Exhibit 2.1
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of July 3, 2007
(the "Execution Date"), is entered into by and among Citizens Communications
Company, a Delaware corporation (the "Buyer"), and Country Road Communications
LLC, a Delaware Limited Liability Company (the "Stockholder") in its capacity as
the sole stockholder of Xxxxx Telephone Holdings Inc., a Delaware corporation
(the "Company").
RECITALS
A. The Company, through its subsidiaries Global Valley Networks Inc.
("GVN") and GVN Services ("GVS"), each a California corporation, is engaged in
the business of providing telecommunication services.
B. Stockholder is the sole record and beneficial owner of all of the issued
and outstanding capital stock of the Company, consisting of 1000 shares of
common stock, $0.01 par value per share (the "Company Common Stock").
C. The Buyer desires to purchase all, but not less than all, of the Company
Common Stock, and Stockholder desires to sell all, but not less than all, of the
Company Common Stock, on the terms and subject to the conditions set forth in
this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants, and agreements set forth in this
Agreement and other good and valuable consideration, the receipt and sufficiency
of which all parties mutually acknowledge, the parties, intending to be legally
bound, agree as follows:
ARTICLE I
DEFINITIONS AND CONSTRUCTION
Section 1.1 Definitions. For purposes of this Agreement, capitalized terms
not otherwise defined in this Agreement shall have the following meanings:
"Actual Net Working Capital" shall mean the amount determined in accordance
with Section 2.3(a).
"Affiliate" shall mean, as to any Person, any other Person controlled by,
under the control of, or under common control with, such Person. As used in this
definition, "control" shall mean possession, directly or indirectly, of the
power to direct or cause the direction of management or policies (whether
through ownership of securities or partnership or other ownership interests, by
contract or otherwise).
"Accounts Receivable" shall have the meaning set forth in Section 3.22
hereof.
"Ancillary Agreements" shall have the meaning set forth in Section 3.4
hereof.
"Balance Sheet" shall have the meaning set forth in Section 3.7 hereof.
"Business Day" shall mean any day other than a Saturday, Sunday or legal
holiday in the State of New York.
"Claim" shall have the meaning set forth in Section 3.9 hereof.
"Closing" or "Closing Date" shall gave the meaning set forth in Section 8.1
hereof.
"Closing Balance Sheet" shall mean the estimated consolidated balance sheet
of the Company to be dated as of the Closing Date and prepared on a basis
consistent with the Balance Sheet.
"Communications Act" means the Communications Act of 1934, as amended.
"Communication Laws" means the Communications Act or the rules,
regulations, orders and published policies of the FCC; the California Public
Utility Code; and the rules, regulations, orders and published policies of the
California Public Utility Commission.
"Communication Licenses" means the FCC Licenses, State Licenses and Local
Authorizations.
"Communications Licenses" shall have the meaning set forth in Section 3.6
hereof.
"Confidential Information" shall have the meaning set forth in Section 6.7
hereof.
"Contracts" shall have the meaning set forth in Section 3.15 hereof.
"Company Common Stock" shall have the meaning set forth in Section 3.1(c)
hereof.
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"Company Governing Documents" shall have the meaning set forth in Section
3.2 hereof.
"Company Intellectual Property" shall have the meaning set forth in Section
3.16 hereof.
"Current Assets" shall mean the sum of (v) cash, (w) accounts receivable -
net of allowance for bad debts and other adjustments, (x) Materials and
Supplies, (y) due to (from) Affiliates, and (z) other current assets, in each
case determined using the same accounting methods, principles, policies,
practices and procedures with consistent judgments, classifications and
valuation and estimation methodologies used by the Company for normal month-end
closing of the books consistent with the calculations set forth on Schedule 3.7
of the Disclosure Schedule.
"Current Liabilities" shall mean the sum of (v) accounts payable, (w)
advance xxxxxxxx, (x) current portion of capital lease obligations, (y) solely
for purposes of calculating Net Working Capital under Section 2.3, the prorata
portion of annual bonuses, and (z) other current liabilities, in each case
determined using the same accounting methods, principles, policies, practices
and procedures with consistent judgments, classifications and valuation and
estimation methodologies used by the Company for normal month-end closing of the
books consistent with the calculations set forth on Schedule 3.7 of the
Disclosure Schedule, but excluding accrued taxes, accrued interest payable, the
current portion of long term debt and the current portion of developer deposit
refunds.
"Default" shall have the meaning set forth in Section 3.15 hereof.
"Employee Plans" shall have meaning set forth in Section 3.10 hereof.
"Encumbrance" shall mean a mortgage, charge, pledge, lien, option,
restriction, claim, right of first refusal, right of preemption, third party
right or interest or other encumbrance or security interest of any kind or
similar right or any other matter affecting title, excluding those imposed by
securities law or required consents for communications license transfers.
"Environmental Law(s)" shall have the meaning set forth in Section 3.17
hereof.
"ERISA" and "ERISA Affiliate" shall have the meanings set forth in Section
3.10 hereof.
"Escrow Agent" shall mean the escrow agent serving in such capacity
pursuant to the Escrow Agreement set forth as Exhibit A.
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"FCC" means the Federal Communications Commission.
"FCC Consent" means the consent of the FCC to the transfer of control of
the FCC Licenses to Buyer, such consent to be effective and not subject to any
stay or injunction.
"FCC Licenses" means those FCC licenses and authorizations set forth in
Schedule 3.6(a), including any renewals, extensions or modifications thereof and
any additions thereto made as of the Closing Date.
"Financial Statements" shall have the meaning set forth in Section 3.7
hereof.
"First and Second Lien Credit Agreements" mean the bank credit agreements
by and among the Royal Bank of Scotland, PLC, as agent, Stockholder, the Company
and others.
"GAAP" shall mean, at any particular time, accounting principles generally
accepted in the United States of America, consistently applied on a going
concern basis and, with respect to interim financial statements, subject to
normal year-end adjustments.
"Governmental Entities" shall have the meaning set forth in Section 3.5(b)
hereof.
"GVN Common Stock" shall have the meaning set forth in Section 3.1(c)
hereof.
"GVN Governing Documents" shall have the meaning set forth in Section 3.2
hereof.
"GVS Common Stock" shall have the meaning set forth in Section 3.1(c)
hereof.
"GVS Governing Documents" shall have the meaning set forth in Section 3.2
hereof.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976,
as amended and the rules and regulations promulgated thereunder.
"Law" means any federal, state, local or foreign law (including common
law), statute, code, ordinance, rule, regulation, judgment, order, injunction,
decree, arbitration award, agency requirement, license or permit of any
Governmental Entity.
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"Local Authorizations" shall have the meaning set forth in Section 3.6
hereof.
"Loss" shall mean any and all losses, liabilities, claims, demands, causes
of action, judgments, damages, fines, suits, actions, costs and expenses
(including reasonable attorney's fees and expenses and all amounts paid in
investigation or defense), whether or not arising out of a claim by a third
party.
"Material Adverse Effect" shall mean, with respect to a specified party,
any change or effect, as the case may be, that has, or is reasonably likely to
have, individually or in the aggregate, a material adverse impact on the assets,
business, or condition (financial or otherwise) of such party and its
subsidiaries taken as a whole; provided, however, that in no event shall any of
the following be or be taken into account in the determination of whether a
Material Adverse Effect has occurred: (a) any change resulting from conditions
generally affecting the telecommunications industry in California or nationally
or from changes in general business or economic conditions if in each case they
do not have a materially disproportionate adverse effect on such party compared
to other businesses in the same industry and geographic markets or (b) any
change resulting from the announcement or pending nature of this transaction or
the compliance by such party with the terms of, or the taking of any action by
such party required by, this Agreement.
"Materials and Supplies" shall mean as set forth on the Closing Balance
Sheet.
"Net Working Capital" shall mean the amount obtained by subtracting the
Current Liabilities from the Current Assets.
"Permitted Liens" shall have the meaning set forth in Section 3.8 hereof.
"Person" shall mean an individual, company, partnership, limited liability
company, limited liability partnership, joint venture, trust or unincorporated
organization, joint stock corporation or other similar organization, government
or any political subdivision thereof, or any other legal entity.
"Purchase Price" shall have the meaning set forth in Section 2.2 hereof.
"Purchase Price Adjustment" shall have the meaning set forth in Section
2.3.
"Regulatory Approvals" shall mean the FCC Consent and State PUC Consent,
and the expiration or earlier termination of the applicable waiting period of
the HSR Act.
"State PUC" shall have the meaning set forth in Section 3.6 hereof.
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"State PUC Consent" means the consent of the California Public Utilities
Commission, such consent to be effective and not subject to any stay or
injunction.
"Taxes" shall mean all taxes, assessments, charges, duties, fees, levies or
other governmental charges in the nature of a tax, including but not limited to,
all federal, state, local, foreign or other income, profits, unitary, business,
franchise, capital stock, real property, personal property, intangible taxes,
withholding, Medicare, unemployment compensation, disability, transfer, sales,
use, excise and other taxes, assessments, charges, duties, fees, or levies of
any kind whatsoever in the nature of a tax (whether or not requiring the filing
of Tax Returns), and all deficiency assessments, additions to tax, penalties and
interest.
"Tax Returns" shall have the meaning set forth in Section 3.11 hereof.
1.2 Construction.
(a) The headings and captions used herein are intended for convenience of
reference only, and shall not modify or affect in any manner the meaning or
interpretation of any of the provisions of this Agreement.
(b) As used herein, the singular shall include the plural, the masculine
and feminine genders shall include the neuter, and the neuter gender shall
include the masculine and feminine, unless the context otherwise requires.
(c) The words "hereof," "herein," and "hereunder," and words of similar
import, when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement.
(d) All references herein to Sections, Schedules or Exhibits shall be
deemed to refer to Sections of and Schedules or Exhibits to this Agreement,
unless specified to the contrary. All Exhibits and Schedules to this Agreement
are integral parts of this Agreement as if fully set forth herein.
(e) The words "include," "includes" and "including" when used herein shall
be deemed in each case to be followed by the words "without limitation."
(f) "To the knowledge of" or any similar phrase shall mean that one of the
persons named on Schedule 3.1 of the Disclosure Schedule (i) actually is aware
of a particular fact or matter or (ii) could reasonably be expected to have
discovered or otherwise become aware of that fact or matter had they made
inquiry of employees of the Company, GVN or GVS or reviewed documents accessible
to the Company, GVN or GVS with respect to the matter in question.
(g) As all parties participated in negotiating and drafting this Agreement,
no rule of construction shall apply to this Agreement which construes ambiguous
language in favor of or against any party by reason of that party's role in
drafting this Agreement.
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ARTICLE II
PURCHASE AND SALE OF COMPANY COMMON STOCK; CLOSING
Section 2.1 Purchase and Sale of Company Common Stock. Upon the terms and
subject to the conditions of the Agreement, on the Closing Date, Stockholder
shall sell, transfer, assign, and deliver to the Buyer, and the Buyer shall
purchase, accept, assume, and receive, all of Stockholder's title and interest
in and to the Company Common Stock, free and clear of any Encumbrances,
restrictive agreements, or adverse claims of any nature whatsoever.
Section 2.2 Purchase Price. The "Purchase Price" for the Company Common
Stock shall be an amount of cash equal to $62,000,000, subject to adjustment as
provided in Section 2.3 (the "Cash Payment").
Section 2.3 Purchase Price Adjustment. The Purchase Price shall be subject
to reduction by the amount, if any that the Net Working Capital contained in the
Closing Balance Sheet is less than $700,000. The Purchase Price shall be subject
to increase by the amount, if any that the Net Working Capital contained in the
Closing Balance Sheet exceeds $1,100,000. In the event that the Net Working
Capital is equal to or greater than $700,000, but equal to or less than
$1,100,000, no adjustment shall be made.
(a) At least five (5) Business Days prior to the Closing Date Stockholder
shall prepare and deliver to the Buyer (i) the Closing Balance Sheet, and (ii) a
statement of its good faith estimate of the Net Working Capital, prepared in
accordance with the format shown on Schedule 2.3 of the Disclosure Schedule and
consistent in all respects with the definitions of Current Assets and Current
Liabilities contained in this Agreement. The Buyer shall within 60 days after
the Closing Date prepare and deliver to Stockholder a statement of the actual
Net Working Capital on the Closing Date ("Actual Net Working Capital"), prepared
in accordance with the format shown on Schedule 2.3 of the Disclosure Schedule
and consistent in all respects with the definitions of Current Assets and
Current Liabilities contained in this Agreement and used in the preparation of
the Balance Sheet delivered pursuant to Section 3.7 hereof. If the amount shown
by the Buyer to be the Actual Net Working Capital is different from the amount
shown by Stockholder's calculation, the Purchase Price shall be readjusted in
accordance with Schedule 2.3(a) using the Actual Net Working Capital.
In the event that Stockholder disagrees with the calculation by the Buyer, the
parties will negotiate in good faith to resolve such disagreement. If, after 30
days, the parties cannot agree then they will submit the issue to a mutually
agreed upon independent accounting firm for its binding determination of the
amount of Net Working Capital calculated in accordance with the requirements of
Schedule 2.3, which determination shall be completed within forty-five (45) days
of their engagement of such accounting firm. The costs of such accounting firm
shall be borne equally by the parties.
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(b) If there is a final total Purchase Price Adjustment (as finally
determined in accordance with the provisions set forth above), then, within five
(5) Business Days after such final determination, either Party will pay the
other (in immediately available funds) in accordance with the provisions above.
Section 2.4 Payment of Purchase Price. On the Closing Date, upon surrender
to the Buyer of certificates representing all and not less than all of the
Company Common Stock, the Buyer shall pay to Stockholder the Cash Payment as
follows:
(a) $56,000,000 (less any reduction, or plus any increase, to the Purchase
Price pursuant to the first or second sentences of Section 2.3) by means of wire
transfer to the account specified in writing to the Buyer by Stockholder not
less than five (5) Business Days before the Closing Date.
(b) $6,000,000 to be held by the Escrow Agent in a separate account
pursuant to the Escrow Agreement in the form annexed hereto as Exhibit A ("the
"Escrow Agreement") to provide for a source of the satisfaction of Stockholder's
obligations under Section 7.1(a)(i) and Section 7.1 (a)(ii) of this Agreement.
The amount held under this Section 2.4(b) will bear interest at the rate
provided for in the Escrow Agreement and, subject to the provisions of the
Escrow Agreement, shall be paid to Stockholder on the eighteenth-month
anniversary of the Closing Date.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF STOCKHOLDER
Except as set forth in the Disclosure Schedule delivered to the Buyer by
Stockholder, which is incorporated by reference herein (the "Disclosure
Schedule"), Stockholder hereby represents and warrants to the Buyer that each of
the representations and warranties set forth in Article 3 is true and correct
and except for the representations and warranties set forth in this Article 3,
Stockholder makes no other representation or warranty (either express or
implied) herein or with respect to the transactions contemplated by this
Agreement:
Section 3.1 Organization and Qualification; Stockholder.
(a) The Company is a corporation duly organized, validly existing, and in
good standing under the laws of the State of Delaware, has all requisite power
and authority to own, lease, and operate its properties and to carry on its
business as it is now being conducted, and is duly qualified and in good
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standing to do business in each jurisdiction in which the nature of the business
conducted by it or the ownership or leasing of its properties makes such
qualification necessary, other than where the failure to be so duly qualified
and in good standing would not have a Material Adverse Effect. Each of GVN and
GVS is a corporation duly organized, validly existing, and in good standing
under the laws of the State of California, has all requisite power and authority
to own, lease, and operate its properties and to carry on its business as it is
now being conducted, and is duly qualified and in good standing to do business
in each jurisdiction in which the nature of the business conducted by it or the
ownership or leasing of its properties makes such qualification necessary, other
than where the failure to be so duly qualified and in good standing would not
have a Material Adverse Effect
(b) Stockholder is a duly organized, validly existing limited liability
company, and in good standing under the laws of the State of Delaware, has all
requisite power and authority to own, lease, and operate its properties and to
carry on its business as it is now being conducted.
(c) Stockholder beneficially and of record owns, in the aggregate, 1000
shares of Company common stock, $0.01 par value per share (the "Company Common
Stock"), which represents all of the issued and outstanding capital stock of the
Company, free and clear of any Encumbrances (other than those imposed by the
First and Second Lien Credit Agreements), limitations on voting rights, charges,
and all other adverse claims. Schedule 3.1(c) sets forth the name of each
officer, director and stockholder of the Company. The Company beneficially and
of record owns, in the aggregate, 52,500 shares of GVN common stock (the "GVN
Common Stock"), which represents all of the issued and outstanding capital stock
of GVN, free and clear of any Encumbrances, limitations on voting rights,
charges, and all other adverse claims. Schedule 3.1(c) sets forth the name of
each officer, director and stockholder of GVN. The Company beneficially and of
record owns, in the aggregate 1000 shares of GVS common stock (the "GVS Common
Stock"), which represents all of the issued and outstanding capital stock of
GVS, free and clear of any Encumbrances, limitations on voting rights, charges,
and all other adverse claims. Schedule 3.1(c) sets forth the name of each
officer, director and stockholder of GVS.
