real Property Lease. Except as disclosed in the
Combined Management Reports or as set forth on Schedule 3.10, all rent
-------------
and other amounts due and payable with respect to the Real Property Leases
have been paid through the date of this Agreement and all rent and other
amounts due and payable with respect to the Real Property Leases on or
prior to the Closing Date will have been paid prior to the Closing Date.
(g) Except as set forth on Schedule 3.10(g)(i), all lessors
-------------------
under the Real Property Leases have consented or prior to Closing will have
consented (where such consent is necessary) to the
16
consummation of the transactions contemplated by this Agreement or the
Related Agreements without requiring modification in the rights or
obligations thereunder. Except as set forth on Schedule 3.10(g)(ii),
--------------------
none of the Real Property Leases are expected to expire or terminate during
the year following the Closing Date.
3.11 Personal Property. Approximately four hundred and seventy
-----------------
seven (477) desk and lap top computers owned by Seller and the
Telecommunication Subsidiaries are used in the Telecommunication Business.
Schedule 3.11 sets forth a true, accurate and complete list of all of the
-------------
tangible personal property used by the Telecommunication Subsidiaries in
their businesses having a present book value of $20,000 or more, other than
items acquired by the Telecommunication Subsidiaries in the ordinary course
of business from the date hereof through the Closing Date. Schedule 3.11
-------------
also sets forth a true, accurate and complete list of all leases of
personal property binding upon the Telecommunication Subsidiaries or any of
their respective assets or properties. All of such tangible personal
property is presently utilized by the Telecommunication Subsidiaries in the
ordinary course of business. Seller has made available to Buyer true,
accurate and complete copies of all such personal property leases.
3.12 Accounts Receivable and Advances. Schedule 3.12(i) sets
-------------------------------- ----------------
forth a true, accurate and complete summary of aging schedule of all
accounts receivable of the Telecommunication Subsidiaries (the "Accounts
Receivable") as of May 31, 1999. Except as set forth on Schedule
--------
3.12(ii), each Account Receivable represents (a) a sale made in the
--------
ordinary course of business and which arose pursuant to an enforceable
written or oral Contract for a bona fide sale of goods or for services
performed, and the Telecommunication Subsidiaries have performed all of
their obligations to produce the goods or perform the services to which
such Account Receivable relates except for prepaid services, and (b) except
as adequately reserved against in the balance sheet included in the
Combined Management Reports, amounts owed which are not more than one
hundred twenty (120) days past due and which are not subject to any claim
or reduction, counterclaim, set-off, recoupment or other claim for credit,
allowances or adjustments by the obligor owing such amount, and each of
which, together with each miscellaneous receivable to be included in the
Closing Date Statement, is collectible in full within one hundred twenty
(120) days of their origination. No advance is subject to any claim for
reduction, counterclaim, set-off, recoupment or other claim for credit,
allowances or adjustments by the obligor thereof, and, except as reserved
against in the Combined Management Reports, all advances are collectible in
full within one hundred twenty (120) days of their origination.
3.13 Intellectual Property. Schedule 3.13 sets forth a true,
--------------------- -------------
accurate and complete list of all of the Telecommunication Subsidiaries'
Intellectual Property. Except as set forth on Schedule 3.13:
-------------
(a) all of Telecommunication Subsidiaries' Intellectual Property
is owned by Telecommunication Subsidiaries free and clear of all Liens, and
is not subject to any license, royalty or other agreement, and the
Telecommunication Subsidiaries have not granted any license or agreed to
pay or receive any royalty in respect of any of Telecommunication
Subsidiaries' Intellectual Property;
17
(b) none of Telecommunication Subsidiaries' Intellectual Property
has been or is the subject of any pending or, to the knowledge of Seller or
the Telecommunication Subsidiaries, threatened litigation or claim of
infringement;
(c) to the knowledge of Seller or the Telecommunication
Subsidiaries, no license or royalty agreement to which any
Telecommunication Subsidiary is a party is in breach or default by any
party thereto or the subject of any notice of termination given or
threatened;
(d) the products and services produced and sold by the
Telecommunication Subsidiaries, any process, method, part, design, material
or other Intellectual Property they employ, and the marketing and use by
the Telecommunication Subsidiaries of any such product, service or
Intellectual Property, in each case to Seller's or the Telecommunication
Subsidiaries' knowledge do not infringe any Intellectual Property or
confidential or proprietary rights of another Person, and no
Telecommunication Subsidiary has received any notice contesting its right
to use any such Intellectual Property;
(e) the Telecommunication Subsidiaries own or possess adequate
rights in and to all Intellectual Property necessary to conduct their
respective businesses as presently conducted;
(f) to the knowledge of Seller and the Telecommunication
Subsidiaries, the Intellectual Property is valid and enforceable; and
(g) to the knowledge of Seller and the Telecommunication
Subsidiaries, no unauthorized third party is engaged in any activity which
infringes the Intellectual Property.
3.14 Contracts. Schedule 3.14(a), sets forth a true, accurate
--------- ----------------
and complete list of all Contracts and arrangements of the following types
to which either (i) any Telecommunication Subsidiary or (ii) Seller, (but
only to the extent comprising part of Seller's Telecommunication Business),
is a party or by which any of them is bound, or to which any of their
respective assets or properties is subject:
(a) any collective bargaining agreement;
(b) any Contract with any employee, officer or director of any
Telecommunication Subsidiary or any respective Affiliates of such
individuals or any Contract with Seller or any affiliate of Seller (other
than those set forth on Schedule 3.17 and Schedule 3.18);
------------- -------------
(c) any Contract with a sales representative, manufacturer's
representative, distributor, dealer, broker, sales agency, advertising
agency or other Person engaged in sales, distributing or promotional
activities, or any Contract to act as one of the foregoing on behalf of any
Person;
(d) any Contract which involves the future payment or receipt of
(i) cash (ii) other property, (iii) an unperformed commitment, or (iv)
goods or services, in each case having a value in excess of $25,000;
(e) any Contract or arrangement pursuant to which any
Telecommunication Subsidiary has made or will make loans or advances, or
has or will have incurred debts or become a guarantor or surety or pledged
its credit on or otherwise become responsible with respect to any
undertaking of
18
another (except for the negotiation or collection of negotiable instruments
in transactions in the ordinary course of business);
(f) any indenture, credit agreement, loan agreement, note,
mortgage, security agreement, lease of personal property, loan commitment
or other Contract or arrangement relating to the borrowing of funds, an
extension of credit or financing;
(g) any Contract or arrangement involving a partnership, joint
venture or other cooperative undertaking;
(h) any Contract or arrangement involving any restrictions with
respect to the geographical area of operations or scope or type of business
of the Telecommunication Subsidiaries;
(i) any power of attorney or agency agreement or arrangement with
any Person pursuant to which such Person is granted the authority to act
for or on behalf of any Telecommunication Subsidiary, or any
Telecommunication Subsidiary is granted the authority to act for or on
behalf of any Person;
(j) any Contract relating to the Computer System;
(k) any Contract for which the full performance thereof may extend
beyond one hundred twenty (120) days from the Execution Date and is not
terminable within ninety (90) days without payment of a termination fee or
similar payment in excess of $25,000;
(l) any Contract not made in the ordinary course of business which
is to be performed in whole or in part at or after the Execution Date;
(m) any Contract, whether or not fully performed, relating to any
acquisition or disposition of any Telecommunication Subsidiary or any
predecessor in interest of any of them, or any acquisition or disposition
of any subsidiary, division, line of business, or real property; and
(n) any Contract, including without limitation, all interconnect
agreements not specified above that is material to any Telecommunication
Subsidiary.
Except as set forth on Schedule 3.14(b), Seller has made available
----------------
to Buyer true, accurate and complete copies of each document set forth
therein and a written description of each oral arrangement so listed.
Except as set forth on Schedule 3.14(c), all such Contracts to which
----------------
Seller or a Telecommunication Subsidiary is a party have been entered into
by it in the ordinary course of business and are on terms that are no less
favorable to Seller or the Telecommunication Subsidiary than the terms
which could be obtained from an unrelated third party and, if cancelled at
any time, would not have a Telecommunication Subsidiary Material Adverse
Effect. Seller and the Telecommunication Subsidiaries believe that, except
for the Contracts listed on Schedule 3.14(a), there are no other
----------------
Contracts to which a Telecommunication Subsidiary is a party. Seller has
made available to Buyer true, accurate and complete copies of each form
which has been used in the businesses of the Telecommunication Subsidiaries
and is in effect with respect to any third party as of the Execution Date.
19
3.15 Telecommunication Authorizations. Schedule 3.15 sets forth
-------------------------------- -------------
a true, accurate and complete list of all Telecommunication Authorizations
held by the Telecommunication Subsidiaries and all Telecommunication
Authorizations held by Seller and to be conveyed to the Telecommunication
Subsidiaries pursuant to the terms hereof. All such Telecommunication
Authorizations are validly held and in full force and effect and, except as
set forth on Schedule 3.23 with respect to Xxxxx in Oklahoma, are not
-------------
subject to any conditions outside the ordinary course. Except for the
Telecommunication Authorizations set forth on Schedule 3.3(a), there are
---------------
no Telecommunication Authorizations, whether federal, state, local or
foreign, which are necessary for the lawful operation of the businesses of
the Telecommunication Subsidiaries.
3.16 Insurance.
---------
(a) Seller has heretofore made available to Buyer a true, accurate
and complete copy of all policies of fire, liability, workmen's
compensation, title and other forms of insurance owned, held by or
applicable to the Telecommunication Subsidiaries (and their respective
businesses and assets) for all periods prior to the Closing Date. All such
policies are in full force and effect, all premiums with respect thereto
covering all periods up to and including the Closing Date have been paid,
and no notice of cancellation or termination has been received with respect
to any such policy. Such policies are sufficient for compliance with (i)
all requirements of Law and (ii) all Contracts to which each
Telecommunication Subsidiary is a party, and are valid, outstanding and
enforceable policies. Such insurance policies provide types and amounts of
insurance customarily obtained by businesses similar to the business of the
Telecommunication Subsidiaries. Except as set forth on Schedule 3.16,
-------------
none of the Telecommunication Subsidiaries have been refused any insurance
with respect to its assets or operations, and its coverage has not been
limited by any insurance carrier to which it has applied for any such
insurance or with which it has carried insurance, since February 18, 1998.
(b) Schedule 3.16 sets forth a true, accurate and complete list
--------------
of all pending claims which have been made by any Telecommunication
Subsidiary since February 18, 1998 under any workmen's compensation,
general liability, property or other insurance policy applicable to the
Telecommunication Subsidiaries or any of their respective properties.
Except as set forth on Schedule 3.16, there are no pending or, to the
-------------
knowledge of Seller or the Telecommunication Subsidiaries, threatened
claims under any insurance policy.
3.17 Employee Benefit Plans and Employment Agreements.
------------------------------------------------
(a) General. Except as set forth on Schedule 3.17, neither
------- -------------
any Telecommunication Subsidiary nor any ERISA Section 414(b), (c)
Affiliate of any Telecommunication Subsidiary is a party to or participates
in or has any liability or contingent liability with respect to:
(i) any "employee welfare benefit plan" or "employee pension
benefit plan" as those terms are respectively defined in
sections 3(1) and 3(2) of ERISA, including a "multi-
employer plan" (as defined in section 3(37) of ERISA),
(ii) any retirement or deferred compensation plan, incentive
compensation plan, stock plan, unemployment compensation
plan, vacation pay, severance pay, bonus or benefit
arrangement, insurance or hospitalization program or any
other fringe benefit arrangements for any current or
former employee,
20
director, consultant or agent, whether pursuant to
contract, arrangement, custom or informal understanding,
which does not constitute an "employee benefit plan" (as
defined in section 3(3) of ERISA), or
(iii) any employment agreement to which any Telecommunication
Subsidiary is a party.
