EXHIBIT 2.7
STOCK PURCHASE AGREEMENT
among
MJD VENTURES, INC.,
X. X. XXXXXXXXXX, III,
X. X. XXXXXXXXXX, XX,
XXX X. XXXXX,
THOSE OTHER SHAREHOLDERS LISTED ON SCHEDULE 2.7 HERETO
and
PEOPLES MUTUAL TELEPHONE COMPANY
dated as of December 10, 1999
TABLE OF CONTENTS
This Table of Contents is not part of this Agreement but is attached for
convenience only.
ARTICLE I PURCHASE OF STOCK..................................................2
Section 1.1 PURCHASE AND SALE........................................2
Section 1.2 PURCHASE PRICE...........................................2
Section 1.3 POST-CLOSING ADJUSTMENTS TO THE ADJUSTED
PURCHASE PRICE...........................................3
Section 1.4 EXCLUDED ASSETS AND LIABILITIES .........................4
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE SELLERS.....................4
Section 2.1 CORPORATE ORGANIZATION...................................4
Section 2.2 AUTHORIZATION............................................5
Section 2.3 NO VIOLATION.............................................5
Section 2.4 SUBSIDIARIES AND INVESTMENTS.............................5
Section 2.5 STOCK RECORD BOOK........................................6
Section 2.6 CORPORATE BOOKS..........................................6
Section 2.7 TITLE TO STOCK...........................................6
Section 2.8 OPTIONS AND RIGHTS.......................................7
Section 2.9 FINANCIAL STATEMENTS.....................................7
Section 2.10 EMPLOYEES................................................8
Section 2.11 ABSENCE OF CERTAIN CHANGES...............................9
Section 2.12 CONTRACTS...............................................10
(a) GENERALLY.................................................10
(b) COMPLIANCE................................................11
Section 2.13 TRUE AND COMPLETE COPIES................................11
Section 2.14 TITLE AND RELATED MATTERS...............................12
(a) OWNED PROPERTY, LIENS.....................................12
(b) LEASED PROPERTY...........................................12
(c) REGULATORY/ZONING COMPLIANCE..............................12
(d) UTILITIES.................................................13
(e) CONDITION.................................................13
Section 2.15 LITIGATION..............................................13
Section 2.16 TAX MATTERS.............................................13
(a) GENERALLY.................................................13
(b) GOOD FAITH................................................14
(c) CLAIMS....................................................14
(d) COURSE OF BUSINESS........................................15
(e) WITHHOLDINGS..............................................15
(f) PARTNERSHIPS..............................................15
(g) ACCOUNTING METHOD ADJUSTMENTS.............................15
-i-
(h) TAX EXEMPTIONS............................................15
(i) TAX RETURN REVIEWS........................................15
(j) POWER OF ATTORNEY.........................................15
(k) TRUE AND COMPLETE COPIES..................................15
Section 2.17 BANK AND BROKERAGE ACCOUNTS.............................15
Section 2.18 COMPLIANCE WITH APPLICABLE LAWS, REGULATIONS
AND ORDERS..............................................16
Section 2.19 EMPLOYEE BENEFIT PLANS..................................16
Section 2.20 INTELLECTUAL PROPERTY...................................19
Section 2.21 ENVIRONMENTAL MATTERS...................................20
(a) GENERALLY.................................................20
(b) PROPERTY..................................................20
(c) TRANSPORTATION............................................20
(d) NOTIFICATION OF RELEASE...................................21
(e) LIENS.....................................................21
(f) SITE ASSESSMENTS..........................................21
Section 2.22 CAPITAL EXPENDITURES AND INVESTMENTS....................21
Section 2.23 DEALINGS WITH AFFILIATES................................21
Section 2.24 INSURANCE...............................................22
Section 2.25 COMMISSIONS.............................................22
Section 2.26 PERMITS AND REPORTS.....................................22
Section 2.27 ABSENCE OF UNDISCLOSED LIABILITIES......................23
Section 2.28 YEAR 2000 COMPLIANCE....................................24