Section 3.2 Governing Documents. Stockholder has furnished to the Buyer
true, complete, and correct copies of (a) the certificate of incorporation and
bylaws of the Company, each as amended or restated to the date of this Agreement
(the "Company Governing Documents"), (b) the certificate of incorporation and
bylaws of GVN, each as amended or restated to the date of this Agreement (the
"GVN Governing Documents") and (c) the certificate of incorporation and bylaws
of GVS, each as amended or restated to the date of this Agreement (the "GVS
Governing Documents"). None of the Company, GVN, GVS and Stockholder is in
violation of any provision of their respective Governing Documents and such
Governing Documents remain in full force and effect.
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Section 3.3 Capitalization. Except as set forth on Schedule 3.3 of the
Disclosure Schedule:
(a)(i) The authorized capital stock of the Company consists of 1000 shares
of Company Common Stock, all of which are issued and outstanding. No shares of
Company Common Stock are reserved for any purpose. Each of the outstanding
shares of Company Common Stock is duly authorized, validly issued, and fully
paid and non-assessable, and has not been issued in violation of (nor are any of
the authorized shares of Company Common Stock subject to) any preemptive or
similar rights under the Company Governing Documents, federal or state laws, or
any agreement to which the Company is a party or by which it is bound.
(ii) The authorized capital stock of GVN consists of 52,500 shares of GVN
Common Stock, all of which are issued and outstanding. No shares of GVN Common
Stock are reserved for any purpose. Each of the outstanding shares of GVN Common
Stock is duly authorized, validly issued, and fully paid and non-assessable, and
has not been issued in violation of (nor are any of the authorized shares of GVN
Common Stock subject to) any preemptive or similar rights under the GVN
Governing Documents, federal or state laws, or any agreement to which GVN is a
party or by which it is bound.
(iii) The authorized capital stock of GVS consists of 1000 shares of GVS
Common Stock, all of which are issued and outstanding. No shares of GVS Common
Stock are reserved for any purpose. Each of the outstanding shares of GVS Common
Stock is duly authorized, validly issued, and fully paid and non-assessable, and
has not been issued in violation of (nor are any of the authorized shares of GVS
Common Stock subject to) any preemptive or similar rights under the GVS
Governing Documents, federal or state laws, or any agreement to which GVS is a
party or by which it is bound.
(b) The Company does not (i) directly or indirectly own, (ii) have any
agreement to purchase or otherwise acquire, or (iii) except as set forth on
Schedule 3.3(b) of the Disclosure Schedule, hold any interest convertible into
or exchangeable or exercisable for, any equity interest in any Person other than
GVN and GVS. Neither GVN nor GVS (i) directly or indirectly owns, (ii) has any
agreement to purchase or otherwise acquire, or (iii) holds any interest
convertible into or exchangeable or exercisable for, any equity interest in any
Person.
(c) There are no options, warrants, or other rights, agreements,
arrangements, or commitments of any character to which Stockholder, the Company,
GVN or GVS is a party or by which any of them is bound relating to the issued or
unissued Company Common Stock, GVN Common Stock or the GVS Common Stock or other
securities of the Company, GVN or GVS or obligating Stockholder, the Company,
GVN or GVS to grant, issue, or sell any shares of Company Common Stock, GVN
Common Stock or the GVS Common Stock or other securities. There are no
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agreements, arrangements, or commitments of any character (contingent or
otherwise) pursuant to which any Person is or may be entitled to receive any
payment based on the revenues or earnings, or calculated in accordance
therewith, of the Company, GVN or GVS. There are no voting trusts, proxies, or
other agreements or understandings with respect to the voting of any shares of
Company Common Stock, the GVN Common Stock or the GVS Common Stock.
(d) There are no obligations, contingent or otherwise, of Stockholder, the
Company, GVN or GVS to (i) repurchase, redeem, or otherwise acquire the capital
stock or other securities of the Company, GVN or GVS; or (ii) provide material
funds to, or make any material investment in (in the form of a loan, capital
contribution, or otherwise), or provide any guarantee with respect to the
obligations of any Person.
Section 3.4 Authority. Stockholder has full power and authority to execute
and deliver this Agreement and the other documents contemplated by this
Agreement (the "Ancillary Agreements") to which Stockholder is a party, and
subject to obtaining Regulatory Approvals, to perform the obligations hereunder
and thereunder, and to consummate the transactions contemplated hereby and
thereby. This Agreement and the Ancillary Agreements to which Stockholder is a
party have been duly executed and delivered by Stockholder and constitute the
legal, valid, and binding obligations of Stockholder, enforceable in accordance
with their respective terms, subject however to applicable bankruptcy,
insolvency and other similar laws affecting the rights and remedies of creditors
generally and to general equitable principles.
Section 3.5 No Conflict; Required Filings and Consents.
(a) Except as set forth in Schedule 3.5(a) of the Disclosure Schedule, the
execution and delivery of this Agreement and the Ancillary Agreements by
Stockholder do not, and the consummation of the transactions contemplated hereby
and thereby shall not, (i) conflict with or violate the Company Governing
Documents, the GVN Governing Documents, the GVS Governing Documents or the
operating or management agreement of Stockholder; (ii) to the knowledge of
Stockholder, conflict with or violate any Law applicable to Stockholder, the
Company, GVN or GVS or by which any of their respective properties is bound or
subject; or (iii) result in any breach of or constitute a default (or an event
that with notice or lapse of time or both would become a default) under, or give
to any other Person any rights of termination, amendment, acceleration, or
cancellation of, or require payment under, or result in the creation of an
Encumbrance on any of the properties or assets of Stockholder, the Company, GVN
or GVS pursuant to, any material note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise, or other instrument or obligation
to which Stockholder, the Company, GVN or GVS is a party or by or to which any
of their respective properties is bound or subject.
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(b) Except as set forth in Schedule 3.5(b) of the Disclosure Schedule, the
execution and delivery of this Agreement and the Ancillary Agreements by
Stockholder do not, and the consummation of the transactions contemplated hereby
and thereby shall not, require either the Company, GVN or GVS or Stockholder to
obtain any consent, license, permit, approval, waiver, authorization, or order
of, or to make any filing with or notification to, (i) any governmental or
regulatory authority, foreign or domestic (federal, state, or local)
(collectively, "Governmental Entities") or (ii) any party to any Contract.
Section 3.6 Communications Regulatory Matters.
(a) Except as set forth in Schedule 3.6 of the Disclosure Schedule, as of
the date hereof, GVN and GVS have all permits, licenses and authorizations from
each Governmental Entity that regulates telecommunications in each applicable
jurisdiction ("Communications Licenses"), including without limitation, (A) the
FCC; (B) the California Public Utility Commission (the "State PUC") (together
with any renewals, extensions, or modifications thereof and any additions
thereto made as of the Closing Date, the "State License"); and (C) the
appropriate municipal governmental entities (together with any renewals,
extensions, or modifications thereof and any additions thereto made as of the
Closing Date, the "Local Authorizations"); in each case that are required for
the conduct of the business of GVN and GVS as presently conducted. Schedule
3.6(a) of the Disclosure Schedule sets forth a true, correct and complete list
of all of the Communications Licenses. Schedule 3.6(a) of the Disclosure
Schedule also correctly specifies the expiration date of each Communications
License in effect as of the Execution Date. The Company is not required to
obtain or hold in its own name any Communication Licenses, any State License or
any Local Authorizations in order for GVN or GVS to conduct business as
presently conducted.
(b) Except as set forth in Schedule 3.6(b) of the Disclosure Schedule, each
of the Communications Licenses was duly issued, is valid and in full force and
effect, has not been suspended, canceled, revoked or modified in any materially
adverse manner and is not subject to conditions or requirements that are not
generally imposed on such authorizations.
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(c) Except as set forth in Schedule 3.6(c)(i) of the Disclosure Schedule,
(A) each holder of a Communications License has operated in compliance with all
terms thereof; and (B) each holder of a Communications License is in compliance
with, and the conduct of its business has been and is in compliance with, the
Communications Act, and any applicable Communications Laws; and (C) each such
holder has timely filed all registrations and reports and paid all required fees
and contributions, including any renewal applications, required by the
Communications Act, any or any applicable Communications Laws, except with
respect to (A), (B) and (C) above, to the extent that any failure to do so would
not have a Material Adverse Effect. Without limiting the forgoing, GVN or GVS,
as the case may be, (1) is capable of providing local number portability in
material compliance with 47 U.S.C. ss. 251(b)(2) and the implementing rules of
the FCC, (2) complies in all material respects with the requirements of the
Communications Assistance for Law Enforcement Act ("CALEA"), 47 U.S.C. ss. 1001
et seq. and the implementing rules of the FCC; (3) is capable of providing
enhanced 911 service in material compliance with 47 U.S.C. ss. 251(e)(3) and the
implementing rules of the FCC and FCC policies thereunder. Except as set forth
in Schedule 3.6(c) of the Disclosure Schedule, (w) there is no pending or, to
the knowledge of Stockholder, any threatened action by or before the FCC, the
State PUC, or any municipal Governmental Entity to revoke, cancel, suspend,
modify or refuse to renew any material Communications License, (x) except as set
forth in Schedule 3.6(c)(ii) of the Disclosure Schedule, there is not now
issued, outstanding or, to the knowledge of Stockholder, threatened, any notice
by the FCC, the State PUC, any municipal Governmental Entity of any material
violation or complaint, or any application, complaint, or proceeding (other than
applications, proceedings, or complaints that generally affect the industry of
the Company, GVN and GVS as a whole) relating to the business or operations of
the Company, GVN or GVS, and (y) to the knowledge of Stockholder, no Person has
asserted in writing to a Governmental Entity that any material Communications
License should be modified or revoked, or that GVN or GVS is not in material
compliance with any Communications License.
(d) Except as set forth in Schedule 3.6(d) of the Disclosure Schedule, to
the knowledge of Stockholder no event has occurred that reasonably could be
expected to lead to the revocation or termination of any of the material
Communications Licenses or the imposition of any restriction thereon, or that
would prevent any of the material Communications Licenses from being renewed on
a routine basis or in the ordinary course.
(e) None of the execution, delivery or performance of this Agreement by
Stockholder, nor the consummation of the transactions contemplated hereby or
thereby will result in any revocation, cancellation, suspension or material
modification of any Communications Licenses or give rise to the right of any
governmental entity to take any such action or to fail to renew any
Communications License except as contemplated by this Agreement.
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(f) The regulatory tariffs applicable to GVN and GVS described in Schedule
3.6(f) of the Disclosure Schedule are all of the Federal and state tariffs
applicable to regulated telecommunications services offered by GVN and GVS. All
of these tariffs remain in full force and effect on the date of this Agreement
in accordance with their terms, and there is no outstanding notice of
cancellation or termination or, to knowledge of Stockholder, any threatened
cancellation or termination in connection therewith, nor is GVN or GVS subject
to any restrictions or conditions applicable to their regulatory tariffs that
limit or would limit the operation of GVN and GVS (other than restrictions or
conditions generally applicable to tariffs of that type). To the extent required
by Law, each such tariff has been duly and validly approved by the FCC, State
PUC, or other Governmental Entity having jurisdiction thereof. None of GVN and
GVS is in material default under the terms and conditions of any such tariff and
to the knowledge of Stockholder, there is no fact that reasonably could be
expected to lead to a claim of default by GVN or GVS in any material respect
under any such tariff. Except as set forth in Schedule 3.6(f)(i) of the
Disclosure Schedule, as of the date hereof, to the knowledge of Stockholder,
there are no applications by GVN or GVS or petitions by others (other than
end-user complaints), or proceedings pending or threatened before the FCC, the
State PUC or other Governmental Entities relating to GVN or GVS that reasonably
could be expected to have a Material Adverse Effect on GVN or GVS. To the
knowledge of Stockholder, there are no material violations by subscribers or
others under any such tariff. A true and correct copy of each tariff applicable
to the telecommunications business has been delivered to the Buyer.
Section 3.7 Financial Statements.
(a) Stockholder has delivered to the Buyer (i) an audited consolidated
balance sheet of the Stockholder at December 31, 2006, and any notes related
thereto, (ii) an audited income statement and statement of cash flow as of
December 31, 2006 for the Stockholder and any notes related thereto, (iii) an
unaudited consolidating balance sheet and income statement as of December 31,
2006, for the Company, GVN and GVS, (iv) an unaudited consolidated balance
sheet, income statement and statement of cash flow of the Company and its
subsidiaries, GVN and GVS, for the fiscal year ended December 31, 2006 (the
"Balance Sheet"), and (v) unaudited balance sheets and the related income
statements and statements of cash flow for the Company, GVN and GVS for the
four-month period ended April 30, 2007 (collectively, the "Financial
Statements"). The audited Financial Statements present fairly, in all material
respects, the financial position, results of operations and cash flows of
Stockholder and its subsidiaries for the year ended December 31, 2006 and have
been prepared in accordance with GAAP. The unaudited Financial Statements,
insofar as they relate to the Company, GVN and GVS, are complete and correct in
all material respects, have been prepared on a consistent basis and present
fairly the financial condition, operating results and cash flows of the Company,
GVN and GVS as of the dates and during the periods indicated therein, subject to
the disclosures set forth on Schedule 3.7(a) of the Disclosure Schedule. Except
to the extent reflected or reserved against or disclosed in the Financial
Statements, or as listed on Schedule 3.7(a) of the Disclosure Schedule, none of
the Company, GVN or GVS have any liabilities or obligations of any kind, known
or unknown, whether accrued, absolute, contingent or otherwise, other than
liabilities incurred in the ordinary course of business consistent with past
practices that would be required to be reflected on a balance sheet of the
Company, GVN or GVS.
14
(b) Except as set forth on Schedule 3.7(b) of the Disclosure Schedule,
since April 30, 2007, no part of any receivable or other amount shown or
reflected in the Financial Statements as being due to the Company, GVN or GVS
has been written off, written down, waived or released for an amount less than
book value by the Company, GVN or GVS.
(c) Except as set forth on Schedule 3.7(c) of the Disclosure Schedule,
since December 31, 2006, the business of the Company, GVN and GVS has not been
materially affected by the loss or bankruptcy of any customer, or of any source
of supply or by the cancellation or loss of any order or contract nor, to the
knowledge of Stockholder, are there any circumstances likely to lead thereto.
(d) Nothing has come to the attention of Stockholder that reasonably would
lead it to believe that any deficiencies exist (i) in the internal controls of
the Company, GVN or GVS or (ii) in the design or operation of internal controls
that reasonably could be expected to adversely affect the ability to record,
process, summarize and report financial data of the Company, GVN or GVS.
(e) Reserved.