(b) Plan Documents and Reports. A true, accurate and complete
--------------------------
copy of each of the plans, arrangements, and agreements set forth on
Schedule 3.17 (collectively, the "Benefit Plans"), and all Contracts
-------------- --------------
relating thereto, or to the funding thereof, including all trust
agreements, insurance contracts, administration contracts, investment
management agreements, subscription and participation agreements, and
record keeping agreements, each as in effect on the date hereof, has been
made available to Buyer. In the case of any Benefit Plan which is not in
written form, Buyer has been supplied with a true, accurate and complete
description of such Benefit Plan, as in effect on the date hereof. A true,
accurate and complete copy of the most recent annual report and all
schedules and attachments thereto, summary plan description, and Internal
Revenue Service determination letter with respect to each such Benefit
Plan, to the extent applicable, has been made available to Buyer, and there
have been no material changes in the financial condition of the respective
Benefit Plans from that stated in the annual reports and actuarial reports
supplied.
(c) Compliance With Laws; Liabilities. As to all Benefit Plans,
---------------------------------
except as set forth on Schedule 3.17:
-------------
(i) All Benefit Plans comply and have been administered in
form and in operation in all material respects with all
requirements of Law applicable thereto, and there has
been no notice issued by any Governmental Authority
questioning or challenging such compliance.
(ii) All Benefit Plans that are employee pension benefit
plans (as defined in section 3(2) of ERISA) comply in
form and in operation with all applicable requirements
of sections 401(a) and 501(a) of the Code; there have
been no amendments to such Benefit Plans which are not
the subject of a determination letter issued with
respect thereto by the Internal Revenue Service; and to
the knowledge of Seller and the Telecommunication
Subsidiaries no event has occurred which will or could
give rise to disqualification of any such Benefit Plan
under such sections or to a tax under section 511 of the
Code.
(iii) None of the assets of any Benefit Plan is invested in
employer securities or employer real estate.
(iv) There have been no nonexempt "prohibited transactions"
(as described in section 406 of ERISA or section 4975 of
the Code) with respect to any Benefit Plan, and neither
any Telecommunication Subsidiary nor any ERISA Affiliate
of any Telecommunication Subsidiary has otherwise
engaged in any nonexempt prohibited transaction.
21
(v) There has been no act or omission which has given rise
to or to the knowledge of Seller and the
Telecommunications Subsidiaries may give rise to fines,
penalties, taxes, or related charges under sections
502(c), 502(i), 502(l) or 4071 of ERISA or Chapters 43,
47, or 68 of the Code for which either any
Telecommunication Subsidiary or any ERISA Affiliate of
any Telecommunication Subsidiary may be liable.
(vi) None of the payments for any Telecommunication
Subsidiary Employee contemplated by the Benefit Plans
would, in the aggregate, constitute excess parachute
payments as defined in section 280G of the Code (without
regard to subsection (b)(4) thereof).
(vii) There are no actions, suits, or claims (other than
routine claims for benefits) pending or to knowledge of
Seller and the Telecommunication Subsidiaries threatened
involving such Benefit Plans or the assets thereof, and
to the Seller's and the Telecommunication Subsidiaries'
knowledge no facts exist which could give rise to any
such actions, suits, or claims (other than routine
claims for benefits).
(viii) No Benefit Plan is subject to Title IV of ERISA and no
Telecommunication Subsidiary has any existing,
threatened contingent, assessed or unassessed liability
with respect to any plan that is or has been subject to
Title IV of ERISA.
(ix) Each Benefit Plan which constitutes a "group health
plan" (as defined in section 607(1) of ERISA or section
4980B(g)(2) of the Code), including any Benefit Plans of
current and former affiliates which must be taken into
account under section 4980B and 414(t) of the Code or
section 601 of ERISA, have been operated in compliance
with applicable law in all material respects, including
the group health plan continuation coverage requirements
of section 4980B of the Code and section 601 of ERISA to
the extent such requirements are applicable.
(x) The Seller does not receive services from any
individuals who are leased employees within the meaning
of Code Section 414(n) and to the knowledge of Seller
and the Telecommunication Subsidiaries, none of the
persons performing services for Seller, any
Telecommunication Subsidiary, or any ERISA Affiliate has
been improperly classified as an independent contractor
or a leased employee, or as being exempt from the
payment of wages for overtime, other than such improper
classifications which, in the aggregate, would not have
a Telecommunication Subsidiary Material Adverse Effect.
(xi) Neither any Telecommunication Subsidiary nor any ERISA
Affiliate of any Telecommunication Subsidiary has any
liability or contingent liability under any Benefit Plan
or otherwise for providing post-retirement medical or
life insurance benefits, other than statutory liability
for providing group health
22
plan continuation coverage under Part 6 of Title I of
ERISA and section 4980B (or any predecessor section
thereto) of the Code.
(xii) There has been no act or omission that would impair the
right or ability of any Telecommunication Subsidiary and
any ERISA Affiliate of any Telecommunication Subsidiary
unilaterally to amend or terminate any Benefit Plan.
(d) Multi-employer Plan. Neither any Telecommunication
-------------------
Subsidiary nor any ERISA Affiliate of any Telecommunication Subsidiary
contributes to or has any liability or contingent liability to any multi-
employer plan.
(e) Self-insured Medical Benefits Claims. As of July 2, 1999,
------------------------------------
there were $17,859.00 of incurred but unpaid claims under all self-insured
medical benefit programs of the Telecommunications Subsidiaries.
(f) Severance Payments. Seller is solely liable for all amounts
------------------
payable (in cash, stock or property) under the Advanced Communications
Group, Inc. 1997 Stock Awards Plan (including without limitation any awards
under such plans pursuant to the employment contracts), the Advanced
Communications Group, Inc. Employee Stock Purchase Plan and the 1999
Retention Program, except for amounts payable by employees or other
participants, and the Telecommunications Subsidiaries have no liability
actual, potential or contingent under any of the foregoing arrangements.
3.18 Employment and Labor Matters.
----------------------------
(a) Seller has made available to Buyer the name, title, and annual
compensation at the then current rate of the Telecommunication Subsidiary
employees employed as of May 15, 1999. Except as set forth on Schedule
--------
3.18, since February 18, 1998, the Telecommunication Subsidiaries have and
----
currently are conducting their respective businesses in full compliance
with all Laws relating to employment and employment practices, terms and
conditions of employment, wages and hours and nondiscrimination in
employment.
(b) Except as set forth on Schedule 3.18, since February 18,
-------------
1998 there has been no labor strike, dispute, slow-down, work stoppage or
other labor difficulty actually pending to the knowledge of Seller or
Telecommunication Subsidiaries threatened against or involving any of the
Telecommunication Subsidiaries and the relationships of the
Telecommunication Subsidiaries with their respective employees are good. No
grievance or arbitration proceeding arising out of or under any collective
bargaining agreement between any of the Telecommunication Subsidiaries and
their respective employees is pending and, to the knowledge of Seller, no
claim therefor has been asserted. None of the employees of any of the
Telecommunication Subsidiaries is covered by any collective bargaining
agreement, no collective bargaining agreement is currently being negotiated
and, to the knowledge of Seller, no attempt is currently being made or
since February 18, 1998 has been made to organize any employees of any of
the Telecommunication Subsidiary to form or enter a labor union.
3.19 Capital Improvements. Schedule 3.19 sets forth a true,
-------------------- -------------
accurate and complete list of all of the capital improvements or purchases
or other capital expenditures since May 31, 1999 to
23
which the Telecommunication Subsidiaries have committed or for which they
have contracted and which in any event have not been completed prior to the
Execution Date and the cost and expense reasonably estimated to complete
such work and purchases.
3.20 Taxes.
-----
(a) All Tax Returns required to be filed by or with respect to the
Telecommunication Subsidiaries through the Closing Date with respect to all
Taxes imposed by the United States or any foreign country or by any state,
municipality, subdivision or instrumentality of the United States or of any
foreign country or by any other tax authority, have been or will be
accurately prepared, and have been or will be duly and timely filed, and
all Taxes (including Taxes withheld from employees' salaries and all other
withholding Taxes and obligations and all deposits required to be made by
or with respect to the Telecommunication Subsidiaries with respect to such
withholding Taxes or otherwise), interest, penalties, assessments and/or
deficiencies due with respect to any taxable period or partial taxable
period of the Telecommunication Subsidiaries ending on or before the
Closing Date have been or will be timely paid, or to the extent not due and
payable as of the Closing Date, adequate provision for the payment thereof
has been or will be made on the Combined Management Reports or the books of
account of the Telecommunication Subsidiaries.
(b) Except as set forth in Schedule 3.20 and as of the Execution
-------------
Date: (i) none of the Telecommunication Subsidiaries has ever been
audited by the IRS or other taxing authority; (ii) none of the
Telecommunication Subsidiaries has been a member of an affiliated group (as
defined in Section 1504(a) of the Code) or filed or been included in a
combined, consolidated or unitary income tax return other than the
affiliated group of which Seller is the parent; (iii) none of the
Telecommunication Subsidiaries are required to make any material adjustment
under Section 481(a) of the Code by reason of a change or proposed change
in accounting method or otherwise; (iv) no material issue has been raised
by any taxing authority with respect to any of the Telecommunication
Subsidiaries in any audit or examination which, by application of similar
principles, could reasonably be expected to result in a proposed material
adjustment to the liability for Taxes for any period not so examined; (v)
none of the Telecommunication Subsidiaries are liable for the Taxes of any
taxpayer other than the Telecommunication Subsidiaries for any taxable
period beginning before the Closing Date; (vi) none of the
Telecommunication Subsidiaries are obligated to make, and as a result of
any event connected with the transactions contemplated by this Agreement
will not become obligated to make, any "excess parachute payment" within
the meaning of Section 280G of the Code, determined without regard to
subsection (b)(4) thereof; (vii) none of the Telecommunication Subsidiaries
are a party to any safe harbor lease within the meaning of section
168(f)(8) of the Code, as in effect prior to amendment by the Tax Equity
and Fiscal Responsibility Act of 1982; (viii) none of the assets of any of
the Telecommunication Subsidiaries secures any debt the interest on which
is tax exempt under Section 103 of the Code; (ix) none of the
Telecommunication Subsidiaries have entered into a transaction which is
being accounted for as an installment obligation under Section 453 of the
Code, nor are the Telecommunication Subsidiaries a party to an interest
rate swap, currency swap or other similar transaction; (x) no items of
income attributable to transactions occurring on or before the close of the
last preceding taxable year of any of the Telecommunication Subsidiaries
will be required to be included in taxable income by any of the
Telecommunication Subsidiaries in a subsequent taxable year by reason of
any of the Telecommunication Subsidiaries reporting income on the cash
method of accounting, the completed contract method or the percentage of
completion-capitalized cost method; (xi) the Seller is not a
24
"foreign person" as defined in Section 1445(f)(3) of the Code; and (xii)
none of the Telecommunication Subsidiaries intend to file state income Tax
returns in any state.
3.21 No Defaults or Violations. Except as set forth on Schedule 3.21:
------------------------- -------------
(a) None of the Telecommunication Subsidiaries has breached any
material provision of, nor is it in default under the terms of, any
Contract to which it is a party or under which it has any rights or by
which it is bound, and, to the knowledge of Seller or the Telecommunication
Subsidiaries, no other party to any such Contract has breached such
Contract or is in default thereunder.
(b) Except as set forth on Schedules 3.1, 3.18(a) and 3.23, the
-------------------------------
Telecommunication Subsidiaries, all of their respective assets (including
without limitation the Telecommunication Authorizations), and the Owned
Property, since its ownership by Valu-Line and, to the knowledge of the
Seller and the Telecommunication Subsidiaries, the Leased Property are in
compliance with, and no violation exists under, any and all Laws applicable
to the Telecommunication Subsidiaries and to such properties and assets.
(c) No notice from any Governmental Authority has been received by
any Telecommunication Subsidiary claiming any violation of any Law
(including any building, zoning or other ordinance) or requiring any work,
construction or expenditure.