Section 2.29 DISCLOSURE..............................................24
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.................24
Section 3.1 CORPORATE ORGANIZATION..................................24
Section 3.2 AUTHORIZATION...........................................25
Section 3.3 NO VIOLATION............................................25
Section 3.4 INVESTMENT INTENT.......................................25
ARTICLE IV COVENANTS OF THE SELLERS AND THE COMPANY.........................26
Section 4.1 REGULAR COURSE OF BUSINESS..............................26
(a) GENERALLY.................................................26
(b) COMPENSATION..............................................26
(c) INSURANCE.................................................26
(d) CLAIMS....................................................26
(e) SUPPLEMENT................................................26
Section 4.2 AMENDMENTS..............................................26
Section 4.3 CAPITAL CHANGES.........................................27
Section 4.4 DIVIDENDS...............................................27
Section 4.5 CAPITAL EXPENDITURES; TRANSACTIONS WITH AFFILIATES......27
Section 4.6 BORROWING...............................................27
Section 4.7 PROPERTY................................................27
-ii-
Section 4.8 OTHER COMMITMENTS.......................................27
Section 4.9 INTERIM FINANCIAL INFORMATION, INVESTMENT K-1s..........27
Section 4.10 CONSENTS AND AUTHORIZATIONS.............................28
Section 4.11 ACCESS..................................................28
Section 4.12 NOTICE OF TRANSFER......................................28
Section 4.13 PAYMENT OF STAMP TAX....................................28
Section 4.14 DISCLOSURE..............................................28
Section 4.15 COOPERATION WITH PURCHASER..............................29
ARTICLE V COVENANTS OF THE PURCHASER........................................29
Section 5.1 CONSENTS AND AUTHORIZATIONS.............................29
Section 5.2 EMPLOYESS ..............................................29
ARTICLE VI OTHER AGREEMENTS.................................................29
Section 6.1 AGREEMENT TO DEFEND.....................................29
Section 6.2 FURTHER ASSURANCES......................................30
Section 6.3 CONSENTS................................................30
Section 6.4 NO SOLICITATION OR NEGOTIATION..........................30
Section 6.5 NO TERMINATION OF THE OBLIGATIONS BY SUBSEQUENT
DISSOLUTION.............................................30
Section 6.6 PUBLIC ANNOUNCEMENTS....................................31
Section 6.7 RECORDS AND INFORMATION.................................31
(a) RETENTION OF RECORDS......................................31
(b) ACCESS TO INFORMATION.....................................31
(c) DELIVERY OF CORPORATE RECORDS.............................32
(d) WITNESSES.................................................32
Section 6.8 INSURANCE POLICIES AND CLAIMS ADMINISTRATION............32
(a) INSURANCE COVERAGE PRIOR TO THE CLOSING DATE..............32
(b) INSURANCE COVERAGE AFTER THE CLOSING DATE.................33
Section 6.9 OTHER TAX MATTERS.......................................33
(a) TAX RETURNS...............................................33
(b) INFORMATION...............................................34
ARTICLE VII CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER..................34
Section 7.1 REPRESENTATIONS AND WARRANTIES..........................34
Section 7.2 CONSENTS AND APPROVALS..................................34
Section 7.3 NO MATERIAL ADVERSE CHANGE..............................35
Section 7.4 NO PROCEEDING OR LITIGATION.............................35
Section 7.5 OFFICER'S CERTIFICATE...................................35
Section 7.6 CERTIFICATES OF GOOD STANDING...........................35
-iii-
Section 7.7 OPINION OF SELLERS' COUNSEL. ...........................35
Section 7.8 CONTINUATION OF X. XXXXXXXXXX, III EMPLOYMENT
AGREEMENT...............................................36
Section 7.9 NONCOMPETITION AGREEMENT................................36
Section 7.10 X. XXXXX EMPLOYMENT AGREEMENT...........................36
Section 7.11 RESIGNATIONS............................................36
Section 7.12 OTHER DOCUMENTS.........................................36
Section 7.13 LIENS...................................................36