Section 3.8 Absence of Certain Changes. Since December 31, 2006, except as
set forth on Schedule 3.8 of the Disclosure Schedule, and except for
transactions contemplated by this Agreement, each of the Company, GVN and GVS
has conducted its business only in the ordinary course and consistent with past
practice, and has not:
(a) suffered any Material Adverse Effect;
(b) incurred any liabilities or obligations (absolute, accrued, contingent
or otherwise) except current liabilities incurred and liabilities under
contracts entered into in the ordinary course of business and consistent with
past practice (including obligations or liabilities arising from one transaction
or a series of related or similar transactions, and all periodic installments or
payments under any lease or other agreement providing for periodic installments
or payments, as a single obligation or liability), or increased, or experienced
any change in any assumptions underlying or methods of calculating any bad debt,
contingency or other reserves;
(c) declared, set aside or paid any non-cash dividend or non-cash
distribution in respect of shares of Company Common Stock or other securities of
the Company or redeemed, purchased or otherwise acquired any shares of Company
Common Stock or other securities of the Company;
15
(d) issued, delivered, or sold, or authorized the issuance, delivery or
sale of, any share of Company Common Stock, GVN Common Stock or GVS Common Stock
or any option or rights with respect thereto, or modification or amendment of
any right of any holder of outstanding shares of Company Common Stock, GVN
Common Stock or GVS Common Stock or options with respect thereto;
(e) paid, discharged or satisfied any claims, liabilities or obligations
(absolute, accrued, contingent, known or unknown, or otherwise) other than the
payment, discharge or satisfaction in the ordinary course of business and
consistent with past practice of liabilities or obligations reflected or
reserved against in the Balance Sheet or incurred in the ordinary course of
business and consistent with past practice since December 31, 2006;
(f) (i) permitted or allowed any of the assets or properties of GVN or GVS
to be subjected to any Encumbrance except for (A) warehousemen's, mechanics',
materialmen's, repairmen's or other like liens arising in the ordinary course of
business consistent with past practice securing sums which are not overdue, (B)
pledges or deposits to secure obligations under worker's compensation laws or
similar legislation, (C) deposits to secure public or statutory obligations of
GVN or GVS or (D) deposits to secure surety, appeal or customs bonds in the
ordinary course of business consistent with past practice, (E) other
encumbrances not securing monetary obligations that are payable in the ordinary
course of business and not materially affecting the use of assets in the
ordinary course of business, or (F) liens arising from taxes not due and payable
or contested in good faith, but, in each case, only to the extent shown as
Current Liabilities on the Closing Balance Sheet, or (ii) permitted or allowed
any of the assets or properties of the Company to be subjected to any
Encumbrance except for those under the existing First and Second Lien Credit
Agreements, (the exceptions under clauses (f)(i) and (f)(ii) above being herein
collectively called "Permitted Liens");
(g) written down the value of any inventory or written off as uncollectible
any notes or accounts receivable with a value greater than $25,000;
(h) canceled any debts, or waived any claims or rights with a value greater
than $25,000;
(i) sold, transferred or otherwise disposed of any of its properties or
assets in excess of $25,000, except in the ordinary course of business and
consistent with past practice;
(j) disposed of or permitted to lapse any rights to the use of any patent,
trademark, trade name or copyright;
16
(k) granted any general increase in the compensation of employees of the
Company, GVN or GVS (including any such increase pursuant to any bonus, pension,
profit sharing or other plan or commitment) or any increase in the compensation
payable or to become payable to any employee of the Company, GVN or GVS in
excess of merit increases consistent with past practice, and no such increase is
customary on a periodic basis or required by agreement or understanding;
(l) made any capital expenditure or commitment for capital expenditures, in
excess of that budgeted for 2007 or otherwise permitted under this Agreement;
(m) made any change in any method of accounting or accounting practice or
failed to maintain the books and records of the Company, GVN or GVS in the
ordinary course of business and consistent with past practice;
(n) failed to maintain any of its properties or equipment that in the
aggregate for all such property and equipment had a book value of $50,000 in
good operating condition and repair, subject to ordinary wear and tear;
(o) failed to maintain in full force and effect all existing policies of
insurance at least at such levels as were in effect prior to such date or
canceled any such insurance or, to its knowledge, taken or failed to take any
action that would enable the insurers under such policies to avoid liability for
claims arising out of occurrences prior to the Closing; or
(p) agreed in writing or otherwise to take any action with respect to any
of the matters described in this Section 3.8.
Section 3.9 Litigation.
(a) Except as set forth in Schedule 3.9(a) of the Disclosure Schedule,
there is no action, suit, claim, investigation or proceeding, whether at Law or
in equity (a "Claim"), pending or, to the knowledge of Stockholder, threatened
that questions the validity of this Agreement or the Ancillary Agreements or any
action taken or to be taken by the Company, GVN or GVS or Stockholder in
connection with the consummation of the transactions contemplated hereby or
thereby or which seeks to prohibit, enjoin or otherwise challenge any of the
transactions contemplated hereby or thereby or which could constitute a Material
Adverse Effect.
17
(b) Schedule 3.9(b) of the Disclosure Schedule sets forth an accurate and
complete list, and a brief description (setting forth the names of the parties
involved, the court or other Governmental Entity involved, the relief sought and
the substantive allegations and the status thereof), of each Claim pending or,
to the knowledge of Stockholder, threatened against or affecting the Company,
GVN or GVS or Stockholder. None of the pending or threatened Claims set forth on
Schedule 3.9(b) of the Disclosure Schedule, individually or in the aggregate,
reasonably could be expected to have a Material Adverse Effect. To the knowledge
of Stockholder no event has occurred and no circumstance, matter or set of facts
exist which would constitute a valid basis for the assertion by any third party
of any Claim, other than those listed on Schedule 3.9(b) of the Disclosure
Schedule. Except as set forth in Schedule 3.9(b) of the Disclosure Schedule,
there is no outstanding or, to the knowledge of Stockholder, threatened
judgment, injunction, judgment, order or consent or similar decree or agreement
(including, without limitation, any consent or similar decree or agreement with
any Governmental Entity) against, affecting or naming the Company, GVN or GVS or
Stockholder.
(c) To the knowledge of Stockholder, except as disclosed in Schedule 3.9(c)
of the Disclosure Schedule, there is no claim (whether based on statute,
negligence, breach of warranty, strict liability or any other theory) pending
or, to the knowledge of Stockholder, threatened relating directly or indirectly
to any product manufactured or sold, or any services performed, by the Company,
GVN or GVS that reasonably could be expected to result in an aggregate cost to
the Company, GVN and GVS of more than $10,000.
Section 3.10 Employee Benefit Plans; Labor Matters.
(a) Set forth in Schedule 3.10(a) of the Disclosure Schedule is a complete
and correct list of all "employee benefit plans" (as defined in the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")), all plans or
policies providing for "fringe benefits" (including, without limitation,
vacation, paid holidays, personal leave, employee discount, educational benefit,
or similar programs), and each other bonus, incentive, compensation, deferred
compensation, profit sharing, stock, severance, retirement, health, life,
disability, group insurance, employment, stock option, stock purchase, stock
appreciation right, supplemental unemployment, layoff, consulting, or any other
similar plan, agreement, policy, or understanding (whether written or oral,
qualified or nonqualified, currently effective or terminated), and any trust,
escrow, or other agreement related thereto that (i) is or within the past six
(6) years has been established, maintained, or contributed to by the Company,
GVN or GVS or any ERISA Affiliate (as hereinafter defined) for the benefit of
any current or former employee, officer or director of the Company, GVN or GVS,
or (ii) with respect to which the Company, GVN or GVS may have a liability
whether direct or indirect, actual or contingent (including, but not limited to,
liability arising from being an ERISA Affiliate) (each, an "Employee Plan", and
collectively, the "Employee Plans"). For purposes of this Agreement, "ERISA
Affiliate" means, as appropriate, the Company, GVN or GVS and each Person or
other trade or business, whether or not incorporated, that is or within the past
six (6) years has been treated as a single employer or controlled group member
with each pursuant to Section 414 of the Internal Revenue Code of 1986, as
amended (the "Code"), or ERISA Section 4001. None of the Company, GVN or GVS has
any liability with respect to any plan, arrangement or practice of the type
described in this Section 3.10(a) other than the Employee Plans.
18
(b) No ERISA Affiliate has made any written or oral representations to any
employee or officer or former employee or officer of the Company, GVN or GVS
promising or guaranteeing any coverage under any employee welfare benefit plan
(as defined in Section 3(1) of ERISA) for any period of time beyond the end of
the current plan year (except to the extent of coverage required under Code
Section 4980B). No Employee Plan provides benefits, including, without
limitation, death or medical benefits, beyond termination of service or
retirement other than (i) coverage mandated by Law, (ii) death or retirement
benefits under any Employee Plan that is intended to be qualified under Section
401(a) of the Code or (iii) deferred compensation benefits reflected on the
books of the Company, GVN or GVS. Except as provided in Section 5.6, the
consummation of the transactions contemplated by this Agreement shall not (i)
accelerate the time of payment or vesting, or increase the amount of
compensation (including amounts due under Employee Plans) due to any employee,
officer, former employee, or former officer of the Company, GVN or GVS, or (ii)
constitute a stated triggering event under any Employee Plan that will result in
any payment (whether of severance pay or otherwise) becoming due from the
Company to any officer, employee, or former employee (or dependents of such
employee).
(c) All employees of the Company, GVN or GVS are terminable at will and
other than as set forth in Schedule 3.10(c) of the Disclosure Schedule there are
no binding commitments, written or oral, to any present or former director,
officer, agent, or employee concerning his or her term, condition, or benefits
of employment by the Company, GVN or GVS.
(d) With respect to each Employee Plan, Stockholder has furnished to the
Buyer true, correct, and complete copies (to the extent applicable or existing)
of (i) the plan documents and summary plan description; (ii) the most recent
determination letter received from the Internal Revenue Service (the "IRS");
(iii) the annual reports required to be filed for the two most recent plan years
of each such Employee Plan; (iv) all related trust agreements, insurance
contracts, or other funding agreements that implement such Employee Plan; and
(v) all other documents, records, or other materials related thereto requested
by the Buyer.
(e) Set forth on Schedule 3.10(e) of the Disclosure Schedule is a complete
list of all Employee Plans that are employee pension benefit plans (as defined
in Section 3(2) of ERISA) maintained by the Company, GVN or GVS or with respect
to which the Company, GVN or GVS contributes or has any liability ("Employer
Contribution Plans"). Each Employer Contribution Plan meets the qualification
requirements of the Code in form and operation, and each Employer Contribution
Plan, and each trust (if any) forming a part thereof, has received a favorable
determination letter or opinion letter from the IRS as to the qualification
under the Code of such Employer Contribution Plan and the tax-exempt status of
such related trust, and, to the knowledge of Stockholder, nothing has occurred
since the date of such determination letter or opinion letter that could be
expected to adversely affect the qualification of such Employer Contribution
Plan or the tax-exempt status of such related trust.
19
(f) Neither the Company, GVN or GVS, nor any ERISA Affiliate, nor any plan
fiduciary of any Employee Plan, has engaged in any transaction in violation of
Section 406(a) or (b) of ERISA or any "prohibited transaction" (as defined in
Section 4975(c)(1) of the Code) that could subject the Company, GVN or GVS, or
the Buyer to any Taxes, penalties, or other liabilities resulting from such
prohibited transaction. No condition exists that could subject the Company, GVN
or GVS, or the Buyer to any excise tax, penalty tax, or fine related to any
Employee Plan. There is no pending or threatened assessment, complaint,
proceeding, or investigation of any kind in any court or government agency with
respect to any Employee Plan (other than a routine claim for benefits), nor is
there a basis for one.
(g) There are no agreements that shall or may provide payments to any
officer, employee, stockholder, or highly compensated individual that shall be
"parachute payments" under Code Section 280G that are nondeductible to the
Company, GVN or GVS, or subject to Tax under Code Section 4999 for which the
Company, GVN or GVS would have withholding liability. The disallowance of a
deduction under Code Section 162(m) for employee remuneration will not apply to
any amount paid or payable by the Company, GVN or GVS under any contract,
Employee Plan, program, arrangement or understanding currently in effect with
respect to any officer or employee of the Company, GVN or GVS.
(h) Except as set forth on Schedule 3.10(h) of the Disclosure Schedule,
there is no Employee Plan that is or was subject to Part 3 of Title I of ERISA
or Title IV of ERISA during the past six (6) years; each Employee Plan has been
operated in all material respects in compliance with its terms and any related
documents or agreements and in compliance with ERISA, the Code, and all other
applicable Laws for the past six (6) years; none of the Employee Plans is or was
a "multiple employer plan", "multi-employer plan" or "multiple employer welfare
arrangement" (as described or defined in ERISA or the Code), nor has the
Company, GVN, GVS or any ERISA Affiliate ever contributed or been required to
contribute to any such plan during the past six (6) years; there are no material
unfunded liabilities existing under any Employee Plans; and each Employee Plan
that has not been terminated could be terminated as of the Closing Date without
any material liability to the Buyer, the Company, GVN or GVS. All required
contributions to the Employee Plans have been made timely.
20
(i) None of the Company, GVN or GVS is now, since July 30, 2002 has been,
or to the knowledge of Stockholder, has ever been, a party to any collective
bargaining or other labor union contract, and none of the Company, GVN or GVS is
in negotiations concerning a collective bargaining agreement. To the knowledge
of Stockholder, for the past six (6) years there has been no union organizing
activity occurring at the Company, GVN or GVS. Each of the Company, GVN and GVS
has been in material compliance with all applicable Laws respecting employment,
employment practices, and wages and hours for the past six (6) years. There is
no pending or, to the knowledge of Stockholder, threatened labor dispute,
strike, or work stoppage against the Company, GVN or GVS that may interfere with
the business activities of the Company, GVN or GVS. Neither the Company, GVN or
GVS nor any of its representatives or employees has committed any unfair labor
practices in connection with the operation of the business of the Company, GVN
or GVS, and there is no pending or, to the knowledge of Stockholder, threatened
charge or complaint against the Company, GVN or GVS by the National Labor
Relations Board or any comparable Governmental Entity.
(j) Schedule 3.10(j) of the Disclosure Schedule sets forth, and Stockholder
has provided to the Buyer true and correct copies of, each of the following with
respect to the Company, GVN and GVS as of the Execution Date: (i) all employment
agreements with officers or employees; (ii) any severance agreements, programs,
policies, plans, or arrangements, whether or not written; (iii) all agreements
with consultants obligating the Company, GVN or GVS to make annual cash payments
in an amount exceeding $10,000; and (iv) all non-competition agreements, except
for such of items (i) through (iv), inclusive, as to which none of the Company,
GVN or GVS shall have any liability or obligation on or after the Closing Date.
(k) None of the Company, GVN or GVS has amended or taken any other action
with respect to any of its Employee Plans or any of the plans, programs,
agreements, policies, or other arrangements described in this Section 3.10 since
December 31, 2006. None of the Company, GVN or GVS has agreed or committed to
institute any plan, program, arrangement or agreement for the benefit of
employees or former employees of the Company, GVN or GVS other than the Employee
Plans, or to make any amendments to any of the Employee Plans.
(l) All contributions required to be paid with respect to workers'
compensation arrangements of the Company, GVN or GVS have been made or accrued
as a liability on the Financial Statements. Schedule 3.10 (l) of the Disclosure
Schedule contains a complete and correct description of all workers'
compensation claims for which the Company, GVN or GVS is, or may be, liable as
of the Execution Date. The maximum increase to the workers' compensation
insurance premium costs to which the Company, GVN or GVS is exposed as a result
of those claims is the additional assessment (168% of the standard premium plus
California Occupational Safety and Health Act assessments) for 2007 and the
subsequent 2 years, provided that the claims history after the Execution Date
may result in such assessment being lower or higher.
21
(m) Except as set forth on Schedule 3.10(m) of the Disclosure Schedule, no
Employee Plan is or at any time was funded through a "welfare benefit fund" as
defined in Section 419(e) of the Code, and no benefits under any Employee Plan
are or at any time have been provided through a voluntary employees' beneficiary
association (within the meaning of subsection 501(c)(9) of the Code) or a
supplemental unemployment benefit plan (within the meaning of Section 501(c)(17)
of the Code).
(n) Except as set forth on Schedule 3.10(n) of the Disclosure Schedule, all
prior contributions, transfers and payments in respect of any Employee Plan,
other than transfers incident to an incentive stock option plan within the
meaning of Code Section 422, have been or are fully deductible under the Code.
(o) All (i) insurance premiums required to be paid with respect to, (ii)
benefits, expenses, and other amounts due and payable under, and (iii)
contributions, transfers, or payments required to be made to, any Employee Plan
prior to the Closing Date will have been paid, made or accrued on or before the
Closing Date.
(p) With respect to any insurance policy providing funding for benefits
under any Employee Plan, (i) there is no liability of the Company, GVN or GVS in
the nature of a retroactive rate adjustment, loss sharing arrangement, or other
actual or contingent liability, nor would there be any such liability if such
insurance policy was terminated on the date hereof, and (ii) no insurance
company issuing any such policy is in receivership, conservatorship, liquidation
or similar proceeding and, to the knowledge of Stockholder, no such proceedings
with respect to any insurer are imminent.
(q) No Employee Plan provides benefits to any individual who is not a
current or former employee of the Company, GVN or GVS or the dependents or other
beneficiaries of any such current or former employee.
(r) The term "Foreign Plan" shall mean any Employee Plan that is maintained
outside of the United States. Each Foreign Plan complies with all applicable Law
(including, without limitation, applicable Law regarding the form, funding and
operation of the Foreign Plan) in all material respects. The Financial
Statements accurately reflect the Foreign Plan liabilities and accruals for
contributions required to be paid to the Foreign Plans, in accordance with
applicable generally accepted accounting principles consistently applied. All
contributions required to have been made to all Foreign Plans as of the Closing
Date will have been made as of the Closing Date. There are no actions, suits or
claims pending or, to the best of Stockholder's knowledge, threatened with
respect to the Foreign Plans (other than routine claims for benefits). There
have not occurred, nor are there continuing any transactions or breaches of
fiduciary duty under applicable Law which could have a material adverse effect
on (1) any Foreign Plan or (2) the condition of the Company, GVN or GVS or any
ERISA Affiliate.
22
Section 3.11 Taxes.