3.22 Environmental Matters. Except as set forth on Schedule 3.22:
--------------------- -------------
(a) the business and operations of the Telecommunication
Subsidiaries are in full compliance with all applicable Environmental Laws,
and, to the knowledge of Seller, no condition exists or event has occurred
which, with or without notice or the passage of time or both, would
constitute a violation of, or give rise to any Lien under, any applicable
Environmental Law;
(b) the Telecommunication Subsidiaries are in possession of all
Environmental Permits required for the conduct or operation of their
respective businesses (or any part thereof), and are in full compliance
with all of the requirements and limitations included in such Environmental
Permits;
(c) Seller and Telecommunication Subsidiaries have not used or
stored any Hazardous Substances in, on, or at any of the properties or
facilities of the Telecommunication Subsidiaries under their control, and
Seller and the Telecommunication Subsidiaries have not contracted for the
use of Hazardous Substances in the construction or repair of, or any
alterations or additions to, any of the properties or facilities of the
Telecommunications Subsidiaries, except in each case for inventories of
substances set forth on Schedule 3.22 which are used or are to be used in
-------------
the ordinary course of business (which inventories have been stored and
used in accordance with all applicable Environmental Laws and Environmental
Permits); provided, however, that this representation shall be deemed
--------- -------
to be made with respect to properties and facilities constituting the
Leased Property only to the knowledge of Seller and the Telecommunication
Subsidiaries.
(d) none of Seller or the Telecommunication Subsidiaries has
received any notice from any Governmental Authority or any other Person
that any aspect of the business, operations or facilities of any
Telecommunication Subsidiary is in violation of any Environmental Law or
Environmental
25
Permit, or that any of them is responsible (or potentially responsible) for
the cleanup or remediation of any Hazardous Substance at any location;
(e) none of the Telecommunication Subsidiaries have deposited or
incorporated any Hazardous Substances into, on, beneath, or adjacent to any
property except as may be permitted by law;
(f) none of the Telecommunication Subsidiaries are the subject of
any pending or, to the knowledge of Seller or the Telecommunication
Subsidiaries, threatened litigation or proceedings in any forum, judicial
or administrative, involving a demand for damages, injunctive relief,
penalties, or other potential liability with respect to violations of any
applicable Environmental Law;
(g) the Telecommunication Subsidiaries have timely filed all
reports and notifications required to be filed with respect to all of their
properties and facilities and have generated and maintained all required
records and data under all applicable Environmental Laws; and
(h) to the knowledge of Seller and the Telecommunication
Subsidiaries, no condition has existed or event has occurred with respect
to any property that was at any time owned or leased, or any direct or
indirect subsidiary that was at any time owned, by any Telecommunication
Subsidiary, which property or subsidiary has been sold, transferred or
disposed or for which lease has terminated, that in any case could, with or
without notice, passage of time or both, give rise to any present or future
liability of any Telecommunications Subsidiary pursuant to any
Environmental Law.
3.23 Litigation.
----------
(a) Except as set forth on Schedule 3.23, there are no actions,
-------------
suits, arbitrations, regulatory proceedings or other litigation,
proceedings or governmental investigations pending or, to the knowledge of
Seller, threatened against any Telecommunication Subsidiary or any of their
respective officers, directors, employees, agents or stockholders thereof
in their capacity as such any of the properties or businesses of the
Telecommunication Subsidiaries, and Seller is not aware of any facts or
circumstances which may give rise to any of the foregoing. Except as set
forth on Schedule 3.23, all of the proceedings pending or known by Seller
-------------
to be threatened against any Telecommunication Subsidiary are covered by
insurance policies (or other indemnification agreements with third parties)
and are being defended by the insurers (or such third parties), subject to
such deductibles as are set forth on such Schedule. Except as set forth on
Schedule 3.23, no Telecommunication Subsidiary is subject to any order,
-------------
judgement, decree, injunction, stipulation or consent order of or with any
court or other Governmental Authority. No Telecommunication Subsidiary has
entered into any agreement to settle or compromise any proceeding pending
or threatened against it which has involved any obligation other than the
payment of money or for which any Telecommunication Subsidiary has any
continuing obligation.
(b) There are no claims, actions, suits, proceedings or, to the
knowledge of Seller or the Telecommunication Subsidiaries, investigations
pending or threatened by or against Seller or any Telecommunication
Subsidiary with respect to this Agreement or the Related Agreements, or in
connection with the transactions contemplated hereby or thereby, and Seller
has no reason to believe there is a valid basis for any such claim, action,
suit, proceeding, or investigation.
26
3.24 Bank Accounts. Schedule 3.24 sets forth a true, accurate
------------- -------------
and complete list of the names and locations of each bank or other
financial institution at which any of the Telecommunication Subsidiaries
have an account (giving the account numbers) or safe deposit box and the
names of all Persons authorized to draw thereon or have access thereto, and
the names of all Persons, if any, now holding powers of attorney or
comparable delegation of authority from any Telecommunication Subsidiary.
3.25 Customers and Suppliers.
-----------------------
(a) Schedule 3.25 sets forth the one hundred (100) largest
-------------
customers of each of the Telecommunication Subsidiaries, in terms of
balances due during the most recent completed month among which are
included the ten (10) largest customers of the Telecommunication
Subsidiaries, (collectively, the "Major Customers"); and
(b) Schedule 3.25 sets forth the fifty largest suppliers of the
-------------
Telecommunication Subsidiaries, in terms of purchases during the most
recently completed month (collectively, the "Major Suppliers").
From May 31, 1999 through the Execution Date, except as set forth on
Schedule 3.25, there has not been any Telecommunication Subsidiary
-------------
Material Adverse Change in the business relationship, and there has been no
material dispute, between any Telecommunication Subsidiary and any Major
Customer or Major Supplier, and, to the knowledge of Seller, there are no
indications that any Major Customer or Major Supplier intends to reduce its
purchases from, or sales to, respectively, any Telecommunication
Subsidiary. To the knowledge of Seller and the Telecommunication
Subsidiaries, there have been no material changes to the lists contained on
Schedule 3.25 since the date as of which they speak.
-------------
3.26 Claims Against Officers and Directors. Except as set forth
-------------------------------------
on Schedule 3.23, there are no pending or, to the knowledge of Seller or
-------------
the Telecommunication Subsidiaries, threatened claims against any director,
officer, employee or agent of any Telecommunication Subsidiary or any other
Person which could give rise to any claim for indemnification against any
Telecommunication Subsidiary.
3.27 No Other Agreement. Seller has no Contract or arrangement
------------------
with respect to the sale or other disposition of Telecommunication
Subsidiaries Shares, except as set forth in this Agreement.
3.28 Brokers. Neither Buyer nor any Affiliate of Buyer has or
-------
shall have any liability or otherwise suffer or incur any Loss as a result
of or in connection with any brokerage or finder's fee or other commission
of any Person retained by Seller or the Telecommunication Subsidiaries in
connection with any of the transactions contemplated by this Agreement.
3.29 Accuracy of Statements. Neither this Agreement nor any
----------------------
schedule, exhibit, statement, list, document, certificate or other
information furnished or to be furnished by or on behalf of Seller or the
Telecommunication Subsidiaries to Buyer or any representative or Affiliate
of Buyer in connection with this Agreement or any of the transactions
contemplated hereby contains or will contain any untrue statement of a
material fact or omits or will omit to state a material fact
27
necessary to make the statements contained herein or therein, in light of
the circumstances in which they are made, not misleading.
3.30 Due Diligence Materials. Except as set forth in
-----------------------
Schedule 3.30, Seller has made available to Buyer or its representatives,
-------------
in accordance with the terms of Section 5.4, all documents of the character
and type reasonably requested by Buyer in connection with its "due
diligence" investigation of the Telecommunication Subsidiaries.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller, as of the date of this
Agreement and as of the Closing Date (as if such representations and
warranties were remade on the Closing Date), as follows:
4.1 Due Incorporation. Buyer is a corporation duly organized,
-----------------
validly existing and in good standing under the laws of the State of
Delaware, with all requisite power and authority to own, lease and operate
its properties and to carry on its business as they are now being owned,
leased, operated and conducted.
4.2 Due Authorization. Buyer has full power and authority to
-----------------
enter into this Agreement and the Related Agreements and to consummate the
transactions contemplated hereby and thereby. The execution, delivery and
performance by Buyer of this Agreement and Related Agreements have been
duly and validly approved by the board of directors of Buyer and no other
actions or proceedings on the part of Buyer are necessary to authorize this
Agreement, the Related Agreements and the transactions contemplated hereby
and thereby. Buyer has duly and validly executed and delivered this
Agreement and has duly and validly executed and delivered (or prior to or
at the Closing will duly and validly execute and deliver) the Related
Agreements. This Agreement and the Related Agreements constitute legal,
valid and binding obligations of Buyer, in each case enforceable in
accordance with their respective terms, except as such enforceability may
be limited by applicable bankruptcy, insolvency, moratorium, reorganization
or similar laws in effect which affect the enforcement of creditors' rights
generally and by equitable limitations on the availability of specific
remedies.
4.3 Consents and Approvals; Authority Relative to This
--------------------------------------------------
Agreement.
---------
(a) Except as set forth on Schedule 4.3(a), no Consent is
---------------
necessary in connection with the execution, delivery and performance by
Buyer of this Agreement and the Related Agreements and the consummation of
the transactions contemplated hereby and thereby.
(b) Except as set forth on Schedule 4.3(b), the execution,
---------------
delivery and performance by Buyer of this Agreement and its Related
Agreements do not and will not, and the consummation of the transactions
contemplated hereby and thereby does not and will not, (i) violate any Law
applicable to Buyer or any of its properties or assets; or (ii) violate or
conflict with any provision of the certificate of incorporation, charter,
bylaws or similar organizational instruments of Buyer.
28
4.4 Investment Intent. Buyer is acquiring the Telecommunication
-----------------
Subsidiary Shares for its own account and not with a view to their
distribution within the meaning of Section 2(11) of the Securities Act of
1933 and regulations and rules issued pursuant to that Act.
4.5 Foreign Carrier Affiliation. Buyer is not affiliated with a
---------------------------
foreign carrier that has been classified as a dominant carrier by the FCC
as those terms are defined in part 63 of the FCC's rules.
4.6 Buyer Capitalization. Buyer is capitalized in the amount of
--------------------
Seven Hundred Fifty Thousand and No/100s Dollars ($750,000.00) as
represented by a demand note or notes payable to Buyer.
4.7 Accuracy of Statements. Neither Article IV of this
---------------------- ----------
Agreement nor any schedule, exhibit, certificate or other information
furnished or to be furnished by or on behalf of Buyer or any of its
Affiliates to Seller or any representative or Affiliate of Seller in
connection with this Agreement or any of the transactions contemplated
hereby contains or will contain any untrue statement of a material fact or
omits or will omit to state a material fact necessary to make the
statements contained herein or therein, in light of the circumstances in
which they are made, not misleading
ARTICLE V.
COVENANTS
5.1 Implementing Agreement. Subject to the terms and conditions
----------------------
hereof, each party hereto shall take all action required of it to fulfill
its obligations under the terms of this Agreement and shall otherwise use
their best efforts to facilitate the consummation of the transactions
contemplated hereby. Seller agrees that unless this Agreement is terminated
in accordance with the provisions of Section 9.1, Seller will not sell the
Shares to any Person other than Buyer (or an Affiliate of Buyer) and will
not take any other action which would have the effect of preventing or
disabling Seller's performance of its obligations under this Agreement.
5.2 Seller Telecommunication Assets and Liabilities Conveyance
-----------------------------------------------------------
And Assumption. Prior to the Closing, Seller shall use its reasonable best
---------------
efforts to assign, transfer or convey the Seller Telecommunication Assets
(each one and all collectively referred to as "Conveyance") and shall
assign, transfer and convey the Seller Telecommunication Liabilities,
including, but not limited to those listed on Schedule 5.2, as may change
------------
in the ordinary course of business, to, in Seller's discretion after
consultation with Buyer, any one or all of the Telecommunication
Subsidiaries, respectively, pursuant to a Xxxx of Sale, Assignment and
Assumption Agreement in form reasonably acceptable to Buyer.
5.3 Telecommunication Subsidiary Assumption of Liability. Prior
----------------------------------------------------
to the Closing, the Telecommunication Subsidiaries shall assume those
Seller Telecommunication Liabilities assigned, transferred or conveyed to
each of them, jointly or severally, as determined in Seller's discretion
after consultation with Buyer, including, but not limited to those listed
on Schedule 5.2, as may change in the ordinary course of business.