Section 7.14 DELIVERY OF MINUTE BOOKS................................36
Section 7.15 DELIVERY OF FINANCIAL STATEMENTS........................36
Section 7.16 AMENDMENT TO LEASE AGREEMENTS...........................37
Section 7.17 RENEWAL OF FRANCHISES...................................37
Section 7.18 COMPLETION OF NATAL PROJECT.............................37
Section 7.19 COMPLETION OF ENVIRONMENTAL ACTIONS.....................37
ARTICLE VIII CONDITIONS TO THE OBLIGATIONS OF THE SELLERS...................37
Section 8.1 REPRESENTATIONS AND WARRANTIES..........................37
Section 8.2 CONSENTS AND APPROVALS..................................38
Section 8.3 NO PROCEEDING OR LITIGATION.............................38
Section 8.4 SECRETARY'S CERTIFICATE.................................38
Section 8.5 OPINION OF PURCHASER'S COUNSEL..........................38
Section 8.6 RESTATED EMPLOYMENT AGREEMENT...........................38
Section 8.7 NONCOMPETITION AGREEMENT................................38
Section 8.8 X. XXXXX EMPLOYMENT AGREEMENT...........................38
Section 8.9 AMENDMENT TO LEASE AGREEMENTS...........................38
ARTICLE IX CLOSING..........................................................38
Section 9.1 CLOSING.................................................38
Section 9.2 CLOSING DATE PAYMENT AND RECEIPT OF SHARES..............39
ARTICLE X TERMINATION AND ABANDONMENT.......................................39
Section 10.1 METHODS OF TERMINATION..................................39
(a) MUTUAL CONSENT............................................39
(b) SELLERS' FAILURE TO PERFORM...............................39
(c) PURCHASER'S FAILURE TO PERFORM............................40
(d) FAILURE TO CLOSE BY MARCH 31, 2000........................40
(e) MATERIAL ADVERSE CHANGE...................................40
(f) REMEDIES..................................................40
Section 10.2 PROCEDURE UPON TERMINATION..............................40
(a) RETURN OF RECORDS.........................................40
(b) CONFIDENTIALITY...........................................41
-iv-
ARTICLE XI SURVIVAL OF TERMS; INDEMNIFICATION...............................41
Section 11.1 SURVIVAL; LIMITATIONS...................................41
Section 11.2 INDEMNIFICATION BY THE SELLERS..........................41
(a) MISREPRESENTATION OR BREACH...............................42
(b) TAXES.....................................................42
(c) OTHER CLAIMS..............................................42
(d) RELATED EXPENSES..........................................42
Section 11.3 INDEMNIFICATION BY THE PURCHASER........................42
(a) MISREPRESENTATION OR BREACH...............................42
(b) TAXES.....................................................42
(c) OTHER CLAIMS..............................................43
(d) RELATED EXPENSES..........................................43
Section 11.4 THIRD PARTY CLAIMS......................................43
(a) GENERALLY.................................................43
(b) COUNSEL...................................................44
Section 11.5 OTHER CLAIMS............................................44
Section 11.6 CONTINUED LIABILITY FOR INDEMNITY CLAIMS................46
Section 11.7 BASKET AMOUNT...........................................46
(a) INDEMNIFICATION BY THE SELLERS ...........................46
(b) INDEMNIFICATION BY THE PURCHASER .........................46
(c) AGGREGATION ..............................................46
Section 11.8 RIGHT OF OFFSET ........................................46
Section 11.9 ESCROW OF LIQUID ASSETS ................................47
ARTICLE XII GENERAL PROVISIONS..............................................48
Section 12.1 AMENDMENT AND MODIFICATION..............................48
Section 12.2 WAIVER..................................................48
Section 12.3 CERTAIN DEFINITIONS.....................................48
Section 12.4 NOTICES.................................................53
Section 12.5 ASSIGNMENT..............................................54
Section 12.6 GOVERNING LAW...........................................54
Section 12.7 COUNTERPARTS............................................54
Section 12.8 HEADINGS................................................54
Section 12.9 ENTIRE AGREEMENT........................................54
Section 12.10 NO BENEFIT..............................................55