(a) All material returns and reports (the "Tax Returns") of or with respect
to any Tax that are required to be filed by or with respect to the Company, GVN
or GVS or their respective business or activities have been duly and timely
filed. All such filed Tax Returns and all related required statements and
disclosures are true, complete and accurate in all material respects, including
statements required to be filed by Income Tax Regulation Section 1.382-11T. All
Taxes that have been or are due have been timely paid in full, except Taxes that
are being contested in good faith by appropriate proceedings and for which the
Company, GVN or GVS, as the case may be, shall have set aside on its books
adequate cash reserves. None of the Company, GVN or GVS is subject to taxation
by any jurisdiction where it does not file Tax Returns, except where the failure
to do so would not have a Material Adverse Effect on the Company, GVN or GVS.
All withholding Tax requirements imposed on or with respect to the Company, GVN
or GVS have been satisfied in full in all material respects. No penalty,
interest, or other charge is due with respect to the late filing of any such Tax
Return or late payment of any such Tax.
(b) Except as set forth on Schedule 3.11(b) of the Disclosure Schedule, as
of the Execution Date, there is not in force any extension of time with respect
to the due date for the filing of any Tax Return of or with respect to the
Company, GVN or GVS nor any waiver or agreement for any extension of time for
the assessment, collection, or payment of any Tax of or with respect to the
Company, GVN or GVS.
(c) Except as set forth on Schedule 3.11(c) of the Disclosure Schedule, as
of the Execution Date, there are no pending audits, actions, proceedings,
investigations, disputes, or claims with respect to or against the Company, GVN
or GVS for or with respect to any Taxes; no assessment, deficiency, or
adjustment has been assessed or proposed with respect to any Tax Return of or
with respect to the Company, GVN or GVS; and, to the knowledge of Stockholder,
there is no reasonable basis on which any claim for material Taxes can be
asserted against the Company, GVN or GVS, other than those disclosed (and to
which are attached true and complete copies of all audit or similar reports) on
Schedule 3.11(c) of the Disclosure Schedule or other than those Taxes not yet
due or payable. Stockholder has delivered to the Buyer (or its counsel) correct
and complete copies of all Tax Returns, examination reports, and statements of
any deficiencies assessed against or agreed to by the Company, GVN or GVS during
the past five years.
23
(d) None of the Company, GVN, GVS or Stockholder is a party to any written
Tax allocation or sharing agreements or any unwritten Tax allocation or sharing
arrangements. None of the Company, GVN or GVS is liable for the Taxes of any
Person (other than each other) under federal, state, foreign, or local Law or as
a transferee or a successor, by contract or by Section 1.1502-6 of the Treasury
Regulations or any similar state or local Law.
(e) Except for inchoate statutory liens for current Taxes not yet due and
payable, no liens for Taxes exist upon the assets of the Company, GVN or GVS.
(f) None of the Company, GVN or GVS shall be required to include any amount
in income for any taxable period beginning after December 31, 2006 as a result
of a change in accounting method for any taxable period ending on or before
December 31, 2006 or pursuant to any agreement with any Tax authority with
respect to any such taxable period.
(g) Except as set forth on Schedule 3.11(g) of the Disclosure Schedule, no
property of the Company, GVN or GVS is held in an arrangement for which
partnership Tax Returns are being filed, and none of the Company, GVN or GVS
owns any interest in any controlled foreign corporation (as defined in Section
957 of the Code), passive foreign investment company (as defined in Section 1296
of the Code), foreign trust, or other Person the income of which is required to
be included in the income of the Company, GVN or GVS.
(h) No property of the Company, GVN or GVS is "tax-exempt use property"
(within the meaning of Section 168(h) of the Code) or "tax-exempt bond financed
property" (within the meaning of Section 168(g)(5) of the Code).
(i) Stockholder is not a Foreign Person under Section 1445(f)(3) of the
Code.
(j) None of the Company, GVN or GVS has made an election under Section
341(f) of the Code.
(k) Stockholder has owned 100% of the issued and outstanding stock of the
Company since July 30, 2002 (the "Initial Acquisition Date"). The Company has
also owned 100% of the issued and outstanding shares of (i) GVN at all times
since the Initial Acquisition Date and (ii) GVS since its formation. Schedule
3.11(k) of the Disclosure Schedule includes a schedule of the U.S. and
California net operating losses generated by the Company, GVN and GVS (combined)
from August 1, 2001 through December 31, 2005. Although the Company, GVN and GVS
underwent an ownership change under Section 382 of the Code on March 3, 2003,
the cumulative combined carry forward of unused "section 382 limitation" under
Section 382(b)(2) of the Code for the post-change year ending on the Closing
Date exceeds the pre-change net operating losses set forth on Schedule 3.11(k).
The Company, GVN and GVS did not have a Net Unrealized Built-In Loss as defined
in Internal Revenue Code Section 382(h) at the time of the March 3, 2003
ownership change. None of the tax net operating losses generated by the Company,
GVN or GVS for any tax period ending after August 1, 2001 is permitted or
required to be carried back to any tax period ending on or before August 1,
2001. Other than the ownership change which occurred on March 3, 2003, no
Internal Revenue Code Section 382 ownership change has occurred for the Company
or GVN since the Initial Acquisition Date and for GVS since its formation.
24
Section 3.12 Certain Business Practices. To the knowledge of Stockholder,
neither the Company, GVN or GVS nor any director, officer, stockholder, agent,
or employee of the Company, GVN or GVS has: (a) used any funds on behalf of the
Company, GVN or GVS for unlawful contributions, gifts, entertainment, or other
unlawful expenses relating to political activity; (b) made any unlawful payment
to foreign or domestic government officials or employees or to foreign or
domestic political parties or campaigns or violated any provision of the Foreign
Corrupt Practices Act of 1977, as amended; or (c) made any other unlawful
payment.
Section 3.13 Brokers; Other Transactions. Except as set forth on Schedule
3.13 of the Disclosure Schedule, no broker, finder, or investment banker is
entitled to any brokerage, finders, or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Company, GVN or GVS or Stockholder. Stockholder is
not a party or subject to any actual or prospective agreement, arrangement, or
understanding, written or oral, express or implied, involving any transaction
that is inconsistent with Stockholder's execution and delivery of this
Agreement.
Section 3.14 Insurance. Schedule 3.14 of the Disclosure Schedule lists all
insurance policies in effect on the Execution Date under which the Company, GVN
or GVS is a beneficiary or an insured. As of the date of this Agreement,
Stockholder is not aware of any notice that any of the policies listed on
Schedule 3.14 of the Disclosure Schedule have been or shall be canceled prior to
its scheduled termination date, or would not be renewed substantially on the
same terms now in effect if the insured party requested renewal or has received
notice from any of its insurance carriers that any insurance premiums shall be
subject to increase in an amount materially disproportionate to the amount of
the increases with respect thereto (or with respect to similar insurance) in
prior years. None of the Company, GVN or GVS is in default under any such policy
and all premiums due and payable with respect to such coverage have been paid or
accrued.
25
Section 3.15 Properties, Contracts; Leases and Other Agreements; Bank
Accounts.
(a) Each of the Company, GVN and GVS has good title to, or a valid
leasehold, license or similar interest in, all of the properties and assets used
in or necessary to the operation of its business as currently conducted,
including, without limitation, each item of equipment and other personal
property, tangible, intangible or otherwise, included as an asset in the Balance
Sheet (other than inventory and equipment disposed of in the ordinary course of
business since December 31, 2006) and to each item of personal property
necessary to the operation of its business as currently conducted acquired since
December 31, 2006, free and clear of any Encumbrances except (x) Permitted
Liens, and (y) as set forth in Schedule 3.15(a) of the Disclosure Schedule.
Schedule 3.15(a) of the Disclosure Schedule contains a detailed list as of
December 31, 2006 of all machinery, equipment, vehicles, furniture and other
personal property owned or used by the Company, GVN or GVS in the operation of
their respective businesses, having an original cost of $25,000 or more.
(b) Schedule 3.15(b) of the Disclosure Schedule describes all real property
owned by the Company, GVN or GVS. All such real property is owned free and clear
of any Encumbrances except (x) Permitted Liens, and (y) as set forth in Schedule
3.15(a) of the Disclosure Schedule. All leasehold interests for real property
and any material personal property used by the Company, GVN or GVS in its
business are held pursuant to lease agreements which to the knowledge of
Stockholder are valid and enforceable in accordance with their terms in all
material respects, the agreements for which are listed on Schedule 3.15(b) of
the Disclosure Schedule. To the knowledge of Stockholder, all properties owned
or leased by the Company, GVN or GVS comply in all material respects with all
applicable private agreements (to which the Company, GVN or GVS is a party),
zoning requirements and other Laws relating thereto and there are no
condemnation proceedings pending or, to the knowledge of Stockholder, threatened
with respect to such properties. None of the Company, GVN or GVS has assigned or
subleased its interests under such leases or the assets covered thereby. Each
such lease has been duly and validly executed by the Company, GVN or GVS, as the
case may be, is in full force and effect and constitutes the valid and binding
agreement of the Company, GVN or GVS, as the case may be.
(c) Except as set forth on Schedule 3.15(c) of the Disclosure Schedule, and
excluding trade accounts payable incurred in the ordinary course of business and
payable to Persons other than Affiliates of the Company, none of the Company,
GVN or GVS has any liabilities for borrowed funds, extensions of credit or other
advances that are subject to repayment whether pursuant to a written agreement,
oral understanding or course of conduct, and whether reflected on the Financial
Statements as indebtedness, accounts payable or otherwise, and any such
liability set forth on Schedule 3.15(c) of the Disclosure Schedule may be
prepaid at any time without premium or penalty.
(d) Except as set forth in Schedule 3.15(d) of the Disclosure Schedule,
none of the Company, GVN or GVS is currently a party to any agreements,
contracts or commitments relating to the acquisition of the assets or capital
stock of any other business enterprise.
26
(e) Except as set forth in Schedule 3.15(e) of the Disclosure Schedule, as
of the Execution Date, none of the Company, GVN or GVS is a party to any
agreement, loan, contract, lease, guarantee, letter of credit, line of credit or
commitment not referred to elsewhere in this Agreement or in the Disclosure
Schedule which:
(i) involves potential payments by the Company, GVN or GVS or incurring by
the Company, GVN or GVS of costs or obligation, of more than $50,000 in the
aggregate;
(ii) involves payments based on profits of the Company, GVN or GVS;
(iii) relates to the future purchase of goods or services in excess of the
requirements of the business of the Company, GVN or GVS at current levels or for
normal operating purposes;
(iv) include powers of attorney or grants of agency by the Company, GVN or
GVS;
(v) cannot be canceled by the Company, GVN or GVS without penalty or
premium on no more than 30 days notice;
(vi) contains any agreement limiting the Company, GVN, GVS or any present
or future Affiliate from competing in the State of California;
(vii) were not made in the ordinary course of business; or
(viii) otherwise materially affects the business of the Company, GVN or
GVS.
(f) Except as set forth in Schedule 3.15(f) of the Disclosure Schedule, no
current contracts involving more than $25,000 that are material to the business
of the Company, GVN or GVS are terminable or are subject to modification by
reason of the consummation of the transactions contemplated by this Agreement or
the Ancillary Agreements and none of the Company, GVN or GVS has received notice
of any potential termination or modification of such contracts.
(g) Except as set forth in Schedule 3.15(g) of the Disclosure Schedule, to
the knowledge of Stockholder, no significant currently existing customer or
supplier or other business partner of the Company, GVN or GVS has expressed any
present intention on the part of any to either (A) terminate or significantly
adversely change its current existing business relationship with the Company,
GVN or GVS either now or in the foreseeable future, or (B) fail to renew or
extend its current existing business relationship with the Company, GVN or GVS
at the end of the term of any existing contractual arrangement such entity may
have with the Company, GVN or GVS on substantially similar terms.
27
(h) Set forth on Schedule 3.15(h) of the Disclosure Schedule is an accurate
and complete list showing the name and address of each bank, securities broker,
mutual fund, investment company, investment adviser or other financial
institution or similar Person with which the Company, GVN or GVS has an account,
including the account or box number and the names of all Persons authorized to
draw thereon or have access thereto as of the Execution Date.
(i) Except as set forth on Schedule 3.15(i) of the Disclosure Schedule all
material contracts and agreements to which the Company, GVN or GVS is a party
("Contracts") (i) are valid and enforceable in accordance with their respective
terms; (ii) no Default (as hereinafter defined) exists under any Contract either
by the Company, GVN or GVS or, to the knowledge of Stockholder, by any other
party thereto; and (iii) Stockholder is not aware of the assertion by any third
party of any claim of Default or breach under any of the Contracts. For purposes
of this Agreement, the term "Default" means, with respect to any Contract, (x)
any material breach of or default under such Contract, or (y) any event, other
than the normal passage of time, which would (either with or without notice or
lapse of time or both) give rise to any right of termination, cancellation or
acceleration of any obligation to repay with respect to such Contract.
(j) Set forth on Schedule 3.15(j) of the Disclosure Schedule is an accurate
and complete list showing all Contracts whereby the Company, GVN or GVS is
providing products or services of any kind to a third party where the remaining
value of such Contract equals or exceeds $25,000.
Section 3.16 Intellectual Property. Schedule 3.16 of the Disclosure
Schedule sets forth a complete and correct list of each patent application,
trademark (whether or not registered), trademark application, trade name,
service xxxx, material copyright and other proprietary intellectual property
(including, without limitation, proprietary computer software, whether in object
or source form) owned or used by the Company, GVN or GVS (collectively, the
"Company Intellectual Property"). The Company Intellectual Property, if any,
owned by the Company, GVN or GVS and carried as an asset on the Balance Sheet is
valid and enforceable, and the Company, GVN or GVS, as the case may be, has the
exclusive right to use such Company Intellectual Property. With respect to the
Company Intellectual Property, if any, used by the Company, GVN or GVS and not
carried as an asset on the Balance Sheet, the Company, GVN or GVS, as the case
may be, has the valid right to use such Company Intellectual Property. The
current use by the Company, GVN and GVS of the Company Intellectual Property, if
any, does not infringe the rights of any other Person, and to the knowledge of
Stockholder no other Person is infringing the rights of the Company, GVN or GVS,
as the case may be, in the Company Intellectual Property.
28
Section 3.17 Environmental Matters. Except for matters disclosed in
Schedule 3.17 of the Disclosure Schedule: (a) the properties, operations, and
activities of the Company, GVN and GVS comply and for the past five (5) years
have complied, in all material respects with, all applicable Environmental Laws
(as hereinafter defined); (b) none of the Company, GVN or GVS has received
written (or to the knowledge of Stockholder, oral) notice that the Company, GVN
or GVS (and their respective properties, operations and activities) is subject
to any existing, pending, or threatened action, suit, claim, investigation,
inquiry, notice or proceeding (judicial or administrative) by or before any
Governmental Entity or private party under any Environmental Law or common law;
(c) to the knowledge of Stockholder, there are no physical or environmental
conditions existing on any property used by the Company, GVN or GVS or resulting
from the operations or activities of any of them or their Affiliates, vendors,
contractors, successors or assigns on behalf of the Company, GVN or GVS (or any
of their then subsidiaries), that reasonably could be expected to give rise to
any on-site or off-site investigation, remedial or other response obligations or
other liabilities of the Company, GVN or GVS under any Environmental Laws; (d)
to the knowledge of Stockholder, there has been no release of hazardous
substances or any pollutant or contaminant (as defined herein), into the
environment (air, water, land or groundwater), by the Company, GVN or GVS (or
any of their then subsidiaries) or in connection with any of their respective
properties, operations or activities that reasonably could be expected to give
rise to any on-site or off-site investigation, remedial or other response
obligations or other liabilities imposed on the Company, GVN or GVS under any
Environmental Laws or common law; (e) none of the Company, GVN or GVS has
received written (or to the knowledge of Stockholder, oral) notice under
Environmental Law which would require the Company, GVN or GVS to remove any
telephone poles or to investigate, remediate, or dispose of or otherwise respond
to any creosote located on or near those poles and, to the knowledge of
Stockholder, any poles removed by the Company, GVN or GVS (or any of their then
subsidiaries) in the past have been handled, managed or disposed of in
accordance with Environmental Laws;(f) to the knowledge of Stockholder, there is
no friable asbestos or asbestos containing material present in or on any of the
properties owned or operated by the Company, GVN or GVS; (g) the Company, GVN
and GVS have obtained and operate (and for the past five (5) years have
operated) in compliance with any registrations, permits, licenses, approvals,
consents and authorizations required under any Environmental Laws and (h)
Stockholder has made available to the Buyer all internal and external
environmental audits, investigations, reviews, assessments and studies and all
correspondence on environmental matters in the possession of Stockholder, the
Company, GVN or GVS relating to any of the current or former properties,
operations or activities by the Company, GVN or GVS (or any of their then
subsidiaries), that relate to their compliance with or liability under
Environmental Laws; and (i) the Company, GVN and GVS operate in such a manner as
to handle, store, transport, manage and dispose of any and all hazardous
substances or hazardous wastes in compliance with Environmental Laws. The
Company, GVN and GVS have not made any changes in their operations, practices or
procedures that reasonably could be likely to have an adverse impact on
environmental matters and compliance with Environmental Laws, since the date of
the Phase I Environmental Site Assessment with respect to each location for
which a Phase I Report was provided.