------------
29
5.4 Access to Information and Facilities.
------------------------------------
(a) From and after the date of this Agreement or such earlier time
as Buyer and Seller shall have mutually agreed through the Closing Date,
Seller shall, and shall cause the Telecommunication Subsidiaries to, give
Buyer and Buyer's representatives and advisors reasonable access during
normal business hours to all of the facilities, properties, books,
Contracts, commitments and records of Seller and the Telecommunication
Subsidiaries and shall make the officers and employees of Seller and the
Telecommunication Subsidiaries available to Buyer and its representatives
as Buyer and its representatives shall from time to time request. Buyer
and its representatives will be furnished with any and all information
concerning the Telecommunication Subsidiaries which Buyer or its
representatives reasonably request. Without limiting the foregoing, upon
reasonable notice to Seller, Seller shall, and shall cause the
Telecommunication Subsidiaries to, give Buyer and its representatives and
advisors reasonable access to all Company Properties during normal business
hours to perform, at Buyer's sole expense, such environmental and other
tests as Buyer or its representatives may reasonably determine (the "Buyer
Tests"). Buyer shall defend, indemnify and hold the Seller Indemnified
Parties harmless from any and all Losses, including damage to property and
injury, including death, to employees of Seller, Buyer or third parties, to
the extent attributable to actions taken by or on behalf of Buyer in taking
the Buyer Tests.
(b) Buyer will not, will cause its Affiliates not to, and will
instruct its and its Affiliates' agents and financing sources not to
disclose any Seller Confidential Information to any Person other than
Buyer's employees, agents and financing sources on a "need to know" basis
without the prior consent of the Seller, unless compelled to disclose any
such Seller Confidential Information by judicial or administrative process
or, in the opinion of Buyer's counsel by other requirements of law.
(c) Seller will not, will cause its Affiliates to not, and will
instruct its and its Affiliates' agents and financing sources to not
disclose any Buyer Confidential Information to any Person other than
Seller's or the Telecommunication Subsidiaries' employees, agents and
financing sources without the prior consent of Buyer, unless compelled to
disclose any such Buyer Confidential Information by judicial or
administrative process or, in the opinion of Seller's counsel, by other
requirements of law.
5.5 Consents and Approvals.
----------------------
(a) As soon as practicable after the execution of this Agreement,
Seller shall use its best efforts, and shall cause the Telecommunication
Subsidiaries to use their respective best efforts, to obtain all consents,
approvals, certificates and other documents required in connection with the
performance by any such parties of this Agreement and their respective
Related Agreements and the consummation of the transactions contemplated
hereby and thereby, including all consents and approvals by each party to
any of the Contracts referred to in Schedule 3.14. Seller shall, and
-------------
shall cause the Telecommunication Subsidiaries to, make all filings,
applications, statements and reports to all Governmental Authorities and
other Persons which are required to be made prior to the Closing Date by or
on behalf of Seller, the Telecommunication Subsidiaries or any of their
respective Affiliates pursuant to any applicable Law or Contract in
connection with this Agreement or any of their respective Related
Agreements and the transactions contemplated hereby and thereby, including
prompt filings under the HSR Act and expedited submission of all materials
required by any Governmental Authority in connection with such filings.
30
(b) As soon as practicable after execution of this Agreement Buyer
shall, where appropriate, cooperate with Seller and the Telecommunication
Subsidiaries in the making of and make all filings, applications,
statements and reports to all Governmental Authorities and other Persons
which are required to be made prior to the Closing Date by or on behalf of
Buyer or any of its Affiliates pursuant to any applicable Law or Consent in
connection with this Agreement or any Related Agreement and the
transactions contemplated hereby and thereby, including prompt filings
under the HSR Act and expedited submission of all materials required by any
Governmental Authority in connection with such filings.
(c) During the period beginning on the Closing Date and ending
sixty (60) days after the Closing Date, Buyer may not, without the consent
of Seller, and Seller may not, without the consent of the Buyer, withdraw
any pending application to any Governmental Authority for Consent to
approval of the transfer-of-control of the Telecommunication Subsidiary
holding any Telecommunication Authorization or the assignment of any
Telecommunication Authorization to the Buyer or a Telecommunication
Subsidiary, as the case may be, or terminate any Telecommunication
Authorization that is the subject of any such pending application for
Consent.
5.6 Resignation of Officers and Directors. Seller shall cause
-------------------------------------
each officer and member of the board of directors of Telecommunication
Subsidiaries, if so requested by Buyer, to tender his or her resignation
from such position effective as of the Closing. Seller hereby assumes all
liability for and shall make payment of all amounts payable arising out of
the resignation or removal of the officers and members of the board of
directors of the Telecommunication Subsidiaries called for in this Section
5.6
5.7 Use of Name. From and after the Closing Date, neither
-----------
Seller nor any of its Affiliates will directly or indirectly use in any
manner any trade name, trademark, service xxxx or logo used by the
Telecommunication Subsidiaries or any word or logo that is similar in sound
or appearance. Prior to Closing, Seller's Telecommunication Business
related trademarks listed on Schedule 5.7 shall be transferred to a
------------
Telecommunication Subsidiary to be mutually agreed upon by Seller and
Buyer.
5.8 Preservation of Business.
------------------------
(a) Until the Closing, Seller shall cause the Telecommunication
Subsidiaries to incur and pay expenses and otherwise operate only in the
usual, regular and ordinary course and in a manner consistent with past
practice, and Seller shall use commercially reasonable efforts to (i)
preserve intact the present business organization and personnel of the
Telecommunication Subsidiaries, (ii) preserve the good will and
advantageous relationships of the Telecommunication Subsidiaries with
customers, suppliers, independent contractors, employees and other Persons
material to the operation of their respective businesses, (iii) prevent any
event which could have a Telecommunication Subsidiary Material Adverse
Effect, and (iv) not permit any action or omission which would cause any of
the representations or warranties of Seller contained herein to become
inaccurate or any of the covenants of Seller to be breached.
(b) Without limiting the generality of clause (a), until the
----------
Closing, except as set forth on Schedule 5.8, or with the prior written
------------
consent of Buyer, Seller will not permit any Telecommunication Subsidiary
to:
31
(i) incur any obligation or enter into any Contract which either
(x) requires a payment by any party in excess of, or a series
of payments which in the aggregate exceed, $25,000 or provides
for the delivery of goods or performance of services, or any
combination thereof, having a value in excess of $25,000, or
(y) has a term of, or requires the performance of any
obligations by any Telecommunication Subsidiaries over a
period in excess of six months and is not terminable within
ninety (90) days without payment of a termination fee or
similar payment in excess of $25,000,
(ii) take any action, or enter into or authorize any Contract or
transaction, other than in the ordinary course of business and
consistent with past practice, including, without limitation,
the licensing of products or software to third parties.
(iii) do any act or omit to do any act, or permit any act or
omission to act, which would cause a material breach of any of
the Contracts set forth on Schedule 3.14 or any other
-------------
Contract or obligation the breach of which could have a
Telecommunication Subsidiary Material Adverse Effect,
(iv) sell, lease, abandon, transfer, convey, assign or otherwise
dispose of any of its assets or properties with a value in
excess of $25,000, except sales of inventory in the ordinary
course of business and consistent with past practice,
(v) suffer or permit the creation of any Lien over any of its
assets or properties other than in the ordinary course of
business and consistent with past practice,
(vi) waive, release or cancel any claims against third parties or
debts owing to it in excess of $25,000, or any rights which
have a value in excess of $25,000,
(vii) make any changes in its accounting systems, policies,
principles or practices,
(viii) enter into, authorize or permit any transaction with Seller or
any Affiliate of Seller,
(ix) authorize for issuance, issue, sell, deliver or agree or
commit to issue, sell or deliver (whether through the issuance
or granting of options, warrants, convertible or exchangeable
securities, commitments, subscriptions, rights to purchase or
otherwise) any shares of capital stock or any other securities
of any Telecommunication Subsidiary, or amend any of the terms
of any such capital stock or other securities,
(x) split, combine, or reclassify any shares of its capital stock,
declare, set aside or pay any dividend or other distribution
(whether in cash, stock or property or any combination
thereof) in respect of its capital stock, or redeem or
otherwise acquire any capital stock or other securities of any
Telecommunication Subsidiary,
32
(xi) make any borrowing, incur any debt (other than trade payables
in the ordinary course of business and consistent with past
practice), or assume, guarantee, endorse (except for the
negotiation or collection of negotiable instruments in the
ordinary course of business and consistent with past practice)
or otherwise become liable (whether directly, contingently or
otherwise) for the obligations of any other Person, or make
any payment or repayment in respect of any indebtedness (other
than trade payables and accrued expenses in the ordinary
course of business and consistent with past practice),
(xii) make any loans, advances or capital contributions to, or
investments in, any other Person,
(xiii) enter into, adopt, amend or terminate any bonus, profit
sharing, compensation, termination, stock option, stock
appreciation right, restricted stock, performance unit, stock
equivalent, stock purchase agreement, pension, retirement,
deferred compensation, employment, severance or other employee
benefit agreements, trusts, plans, funds or other arrangements
for the benefit or welfare of any director, officer,
consultant or employee, or increase in any manner the
compensation or fringe benefits of any director, officer,
consultant or employee or pay any benefit not required by any
existing plan and arrangement or enter into any contract,
agreement, commitment or arrangement to do any of the
foregoing,
(xiv) enter into or amend any employment or severance agreement
which increases in any manner the salary, wages, bonus,
commission, or other compensation or benefits of any director
or officer of any Telecommunication Subsidiary,
(xv) increase in any manner the salary, wage, bonus, commission or
other compensation or benefits of any director or officer of
any Telecommunication Subsidiary,
(xvi) pay any benefit not required by any plan and arrangement as in
effect as of the date hereof (including, without limitation,
the granting of stock options, stock appreciation rights or
performance units),
(xvii) except for capital expenditures contemplated by clause (xviii),
--------------
acquire, lease or encumber any assets outside the ordinary
course of business or any assets which are material to any
Telecommunication Subsidiary,
(xviii) authorize or make any capital expenditures which individually
or in the aggregate are in excess of $50,000,
(xix) make any Tax election (other than routine elections made on
Tax Returns filed in the ordinary course of business
consistent with past practice that will not, in the aggregate,
have a Telecommunication Subsidiary Material Adverse Effect on
the taxable income or loss of the Telecommunication
Subsidiaries for any taxable year ending after the Closing
Date) or settle or
33
compromise any federal, state, local or foreign income Tax
liability, or waive or extend the statute of limitations in
respect of any such Taxes,
(xx) pay any amount, perform any obligation or agree to pay any
amount or perform any obligation, in settlement or compromise
of any suits or claims of liability against any of the
Telecommunication Subsidiaries, or any of their respective
directors, officers, employees or agents,
(xxi) terminate, rescind, modify, amend or otherwise alter or change
any of the terms or provisions of any Contract, pay any amount
in excess of $25,000 not required by Law or by any Contract,
or reduce, discount, waive or forego any material payment or
right thereunder, or agree to any compromise or settlement
with respect thereto, or
(xxii) write up any accounts receivable or other asset previously
written down or written off.
(c) Without limiting the generality of clause (a), until the
Closing, except as set forth on Schedule 5.8, Seller shall cause the
------------
Telecommunication Subsidiaries to:
(i) maintain their respective books, accounts and records in the
usual, regular and ordinary manner, and on a basis consistent
with the respective Telecommunication Subsidiaries' past
practices,
(ii) continue to carry their respective existing insurance through
the Closing Date, and shall not allow any breach, default,
termination or cancellation of such insurance policies or
agreements to occur or exist, and
(iii) duly comply with all Laws applicable to their respective
businesses and operations.
5.9 Supplemental Information. From time to time prior to the
------------------------
Closing, Seller will promptly disclose in writing to Buyer any matter
hereafter arising which, if existing, occurring or known at the date of
this Agreement would have been required to be disclosed to Buyer or which
would render inaccurate any of the representations, warranties or
statements set forth in Article III hereof. No information provided to
-----------
Buyer pursuant to this Section shall be deemed to cure any breach of any
representation, warranty or covenant made in this Agreement or in any
Related Agreement.