Section 12.11 DELAYS OR OMISSIONS.....................................55
Section 12.12 SEVERABILITY............................................55
Section 12.13 EXPENSES................................................55
Section 12.14 TIME OF THE ESSENCE.....................................55
Section 12.15 INJUNCTIVE RELIEF.......................................56
-v-
SCHEDULES
1.4 Excluded Assets and Liabilities
2.3 No Violations
2.4 Subsidiaries and Investments
2.5 Capital Stock
2.6 Corporate Books
2.7 List of Shareholders/No Liens on Shares
2.10 Employees
2.11 Certain Changes
2.12 Contracts
2.14(a) Owned Property, Liens
2.14(b) Leased Property
2.14(c) Regulatory/Zoning Compliance
2.14(e) Condition
2.15 Litigation
2.16 Tax Matters
2.17 Bank and Brokerage Accounts
2.19 Employee Benefit Plans
2.20 Intellectual Property
2.21 Environmental Matters
2.22 Capital Expenditures and Investments
2.23 Dealings with Affiliates
2.24 Insurance
2.25 Brokerage Commission
2.26 Permits
2.27 Absence of Undisclosed Liabilities/Corporate Debt
3.3 Consents and Authorizations of Purchaser
4.9 Interim Financial Information
4.14 Article IV Disclosure Statement
EXHIBITS
7.7 Opinion of Sellers' Counsel
7.8 Restated Employment Agreement
7.9 Noncompetition Agreement
7.10 X. Xxxxx Employment Agreement
8.5 Opinion of Purchaser's Counsel
11.9 Escrow Agreement
AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "AGREEMENT") is entered into as of the
10th day of December, 1999, among MJD VENTURES, INC., a Delaware corporation
(the "PURCHASER"), X. X. XXXXXXXXXX, III, a Virginia resident ("X. XXXXXXXXXX,
III"), X. X. XXXXXXXXXX, XX, a Virginia resident ("X. XXXXXXXXXX, XX"), XXX X.
XXXXX, a Virginia resident ("X. XXXXX"), those other shareholders listed on
Schedule 2.7 hereto (collectively, the "REMAINING SHAREHOLDERS") (such Remaining
Shareholders, together with X. Xxxxxxxxxx, III, X. Xxxxxxxxxx, XX and X. Xxxxx
referred to individually hereinafter as a "SELLER" and collectively as the
"SELLERS", with the term "Sellers" including any and all of such Remaining
Shareholders, X. Xxxxxxxxxx, III, X. Xxxxxxxxxx, XX and X. Xxxxx), and PEOPLES
MUTUAL TELEPHONE COMPANY, a Virginia corporation ("PEOPLES" or the "COMPANY").
RECITALS
WHEREAS, X. Xxxxxxxxxx, III owns 24 shares of $25.00 par value common
stock of the Company, X. Xxxxxxxxxx, XX owns 3,463 shares of $25.00 par value
common stock of the Company, X. Xxxxx owns 3,296 shares of $25.00 par value
common stock of the Company, and the Remaining Shareholders collectively own
3,049 shares of $25.00 par value common stock of the Company, such combined
9,832 shares constituting all of the issued and outstanding shares of capital
stock of the Company (the "PEOPLES TELEPHONE CAPITAL STOCK");
WHEREAS, Peoples owns one (1) share of no par common stock of Peoples
Mutual Services Company, a Virginia corporation ("PEOPLES SERVICES"),
constituting all of the issued and outstanding shares of capital stock of
Peoples Services (the "PEOPLES SERVICES CAPITAL STOCK")(any and all shares,
options, warrants, rights and interests, legal or equitable, in or with respect
to the Peoples Telephone Capital Stock and/or the Peoples Services Capital Stock
hereinafter referred to collectively as the "SHARES").
WHEREAS, Peoples is an operating telephone company that provides wireline
telecommunications services in four (4) exchanges in the State of Virginia
(Gretna, Xxxx, Xxxxx and Xxxxx Level), serving the communities of Gretna,
Brights, Pittsville, Zion, Hurt, Motley, Grit, Xxxxx, Xxxxx Level and Lakeside,
with approximately 7,794 access lines (the "EXCHANGE"); and Peoples operates as
a reseller for a local internet service provider, currently providing service to
approximately 600 subscribers (collectively, the businesses of Peoples, Peoples
Services and all of Peoples' other subsidiaries, if any, are hereinafter
referred to as the "COMMUNICATIONS BUSINESS", the "BUSINESS" or the "BUSINESS");
WHEREAS, the Sellers desire to sell, and the Purchaser desires to
purchase, on the terms and subject to the conditions set forth in this
Agreement, the Shares.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements set forth herein, the parties hereto agree as follows:
1
I. PURCHASE OF STOCK
1.1. PURCHASE AND SALE. At the Closing Date, on the terms and subject
to the conditions set forth in this Agreement, the Sellers agree to sell to
the Purchaser, and the Purchaser agrees to purchase from the Sellers, the
Shares.