29
For the purpose of this Agreement, the following terms shall be defined:
"Environmental Law(s)" shall mean any federal, state, regional, local or common
law legal requirement, including but not limited to statutes, regulations,
ordinances, orders, permits, decisions and interpretive documents, as amended,
of any governmental entity or judicial authority, pertaining to health or the
environment (air, water, land and groundwater), including, but not limited to
the Comprehensive Environmental Response, Compensation, and Liability Act
("CERCLA"), the Resource Conservation and Recovery Act ("RCRA"), the Clean Air
Act, the Clean Water Act, the National Oil and Hazardous Substances Contingency
Plan ("NCP"); Toxic Substances Control Act ("TSCA"); and their State, Regional
and Local counterparts.
"Hazardous Substance," "pollutant" or "contaminant" shall have the meaning as
those terms are defined in any Environmental Law, including CERCLA and RCRA, and
shall also include asbestos, formaldehyde, creosote, petroleum products, toxic
substances, and mold.
"Release" shall have the meaning as that term is defined in any Environmental
Law.
Section 3.18 Licenses; Permits; Compliance. Etc.
(a) Schedule 3.18(a) of the Disclosure Schedule contains a list and
description, as of the Execution Date, of all currently effective material
permits, licenses, and authorizations of and registrations and qualifications
with, Governmental Entities held by the Company, GVN or GVS (the "Licenses")
(other than the Communication Licenses referred to in Section 3.6 above). Each
of the Company, GVN or GVS, as the case may be, is in possession of all material
franchises, grants, authorizations, licenses, permits, easements, rights-of-way,
variances, exemptions, consents, certificates, approvals, and orders from
non-Governmental Entities necessary to own, lease, and operate its properties
and to carry on its business as it is now being conducted and currently proposed
to be conducted by the Company, GVN or GVS (the "Permits").
30
(b) Except as set forth on Schedule 3.18(b) of the Disclosure Schedule,
none of the Licenses is terminable as the result of, has increased rights or
obligations as a result of, or becomes vested or accelerated by, or otherwise
requires the consent or other approval of any other Person with respect to or as
a result of, the transactions contemplated by this Agreement. Each of the
Company, GVN and GVS is in compliance in all material respects under all of the
Licenses and Permits by which any of its respective properties or assets is
bound and (i) to the knowledge of Stockholder, no event has occurred that
constitutes a violation or breach of or a default (with the passage of time or
the giving of notice or both) in respect of any thereof, and (ii) to the
knowledge of Stockholder, each of the other parties thereto or bound thereby has
performed all the obligations required, to the knowledge of Stockholder, to be
performed by it to date and is not in default thereunder. To the knowledge of
Stockholder, each of the Licenses and Permits is in full force and constitutes a
legal, valid, and binding obligation of the Company, GVN or GVS and the other
parties thereto, enforceable in accordance with its terms. True and complete
copies of all items required to be disclosed on Schedule 3.18(a) of the
Disclosure Schedule have been delivered to the Buyer.
Section 3.19 Contracts to Acquire an Interest in the Company, GVN or GVS.
Other than this Agreement, there are no contracts, agreements, understandings,
or other rights, whether written or oral, granted by the Company, GVN, GVS or
Stockholder to any Person pursuant to which such Person may be entitled to
receive an equity interest in the Company, GVN or GVS or any payment with
respect thereto.
Section 3.20 Employees.
(a) Schedule 3.20(a) of the Disclosure Schedule sets forth an accurate,
correct, and complete list of employees (including employees on leaves of
absence, if any) of the Company, GVN and GVS as of the Execution Date, including
name, title or position, the present annual compensation or wage rate, any
interests in any bonus or incentive compensation plan, and any other perquisite
or form of non-cash compensation for which the Company, GVN or GVS will be
liable for on and after the Closing Date. To the knowledge of Stockholder, no
employee is subject to a non-competition or any other form of agreement, whether
written or oral, that would prevent such employee from continuing as an employee
of the Company, GVN, GVS or the Buyer, as the case may be, upon consummation of
the transactions contemplated by this Agreement.
(b) Schedule 3.20(b) of the Disclosure Schedule sets forth an accurate and
complete list as of the Execution Date of all loans, debts, and other
obligations (collectively, "Employee Loans") owed by any employee of the
Company, GVN or GVS that shall remain outstanding after the Closing.
31
Section 3.21 Debt Owed to Stockholder. Except as set forth on Schedule 3.21
of the Disclosure Schedule, there are no outstanding loans or other debt
obligations due to Stockholder or its Affiliates (other than the Company, GVN or
GVS) from the Company, GVN or GVS, and all debt obligations owed by the Company,
GVN or GVS to Stockholder or its Affiliates (other than the Company, GVN or GVS)
prior to Closing shall have been forgiven (or converted into a capital
contribution) by Stockholder or its Affiliates (other than the Company, GVN or
GVS) prior to the Closing Date.
Section 3.22 Accounts Receivable. Except as set forth in Schedule 3.22 of
the Disclosure Schedule, (i) all accounts receivable of the Company, GVN or GVS
that are reflected on the Balance Sheet or on the accounting records of the
Company, GVN or GVS as of the Execution Date (collectively, the "Accounts
Receivable") represent valid obligations arising from sales actually made or
services actually performed in the ordinary course of business of the Company,
GVN or GVS and (ii) to the knowledge of Stockholder, there is no contest, claim,
or right of set-off that are not reserved for under any Contract with any
obligor of an Accounts Receivable relating to the amount or validity of such
Accounts Receivable, as so reserved. Schedule 3.22 of the Disclosure Schedule
contains a complete and accurate list of all Accounts Receivable, which list
sets forth the aging of such Accounts Receivable.
Section 3.23 Inventory. All inventory of the Company, GVN or GVS consists
of a quality and quantity usable and salable in the ordinary course of business
consistent with past practices of the Company, GVN or GVS, except for obsolete
items and items of below standard quality, all of which have been written off or
written down to net realizable value in the Balance Sheet or on the accounting
records of the Company, GVN or GVS as of the Execution Date, as the case may be.
Schedule 3.23 of the Disclosure Schedule contains a complete and accurate list
of all inventories of the Company, GVN and GVS as of the date of the Balance
Sheet.
Section 3.24 No Undisclosed Liabilities. Except as set forth in Schedule
3.7 or Schedule 3.24 of the Disclosure Schedule, none of the Company, GVN or GVS
has any liabilities or obligations of any nature, except for (i) liabilities or
obligations reflected or reserved against in the Balance Sheet, and (ii) current
liabilities incurred in the ordinary course of business of the Company, GVN or
GVS, as the case may be, since the date thereof, none of which are material.
Section 3.25 Reserved
32
Section 3.26 Relationships with Affiliates.
(a) Except as set forth in reasonable detail on Schedule 3.26(a) of the
Disclosure Schedule and except for the provision of telecommunication services
to any officer, director or employee of the Company, GVN or GVS or any immediate
family member of any of the foregoing in the ordinary course of business, no
officer, director or employee of the Company, GVN or GVS or Stockholder or
immediate family member of any of the foregoing, provides or causes to be
provided to the Company, GVN or GVS any assets, services or real property
facilities, and the Company, GVN and GVS does not provide or cause to be
provided to any such officer, director, employee, Stockholder (other than the
Company, GVN or GVS, as the case may be), or any immediate family member of any
of the foregoing, any assets, services or real property facilities. Except as
set forth in reasonable detail on Schedule 3.26(a) of the Disclosure Schedule,
Stockholder (other than the Company, GVN or GVS, as the case may be) has no
interest of any nature in any of the assets used in connection with the
operation of (or otherwise related to) the business of the Company, GVN or GVS.
Except as may have been described above or on any Disclosure Schedule, no
Affiliate of Stockholder has entered into any transaction with the Company, GVN
or GVS other than on an arms length basis.
(b) Schedule 3.26(b) of the Disclosure Schedule sets forth a true and
complete list and brief description of all contracts pursuant to which
Stockholder or any of the officers, directors or employees of the Company, GVN
or GVS, or their immediate family members, (i) to the knowledge of Stockholder,
have a pecuniary interest in any supplier, vendor or customer of the Company,
GVN or GVS or any Person with which the Company, GVN or GVS is in competition
(excluding shares of publicly traded stock or securities aggregating less than
three percent of the outstanding shares thereof), (ii) is indebted to the
Company, GVN or GVS, (iii) is a party to any non-employment related Contract or
transaction with the Company, GVN or GVS, or (iv) have any debts, liabilities or
obligations guaranteed by the Company, GVN or GVS, or, except as disclosed in
Schedule 3.20 of the Disclosure Schedule, as to which the Company, GVN or GVS is
a surety or accommodation party with respect thereto.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer hereby represents and warrants to Stockholder as follows:
Section 4.1 Organization. The Buyer is a corporation duly organized,
validly existing, and in good standing under the laws of Delaware, and is duly
qualified and in good standing to do business as a foreign corporation in each
jurisdiction in which the failure to be so qualified and in good standing would
affect the validity or enforceability of this Agreement or would have a Material
Adverse Effect on the Buyer.
Section 4.2 Authority. The Buyer has all requisite corporate power and
authority to execute and deliver this Agreement and the Ancillary Agreements, to
perform its obligations hereunder and thereunder, and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement and the Ancillary Agreements by the Buyer and the consummation by the
Buyer of the transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate action and no other corporate proceedings
on the part of the Buyer is necessary to authorize this Agreement and the
Ancillary Agreements or to consummate the transactions contemplated hereby and
thereby. This Agreement and the Ancillary Agreements have been duly executed and
delivered by the Buyer and constitute the legal, valid, and binding obligations
of the Buyer, enforceable in accordance with their respective terms.
33
Section 4.3 No Conflict; Required Filings and Consents.
(a) Except as disclosed in Schedule 4.3 of the disclosure schedule
delivered to Stockholder by the Buyer which is incorporated by reference herein,
the execution and delivery of this Agreement and the Ancillary Agreements by the
Buyer do not, and the consummation of the transactions contemplated hereby and
thereby shall not, (i) conflict with or violate the organizational and governing
documents of the Buyer, in each case as amended or restated as of the date of
this Agreement (including, without limitation, the certificate of incorporation
or bylaws); (ii) to the knowledge of the Buyer, conflict with or violate any
Laws applicable to the Buyer or by which any of its properties is bound or
subject; or (iii) result in any breach of or constitute a default (or an event
that with notice or lapse of time or both would become a default) under, or give
to others any rights of termination, amendment, acceleration or cancellation of,
or result in the creation of an Encumbrance on any of the properties or assets
of the Buyer pursuant to, any material note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise, or other instrument or
obligation to which the Buyer is a party or by or to which the Buyer or any of
its properties is bound or subject.
(b) Except as disclosed in Schedule 4.3 of the disclosure schedule
delivered to Stockholder by the Buyer which is incorporated by reference herein,
the execution and delivery of this Agreement and the Ancillary Agreements by the
Buyer does not, and the consummation of the transactions contemplated by this
Agreement and the Ancillary Agreements shall not, require the Buyer to obtain
any consent, license, permit, approval, waiver, authorization, or order of, or
to make any filing with or notification to, any Governmental Entity.
(c) Buyer is fully qualified under all applicable Laws to be a transferee
of the FCC Licenses and the State PUC License. Buyer knows of no reason why the
FCC or the State PUC will not grant their consent to the transfer of control to
the Buyer of the FCC Licenses and the State PUC License. Buyer knows of no fact
that would reasonably be expected to lead to a condition of the FCC Consent or
State PUC Consent that would not allow the Buyer to consummate the transactions
contemplated by this Agreement under Section 8.2(d). The Buyer does not have ten
percent or greater foreign owners, including both equity and voting shares, and
the Buyer is not controlled by foreigners such that FCC Consent will include
Team Telecom review.
34
Section 4.4 No Other Representations or Warranties of Stockholder. The
Buyer acknowledges that Stockholder makes or has made only the representations
and warranties expressly set forth in Article 3 and any certificates delivered
by or on behalf of Stockholder pursuant to Article 8. In particular, and without
limiting the generality of the foregoing, the Buyer acknowledges that no
representation or warranty is made with respect to any financial projections or
in any management presentations and accompanying materials.
ARTICLE V
PRE-CLOSING COVENANTS
The parties agree as follows with respect to the period between the
Execution Date and the Closing Date:
Section 5.1 General.
(a) On the terms and subject to the conditions of this Agreement, each
party shall use commercially reasonable efforts to cause the Closing to occur,
including taking all reasonable actions necessary (i) to comply promptly with
all legal requirements that may be imposed on it or any of its Affiliates with
respect to the Closing, (ii) to obtain each consent required to be obtained by
such party and each other consent of, and make necessary filings with, any
Governmental Entity, which if not obtained or made is reasonably likely to have
a material adverse effect on the ability of the parties to consummate the
transactions contemplated by this Agreement or result in a Material Adverse
Effect and (iii) to cause the occurrence or meeting of the conditions precedent
set forth in Article 8.
(b) In furtherance of and not in limitation of the provisions of Section
5.1(a), each party shall use commercially reasonable efforts and cooperate with
the other with respect to obtaining the any governmental consents required and
other consents, approvals and waivers required to be obtained to consummate the
transactions contemplated by this Agreement. In particular, when permitted by
the applicable Governmental Entity, Stockholder shall, and shall cause the
Company, GVN and GVS to, and the Buyer, or persons nominated thereby, will,
promptly provide drafts to the other party, allow reasonably adequate time for
comment by the other party and agree promptly, to the extent the same are
accurate and reasonable, to the contents of all notifications, filings,
submissions, further documentation and evidence to be submitted to all relevant
Governmental Entities. Stockholder shall, and shall cause the Company, GVN, and
GVS to, and the Buyer shall, in each case where permitted by the relevant
Governmental Entity, allow individuals nominated by each of the other parties to
attend all meetings with Governmental Entities and, where appropriate, as
mutually agreed, to make oral submissions at such meetings. The Buyer shall, and
Stockholder shall, and shall cause the Company, GVN and GVS to, (i) furnish to
the other such necessary information and reasonable assistance as the other may
require in connection with its preparation of any notification, filing,
submission or further documentation or evidence that is necessary in obtaining
any governmental consents required, and (ii) when permitted by the applicable
Governmental Entity, promptly disclose to the other all correspondence received
from or sent to any relevant Governmental Entity in connection herewith and
shall keep the other fully informed of any other related communication in
whatever form with any of the relevant Governmental Entities. The Buyer shall,
and Stockholder shall, and shall cause the Company, GVN and GVS to, use
commercially reasonable efforts to comply promptly with any inquiry or request
for additional information from any relevant Governmental Entity in connection
herewith and shall use commercially reasonable efforts to promptly provide any
supplemental information requested in connection with the notifications, filings
and/or submissions made hereunder for the purposes of obtaining the governmental
consents required. Notwithstanding the foregoing, the provisions of this Section
5.1(b) are subject to Section 5.4 hereof and any other confidentiality or
privilege limitations applicable to the parties hereto and their Affiliates.
35
(c) In furtherance of and not in limitation of the provisions of Sections
5.1(a) and (b), each of Stockholder and the Buyer shall, as promptly as
practicable, but in no event later than fifteen (15) Business Days following the
execution and delivery of this Agreement, file, or cause to be filed with the
United States Federal Trade Commission and the United States Department of
Justice the notification and report form, if any, required for the transactions
contemplated hereby and any supplemental information requested in connection
therewith pursuant to the HSR Act. Any such notification and report form and
supplemental information shall be in substantial compliance with the
requirements of the HSR Act. Stockholder and the Buyer shall, to the extent each
is able, seek early termination of the applicable waiting period under the HSR
Act. Notwithstanding anything in this Agreement to the contrary, the Buyer shall
not be required to take any action in connection with any competition laws
(including HSR) that would require the Buyer or any of its Affiliates to agree
to, or proffer to, not compete in any market or divest or hold separately any
assets or any portion of any business of the Buyer or its Affiliates, or the
Company, GVN or GVS.