5.10 Exclusivity. Until Closing or until this Agreement is
-----------
terminated in accordance with the provisions of Section 9.1, none of Seller
or any of the Telecommunication Subsidiaries or any of their respective
directors, officers, employees, representatives, agents or Affiliates
shall, directly or indirectly, solicit, initiate, encourage, respond
favourably to, permit or condone inquires or proposals from, or provide any
confidential information to, or participate in any discussions or
negotiations with, any Person (other than Buyer, its directors, officers,
employees, representatives and agents) concerning (a) any merger, sale of
assets not in the ordinary course of business, acquisition, business
combination, change of control or other similar transaction involving the
Telecommunication Subsidiaries, or (b) any purchase or other acquisition by
any Person of any of the Telecommunication Subsidiary Shares, or (c) any
sale or issuance by any Telecommunication
34
Subsidiary of any shares of its capital stock. Until Closing or until this
Agreement is terminated in accordance with the provisions of Section 9.1,
Seller will promptly advise Buyer of, and communicate to Buyer the terms
and conditions of (and the identity of the Person making), any such inquiry
or proposal received.
5.11 Interim Financial Statements. Seller agrees to provide to
----------------------------
Buyer (a) as soon as practicable after the end of each calendar month
Interim Financial Statements, consisting of a balance sheet as of the end
of such month for each of the Telecommunication Subsidiaries and a
statement of operations of the Telecommunication Subsidiaries for that
month and for the portion of the year then ended and (b) as soon as
practicable after the end of each week prior to the Closing Date, the
weekly internal management financial and operational reports with respect
to the Telecommunication Subsidiaries prepared in accordance with past
practice.
5.12 Tax Indemnity.
-------------
(a) For purposes of this Agreement, "Tax Indemnification Period"
means the period (including all prior taxable years) or partial period
ending on or before the Closing Date. For any taxable year of the
Telecommunication Subsidiaries that does not end on, and would otherwise
extend beyond, the Closing Date, there shall be a deemed short taxable year
ending on and including such date and a second deemed short taxable year
beginning on and including the day after such date. The allocation on
returns of taxes measured by income between deemed short taxable years
shall be consistent with Federal income tax returns (adjusted to eliminate
the effects of the Election described in Section 5.16) and in all other
cases shall be pro rata except for items of income or loss arising from an
extraordinary event, which shall be reflected in the period in which such
event occurred.
(b) Seller agrees to indemnify the Buyer Indemnified Parties
against, and agrees to hold each of them harmless from, any and all Losses
incurred or suffered by them relating to or arising out of or in connection
with any and all Taxes that have become due and payable during, or which
have accrued with respect to the Telecommunication Subsidiaries for, any
period included in the Tax Indemnification Period that have not been paid
prior to the Closing Date, including (i) any Taxes imposed as a result of
each Election (as such term is described in Section 5.16 or reserved on
the Preliminary Statement and (ii) Taxes of a taxpayer other than the
Telecommunications Subsidiaries. Any Taxes attributable to the operations
of the Telecommunication Subsidiaries payable as a result of an audit of
any Tax Return filed for any taxable year falling with the Tax
Indemnification Period shall be deemed to have accrued in the period to
which such Taxes are attributable.
(c) Buyer agrees to indemnify the Seller Indemnified Parties
against, and agrees to hold each of them harmless from, any and all Losses
incurred or suffered by them relating to or arising out of or in connection
with any and all Taxes that have become due and payable during, or which
have accrued with respect to the Telecommunication Subsidiaries for, any
period after the Tax Indemnification Period. Any Taxes attributable to the
operations of the Telecommunication Subsidiaries payable as a result of an
audit of any Tax Return shall be deemed to have accrued in the period to
which such Taxes are attributable.
35
5.13 Inter-company Agreements. Effective as of the Closing,
------------------------
without any cost to the Telecommunication Subsidiary, Seller shall cause
its Affiliates and the Telecommunication Subsidiaries to terminate,
rescind, cancel and render void and of no effect any and all Contracts
listed on Schedule 5.13 between the Telecommunication Subsidiaries on the
-------------
one hand and any Seller or any of its Affiliates (other than the
Telecommunication Subsidiaries) on the other hand; provided that this
--------
Section 5.13 shall not apply to liabilities reflected on the Closing Date
Statement or to this Agreement or any Related Agreement.
5.14 Excluded Liabilities. Prior to the Closing Date, Seller
--------------------
shall pay, discharge or assume, or provide the Telecommunication
Subsidiaries with sufficient funds to pay and discharge in full, all
indebtedness of the Telecommunication Subsidiaries for borrowed money,
except as set forth in Schedule 5.14.
-------------
5.15 Tax Matters. Seller and Buyer may reasonably request (the
-----------
"Requesting Party") from the other (the "Providing Party"), and the
Providing Party shall make available to the Requesting Party, at the
expense of the Requesting Party, such records as the Requesting Party may
reasonably need for the preparation of any Tax Returns or other similar
reports or forms required to be filed by the Requesting Party and such
records as Requesting Party may require for the defence of any audit,
examination, administrative appeal or litigation of any such Tax Return or
other similar report or form.
5.16 338(h)(10) election.
-------------------
(a) At the option of the Buyer, Seller and Buyer shall jointly
make the elections provided for by Sections 338(g) and 338(h)(10) of the
Code and Treasury Regulation Section 1.338(h)(10)-1 (and any comparable
election under state or local tax law) with respect to the purchase of the
Shares of any one or more Telecommunication Subsidiaries by Buyer (each, an
"Election"). At the Closing, Seller shall deliver Internal Revenue
--------
Service Form 8023 to Buyer, with Sections 3a through 8h and 11a through 11g
completed and signed by Seller for each Telecommunication Subsidiary with
respect to which an Election will be made, and, if Buyer determines after
the Closing to make an Election with respect to a Telecommunication
Subsidiary, Seller shall cooperate with Buyer, at Buyer's expense, in
preparing such items. Also, Seller and Buyer shall cooperate with each
other to take all actions necessary and appropriate (including filing such
additional forms, returns, elections, schedules and other documents) as may
be required to effect and preserve a timely Election in accordance with the
provisions of Treasury Regulation Section 1.338(h)(10)-1 (or any comparable
provisions of state or local tax law) or any successor provisions. Seller
and Buyer shall report the purchase by Buyer of the applicable
Telecommunication Subsidiary Shares pursuant to this Agreement consistent
with the Elections (and any comparable elections under state or local tax
laws) and shall take no position inconsistent therewith in any Tax Return,
any proceeding before any taxing authority or otherwise.
(b) In connection with the Elections, Buyer shall (i) determine
the "Modified Aggregate Deemed Sale Price" of the Stock of each
Telecommunication Subsidiary with respect to which an Election is made
(within the meaning of, and in accordance with, Treasury Regulation Section
1.338(h)(10)-1(f)) and (ii) determine the proper allocations (the
"Allocations") of the "Modified Aggregate Deemed Sale Price" of each
Telecommunication Subsidiary with respect to which an Election is made
among the assets of such Telecommunication Subsidiary (in accordance with
36
Section 338(b)(5) of the Code and the Treasury Regulations promulgated
thereunder). Seller and Buyer shall (x) be bound by such determinations
and such Allocations for purposes of determining any Taxes, (y) prepare and
file their Tax Returns on a basis consistent with such determinations and
such Allocations and (z) take no position inconsistent with such
determinations and Allocations on any applicable Tax Return. In the event
that any such Allocation is disputed by any taxing authority, the party
receiving notice of the dispute shall promptly notify the other party
hereto concerning resolution of the dispute. Any liability for Taxes
arising from the Elections shall be borne by Seller, including any Taxes
imposed on the Telecommunication Subsidiaries as a result of such Election.
5.17 Employment and Employee Benefit Matters
---------------------------------------
(a) As of the Closing Date Buyer shall have in place employee
benefits plans, policies, and procedures substantially similar to those
that are available to the employees of the Telecommunication Subsidiaries
that are listed on Schedule 3.17(a)(i), provided that this provision
-------------------
shall in no way limit Buyer's ability to amend or terminate any such plans.
(b) Within twenty (20) days after the Closing Date, Seller shall
cause all contributions on behalf of (i) all employees of the
Telecommunication Subsidiaries and (ii) those Seller employees who have
accepted an offer of employment with Buyer before the Closing Date
(collectively, the "Affected Employees") to be made to the Advanced
Communications Group, Inc. Retirement Savings Plan ("Seller's 401(k) Plan")
for payroll periods ending prior to the Closing Date. Effective as of the
Closing Date, Buyer shall establish a successor defined contribution plan
(as defined in section 3(34) of ERISA) with a cash or deferred arrangement
to Seller's 401(k) Plan, which plan shall be referred to as "Buyer's 401(k)
Plan". Buyer shall cause Buyer's 401(k) Plan to recognize the past service
of Affected Employees for purposes of eligibility and vesting to the extent
such service was recognized for such purposes under Seller's 401(k) Plan
immediately prior to the Closing Date. Effective as of the Closing Date,
Seller shall cause the trustees of Seller's 401(k) Plan to spin-off and to
transfer from Seller's 401(k) Plan to Buyer's 401(k) Plan the assets and
liabilities under Seller's 401(k) Plan attributable to Affected Employees
including any promissory notes evidencing participant loans outstanding
under the terms of Seller's 401(k) Plan to any Affected Employee. Buyer
shall cause Buyer's 401(k) Plan to accept such a transfer of assets and
liabilities under Seller's 401(k) Plan attributable to Affected Employers,
and to contain all provisions necessary to assure that the requirements of
section 411(d)(6) of the Code are satisfied upon the transfer of assets and
liabilities to Buyer's 401(k) Plan from Seller's 401(k) Plan. The transfer
of assets and liabilities from Seller's 401(k) Plan to Buyer's 401(k) Plan
shall comply in all respects with section 414(l) of the Code and Seller and
Buyer shall use their reasonable best efforts to accomplish the transfer of
assets and liabilities as described above, including the filing of any
necessary forms with any governmental agency.
(c) Seller shall retain sole liability and responsibility for
payment (and all expenses associated therewith) of all amounts (whether
cash, stock or other property) payable to employees of the
Telecommunications Subsidiaries under all plans sponsored by Advanced
Communications Group, Inc., including, but not limited to, the Advanced
Communications Group, Inc. Employee Stock Purchase Plan, the Advanced
Communication Group, Inc. 1997 Stock Awards Plan and the 1999 Retention
Program and under any awards of equity based compensation (including,
without limitation options on Seller's Stock) under any employment
agreement, and further shall indemnify
37
the Buyer for any claims against Buyer or the Telecommunications
Subsidiaries for any and all amounts due under any such program maintained
by Advanced Communications Group, Inc.
(d) Seller hereby assumes all liability for and shall make payment
of all amounts payable under any employment agreement between the
Telecommunication Subsidiaries and any employee thereof (including, but not
limited to the employment agreements between the Telecommunication
Subsidiaries and Xxxx X. Xxxxx, Xxxx X. Xxxxxxx and X. Xxxxxxx Van Leur)
under any provisions in any such employment agreement relating to change in
ownership, management or employment responsibilities or compensation, or
change in control that are applicable in connection with the instant
transaction.
5.18 Buyer Capitalization. Buyer shall remain capitalized in an
--------------------
amount no less than Seven Hundred Fifty Thousand and No/100s Dollars
($750,000.00) through the Closing Date.
5.19 Directory Sales Agreement. Seller and Buyer agree to
-------------------------
negotiate in good faith, the terms of a Directory Sales Agreement, which
shall incorporate the principal terms identified in Exhibit F.
---------
5.20 Advertising Agreement. Seller, or its designee, and Buyer
---------------------
agree to negotiate in good faith the terms of an Advertising Agreement,
which shall incorporate the principle terms identified in Exhibit C
---------
attached hereto.
5.21 Transitional Services Agreement. Seller and Buyer shall
-------------------------------
execute a Transitional Services Agreement in a form substantially similar
to Exhibit D attached hereto.
---------
5.22 Consulting Agreement. Seller and Buyer shall execute a
--------------------
Consulting Agreement in a form substantially similar to Exhibit E
---------
attached hereto.
5.23 Telecommunication Services Agreement. On or after the
------------------------------------
Closing Date, hereof, Buyer shall have the option, to be exercised solely
at its discretion, to submit a commercially competitive bid to Seller for
the provision of telecommunications services to Seller. Seller shall
consider Buyer's bid in good faith and may, reject such bid (a) in favor of
a bid more advantageous to it in terms of price, service quality and range
of service, or (b) if Buyer's bid contains terms and conditions which are
not commercially reasonable.