1.2. PURCHASE PRICE.
(a) The Purchaser shall purchase the Shares of Peoples Telephone
Capital Stock from the Sellers, at a price per share of Peoples
Telephone Capital Stock (the "PRICE PER SHARE") equal to the
Adjusted Purchase Price (as defined below) divided by 9,832
(being the number of shares of Peoples Telephone Capital Stock
issued and outstanding as of the Closing Date). The Adjusted
Purchase Price shall be the sum of Thirty-Five Million and
No/100 Dollars ($35,000,000) minus the Company's Total Long
Term Debt as of the Closing Date, (such sum being the "BASE
PURCHASE PRICE"), plus or minus "NET WORKING CAPITAL" as
defined in accordance with Section 1.2(b) below, and plus the
"SECURITIES VALUE" as defined in accordance with Section 1.2(c)
below. The Adjusted Purchase Price shall be payable in
accordance with this Article I, subject to the provisions of
Section 9.2 hereof.
(b) The Base Purchase Price shall be adjusted by adding to it or
subtracting from it, as the case may be, the Net Working
Capital on the Closing Date. For the purposes hereof, Net
Working Capital shall be defined as the Company's current
assets minus current liabilities, computed in accordance with
GAAP, consistently applied (on a consolidated basis). To the
extent the Company's current assets exceed the Company's
current liabilities on the Closing Date, the Base Purchase
Price shall be increased, dollar for dollar. To the extent the
Company's current liabilities exceed the Company's current
assets on the Closing Date, the Base Purchase Price shall be
decreased, dollar for dollar. The Net Working Capital of the
Company shall be based on an estimated closing balance sheet of
the Company, which shall be delivered to the Purchaser at least
ten (10) days prior to the Closing Date, prepared in good faith
by Xxxxxxx and Xxxxxx, Certified Public Accountants, LLP,
subject to the Purchaser's review and approval thereof, which
shall not be unreasonably withheld.
(c) The Base Purchase Price shall additionally be adjusted by
adding to it the "Securities Value," determined as follows:
(i) The value of all shares of capital stock of Illuminet
Holdings, Inc. ("ILLUMINET")(NASDAQ Symbol "ILUM") owned by the
Company as of the Closing Date shall be determined by multiplying
the total number of such shares by the average closing price of a
share of Illuminet capital stock on the NASDAQ National Market for
the twenty (20) day period ending ten (10) days prior to the Closing
Date; and
2
(ii) The value of all shares of Class A Common Stock of
Trigon Healthcare, Inc. ("TRIGON")(NYSE Symbol "TGH") owned by
the Company as of the Closing Date shall be determined by
multiplying the total number of such shares by the average
closing price of a share of Trigon Class A Common Stock on the
New York Stock Exchange for the twenty (20) day period ending ten
(10) days prior to the Closing Date.
(d) The sum of the Base Purchase Price, plus or minus the Net
Working Capital, plus the Securities Value, all as determined
above, shall be referred to herein as the "ADJUSTED PURCHASE
PRICE."
1.3. POST-CLOSING ADJUSTMENTS TO THE ADJUSTED PURCHASE PRICE. The Adjusted
Purchase Price payable by the Purchaser to the Sellers on the Closing Date
pursuant to Sections 1.2 and 9.2 hereof may be adjusted as follows. Within
ninety (90) days after the Closing Date, the Purchaser shall prepare and submit
to the Sellers a Closing balance sheet for the Company as of the close of
business on the Closing Date (the "CLOSING BALANCE SHEET"), which shall be
prepared in accordance with GAAP and consistent with the Company's past
practices, and mutually acceptable to the Sellers and the Purchaser and their
respective independent public accountants. Upon the Sellers' and the Purchaser's
mutual agreement as to the form and content of the Closing Balance Sheet, the
amount of the Adjusted Purchase Price shall be increased or decreased, as the
case may be, by the difference, if any, between the Net Working Capital and the
Total Long Term Debt determined in good faith as of the Closing Date and the Net
Working Capital and the Total Long Term Debt as such is determined based on the
Closing Balance Sheet. If, as a result of the foregoing post-closing adjustment,
the Adjusted Purchase Price is increased, the Purchaser shall pay the Sellers,
in accordance with their percentage interests shown on Schedule 2.5 hereto
relative to all Sellers (the "PERCENTAGE INTERESTS"), the amount of such
increase by wire transfer of same-day funds within ten (10) business days of the
date on which the parties agree on the Closing Balance Sheet. If as a result of
the post-closing adjustment, the Adjusted Purchase Price is decreased, the
Sellers shall refund to the Purchaser, in accordance with their Percentage
Interests, the amount of such decrease by wire transfer of same-day funds within
ten (10) business days of the date on which the parties agree on the Closing
Balance Sheet.