(d) In furtherance of and not in limitation of the provisions of Sections
5.1(a) and (b), each of Stockholder and the Buyer shall, as promptly as
practicable, but in no event later than twenty (20) Business Days following the
execution and delivery of this Agreement, file, or cause to be filed:
(i) with the FCC the necessary application or applications seeking the FCC
Consent.
(ii) with the State PUC the necessary application seeking the State PUC
Consent. Such State PUC application shall solely seek as affirmative relief an
order authorizing the transfer of control of GVN and GVS and may not seek a
State PUC authorization for GVN or GVS to operate under a regulatory framework
different from that under which those companies currently operate. The parties
shall cooperate to make any notice filings required in connection with this
matter on a timely basis.
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(e) Prior to the Closing Date, Stockholder shall cause the Company, GVN and
GVS to use commercially reasonable efforts to obtain all consents and waivers
from third parties in respect of contracts and other obligations, in each case,
of the Company, GVN and GVS, to the extent such contracts and other obligations
require such consents and waivers as a result of the transactions contemplated
hereby. Stockholder shall pay all of the costs of obtaining the consents
referred to in this clause (e), including all fees, charges, costs and expenses
levied by a counterparty in granting its consent, including assignment fees.
Section 5.2 Operation of Business. Prior to the Closing Date or earlier
termination of this Agreement, Stockholder shall use commercially reasonable
efforts to preserve substantially intact the business organization and present
relationships of the Company, GVN and GVS with their respective customers,
suppliers and employees and to maintain all of their respective insurance
currently in effect. Stockholder will not take, and will not permit the Company,
GVN or GVS to take, any action that could reasonably be expected to have a
Material Adverse Effect on the Company, GVN or GVS or the transactions
contemplated by this Agreement and the Ancillary Agreements. From the Execution
Date through the Closing Date, without the prior written consent of the Buyer,
Stockholder will not, and will not permit the Company, GVN or GVS to, engage in
any practice, take any action, or enter into any transaction outside the
ordinary course of business or inconsistent with past practice of the Company,
GVN or GVS. Without limiting the generality of the foregoing, none of the
Company, GVN or GVS will, without the prior written consent of the Buyer except
as set forth on Schedule 5.2 or as otherwise provided for in this Section 5.2:
(a) sell, lease, transfer, convey, assign or otherwise dispose of any
interest in any material assets, tangible or intangible, other than for a fair
consideration in the ordinary course of business of the Company, GVN or GVS, or
as contemplated by this Agreement it being understood that it shall not be
considered as "in the ordinary course of business" to enter into any dark fiber
leases or any IRUs.
(b) enter into any agreement, contract, lease or license (or series of
related agreements, contracts, leases and licenses) involving more than $25,000
to which the Company, GVN or GVS is a party or by which any of them are bound.
(c) accelerate, extend, materially modify, renew, terminate or cancel any
agreement, contract, lease or license (or series of related agreements,
contracts, leases and licenses) involving more than $25,000 to which the
Company, GVN or GVS is a party and by which any of them are bound.
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(d) impose or permit to exist any Encumbrance upon any of its respective
assets, tangible or intangible (other than Permitted Liens or those Encumbrances
that are to be released pursuant to Section 6.8 hereof).
(e) make any capital expenditure (or series of related capital
expenditures) or commitments in an aggregate amount exceeding $2,600,000 in
calendar year 2007 (or, in the event that the Closing has not occurred prior to
2008, other than those capital expenditures or commitments made during 2008 that
would not exceed the cumulative sum of $216,667 per month times the number of
months elapsed in 2008), provided that the emergency repair or replacement of
capital assets that have been damaged or destroyed will not be covered by the
foregoing limitations; however, Stockholder shall promptly, and in any event
within five (5) Business Days, give the Buyer written notice of the occurrence
of such emergency repair or replacement.
(f) make any capital investment in, any loan to, or any acquisition of the
securities or assets of, any other Person (or series of related capital
investments, loans and acquisitions), other than employee advances in the
ordinary course of business and consistent with past practices.
(g) issue any note, bond or other debt security or create, incur, assume,
or guarantee any indebtedness for borrowed money or capitalized lease
obligation.
(h) merge with any other Person, consolidate or sell or consent to the sale
of any of the material assets of the Company, GVN or GVS or acquire any material
assets, in each case, outside the ordinary course of business of the Company,
GVN or GVS.
(i) authorize or effect any change or amendment in the Company Governing
Documents, the GVN Governing Documents or the GVS Governing Documents.
(j) except as set forth on Schedule 5.2 of the Disclosure Schedule, declare
or pay any dividend, or make any distribution to Stockholder, or otherwise make
any payments to or for the benefit of Stockholder, in each such case in excess
of amounts consistent with past practice, or repurchase or redeem any of its
outstanding capital stock.
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(k) issue or sell any shares of capital stock or any other equity interest
or any beneficial interest therein (including, without limitation, any options
or warrants).
(l) except as otherwise required by Law or consistent with past practices,
take any action with respect to the grant of any severance or termination pay
(other than pursuant to policies or agreements of the Company, GVN or GVS, as
the case may be, in effect on December 31, 2006).
(m) hire any officers or management-level or other employees other than to
replace such employees existing on the Execution Date and for compensation that
is substantially the same.
(n) make any material Tax elections.
(o) fail to maintain any material asset in substantially its current state
of repair, normal wear and tear excepted.
(p) make any material change in their respective accounting and operating
policies or practices.
(q) except as set forth on Schedule 5.2 of the Disclosure Schedule, waive,
settle or release any claim or cause of action.
(r) declare or issue any bonus or other such payments to, or increase the
salary or wages of, any employees of the Company, GVN or GVS other than in the
ordinary course of business, consistent with past practices.
(s) renew or extend any contract that has a term beyond six months and a
contractual value in excess of $25,000.
(t) permit any Communication License to lapse.
(u) commit or agree to do any of the foregoing prohibited actions.
Section 5.3 Access to Information. Upon reasonable notice and subject to
applicable Laws relating to the exchange of information, Stockholder shall
afford to the officers, employees, accountants, counsel and other
representatives of the Buyer, reasonable access during normal business hours
during the period prior to the Closing Date, and in a manner so as not to
interfere with the normal business operations of Stockholder, the Company, GVN
or GVS, to all of their respective properties, books, contracts, commitments and
records for the purpose of updating any review of such items performed prior to
the Execution Date and, during such period, Stockholder shall make available all
other information concerning the business, properties and personnel of
Stockholder, the Company GVN or GVS as the Buyer may reasonably request. It is
the intention of the parties hereto that the Buyer shall conduct an examination
of Stockholder, the Company, GVN and GVS prior to the Closing Date in order to
confirm compliance with the representations, warranties and covenants set forth
in this Agreement. Stockholder will, in any event, provide the Buyer with
monthly balance sheet, cash flow and income statements prepared by the Company,
GVN or GVS. The Buyer will continue to be bound by the terms of that certain
Confidentiality Agreement dated May 17, 2006.
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Section 5.4 Notice of Developments. Stockholder will give prompt written
notice to the Buyer of any material adverse development in the business,
operations, financial condition or results of operations of the Company, GVN or
GVS. The Buyer will give prompt written notice to Stockholder of any material
adverse development in the business, operations, financial condition or results
of operations by providing Stockholder with copies of any Form 8-K's filed by
the Buyer with respect to such matters. Each party hereto will give prompt
written notice to the other party of any material adverse development causing a
breach of any of such party's own representations and warranties set forth
herein. No disclosure by any party pursuant to this Section 5.4 shall be deemed
to amend or supplement any schedule hereto or to prevent or cure any
misrepresentation, breach of warranty, or breach of covenant, nor shall a
decision to close the transactions contemplated hereby be considered a waiver in
respect of any such matter.
Section 5.5 Exclusivity. Until the Closing Date or earlier termination of
this Agreement, in light of the consideration given and the actions undertaken
by the Buyer prior to the execution of this Agreement, Stockholder will not, and
will not permit the Company, GVN or GVS to (a) solicit, initiate or actively
encourage the submission of any proposal or offer from any Person relating to
the acquisition of any material equity interest in, or any substantial portion
of the assets, of the Company, GVN or GVS (including any acquisition structured
as a merger, consolidation or share exchange) or (b) participate in any
discussions or negotiations regarding, furnish any information with respect to,
assist or participate in, or facilitate in any other manner any effort or
attempt by any Person to do or seek any of the foregoing. Stockholder will
notify the Buyer immediately if any Person makes any proposal or offer with
respect to any of the foregoing.
Section 5.6 Stockholder's 401(k) Retirement Plan. Stockholder shall amend,
or otherwise modify, the 401(k) Retirement Plan that covers employees of the
Company, GVN or GVS ("401(k) Plan") so as to vest in each such employee as of
the Closing Date 100% of the Employer Matching Contributions and Employer Profit
Sharing Contributions (as each such term is defined in the 401(k) Plan) in each
such employee's accounts and any earnings thereon. For purposes of the 401(k)
Plan, Stockholder shall treat each individual who (i) is employed by the
Company, GVN or GVS immediately prior to the Closing Date and (ii) commences
employment with the Buyer effective as of the Closing Date, as experiencing a
severance from employment with the Stockholder on the Closing Date within the
meaning of Treasury regulation section 1.401(k)-1(d)(2).
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Section 5.7 Communications Licenses. Prior to the Closing, Stockholder
shall cause the Company, GVN and GVS to maintain the validity of the
Communications Licenses, comply in all material respects with all requirements
of the Communications Licenses, and the Communications Act and any applicable
state or local Laws, including those of the State PUC. Prior to the Closing,
Stockholder shall cause the Company, GVN and GVS to (a) refrain from taking any
action that would jeopardize the validity of any of the Communications Licenses,
(b) prosecute with due diligence any pending applications with respect to the
Communications Licenses, including any renewals thereof and applications seeking
FCC Consent and the State PUC Consent and (c) with respect to Communications
Licenses, file all registrations, reports, renewal applications, and other
documents and pay all required fees and contributions, in each case, that are
required by the Communications Act or any applicable state or local Laws,
including those of the State PUC as and when such filings or reports are
necessary or appropriate.
ARTICLE VI
COVENANTS; ADDITIONAL AGREEMENTS
Section 6.1 Stockholder Release. Effective as of the Closing Date,
Stockholder, for Stockholder and its officers, directors, employees,
stockholders, agents, representatives, successors, and assigns, hereby fully and
unconditionally releases and forever discharges and holds harmless the Company,
GVN and GVS and each of their respective officers, directors, employees,
stockholders, agents, representatives, successors, and assigns from any and all
claims, demands, losses, costs, expenses (including reasonable attorneys' fees
and expenses), obligations, liabilities, and/or damages (collectively, "Claims")
of every kind and nature whatsoever, whether or not now existing or known,
relating in any way, directly or indirectly, to the Company, GVN or GVS that
Stockholder may now have or may hereafter claim against the Company, GVN or GVS
or any of their respective employees, officers, directors, successors, and
assigns, arising prior to the Closing.
Section 6.2 Consent of Stockholder. For purposes of the state corporate law
governing the Company, this Agreement reflects the written consent of
Stockholder with respect to the sale of the Company Common Stock and the
business of the Company to the Buyer, approving the execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby.
Section 6.3 Reserved.
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Section 6.4 Publicity. The Buyer and Stockholder shall cooperate with each
other in the development and distribution of all news releases and other public
disclosures relating to the transactions contemplated by this Agreement. Neither
the Buyer, on the one hand, nor Stockholder, on the other hand, shall issue or
make, or allow to have issued or made, any press release or public announcement
concerning the transactions contemplated by this Agreement without the advance
approval of the form and substance thereof by the other party (which approval
shall not be unreasonably withheld or delayed), unless otherwise required by
applicable legal or stock exchange requirements.
Section 6.5 Transaction Costs. Except to the extent expressly provided
elsewhere in this Agreement, each of Stockholder and the Buyer shall pay all
attorneys', accountants', finders', brokers', investment banking and other fees,
costs and expenses incurred by such party in connection with the preparation,
negotiation, execution, and performance of this Agreement or any of the
transactions contemplated by this Agreement.
Section 6.6 Non-Competition.
(a) Stockholder, for itself and all of the Persons named on Schedule 6.6 of
the Disclosure Schedule (from each of whom Stockholder agrees that it has, or by
the Closing Date shall have, obtained written agreements covering all of the
matters contained in this Section 6.6) (each, a "Non-Compete Party," and
collectively, the "Non-Compete Parties") acknowledge and agree that this
Agreement is entered into in connection with the sale of a business and that, as
part of the consideration and as a material inducement for the execution of this
Agreement and the purchase of the business, the Buyer has required that the
Non-Compete Parties enter into this Section 6.6. The Non-Compete Parties
acknowledge and agree that the Buyer would not enter into this Agreement or
purchase the business absent the Non- Compete Parties' covenants contained in
this Section 6.6. The Non-Compete Parties also acknowledge that the Buyer's
acquisition of the business includes the acquisition of special and confidential
knowledge and information known only to the Non-Compete Parties regarding the
business, including information regarding operations, plans, strategies,
markets, methods of competing, customers and potential customers, vendors and
potential vendors, suppliers, intellectual property, know-how, trade secrets,
and other information, which knowledge and information would provide invaluable
benefits to competitors and potential competitors of the Buyer and the use,
loss, dilution, or impairment of which by the Non-Compete Parties or any other
Person could materially damage the Buyer and the business acquired.
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(b) Stockholder covenants and agrees that, for a period designated on
Schedule 6.6 of the Disclosure Schedule (the "Non-Compete Applicable Date"),
without the written permission of the Buyer, each Non-Compete Party shall not,
directly or indirectly, anywhere within the franchise areas where any of the
Buyer, the Company, GVN or GVS are operating in California as of the Closing
Date (the "Non-Compete Area"): (i) engage (whether as owner, partner,
stockholder, investor, adviser, consultant, contracting party, or referring
source, or otherwise) in any business in California that is substantially
similar to or in competition with the business conducted by the Company, GVN and
GVS at any time prior to the Non-Compete Applicable Date (except that a
Non-Compete Party may beneficially own less than three percent of the common
equity of a publicly traded entity); (ii) solicit or attempt to solicit any
competing business from any Person that the Non-Compete Party or any Person that
was employed by the Non-Compete Party called upon, solicited, or conducted
business with prior to the Non-Compete Applicable Date, including, but not
limited to, customers, clients, and prospective customers and clients of the
Company, GVN and GVS, in each instance for the purpose of employing such
services in a manner that competes with the business of the Company, GVN and GVS
as set forth in Section 6.6(b)(i); or (iii) recruit or hire, attempt to or
assist in any attempt to recruit or hire, or discuss employment or hiring with,
any Person who is an employee of the Company, GVN and GVS.
(c) Stockholder acknowledges that this Section 6.6 is necessary to protect
the interests of the Buyer, the Company, GVN and GVS and that the restrictions
and remedies contained in this Agreement are reasonable in light of the
consideration and other value that the Non-Compete Parties have accepted
pursuant to this Agreement. If any provision of this Section 6.6 should be found
by any court of competent jurisdiction to be unreasonable by reason of its being
too broad as to the period of time, territory, or scope, then, and in that
event, such provision shall nevertheless remain valid and fully effective, but
shall be considered to be amended so that the period of time, territory, or
scope set forth herein shall be changed to be the maximum period of time, the
largest territory, or the broadest scope, as the case may be, that would be
found reasonable and enforceable by such court.
Section 6.7 Confidential Information.
(a) Stockholder acknowledges that it and its officers, directors,
stockholders, employees, agents and representatives, have had access to
confidential information of the Company, GVN and GVS, and may in the future have
access to information proprietary to, used by, or in the possession of the
Company, GVN and GVS or any of their respective customers or not generally known
in the industry, including, but not limited to, records regarding sales, price
and cost information, marketing plans, trade secrets, know-how, computer
programs, source code, intellectual property, customer names, customer lists,
sales techniques, distribution plans or procedures, and other material relating
to the business of the Company, GVN and GVS (the "Confidential Information"),
and Stockholder, for itself and for each of its Affiliates (other than the
Company, GVN and GVS), agrees that from and after the Closing Date for the
period equivalent to the non-competition covenant in Section 6.6, not to use the
Confidential Information other than for the sole benefit of the Company, GVN and
GVS or to disclose such Confidential Information to any Person that is not an
officer or employee (except that if, at such time, such Confidential Information
is subject to a policy of the Buyer or its Affiliates restricting disclosure to
43
non-officers, Stockholder shall not disclose such information to non-officers)
of the Buyer at the time of such disclosure, without the prior written consent
of the Buyer; provided, however, that nothing herein shall prevent Stockholder
from disclosing any such information (i) pursuant to the order of any court or
administrative agency or in any pending legal or administrative proceeding, or
otherwise as required by applicable Law or compulsory legal process or in any
proceeding relating to this Agreement, (ii) to the extent that such information
becomes publicly available other than by reason of disclosure by Stockholder in
violation of this paragraph, and (iii) to Stockholder's legal counsel and other
experts or agents who are informed of the confidential nature of such
information. Stockholder further acknowledges that this covenant to maintain
Confidential Information is necessary to protect the goodwill and proprietary
interests of the Buyer, the Company, GVN and GVS and that the restriction
against the disclosure of Confidential Information and the associated remedies
are reasonable in light of the consideration and other value Stockholder has
accepted pursuant to this Agreement.