5.24 Seller Reimbursements.
---------------------
(a) In the case of a Seller employee, who (i) does not accept
prior to the Closing Date an offer of employment from the Buyer, (ii)
receives, after the Closing Date and during the term of the Transitional
Services Agreement, an offer of employment with the Buyer and (iii) accepts
such offer of employment prior to the end of the tern of the Transitional
Services Agreement, Buyer shall reimburse Seller for 50% of the Retention
Benefits, as hereinafter defined, if any, paid by the Seller during the
term of the Transitional Services Agreement, provided that the amount paid
by Buyer to Seller for any such employee pursuant to this Section 5.24
shall not exceed 50% of the employee base pay actually paid to such
employee during the term of the Transitional Services Agreement.
38
"Retention Benefits" as used herein refers to amounts paid, over and above
the employee's regular compensation, for the period from the Closing Date
to the expiration of the term of the Transitional Services Agreement.
(b) Buyer agrees to reimburse Seller on the ninetieth day after
the Closing Date, Seven Thousand Five Hundred and No/100s Dollars
($7,500.00) for each Consent (i) referred to in Section 2.2 for which a
Telecommunication Authorization Adjustment has been made and (ii) which is
received within the sixty (60) days after the Closing Date.
5.25 Severance Payments. Seller, is solely liable for all amounts
-------------------
payable (in cash, stock or property) under the Advanced Communications
Group, Inc. 1997 Stock Awards Plan (including without limitation any awards
under such plans pursuant to the employment contracts), the Advanced
Communications Group, Inc. Employee Stock Purchase Plan and the 1999
Retention Program, except for amounts payable by employees or other
participants, and the Telecommunications Subsidiaries have no liability
actual, potential or contingent under any of the foregoing arrangements.
5.26 Non-Competition
---------------
(a) Except as Buyer may expressly agree in writing, Seller agrees
that for a period of three (3) years after the Closing Date (the "Non-
Competition Period"), Seller shall not, and shall not permit any of its
Affiliates, (except for officers, directors, and employees outside of their
capacity as such) to, directly or indirectly:
(i) engage in, control, advise, manage, or act as a
consultant to any business which, but only to the extent
it, conducts activities in the Territory (as hereinafter
defined) the same as those conducted by the
Telecommunications Subsidiaries as of the Closing Date;
(ii) solicit, divert or attempt to solicit or divert any
party who is, was, or was solicited to become, a
customer or supplier of the Telecommunication
Subsidiaries for Telecommunication Business at any time
prior to the Closing Date;
(iii) employ or solicit for employment any person who is
employed in a capacity providing Telecommunication
Business services to a Telecommunication Subsidiary;
For purposes of this Section, the phrase "directly or indirectly" shall
include acts or omissions as partner, joint venture, employer, agent,
consultant, or owner of any interest in, any Person. "Territory" shall
mean those geographic areas in which the Telecommunication Subsidiaries
have customers as of the Closing Date.
(b) In the event of actual breach of the provisions of this
Section, Buyer, in addition to any other remedies available to it for such
breach or threatened breach, including the recovery of damages, shall be
entitled to an injunction restraining Seller from such conduct.
39
(c) If at any time any of the provisions of this Section shall be
determined to be invalid or unenforceable by reason of being vague or
unreasonable as to duration, area, scope of activity or otherwise, then
this Section shall be considered divisible (with the other provisions to
remain in full force and effect) and the invalid or unenforceable
provisions shall become and be deemed to be immediately amended to include
only such time, area, scope of activity and other restrictions, as shall be
determined to be reasonable and enforceable by the court or other body
having jurisdiction over the matter, and Seller expressly agrees that this
Agreement, as so Amended, shall be valid and binding as though any invalid
or unenforceable provision had not been included herein.
(d) The parties hereto agree that any damage caused to Buyer by
reason of the breach by Seller or any of its Affiliates of this Section
5.25 would cause irreparable harm that could not be adequately compensated
for in monetary damages alone; therefore, each party agrees that, in
addition to any other remedies, at law or otherwise, the Buyer shall be
entitled to an injunction issued by a court of competent jurisdiction
restraining and enjoining any violation by Seller or any of its Affiliates
of this Section 5.25.
ARTICLE VI.
CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
The obligations of Buyer under Article II of this Agreement are
----------
subject to the satisfaction or waiver by Buyer of the following conditions
precedent on or before the Closing Date:
6.1 Warranties True as of Both Present Date and Closing Date.
--------------------------------------------------------
The representations and warranties of Seller contained herein and qualified
as to materiality shall have been accurate, true and correct, and those not
so qualified shall be true and correct in all material respects, in each
case, on and as of the date of this Agreement, and shall also be accurate,
true and correct to the same extent on and as of the Closing Date with the
same force and effect as though made by Seller on and as of the Closing
Date.
6.2 Compliance with Agreements and Covenants. Seller and the
----------------------------------------
Telecommunication Subsidiaries shall have performed and complied with all
of their respective covenants, obligations and agreements contained in this
Agreement to be performed and complied with by them on or prior to the
Closing Date.
6.3 Consents and Approvals. Buyer shall have received written
----------------------
evidence reasonably satisfactory to it that (a) all material Consents
including without limitation those indicated as such in Schedule 3.3(a)
---------------
required for the consummation of the transactions contemplated hereby or
the ownership and operation of Buyer of the Telecommunication Subsidiaries
have been received and (b) Seller's shareholders shall have voted in favor
of the sale of the transactions contemplated herein.
6.4 Seller Telecommunication Assets Conveyance. Seller shall
-------------------------------------------
have assigned, transferred or conveyed the Seller Telecommunication Assets
and the Seller Telecommunication Liabilities to any one or all of the
Telecommunication Subsidiaries.
40
6.5 Expiration of HSR Waiting Period. The applicable waiting
--------------------------------
period under the HSR Act shall have expired or been earlier terminated
without action by the Justice Department or the Federal Trade Commission to
prevent consummation of the transactions contemplated by this Agreement.
6.6 Documents. Buyer shall have received all of the agreements,
---------
documents and items specified in Section 8.2.
6.7 Telecommunication Subsidiary Material Adverse Change. No
----------------------------------------------------
Telecommunication Subsidiary Adverse Change shall have occurred and no
event shall have occurred which is likely to have a Telecommunication
Subsidiary Material Adverse Effect.
6.8 Actions or Proceedings. No action or proceeding by any
----------------------
Governmental Authority or other Person shall have been instituted or to the
knowledge of Seller, threatened which would (a) result in significant
monetary damages, or (b) if successful, enjoin, restrain or prohibit any
provision of this Agreement or any of the Related Agreements or the
consummation of the transactions contemplated hereby.
6.9 Excluded Liabilities. Except as set forth in Schedules 5.2
-------------------- --------------
and 5.14, or in the "Total Telecom" column of the Combined Management
--------
Report, the Telecommunication Subsidiaries shall have no indebtedness for
borrowed money to third parties or to Seller's Affiliates.
ARTICLE VII.
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER
The obligations of Seller under Article II of this Agreement are
----------
subject to the satisfaction or waiver by Seller of the following conditions
precedent on or before the Closing Date:
7.1 Shareholder Approval. In accordance with Seller's articles
---------------------
of incorporation, bylaws, or the laws of the state of its incorporation a
sufficient number of Seller's shareholders shall have voted in favor of the
sale of the Telecommunication Subsidiaries.
7.2 Warranties True as of Both Present Date and Closing Date.
--------------------------------------------------------
The representations and warranties of Buyer contained herein shall have
been accurate, true and correct in all material respects on and as of the
date of this Agreement, and shall also be accurate, true and correct on and
as of the Closing Date with the same force and effect as though made by
Buyer on and as of the Closing Date.
7.3 Compliance with Agreements and Covenants. Buyer shall have
----------------------------------------
performed and complied with all of its respective covenants, obligations
and agreements contained in this Agreement to be performed and complied
with by it on or prior to the Closing Date.
7.4 Expiration of HSR Waiting Period. The applicable waiting
--------------------------------
period under the HSR Act shall have expired or have been earlier terminated
without action by the Justice Department or the Federal Trade Commission to
prevent consummation of this Agreement.
41
7.5 Documents. Seller shall have received all of the
---------
agreements, documents and items specified in Section 8.3.
7.6 Actions or Proceedings. No action or proceeding by any
----------------------
Governmental Authority or other Person shall have been instituted or
threatened which could enjoin, restrain or prohibit, or could result in
substantial damages in respect of, any provision of this Agreement or any
of the Related Agreements or the consummation of the transactions
contemplated hereby.
7.7 Employee Benefits. Seller shall have received written
-----------------
evidence reasonably satisfactory to Seller that as of the Closing
Date Buyer has established and in place (or will have on Closing
by operation of the transaction) employee benefits plans, policies,
and procedures substantially similar to those that are listed at
Schedule 3.17(i)(a) available to the Telecommunication Subsidiaries'
-------------------
Employees.
ARTICLE VIII.
CLOSING
8.1 Closing. The Closing shall occur at the offices of
-------
Xxxxxxxxx Xxxxxxx Xxxxx Xxxxxx LLP at St. Louis, Missouri, at 9:00 a.m. on
the tenth Business Day after the conditions precedent to Closing specified
in Articles VI and VII shall have occurred or been waived (the "Closing
Date"). The Closing, and all transactions to occur at the Closing, shall
be deemed to have taken place at, and shall be effective as of, the close
of business on the Closing Date. No fewer than three (3) weeks prior to
the date Seller and Buyer anticipate the closing will occur, Seller and
Buyer shall confer about the same.
8.2 Deliveries by Seller. At the Closing, in addition to any
--------------------
other documents or agreements required under this Agreement, Seller shall
deliver to Buyer the following:
(a) Certificates evidencing all of the Telecommunication
Subsidiary Shares, which certificates shall be duly endorsed in blank or
accompanied by duly executed stock powers;
(b) The resignations of the persons listed in Schedule 8.2(b) as
---------------
directors and officers of the Telecommunication Subsidiaries;
(c) Except for those Liens specified on Schedule 8.2(c), a
----------------
written statement from each Person holding a Lien upon any of the assets of
the Telecommunication Subsidiaries, or upon any Telecommunication
Subsidiary Shares, confirming the repayment of the indebtedness secured
thereby and the release as of the Closing Date of (i) such Lien and
(ii) all obligations under any and all Contracts relating thereto;
(d) A certificate dated the Closing Date of Seller certifying as
to the compliance by Seller and the Telecommunication Subsidiaries as the
case may be, with Sections 6.1 and 6.2;
(e) The Certificates of Incorporation or similar instruments of
the Telecommunication Subsidiaries certified by the Secretary of State or
equivalent Person of the jurisdiction of incorporation
42
of the Telecommunication Subsidiaries, and Bylaws or similar instruments of
the Telecommunication Subsidiaries, certified by the Secretary of each of
the Telecommunication Subsidiaries;
(f) Certificates of Good Standing for the Telecommunication
Subsidiaries from each of the States of listed in Schedule 3.1 as those
------------
states in which the respective Telecommunication Subsidiaries are
authorized to do business as a foreign corporation.
(g) An opinion as to the matters set forth in Sections 3.1, 3.2,
3.3, 3.4, and 3.15, dated the Closing Date, of Xxxxxxxxx Xxxxxxx Xxxxx
Xxxxxx LLP, and/or Xxxxxxx Berlin, counsel for Seller and the
Telecommunication Subsidiaries, which opinion shall not be governed or
qualified by, or otherwise subject to, any treatise, written policy or
other document relating to legal opinions, including, without limitation,
the Legal Opinion Accord of the ABA Section of Business Law (1991);
(h) A certificate of the Secretaries of the Seller and the
Telecommunication Subsidiaries certifying resolutions of the Boards of
Directors of the Seller and the Telecommunication Subsidiaries approving
this Agreement, the Seller and Telecommunication Subsidiaries' respective
Related Agreements and the transactions contemplated hereby and thereby
(together with an incumbency and signature certificate regarding the
officer(s) signing on behalf of the Seller and each of the
Telecommunication Subsidiaries);
(i) Duly executed originals of each of the Related Agreements;
(j) A duly executed certificate of Seller in the form specified by
Treas.Reg. Section 1.1445-2(b)(2);
(k) Evidence, in form reasonably satisfactory to Buyer, that none
of the Telecommunication Subsidiaries have breached any material provision
of, nor is it in default under the terms of, any material Interconnect
Agreement listed on Schedule 8.2(k) and
---------------
(l) Evidence, in form reasonably satisfactory to Buyer, that all
material Consents have been obtained.