1.4. EXCLUDED ASSETS AND LIABILITIES. Notwithstanding that this Agreement
relates to the purchase of capital stock from the Sellers by the Purchaser,
which results in the Company retaining any and all of its assets and
liabilities, it is understood and agreed that the Sellers shall remove from the
Company's premises prior to Closing and/or, as appropriate, remove from the
Company's books and records, only those particular assets set forth on Schedule
1.4 hereto (the "EXCLUDED ASSETS"). Further, the Sellers shall assume any and
all liabilities set forth on Schedule 1.4 hereto (the "EXCLUDED LIABILITIES").
The Purchaser agrees that it shall cause the Company to execute, and the Sellers
agree to execute, any and all such bills of sale, deeds, assignments and/or
agreements as may be necessary to transfer title to the Excluded Assets to the
Sellers and to assign and/or transfer the Excluded Liabilities to the Sellers.
The parties hereto further agree that no other assets of the Company, whether
tangible or intangible, shall have been or shall be removed from the Company's
premises or from the Company's books and records except in the ordinary course
of the Company's Business as provided herein from and after December 31, 1998
through the Closing Date.
3
II. REPRESENTATIONS AND WARRANTIES OF THE SELLERS
The Sellers hereby represent and warrant to the Purchaser as follows (to
the extent a representation is modified by a knowledge requirement, it shall
speak to the knowledge of any or all of the Sellers and the Company), with
respect to each of Peoples, Peoples Services and all subsidiaries and affiliates
thereof even though such representation and/or warranty shall use only the word
Company (in other words, if any representation or warranty or covenant or
agreement would be untrue as to any of Peoples, Peoples Services or any of their
subsidiaries or Affiliates then the Sellers must so disclose any such untruth):
2.1. CORPORATE ORGANIZATION. The Company is a corporation duly organized,
validly existing and in good standing with perpetual duration under the laws of
its jurisdiction of incorporation, with full corporate power and authority to
own, operate and lease its properties and to conduct its business as presently
conducted. Each Seller is a resident of the state set forth with respect to such
Seller on Schedule 2.7 hereto. There are no Shareholder Agreements in place
among any of the Sellers. The Company is qualified to do business and is in good
standing in every jurisdiction in which the conduct of its business, the
ownership or lease of its properties, or the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby requires
it to be so qualified. True, complete and correct copies of the Company's
charter and bylaws (and all amendments thereto) as presently in effect have been
delivered to the Purchaser.
2.2. AUTHORIZATION. The Sellers and the Company each have full power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The Board of Directors (and as appropriate,
the shareholders) of the Company has duly authorized the execution, delivery and
performance of this Agreement, and no other corporate proceedings on its part
are necessary to authorize the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby. This
Agreement constitutes a legal, valid and binding obligation of each of the
Sellers and the Company enforceable against each such party in accordance with
its terms, subject to equitable considerations and the effect of bankruptcy and
other laws affecting the rights of creditors generally. The Sellers will, at the
Closing, have full power and authority to deliver the Shares and the
certificates evidencing the Shares to the Purchaser free and clear of all Liens
as provided for herein.