(b) Reserved.
(c) If any provision of this Section 6.7 should be found by any court of
competent jurisdiction to be unreasonable by reason of its being too broad as to
the period of time, territory, or scope, then, and in that event, such provision
shall nevertheless remain valid and fully effective, but shall be considered to
be amended so that the period of time, territory, or scope set forth shall be
changed to be the maximum period of time, the largest territory, or the broadest
scope, as the case may be, which would be found reasonable and enforceable by
such court.
Section 6.8 Bank Consents; Lien Releases. On or prior to the Closing Date,
Stockholder shall obtain and deliver to the Buyer (i) executed releases in
respect of the banks (or other financial institutions) that are parties to the
First and Second Lien Credit Agreements with Stockholder, the Company, GVN
and/or GVS, releasing the Company, GVN and GVS from any and all obligations
thereunder, and (ii) executed UCC termination statements and satisfactions of
the First and Second Lien Credit Agreements (in forms satisfactory to the title
company, if any, issuing policies to the Company, GVN or GVS) such that the
title company, if any, is able to issue policies of insurance without an
exception for any such mortgages.
Section 6.9 Tax Matters.
(a) Liability for Tax Matters. Stockholder shall be liable for and pay, and
pursuant to Article 7 shall indemnify and hold harmless the Buyer and its
Affiliates (including, without limitation, the Company, GVN and GVS following
the consummation of the transactions contemplated hereby) from and against all
Taxes of the Company, GVN or GVS for any Tax period or portion thereof ending on
or before the Closing Date (whether assessed or unassessed), or the reduction of
any tax assets or tax benefits (net of any resulting increase in other tax
assets or tax benefits) that were disclosed (i) on any Tax Return of the
Company, GVN or GVS filed as of the Closing Date for any Tax period beginning on
or after the Initial Acquisition Date and ending on or before the Closing Date
as a result of such Tax Returns not being true, complete and accurate in all
material respects, or (ii) on Schedule 3.11(k).. Stockholder shall be entitled
to (and the Buyer shall file for and pay Stockholder) any refund actually
received by the Buyer or any credit actually used by the Buyer with respect to
any Taxes applicable to the business, assets, or results of operations of the
Company, GVN and GVS in each case attributable to all periods of time up to and
44
including the Closing Date so long as such refund or credit is not attributable
to a tax attribute, tax credit or tax net operating loss of the Buyer or an
affiliate of Buyer for any tax period or the Company, GVN or GVS for a period
ending after the Closing Date or is not reflected in the Net Working Capital.
The Buyer shall be liable for and pay, and pursuant to Article 7 shall indemnify
and hold harmless Stockholder from and against all Taxes (whether assessed or
unassessed) applicable to the business, assets, or results of operations of the
Company, GVN and GVS in each case attributable to all periods of time following
the Closing Date. The Buyer shall be entitled to any refund or credit in respect
of any Taxes applicable to the business, assets, or results of operations of the
Company, GVN and GVS in each case attributable to all periods of time following
the Closing Date.
(b) For purposes of this Section 6.9, in the case of any Taxes that are
imposed on a periodic basis and are payable for a taxable period that includes
(but does not end on) the Closing Date, the portion of such Tax attributable to
periods of time up to and including the Closing Date shall (a) in the case of
any Taxes other than Taxes based upon or related to income or receipts, be
deemed to be the amount of such Tax for the entire taxable period multiplied by
a fraction the numerator of which is the number of days in the taxable period
ending on the Closing Date and the denominator of which is the number of days in
the entire taxable period, and (b) in the case of any Tax based upon or related
to income or receipts, be deemed equal to the amount which would be payable if
the relevant Taxable period ended on the Closing Date. Any credits relating to a
taxable period that begins before and ends after the Closing Date shall be
allocated on a basis consistent with the allocations made pursuant to the
preceding sentence. Stockholder shall not be required to pay any Taxes pursuant
to this Section 6.9 to the extent that such Taxes are taken into account in the
final determination of the Net Working Capital.
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(i) Consistent Tax Reporting. The Buyer shall file a consolidated federal
income tax return that includes the Company, GVN and GVS for the taxable period
of the Company starting with the day following the Closing Date. Accordingly,
the taxable year of the Company, GVN and GVS will close for federal income Tax
purposes at the end of the day on the Closing Date. No election under Section
338 of the Code (relating to stock purchases treated as asset acquisitions) or
under Reg. ss.1.1502-76(b)(2)(ii) (relating to ratable allocation elections)
shall be made. The Company shall not engage in any transactions on the Closing
Date outside the ordinary course of business other than the transactions
contemplated by this Agreement. Stockholder, the Company, GVN and GVS, and the
Buyer shall (a) treat and report the transactions contemplated by this Agreement
in all respects consistently with the provisions of this Agreement for purposes
of any federal, state, local or foreign Tax and (b) not take any actions or
positions inconsistent with the obligations of the parties set forth herein.
(ii) Tax Returns for Tax Periods Ending on or Before the Closing Date.
Stockholder shall prepare or cause to be prepared and file or cause to be filed
all Tax Returns of the Company and all subsidiaries for taxable periods ending
on or before the Closing Date that have not been filed prior to the Closing
Date. Stockholder shall permit the Buyer to review and comment on each such Tax
Return described in the prior sentence at least ten (10) days prior to filing
and shall make such revisions to such Tax Returns as are reasonably requested by
the Buyer. The Company, GVN and GVS shall not amend any Tax Return for any such
Tax Period without the written consent of Stockholder, which shall not be
unreasonably withheld. All Tax Returns prepared by or for Stockholder pursuant
to this Section 6.9 shall be prepared in a manner consistent with the past
practice of the Company, except as otherwise reasonably necessary to comply with
Law.
(iii) Tax Returns for Tax Periods that Include But Do Not End on the
Closing Date. The Company shall prepare or cause to be prepared and file or
cause to be filed all Tax Returns of the Company and all subsidiaries for
taxable periods that include but do not end on the Closing Date. The Company
shall permit Stockholder to review and comment on each such Tax Return described
in the prior sentence at least ten (10) days prior to filing and shall make such
revisions to such Tax Returns as are reasonably requested by Stockholder. The
Company, GVN and GVS shall not amend any Tax Return for any such Tax Period
without the written consent of Stockholder, which shall not be unreasonably
withheld. All Tax Returns to be prepared by or for the Company pursuant to this
Section 6.9(b)(iii) shall be prepared in a manner consistent with the past
practice of the Company, except as otherwise reasonably necessary to comply with
Law.
(c) Reimbursement; Notice. Each party shall promptly pay the other for any
Taxes for which such party is liable under this Section 6.9, but in no event
later than five days prior to the due date of the payment of such Taxes. The
parties agree to negotiate in good faith to resolve any disputes regarding the
payment of any Taxes pursuant to this Section 6.9. Within a reasonable period of
time prior to the payment of any such Tax, the party paying such Tax shall give
written notice to the other party of the Tax payable and the portion that is the
liability of such party, although failure to do so shall not relieve the other
party from its liability hereunder.
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(d) Assistance and Cooperation. After the Closing Date, each party shall
(and shall cause its respective Affiliates, representatives, and agents to):
(i) assist the other party in preparing any Tax Returns that such other
party is responsible for preparing and filing in accordance with this Section
6.9;
(ii) cooperate fully in preparing for any audits of, or disputes with
taxing authorities regarding, any Tax Returns described in this Section 6.9; and
(iii) make available to the other party and to any taxing authority as
reasonably requested all information, records, and documents relating to the
Taxes described in this Section 6.9.
Section 6.10. Further Assurances. Following the Closing, each party hereto
agrees to cooperate fully with the other parties hereto and to execute such
further instruments, documents and agreements and to give such further written
assurances, as may be reasonably requested by any other party at that other
party's cost to give effect to the transactions described herein and
contemplated hereby. Stockholder will use commercially reasonable efforts to
cooperate with the Buyer and to discuss the Financial Statements, the internal
controls of the Company, GVN and GVS and the disclosure controls and procedures
of the Company, GVN and GVS in connection with the Buyer's efforts to comply
with the rules and regulations affecting public companies, including without
limitation, the Xxxxxxxx-Xxxxx Act of 2002 and any rules and regulations
relating thereto.
Section 6.11 Books and Records. From and after the Closing, the Buyer will
cause the Company, GVN and GVS to maintain a reasonable records retention
policy. Stockholder and its accountants, lawyers and representatives shall be
entitled upon reasonable notice and during normal business hours to have access
to and to make copies, at Stockholder's expense, of relevant books and records
of the Company, GVN and GVS with respect to periods or occurrences prior to
Closing for any reasonable purpose relating to the Stockholder's ownership of
the Company, GVN and GVS prior to the Closing, including, without limitation,
the preparation of tax returns. In the event of any litigation or threatened
litigation between the parties relating to this Agreement or the transactions
contemplated hereby, the covenants contained in this Section shall not be
considered a waiver by any party of any right to assert the attorney-client
privilege.
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ARTICLE VII
INDEMNIFICATION
Section 7.1 Indemnification of the Buyer.
(a) Indemnification by Stockholder. Subject to the other terms of this
Article 7, Stockholder shall indemnify and hold the Buyer, its subsidiaries and
their respective stockholders, directors, officers, employees, affiliates and
agents (collectively, the "Buyer Parties") harmless from any and all Losses that
any Buyer Party may suffer or incur (i) as a result of or relating to the
failure of any of the representations and warranties made by Stockholder in this
Agreement to be true and correct in all respects at and as of the date hereof
and at and as of the Closing Date (except that in determining the amount of
Losses resulting from the breach or inaccuracy of any representation or warranty
that is qualified by the concept of materiality, such qualification shall not be
taken into account) ), and (ii) as a result of or relating to the breach of any
of any of the covenants or agreements made by Stockholder in this Agreement. In
addition, without in anyway limiting the foregoing, without the need of the
Buyer Parties to show any breach of any representation or warranty made by
Stockholder, and not subject to the limitations contained in Section 7.1(b),
Stockholder shall indemnify and hold harmless the Buyer Parties (A) from any and
all Losses (including for indemnification) incurred prior to the Closing by the
Company, GVN or GVS under the Stock Purchase Agreement, dated September 9, 2005,
between Xxxxx Telephone Holdings, Inc, and Ground Swell Communications, Inc. and
(B) from any and all Losses arising out of any agreements (employment or
otherwise) with Xxxxx Xxxxxxxxxxxxx.
(b) Limitations on Stockholder's Indemnification. Stockholder's
Indemnification obligations under this Agreement shall be subject to the
following limitations and conditions:
(i) Stockholder will have no indemnification obligation under Section
7.1(a)(i) until an individual Loss or series of related Losses incurred by the
Buyer Parties exceeds $10,000 or the cumulative Losses incurred by the Buyer
Parties exceeds $250,000, whereupon Stockholder will indemnify the Buyer Parties
for the full amount of such Losses.
(ii) Stockholder's cumulative liability for indemnification under Section
7.1(a)(i) shall not exceed amounts initially held under the Escrow Agreement,
together with any interest earned thereon (the "Cap"). No claim for any Loss
shall be made with respect to any breach of representation or warranty to the
extent that such breach or inaccuracy already is reflected in any adjustment to
the Purchase Price calculation pursuant to Section 2.3.
(iii) Stockholder shall have no indemnification obligation with respect to
Losses relating to Environmental Laws or any breach of the representations and
warranties contained in Section 3.17 to the extent such Losses represent amounts
incurred for the performance of remedial action that was not necessary to comply
with Environmental Laws.
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(iv) Stockholder shall have no indemnification obligation for consequential
damages or for punitive or exemplary damages, special damages or other similar
items, except to the extent amounts in respect to any such type of damages are
paid or payable to a third party in respect of a claim by it. Payments by
Stockholder hereunder shall be considered as adjustments to the Purchase Price.
In determining the foregoing thresholds and in otherwise determining the
amount of any Losses for which a Buyer Party is entitled to assert a claim for
indemnification hereunder, the amount of such Loss shall be determined after
deducting therefrom the amount of any insurance proceeds (after giving effect to
any applicable deductible or retention and resulting retroactive premium
adjustment) or other third party recoveries actually received by a Buyer Party
in respect of such Loss. If an indemnification payment is received by a Buyer
Party and the Buyer Party later receives insurance proceeds or other third party
recoveries in respect of the related Loss, the Buyer Party shall immediately pay
to the Escrow Fund (or to Stockholder, if the Escrow Fund has been distributed
to Stockholder), a sum equal to the lower of (x) the actual amount of such
insurance proceeds or other third party recoveries or (y) the actual amount by
which the indemnification payment previously paid by Stockholder with respect to
such Loss would have been reduced had such proceeds been collected prior to the
determination thereof, provided that the Buyer shall be entitled to offset
against any such payment the amount of any indemnification for which such Buyer
Party is entitled to be paid hereunder and that has not been paid by Stockholder
or from the Escrow Fund.
Section 7.2 Indemnification of Stockholder. The Buyer shall indemnify and
hold Stockholder, its subsidiaries, and their respective directors, officers,
employees, and agents (collectively, the "Stockholder Parties") harmless from
any and all Losses that any Stockholder Party may suffer or incur (a) as a
result of or relating to the failure of any of the representations and
warranties made by the Buyer in this Agreement to be true and correct in all
respects at and as of the date hereof and at and as of the Closing Date (except
that in determining the amount of Losses resulting from the breach or inaccuracy
of any representation or warranty that is qualified by the concept of
materiality, such qualification shall not be taken into account) ), and (b) as a
result of or relating to the breach of any of any of the covenants or agreements
made by the Buyer in this Agreement or (c) as a result of or relating to the
failure of the Buyer to perform any of its covenants or agreements set forth
herein which by its terms is to be performed after the Closing.
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Section 7.3 Notice. Any party entitled to receive indemnification under
this Article 7 (the "Indemnified Party") agrees to give prompt written notice to
the party or parties required to provide such indemnification (the "Indemnifying
Parties") upon the occurrence of any indemnifiable Loss or the assertion of any
claim or the commencement of any action or proceeding in respect of which such a
Loss may reasonably be expected to occur (a "Loss Claim"), but the Indemnified
Party's failure to give such notice shall not affect the obligations of the
Indemnifying Party under this Article 7 except to the extent that the
Indemnifying Party is materially prejudiced thereby and shall not affect the
Indemnifying Party's obligations or liabilities otherwise than under this
Article 7. Such written notice shall set forth a reference to the event or
events forming the basis of such Loss or Loss Claim and the estimated amount
involved, unless such amount is uncertain or contingent, in which event the
Indemnified Party shall give a later written notice when the amount becomes
fixed or determinable.
Section 7.4 Defense of Claims. The Indemnifying Party may elect to assume
and control the defense of any Loss Claim, including the employment of counsel
reasonably satisfactory to the Indemnified Party and the payment of expenses
related thereto, if (a) the Indemnifying Party provides reasonable evidence to
the Indemnified Party of its financial ability to satisfy such indemnification
obligation; (b) the Loss Claim does not seek to impose any liability or
obligation on the Indemnified Party other than the payment of money; and (c) the
Loss Claim does not relate to the Indemnified Party's relationship with its
customers or employees. Subject to the last sentence of this Section 7.4, if
such conditions are satisfied and the Indemnifying Party elects to assume and
control the defense of a Loss Claim, then (i) the Indemnifying Party shall not
be liable for any settlement of such Loss Claim effected without its prior
written consent; (ii) the Indemnifying Party may settle such Loss Claim without
the consent of the Indemnified Party so long as the Indemnified Parties are
given full and unconditional releases; and (iii) the Indemnified Party may
employ separate counsel and participate in the defense thereof, but the
Indemnified Party shall be responsible for the fees and expenses of such counsel
unless (A) the Indemnifying Party has failed to adequately assume the defense of
such Loss Claim, (B) the Indemnifying Party has failed to employ effective
counsel with respect thereto or (C) there may exist a conflict of interest
between the Indemnified Party and the Indemnifying Party or their counsel in the
conduct of the defense of such action. If the Indemnifying Party elects not to
assume and control the defense of a Loss Claim, the Indemnified Party may assume
and control the defense of the Loss Claim and may contest, pay, settle or
compromise any such Loss Claim on such terms and conditions as the Indemnified
Party may determine at the cost and expense of the Indemnifying Party, provided
that if the amount to be paid shall exceed $1,000,000 then consent of the
Indemnifying Party shall be requested, which consent will not be unreasonably
withheld and in any event shall be deemed given if no objection is received by
the Indemnified Party within three (3) Business Days after the delivery of such
request. If the issue being contested is related to a Tax liability and the
Indemnifying Party is Stockholder, Stockholder shall not settle, either
administratively or in any other forum, any claim for Taxes which would affect
the liability for Tax of the Indemnified Parties for any period after the
Closing Date, without prior written consent of the Indemnified Parties, which
consent will not be unreasonably withheld.