8.3 Deliveries by Buyer. At the Closing, Buyer shall deliver to
-------------------
Seller the following:
(a) The Consideration;
(b) A certificate, dated the Closing Date, of an executive officer
of Buyer, certifying as to compliance by Buyer as the case may be, with
Sections 7.2 and 7.3;
(c) Certificates of Buyer's secretary certifying resolutions of
the board of directors of parties approving this Agreement and its Related
Agreements and the transactions contemplated hereby and thereby (together
with an incumbency and signature certificate regarding the officer(s)
signing on behalf of Buyer);
(d) Evidence, in form reasonably satisfactory to Seller, that all
material Consents referred to in Schedule 4.3 have been obtained except
------------
for those the failure to have received has been waived by Seller; and
43
(e) An opinion as to the matters set forth in Sections 4.1, 4.2
and 4.3, dated the Closing Date, of Xxxxx, Xxxxx & Xxxxx, counsel for
Buyer, substantially in the form of Schedule 8.3(e), which opinion shall
----------------
not be governed or qualified by, or otherwise subject to, any treatise,
written policy or other document relating to legal opinions, including,
without limitation, the Legal Opinion Accord of the ABA Section of Business
Law (1991).
ARTICLE IX.
TERMINATION
9.1 Termination. This Agreement may be terminated at any time
-----------
on or prior to the Closing Date:
(a) With the mutual consent of Seller and Buyer;
(b) By Seller or Buyer, if the Closing shall not have taken place
on or before February 28, 2000;
(c) By Buyer, if there shall have been a material breach of any
covenant, representation or warranty or other agreement of Seller or of the
Telecommunication Subsidiaries hereunder, and such breach shall not have
been remedied within fifteen (15) Business Days after receipt by Seller of
a notice in writing from Buyer specifying the breach and requesting such be
remedied;
(d) By Seller, if there shall have been a material breach of any
covenant, representation or warranty or other agreement of Buyer hereunder,
and such breach shall not have been remedied within fifteen (15) Business
Days after receipt by Buyer of notice in writing from Seller specifying the
breach and requesting such be remedied; or
(e) By Seller, if the Board of Directors of Seller shall have
determined to recommend an Acquisition Proposal to its stockholders after
determining that such Acquisition Proposal constitutes the Superior
Proposal, and Seller gives Buyer at least five (5) Business Days prior
notice of its intention to effect such termination pursuant to this section
9.1(e), and at the end of the five (5) Business Days notice period Seller
makes payment to Buyer in the amount equal to five percent (5%) of the
Consideration prior to any purchase price adjustment pursuant to Section
2.2 plus Buyer's expenses, supported by written evidence reasonably
satisfactory to Seller, which shall not exceed $450,000. The parties agree
that this is a reasonable sum as liquidated damages and not a penalty.
9.2 Effect of Termination. If this Agreement is terminated
---------------------
pursuant to Section 9.1, all obligations of the parties hereunder shall
terminate, except for the obligations set forth in Sections 5.4(b) and
11.1, which shall survive the termination of this Agreement, except that no
such termination shall relieve any party from liability for any prior
willful breach of this Agreement.
44
ARTICLE X.
INDEMNIFICATION
10.1 Survival. Except as otherwise specified, the
--------
representations and warranties of Seller contained herein shall survive a
period expiring eighteen (18) months after the Closing Date, except that
(a) the representations and warranties contained in Sections 3.20 shall
survive until the close of business on the 90th day after the expiration of
the applicable statute of limitations with respect to Taxes attributable to
any period or partial period prior to the Closing Date, including any
extensions thereof, (b) the representations and warranties contained in
Sections 3.22 shall survive until the close of business on the 90th day
after the expiration of the applicable statute of limitations with respect
to applicable Environmental Laws, and (c) the representations and
warranties contained in Sections 3.2 and 3.4 shall survive forever. The
representations and warranties of Buyer contained herein shall survive the
Closing for a period expiring at the close of business on the date that is
eighteen (18) months after the Closing Date except that the representation
and warranty set forth in Section 4.2 hereof shall survive forever.
10.2 Limits on Indemnification. The parties hereto agree that
-------------------------
any indemnification payments to be made pursuant to this Agreement by
Seller on the one hand or Buyer on the other hand (except pursuant to
Section 10.3(a), with respect to the representations and warranties
contained in Sections 3.12, 3.20 and 3.22, or Sections 10.3(b), 10.3(c),
10.3(d), 10.3(f), and 10.3(k)) or 10.4(b)) shall be subject to the
requirement that no claim may be made until the aggregate amount of
indemnifiable Losses incurred by Seller on the one hand or Buyer on the
other hand exceeds $75,000.00, at which time such claim for indemnification
may be made for the aggregate amount of all indemnifiable Losses exceeding
$75,000.00. Seller's indemnification obligation under Section 10.3(c)
shall be limited in total to One Hundred Fifty Thousand and No/100s dollars
($150,000.00).
10.3 Indemnification by Seller. Seller agrees to indemnify Buyer,
-------------------------
and its Affiliates (including, after the Closing, the Telecommunication
Subsidiaries), and their respective officers, directors, employees, agents
and representatives (excluding, in any event, Seller), against, and agrees
to hold them harmless from, any and all Losses incurred or suffered by them
relating to or arising out of or in connection with any of the following;
provided, however, that such indemnification shall be the sole remedy for
Buyer for any and all such Losses:
(a) any breach of or any inaccuracy in any representation or
warranty made by Seller in this Agreement or any Related Agreement to which
Seller is a party, or any document delivered at the Closing. Buyer's claim
shall have been made in writing to Seller not later than the expiration of
the time periods set forth in Section 10.1; or
(b) failure by either Buyer or Seller to obtain any Consent from a
Commission granting Consent to this Agreement or the transaction
contemplated herein; or
(c) any fines imposed by the Commission of the state of Oklahoma
arising from settlement agreement entered into on or about April 8, 1999
between that Commission and Xxxxx; or
45
(d) arising out of the alleged failure to obtain timely Consent
from a Commission to the acquisition of TRI by Seller; or
(e) the misclassification of certain employees as "exempt
employees" as more fully described on Schedule 3.17(c) and 3.18(a); or
---------------- -------
(f) Hazardous Materials contained in batteries used prior to the
Closing Date in connection with telecommunications switches; or
(g) arising out of the ongoing investigation of the Attorney
General of the State of Kansas into slamming and violations of Kansas
consumer protection laws by Xxxxx; or
(h) the failure of Seller or any Telecommunication Subsidiary to
make any required filing with the FCC; or
(i) arising out of the settlement agreement entered into on or
about June 23, 1999 between the Attorney General of the State of Minnesota
and FirsTel; or
(j) without limiting the generality of the foregoing, any other of
the matters set forth on Schedule 3.23 attached hereto; or
-------------
(k) any breach of or failure by Seller to perform any covenant or
obligation set out or contemplated in this Agreement or any Related
Agreement or any document delivered by it at the Closing.
10.4 Indemnification by Buyer. Buyer agrees to indemnify Seller
------------------------
and its Affiliates, and their respective officers, directors, employees,
agents and representatives, against, and agrees to hold it harmless from,
any and all Losses incurred or suffered by it relating to or arising out of
or in connection with any of the following:
(a) any breach of or any inaccuracy in any representation or
warranty made by Buyer in this Agreement or any Related Agreement to which
Buyer is a party, or any document delivered at Closing. Seller's Claim
shall have been made in writing to Buyer not later than the expiration of
the time periods set forth in Section 10.1; or
(b) any breach of or failure by Buyer to perform any covenant or
obligation set out or contemplated in this Agreement or any Related
Agreement or any document delivered at the Closing.
10.5 Claims. The provisions of this Section shall be subject to
------
Section 10.6. As soon as is reasonably practicable after becoming aware
of a claim for indemnification under this Agreement, the Indemnified Person
shall promptly give notice to the indemnifying person of such claim and the
amount the Indemnified Person will be entitled to receive hereunder from
the Indemnifying Person; provided that the failure of the Indemnified
Person to promptly give notice shall not relieve the Indemnifying Person of
its obligations except to the extent (if any) that the Indemnifying Person
shall have been prejudiced thereby. If the Indemnifying Person does not
object in writing to such indemnification claim within thirty (30) days of
receiving notice thereof, the Indemnified Person shall be entitled to
recover, on the thirty-fifth day after such notice was given, from the
Indemnifying Person the amount of such claim, and no later objection by the
Indemnifying Person shall be permitted; if the
46
Indemnifying Person agrees that it has an indemnification obligation but
objects that it is obligated to pay only a lesser amount, the Indemnified
Person shall nevertheless be entitled to recover, on the thirty-fifth day
after such notice was given, from the Indemnifying Person the lesser
amount, without prejudice to the Indemnified Person's claim for the
difference. In addition to the amounts recoverable by the Indemnified
Person from the Indemnifying Person pursuant to the foregoing provisions,
the Indemnified Person shall also be entitled to recover from the
Indemnifying Person interest on such amounts at the rate of eight percent
(8%) from, and including, the thirty-fifth day after such notice of an
indemnification claim is given to, but not including, the date such
recovery is actually made by the Indemnified Person.
10.6 Notice of Third-Party Claims; Assumption of Defense. The
---------------------------------------------------
Indemnified Person shall give notice as promptly as is reasonably
practicable to the Indemnifying Person of the assertion of any claim, or
the commencement of any suit, action or proceeding, by any Person not a
party hereto in respect of which indemnity may be sought under this
Agreement; provided that the failure of the Indemnified Person to promptly
give notice shall not relieve the Indemnifying Person of its obligations
except to the extent (if any) that the Indemnifying Person shall have been
prejudiced thereby. The Indemnifying Person may, at its own expense,
(a) participate in the defense of any claim, suit, action or proceeding and
(b) upon notice to the Indemnified Person and the Indemnifying Person's
delivering to the Indemnified Person a written agreement that the
Indemnified Person is entitled to indemnification for all Losses arising
out of such claim, suit, action or proceeding and that the Indemnifying
Person shall be liable for the entire amount of any Loss, at any time
during the course of any such claim, suit, action or proceeding, assume the
defense thereof; provided, however, that (i) the Indemnifying Person's
counsel is reasonably satisfactory to the Indemnified Person, and (ii) the
Indemnifying Person shall thereafter consult with the Indemnified Person
upon the Indemnified Person's reasonable request for such consultation from
time to time with respect to such claim, suit, action or proceeding. If
the Indemnifying Person assumes such defense, the Indemnified Person shall
have the right (but not the duty) to participate in the defense thereof and
to employ counsel, at its own expense, separate from the counsel employed
by the Indemnifying Person. If, however, the Indemnified Person reasonably
determines in its judgment that representation by the Indemnifying Person's
counsel of both the Indemnifying Person and the Indemnified Person would
present such counsel with a conflict of interest, then such Indemnified
Person may employ separate counsel to represent or defend it in any such
claim, action, suit or proceeding and the Indemnifying Person shall pay the
fees and disbursements of such separate counsel. Whether or not the
Indemnifying Person chooses to defend or prosecute any such claim, suit,
action or proceeding, all of the parties hereto shall cooperate in the
defense or prosecution thereof.