2.3. NO VIOLATION. Except as set forth on Schedule 2.3, the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby by each of the Sellers and the Company does not
and will not (a) conflict with or result in a breach of the terms, conditions or
provisions of, (b) constitute a default or event of default under (with due
notice, lapse of time or both), (c) result in the creation of any Lien upon the
Company or its capital stock or assets pursuant to, (d) give any third party the
right to accelerate any obligation under, (e) result in a violation of, or (f)
require any authorization, consent, approval, exemption or other action by, or
notice to, any Person pursuant to (i) the charter or bylaws of the Company, (ii)
any applicable Regulation (including, without limitation, the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 1976), (iii) any Order to which either the Sellers
or the Company or any of their properties are subject, or (iv) any Contract to
which the Sellers or the Company or
4
any of their properties are subject. The Sellers and the Company have complied
with all applicable Regulations and Orders in connection with the execution,
delivery and performance of this Agreement and the transactions contemplated
hereby, subject to the requirements which are conditions to the Closing.
2.4. SUBSIDIARIES AND INVESTMENTS. Except as set forth on Schedule 2.4, the
Company has no subsidiaries or investments in any Person. Attached as set forth
on Schedule 2.4 is a true and complete corporate organizational chart for the
Company. Except as set forth on Schedule 2.4, the transactions contemplated by
this Agreement will not conflict with or result in a breach of the terms,
conditions or provisions of any agreement to which the Company is a party with
respect to any such subsidiaries or investments, nor shall the transactions
contemplated by this Agreement trigger any purchase, put, call or right of first
refusal rights in any Person, nor shall the transactions contemplated by this
Agreement result in a violation of, or require any authorization, consent,
approval, exemption or other action by or notice to any Person. Any such
investments constitute an asset of the Company and the Company is the only
Person with any rights thereto. Except as set forth on Schedule 2.4, the Company
does not owe any indebtedness to or on account of any of such subsidiaries or
investments, nor has the Company guaranteed any indebtedness on behalf of, or
have any other contingent obligations with respect to, any such subsidiaries or
investments, and the Company has not pledged any such subsidiaries or
investments or any other of its assets in connection with any obligations
relating to any such investment or subsidiary. The Company is not a general
partner in any of its investments, nor is any employee of the Company an officer
or director of any such investment entity. Except as set forth on Schedule 2.4
hereto, the Company is not a party to any Partnership, Operating, Shareholders'
or Stockholders' Agreements with respect to any of the entities discussed on
Schedule 2.4 hereto. Also set forth on Schedule 2.4 hereto is a listing of all
dividends and/or distributions made with respect to any such subsidiaries and/or
investments since July 31, 1996.
2.5. STOCK RECORD BOOK. The stock record book of the Company is complete and
correct in all material respects. No shares of capital stock of the Company are
currently reserved for issuance for any purpose or upon the occurrence of any
event or condition. The Shares constitute all of the outstanding capital stock
of the Company and the Sellers own all of the outstanding capital stock of the
Company. Peoples is the true and lawful owner of all of the outstanding capital
stock of Peoples Services. Schedule 2.5 sets forth the total number of
authorized and issued shares of capital stock for each of Peoples and Peoples
Services.
2.6. CORPORATE BOOKS. The corporate minute books of the Company and of each
of its subsidiaries are complete and correct in all material respects and
contain signed minutes of all of the proceedings of the shareholders and
directors of the Company and of each of its subsidiaries since incorporation. A
true and complete list of the directors and officers of the Company and of each
of its subsidiaries as of the date hereof is set forth on Schedule 2.6.
2.7. TITLE TO STOCK. The Shares are owned of record by those shareholders
and only such shareholders in such amounts as are set forth on Schedule 2.7
hereto. No shares of preferred stock or other class of capital stock are
authorized, issued or outstanding with respect to the Company or any of its
subsidiaries. The Shares have been duly authorized and validly issued and are
fully paid and nonassessable. The Shares were issued pursuant to applicable
exemptions from registration under Federal securities laws and the securities
laws of the State of Virginia,
5
are owned by the Sellers and will be sold pursuant hereto free and clear of all
Liens. Upon payment of the Adjusted Purchase Price to the Sellers in accordance
with this Agreement, the Sellers will convey to the Purchaser good and
marketable title to the Shares, free and clear of all Liens whatsoever. The
assignments, endorsements, stock powers and other instruments of transfer
delivered by the Sellers to the Purchaser at the Closing will be sufficient to
transfer the Sellers' entire interest, and all of the interests, legal and
beneficial, of Sellers and of all other Persons, in and to the Shares and
thereby in the Peoples Services Capital Stock and in the capital stock of each
other subsidiary of the Company. No dividends or other distributions are owed by
the Company in connection with any of the Shares and, except as specifically set
forth on the Financial Statements or on Schedule 2.7 hereto, none have been made
to any shareholder of the Company or to any of the Sellers since at least
December 31, 1996.