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Section 7.5 Survival of Representations and Warranties; Remedies. All
representations and warranties made in or pursuant to this Agreement shall
survive the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby and continue for a period of 18 months from the
Closing Date; provided, however, that (a) the representations and warranties
contained in Sections 3.11 and 4.2 shall survive for a period equal to all
applicable statute of limitations regarding Loss Claims made with respect to
such subject matter, (b) the representations and warranties contained in Section
3.10 shall survive until the fourth anniversary of the Closing Date, (c) the
representations and warranties contained in Section 3.17 shall survive until the
third anniversary of the Closing Date and (d) any claim for indemnity under this
Article 7 shall survive the time at which it would otherwise terminate if a
claim for indemnification shall have been commenced prior to such time and such
claim or proceeding is pending and is being maintained in good faith, then such
claim shall continue until the final disposition of such claim. The right to
indemnification or any other remedy based on representations, warranties,
covenants and agreements in this Agreement shall not be affected by any
investigation conducted at any time, or any knowledge acquired (or capable of
being acquired) at any time, whether before or after the execution and delivery
of this Agreement or the Closing Date, with respect to the accuracy or
inaccuracy of or compliance with, any such representation, warranty, covenant or
agreement.
Section 7.6 Remedies Exclusive. The remedies provided in this Article 7
shall be the exclusive remedies of the parties after the Closing Date for
monetary damages in connection with the transactions contemplated by this
Agreement, including any breach or non-performance of any representation or
warranty other than in the case of fraud.
ARTICLE VIII
CLOSING; CONDITIONS TO CLOSING
Section 8.1 Closing; Closing Date. The transfer of the Company Common Stock
and the closing of the transactions contemplated by this Agreement (the
"Closing") shall take place within five (5) Business Days following the
satisfaction or waiver of the conditions precedent set forth in Sections 8.2 and
8.3 at the offices of the Buyer. The date of the Closing is referred to from
time to time herein as the "Closing Date."
Section 8.2 Conditions to Obligations of the Buyer to Close. The
obligations of the Buyer to consummate the Closing shall be subject to the
satisfaction, on or before the Closing Date, of each and every one of the
following conditions, all or any of which may be waived, in whole or in part, by
the Buyer.
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(a) Representations and Warranties; Covenants. (A) The representations and
warranties of Stockholder contained in this Agreement (other than those that
address matters as of particular dates) shall be true and correct as of the
Execution Date and as of the Closing (without giving effect to any limitations
as to materiality or "Material Adverse Effect" set forth therein) and (B) the
representations and warranties of Stockholder contained in this Agreement that
address matters as of particular dates shall be true and correct as of such
dates (without giving effect to any limitations as to materiality or "Material
Adverse Effect" set forth therein) with such exceptions in the case of (A) or
(B), as have not had and would not reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect. The covenants and agreements
contained in this Agreement to be complied with by Stockholder at or prior to
the Closing shall have been complied with in all material respects.
(b) No Order. No action or proceeding shall be pending against the Buyer or
any of its Affiliates or any officer or director of the Buyer or any of its
Affiliates which seeks to, or would render it unlawful as of the Closing to
effect the transactions contemplated hereby in accordance with the terms hereof
or creates or reasonably could be expected to create a limitation on the Buyer
to own the Company Common Stock, the GVN Common Stock or the GVS Common Stock,
and no such action shall seek damages in a material amount by reason of the
consummation of the transactions contemplated hereby.
(c) No Material Adverse Effect. No event or events shall have occurred
since the Execution Date, or reasonably be likely to occur, which have, or
reasonably could be expected to result in, a Material Adverse Effect.
(d) All Regulatory Approvals. All Regulatory Approvals shall have been
obtained. All parties shall have complied with the conditions, if any, imposed
in connection with the grant of the Regulatory Approvals in all material
respects; provided that the Buyer will not be required to agree to take any
action (including agreeing to any condition in respect of, or any amendment to,
any Communication License of GVN or GVS, or the divestiture of any assets or
business of the Company, GVN or GVS) that individually or in the aggregate,
would reasonably be expected to have a Material Adverse Effect on the Company,
GVN or GVS and in such event, the Buyer shall not be obligated to effect the
transactions contemplated by this Agreement if such conditions are imposed.
(e) Consents. Each of the consents set forth on Schedule 3.5(b) of the
Disclosure Schedule shall have been duly obtained and received by Stockholder
and shall be, in form and substance, reasonably satisfactory to the Buyer.
(f) Closing Balance Sheet. Stockholder shall have delivered the Closing
Balance Sheet in accordance with Section 2.3(a) hereof.
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(g) Deliveries. Stockholder shall have made or stand willing and able to
make all the deliveries to the Buyer set forth in Section 8.5.
Section 8.3 Conditions to Obligations of Stockholder. The obligations of
Stockholder to consummate the Closing shall be subject to the satisfaction, on
or before the Closing Date, of each and every one of the following conditions,
all or any of which may be waived, in whole or in part, by Stockholder.
(a) Representations and Warranties; Covenants. (A) The representations and
warranties of the Buyer contained in this Agreement (other than those that
address matters as of particular dates) shall be true and correct as of the
Execution Date of this Agreement and as of the Closing (without giving effect to
any limitations as to materiality or "Material Adverse Effect" set forth
therein) and (B) the representations and warranties of the Buyer contained in
this Agreement that address matters as of particular dates shall be true and
correct as of such dates (without giving effect to any limitations as to
materiality or "Material Adverse Effect" set forth therein) with such exceptions
in the case of (A) or (B), as have not had and would not reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect. The
covenants and agreements contained in this Agreement to be complied with by the
Buyer at or prior to the Closing shall have been complied with in all material
respects.
(b) No Order. No action or proceeding shall be pending against Stockholder,
the Company, GVN, GVS or any of their respective Affiliates or any officer or
director of Stockholder, the Company, GVN, GVS or any of their respective
Affiliates which seeks to, or would, render it unlawful as of the Closing to
effect the transactions contemplated hereby in accordance with the terms hereof
or would restrain, prohibit or otherwise interfere with the effective operation
of all or any material portion of the business of the Company, GVN or GVS, and
no such action shall seek damages in a material amount by reason of the
consummation of the transactions contemplated hereby.
(c) Consents. Each of the consents set forth on Schedule 3.5(b) of the
Disclosure Schedule shall have been duly obtained and delivered to Stockholder.
(d) All Regulatory Approvals. All Regulatory Approvals shall have been
obtained. All parties shall have complied with the conditions, if any, imposed
in connection with the grant of the Regulatory Approvals; provided however, that
Stockholder shall not be required to accept or comply with any material
condition that would be unreasonably burdensome on Stockholder and shall not be
obligated to effect the transactions contemplated by this Agreement if such
conditions are imposed.
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(e) No Material Adverse Effect. No event or events constituting a Material
Adverse Effect as to the Buyer shall have occurred since the Execution Date.
(f) Deliveries. The Buyer shall have made or stand willing and able to make
all the deliveries to Stockholder set forth in Section 8.4.
Section 8.4 Deliveries by the Buyer at Closing. At the Closing, the Buyer
will deliver or shall cause to be delivered such documents and instruments as
may be necessary or appropriate to carry out the transactions contemplated by
this Agreement.
Section 8.5 Deliveries by Stockholder at Closing. At the Closing,
Stockholder will deliver or shall cause to be delivered the following:
(a) Certificates, with fully executed stock powers evidencing the Company
Common Stock and any other documentation necessary or appropriate to effect the
transfer of ownership thereof to the Buyer.
(b) The bank consents and releases required pursuant to Section 6.8 hereof.
(c) Certificate of the corporate secretary of the Company, substantially in
the form attached hereto as Exhibit C.
(d) Officers' certificate of the Company, substantially in the form
attached hereto as Exhibit D.
(e) Legal opinions of (i) Xxxxxx Xxxx & Xxxxxxx, LLP, counsel to
Stockholder, substantially in the form attached hereto as Exhibit E-1, and (ii)
counsel to Stockholder covering the matters described in Exhibit E-2.
(f) Such other endorsements, documents, or instruments as may be reasonably
necessary to carry out the transactions contemplated by this Agreement.
ARTICLE IX
TERMINATION
Section 9.1 Termination of Agreement. The Buyer and Stockholder may
terminate this Agreement as provided below:
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(a) The Buyer or Stockholder may terminate this Agreement if the Closing
Date has not occurred on or before the eighteen-month anniversary of the
Execution Date of this Agreement, unless the party electing to so terminate is
in breach of this Agreement as provided in Section 9.1(c) or (d) below;
(b) The Buyer and Stockholder may terminate this Agreement by mutual
written consent at any time prior to the Closing Date
(c) Stockholder may terminate this Agreement by giving written notice to
the Buyer at any time prior to the Closing Date in the event the Buyer has
breached any material representation, warranty or covenants contained in this
Agreement in any material respect, Stockholder has notified the Buyer of the
breach, and the breach has continued without cure for a period of ten days after
the notice of breach; and
(d) The Buyer may terminate this Agreement by giving written notice to
Stockholder at any time prior to the Closing Date in the event Stockholder has
breached any material representation, warranty or covenant contained in this
Agreement in any material respect, the Buyer has notified Stockholder of the
breach, and the breach has continued without cure for a period of ten days after
the notice of breach.
(e) The Buyer or Stockholder may terminate this Agreement if any court of
competent jurisdiction or other Governmental Entity shall have issued an order,
decree, or ruling or taken any action permanently restraining, enjoining or
otherwise prohibiting the consummation of the transactions contemplated by this
Agreement.
Section 9.2 Effect of Termination. If this Agreement is terminated pursuant
to Section 9.1, all rights and obligations of the parties hereto shall terminate
without any liability of any party to the other party except as provided herein;
provided, however, that nothing herein shall relieve any party from liability
for its willful breach of this Agreement.
ARTICLE X
MISCELLANEOUS
Section 10.1 Notices. All notices that are required or may be given
pursuant to this Agreement must be in writing and delivered personally, by a
recognized courier service, by a recognized overnight delivery service, by
telecopy or by registered or certified mail, postage prepaid, to the parties at
the following addresses (or to the attention of such other person or such other
address as any party may provide to the other parties by notice in accordance
with this Section 10.1):
If to the Buyer: Citizens Communications Company
0 Xxxx Xxxxx Xxxx
Xxxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxxx, Esq.
Fax: 000-000-0000
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If to Stockholder: Country Road Communications, LLC
0000 Xx. Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxx, CEO
With a copy to: Xxxxxx, Xxxx & Xxxxxxx LLP
Xxx Xxxxxxxxxxxxx Xxxxx
Xxxxxx, XX 00000
Attention: Xxxxxxxx X. Xxxxxxx, Esquire
Any such notice or other communication shall be deemed to have been given
and received on the day it is personally delivered and signed for by addressee
or, if delivered by courier or overnight delivery service or sent by telecopy,
on the date received, or if mailed, three days after sending.
Section 10.2 Further Assurances. Each party agrees to execute any and all
documents and to perform such other acts as may be necessary or expedient to
further the purposes of this Agreement and the transactions contemplated by this
Agreement, including entering into a mutually acceptable transition services
agreement covering services currently provided to the Company, GVN and GVS by
Stockholder or its Affiliates.
Section 10.3 Counterparts. This Agreement may be executed in one or more
counterparts for the convenience of the parties to this Agreement, all of which
together shall constitute one and the same instrument.
Section 10.4 Assignment. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned or delegated by
any party, without the prior written consent of the other parties (and any such
attempt shall be null and void); except that the Buyer may assign its rights
(but not its obligations) under this Agreement to any direct or indirect
subsidiary of the Buyer. This Agreement is not intended to confer any rights or
benefits to any Person (including, without limitation, any employees of the
Company, GVN or GVS) other than the parties to this Agreement and the
indemnification rights pursuant to Section 7.1 to the Buyer Parties and pursuant
to Section 7.2 to Stockholder Parties.
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Section 10.5 Entire Agreement; Schedules. This Agreement and the related
documents contained as Exhibits and Schedules to this Agreement or expressly
contemplated by this Agreement contain the entire understanding of the parties
relating to the subject matter hereof and supersede all prior written or oral
and all contemporaneous oral agreements and understandings relating to the
subject matter hereof. This Agreement cannot be modified or amended except in
writing signed by the party against whom enforcement is sought (and no attempt
to orally amend this Section 10.5 shall be valid). The Exhibits and Schedules to
this Agreement are hereby incorporated by reference into and made a part of this
Agreement for all purposes. Information set forth on any Schedule shall be
deemed to qualify each other section of this Agreement to which such information
is applicable (regardless of whether or not such other section is qualified by
reference to a Schedule), so long as application to such section is reasonably
discernible from the reading of such disclosure. No information set forth on any
Schedule shall be deemed to broaden in any way the scope of the Stockholder's
representations and warranties. The inclusion of any item on a Schedule is not
evidence of the materiality of such item for purposes of the Agreement, or that
such item is a disclosure required under the Agreement. Any description of any
agreement, document, instrument, plan, arrangement or other item set forth in a
Schedule is a summary only and is qualified in its entirety by the terms of such
agreement, document, instrument, plan, arrangement or item, copies of which have
been made available to the Buyer. No disclosure in any Schedule relating to any
possible breach or violation or any agreement, law or regulation shall be
construed as an admission or indication that any such breach or violation exists
or has actually occurred, or shall constitute an admission of liability to any
third party.
Section 10.6 Specific Performance. The parties hereby acknowledge and agree
that the failure of any party to perform its agreements and covenants under this
Agreement, including, without limitation, failure to take all actions as are
necessary on its part to the consummation of the transactions contemplated by
this Agreement or any violation of the covenants set forth in Sections 6.6 and
6.7, may cause irreparable injury to the other parties for which damages, even
if available, may not be an adequate remedy. Accordingly, each party hereby
agrees that any other party may seek injunctive relief by any court of competent
jurisdiction to compel performance of such party's obligations and to the
granting by any court of the remedy of specific performance of its obligations
under this Agreement or any Ancillary Agreement.
Section 10.7 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the substantive laws of the State of New York,
without giving effect to any conflicts-of-law, rule, or principle that might
require the application of the laws of another jurisdiction.
Section 10.8 Jurisdiction; Venue; Service of Process. Each party hereby
consents and agrees that the federal or state courts of the State of New York
(located in New York, New York) shall have jurisdiction to hear, determine, and
enforce any claims or disputes arising out of or related to the provisions of
this Agreement. Each party hereby irrevocably waives any objection to the laying
of venue in such courts, including, without limitation, any claim based on
improper venue or forum non conveniens. Nothing in this Agreement shall be
deemed or operate to preclude the enforcement of any judgment or order obtained
in such forum or the taking of any action under this Agreement to enforce such
judgment or order in any other forum. Each party hereby agrees that service of
all writs, process, and summons in any suit, claim, action, or proceeding
arising out of or related to the provisions of this Agreement may be made by
certified mail, return receipt requested, in accordance with Section 10.1.
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10.9 Severability. If any one or more of the provisions contained herein,
or the application thereof in any circumstance, is held invalid or unenforceable
in any respect for any reason, the validity, legality and enforceability of any
such provision in every other respect and of the remaining provisions hereof
shall not be in any way impaired or affected, and all such remaining provisions
hereof shall be enforceable in accordance with their terms.
10.10 Attorneys' Fees. Should any litigation be commenced between the
parties concerning the rights or obligations of the parties under this
Agreement, the party prevailing in such litigation shall be entitled, in
addition to such other relief as may be granted, to a reasonable sum as and for
its attorneys' fees and costs in such litigation. This amount shall be
determined by the court in such litigation or in a separate action brought for
that purpose.
IN WITNESS WHEREOF, each of the parties to this Agreement has caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
"Buyer"
Citizens Communications Company
a Delaware corporation
By: /s/ Xxxxxx Xxxxxxxx
----------------------
Xxxxxx Xxxxxxxx
Chief Financial Officer
"Stockholder"
Country Road Communications LLC
a Delaware Limited Liability Company
By: /s/ Xxxxx X. Xxxxxxx
----------------------
Xxxxx X. Xxxxxxx
Chief Executive Officer
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