10.7 Settlement or Compromise. Any settlement or compromise made
------------------------
or caused to be made by the Indemnified Person or the Indemnifying Person,
as the case may be, of any claim, suit, action or proceeding shall also be
binding upon the Indemnifying Person or the Indemnified Person, as the case
may be, in the same manner as if a final judgment or decree had been
entered by a court of competent jurisdiction in the amount of such
settlement or compromise; provided, however, that no obligation,
restriction or Loss shall be imposed on the Indemnified Person as a result
of such settlement without its prior written consent. The Indemnified
Person will give the Indemnifying Person at least thirty (30) days' notice
of any proposed settlement or compromise of any claim, suit, action or
proceeding it is defending, during which time the Indemnifying Person may
reject such proposed settlement or compromise; provided, however, that from
and after such rejection, the Indemnifying Person shall be
47
obligated to assume the defense of and full and complete liability and
responsibility for such claim, suit, action or proceeding and any and all
Losses in connection therewith in excess of the amount of unindemnifiable
Losses which the Indemnified Person would have been obligated to pay under
the proposed settlement or compromise. Notwithstanding the foregoing,
Seller shall not enter into any settlement or compromise of any claim,
action or proceeding relating to Taxes imposed with respect to the
operations of the Telecommunication Subsidiaries which could effect taxable
period(s) of any Telecommunication Subsidiary after the Closing Date
without consulting Buyer.
10.8 Failure of Indemnifying Person to Act. In the event that
-------------------------------------
the Indemnifying Person does not elect to assume the defense of any claim,
suit, action or proceeding, then any failure of the Indemnified Person to
defend or to participate in the defense of any such claim, suit, action or
proceeding or to cause the same to be done, shall not relieve the
Indemnifying Person of its obligations hereunder.
10.9 Tax Character. Seller and Buyer agree that any payments
-------------
pursuant to this Article X will be treated for federal and state income
---------
tax purposes as adjustments to the purchase price of the Shares, and that
they will report such payments on all Tax Returns consistently with such
characterization.
ARTICLE XI.
MISCELLANEOUS
11.1 Expenses. Seller shall pay all expenses of Seller and the
--------
Telecommunication Subsidiaries (including attorneys' fees and expenses) and
Buyer shall pay all expenses of Buyer (including attorneys' fees and
expenses), in each case incurred in connection with this Agreement and the
transactions contemplated hereby. Buyer and Seller shall be responsible for
and pay one-half (1/2) of all sales, use, stamp, transfer, service,
recording, real estate and like taxes or fees, if any, imposed by any
Governmental Authority in connection with the transfer and assignment of
the Shares.
11.2 Amendment. This Agreement may be amended, modified or
---------
supplemented but only in writing signed by each of the parties hereto.
11.3 Notices. Any notice, request, instruction or other document
-------
to be given hereunder by a party hereto shall be in writing and shall be
deemed to have been given, (a) when received if given in person or by
courier or a courier service, (b) on the date of transmission if sent by
telex, facsimile or other wire transmission or (c) six (6) Business Days
after being deposited in the U.S. mail, certified or registered mail,
postage prepaid:
(a) If to Seller, addressed as follows:
Advanced Communications Group, Inc.
Xx. Xxxxxxx X. Xxxxx
000 Xxxxx Xxxxxxxxx Xxxx
Xxxxxxxxxxxx, XX 00000
48
with a copy to:
Xxxxxxxxx Xxxxxxx Xxxxx Xxxxxx, LLP
Attn: Xxxxxxx X. Xxxxxx
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xx. Xxxxx, XX 00000
Facsimile No.: (000) 000-0000
(b) If to Buyer, addressed as follows:
Compass Telecommunication, Inc.
0000 Xxxxxxxx Xxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxx X. Xxxxxx
Facsimile No.: (000) 000-0000
with a copy to:
Xxxxx, Xxxxx & Xxxxx
000 X. XxXxxxx Xx.
Xxxxxxx, XX 00000
Attention: Xxxx X. Xxxxx
Facsimile No.: (000) 000-0000
or to such other individual or address as a party hereto may designate for
itself by notice given as herein provided
11.4 Waivers. The failure of a party hereto at any time or times
-------
to require performance of any provision hereof shall in no manner affect
its right at a later time to enforce the same. No waiver by a party of any
condition or of any breach of any term, covenant, representation or
warranty contained in this Agreement shall be effective unless in writing,
and no waiver in any one or more instances shall be deemed to be a further
or continuing waiver of any such condition or breach in other instances or
a waiver of any other condition or breach of any other term, covenant,
representation or warranty.
11.5 Counterparts. This Agreement may be executed in one or more
------------
counterparts, and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed an original, but all of
which together shall constitute one and the same instrument.
11.6 Interpretation. The headings preceding the text of Articles
--------------
and Sections included in this Agreement and the headings to Schedules
attached to this Agreement are for convenience only and shall not be deemed
part of this Agreement or be given any effect in interpreting this
Agreement. The use of the masculine, feminine or neuter gender herein
shall not limit any provision of this Agreement.
49
The use of the terms "including" or "include" shall in all cases herein
mean "including, without limitation" or "include, without limitation,"
respectively. Underscored references to Articles, Sections, Subsections or
Schedules shall refer to those portions of this Agreement. Consummation of
the transactions contemplated herein shall not be deemed a waiver of a
breach of or inaccuracy in any representation, warranty or covenant or of
any party's rights and remedies with regard thereto. No specific
representation, warranty or covenant contained herein shall limit the
generality or applicability of a more general representation, warranty or
covenant contained herein. A breach of or inaccuracy in any
representation, warranty or covenant shall not be affected by the fact that
any more general or less general representation, warranty or covenant was
not also breached or inaccurate.
11.7 Applicable Law. This Agreement shall be governed by and
--------------
construed and enforced in accordance with the internal laws of the State of
Delaware without giving effect to the principles of conflicts of law
thereof.
11.8 Assignment. This Agreement shall be binding upon and inure
----------
to the benefit of the parties hereto and their respective estates, heirs,
legal representatives, successors and assigns; provided, however, that no
assignment of any rights or obligations shall be made by any party hereto
without the written consent of each other party hereto, except that Buyer
may assign its rights to purchase all or any portion of the
Telecommunication Subsidiary Shares to one or more of its Affiliates
without the prior written consent of Seller; provided, further that no such
assignment shall (i) limit or affect the Buyer's obligations hereunder,
(ii) impair Seller's rights or remedies, or (iii) contravene or violate any
law applicable to or impede the transaction contemplated herein.
11.9 No Third-Party Beneficiaries. This Agreement is solely for
----------------------------
the benefit of the parties hereto and, to the extent provided herein, their
respective estates, heirs, successors, Affiliates, directors, officers,
employees, agents and representatives, and no provision of this Agreement
shall be deemed to confer upon other third parties any remedy, claim,
liability, reimbursement, cause of action or other right.
11.10 Publicity. Prior to the Closing Date, except as required by
---------
Law or the rules of any stock exchange, no public announcement or other
publicity regarding the transactions referred to herein shall be made by
Buyer, Seller, the Telecommunication Subsidiaries or any of their
respective Affiliates, officers, directors, employees, representatives or
agents, without the prior written agreement of Buyer and Seller, in any
case, as to form, content, timing and manner of distribution or
publication; provided, however, that nothing in this Section shall prevent
such parties from discussing such transactions with those Persons whose
approval, agreement or opinion, as the case may be, is required for
consummation of such particular transaction or transactions.
11.11 Liquidated Damages. If (a) all conditions precedent set forth
------------------
in Article VI have been met and (b) Buyer fails to close on the transactions
contemplated hereby, unless Buyer is entitled not to close pursuant to the
terms hereof, Seller may lawfully terminate this Agreement in accordance
with the notice and lapse of time requirements of Section 9.1(d), and if it
is so terminated, an aggregate of Seven Hundred Fifty Thousand and No/100
dollars ($750,000.00) shall be payable by Buyer to Seller, all as liquidated
damages to Seller, and such payments shall be the sole remedy of Seller and
the Telecommunication Subsidiaries for such failure by Buyer to close and
shall only be available as a remedy prior to the Closing.
50
11.12 Effect of Investigation. Any due diligence review, audit or
-----------------------
other investigation or inquiry undertaken or performed by or on behalf of
Buyer shall not limit, qualify, modify or amend the representations,
warranties or covenants of, Seller made or undertaken pursuant to this
Agreement, irrespective of the knowledge and information received (or which
should have been received) therefrom by Buyer.
11.13 Further Assurances. Upon the reasonable request of Buyer
------------------
and at its expense, Seller will on and after the Closing Date execute and
deliver to Buyer such other documents, releases, assignments and other
instruments as may be required to effectuate completely the transfer and
assignment to Buyer of, and to vest fully in Buyer title to, the
Telecommunication Subsidiary Shares and the Seller Telecommunication
Assets, and to otherwise carry out the purposes of this Agreement.
11.14 Severability. If any provision of this Agreement shall be
-------------
held invalid, illegal or unenforceable, the validity, legality or
enforceability of the other provisions hereof shall not be affected
thereby, and there shall be deemed substituted for the provision at issue a
valid, legal and enforceable provision as similar as possible to the
provision at issue.
11.15 Remedies Cumulative. Unless otherwise specified, the
-------------------
remedies provided in this Agreement shall be cumulative and shall not
preclude the assertion or exercise of any other rights or remedies
available by law, in equity or otherwise.
11.16 Entire Understanding. This Agreement and the Related
--------------------
Agreements set forth the entire agreement and understanding of the parties
hereto and supersede any and all prior agreements, arrangements and
understandings among the parties.
11.17 Jurisdiction of Disputes; Waiver of Jury Trial. In the
----------------------------------------------
event any party to this Agreement commences any litigation, proceeding or
other legal action in connection with or relating to this Agreement, any
Related Agreement or any matters described or contemplated herein or
therein, with respect to any of the matters described or contemplated
herein or therein, the parties to this Agreement hereby (a) agree under all
circumstances absolutely and irrevocably to institute any litigation,
proceeding or other legal action in a court of competent jurisdiction
located within the city of Dallas, Texas, whether a state or federal court;
(b) agree that in the event of any such litigation, proceeding or action,
such parties will consent and submit to personal jurisdiction in any such
court described in clause (a) of this Section and to service of process
upon them in accordance with the rules and statutes governing service of
process (it being understood that nothing in this Section shall be deemed
to prevent any party from seeking to remove any action to a federal court
in Dallas, Texas; (c) agree to waive to the full extent permitted by law
any objection that they may now or hereafter have to the venue of any such
litigation, proceeding or action in any such court or that any such
litigation, proceeding or action was brought in an inconvenient forum;
(d) designate, appoint and direct CT Corporation System as its authorized
agent to receive on its behalf service of any and all process and documents
in any legal proceeding in the State of Texas; (e) agree to notify the
other parties to this Agreement immediately if such agent shall refuse to
act, or be prevented from acting, as agent and, in such event, promptly to
designate another agent in the city of Dallas, Texas, satisfactory to
Seller and Buyer, to serve in place of such agent and deliver to the other
parties written evidence of such substitute agent's acceptance of such
designation; (f) agree as an alternative method of service to service of
process in any legal proceeding by mailing of copies thereof to such party
at its address set
51
forth herein for communications to such party; (g) agree that any service
made as provided herein shall be effective and binding service in every
respect; and (h) agree that nothing herein shall affect the rights of any
party to effect service of process in any other manner permitted by Law.
EACH PARTY HERETO WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY DISPUTE IN
CONNECTION WITH OR RELATING TO THIS AGREEMENT, ANY RELATED AGREEMENT OR ANY
MATTERS DESCRIBED OR CONTEMPLATED HEREIN OR THEREIN, AND AGREE TO TAKE ANY
AND ALL ACTION NECESSARY OR APPROPRIATE TO EFFECT SUCH WAIVER.
[The Remainder Of This Page Is Blank Intentionally]
52
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered as of the date first above written.
COMPASS TELECOMMUNICATIONS ADVANCED COMMUNICATIONS
GROUP, INC.
By:
----------------------------
Name:
--------------------------
Title: By:
------------------------- ----------------------------------------
Name: Xxxxxxx X. X'Xxxx
Title: Chairman and Acting Chief Executive
Officer
XXXXX LONG DISTANCE SERVICE, INC.
By:
----------------------------------------
Name: Xxxxxxx X. X'Xxxx
Title: Chairman of the Board
FIRSTEL, INC.
By:
----------------------------------------
Name: Xxxxxxx X. X'Xxxx
Title: Chairman of the Board
TELECOM RESOURCES, INC.
By:
----------------------------------------
Name: Xxxxxxx X. X'Xxxx
Title: Chairman of the Board and President
VALU-LINE OF LONGVIEW, INC.
By:
----------------------------------------
Name: Xxxxxxx X. X'Xxxx
Title: Chairman of the Board
53