2.8. OPTIONS AND RIGHTS. There are no outstanding subscriptions, options,
warrants, rights, puts, calls or other Contracts by which the Company is bound
to issue or to repurchase or otherwise acquire shares of its capital stock, or
pursuant to which any Person has a right to purchase or to acquire, through
conversion or otherwise, shares of the Company's capital stock.
2.9. FINANCIAL STATEMENTS. The Sellers have delivered to the Purchaser
correct and complete copies of (i) the audited consolidated balance sheets of
the Company as of December 31, 1997 and December 31, 1998 and the related
statements of income, cash flow and retained earnings for the fiscal year
reporting periods then ended, together with all notes and schedules thereto (the
"FINANCIAL STATEMENTS") and (ii) the unaudited balance sheet of the Company as
of the period ending July 31, 1999 and the related statement of income for such
period then ended (the foregoing unaudited statements, with all monthly
unaudited statements delivered hereafter, the "UNAUDITED FINANCIAL STATEMENTS").
The Financial Statements have been audited without qualification by Xxxxxxx and
Xxxxxx, Certified Public Accountants, LLP, independent auditors for the Company.
The Financial Statements and the Unaudited Financial Statements (a) have been
prepared in accordance with the books and records of the Company and (b) fairly
present the financial condition and results of operations and cash flows of the
Company as of, and for the respective periods ended on, such dates, all in
conformity with GAAP consistently applied, except, with respect to the Unaudited
Financial Statements, for adjustments and notes that would result from an audit.
Since December 31, 1998 and except as fully set forth in the Financial
Statements and the Unaudited Financial Statements, the Company has no
liabilities (whether accrued, absolute, contingent, unliquidated or otherwise,
whether due or to become due, whether known or unknown, and regardless of when
asserted) arising out of transactions or events heretofore entered into or any
action or inaction or state of facts existing, with respect to, or based upon
transactions or events heretofore occurring. On or before March 1, 2000, the
Sellers shall deliver to the Purchaser correct and complete copies of the
audited consolidated balance sheets of the Company as of December 31, 1999, and
the related statements of income, cash flow and retained earnings for the fiscal
year reporting period then ended, together with all notes and schedules thereto,
at which time such balance sheet and statements shall thereafter be included
within the definition of "Financial Statements" for all purposes hereunder.
2.10. EMPLOYEES.
(a) Schedule 2.10 sets forth a list of all of the Company's
employees, officers, directors, consultants and independent
contractors, together with a
6
description of any Contract regarding the terms of service and
the rate and basis for total compensation of such persons.
(b) Except as set forth on Schedule 2.10 hereto, the Company has
paid or made provision for the payment of all salaries and
accrued wages, accrued vacation and sick leave, and any other
form of accrued, but unpaid, compensation, and has complied in
all material respects with all applicable laws, rules and
regulations relating to the employment of labor, including
those relating to wages, hours, collective bargaining and the
payment and withholding of taxes, and has withheld and paid to
the appropriate governmental authority, or is holding for
payment not yet due to such authority, all amounts required by
law or agreement to be withheld from the wages or salaries of
its employees. No amounts have been accrued on the Company's
books for vacation or sick leave in excess of the current
year's obligations and no such obligations exist. No contracts
or provisions exist that would obligate the Company to pay any
severance compensation to any employee should his or her
employment with the Company be terminated for any reason from
and after the date hereof. No contracts or provisions exist
that would obligate the Company to pay any amounts to any
Person upon the change of control of the Company.
(c) Except as set forth on Schedule 2.10 hereto, the Company is not
a party to any a. outstanding employment agreements or
contracts with officers or employees that are not terminable at
will, or that provide for payment of any bonus or commission or
severance compensation, (ii) agreement, policy or practice that
requires it to pay termination or severance pay to salaried,
exempt, non-exempt or hourly employees, (iii) collective
bargaining agreement or other labor union contract applicable
to persons employed by the Company, nor does the Sellers or the
Company know of any activities or proceedings of any labor
union to organize any such employees. The Company has furnished
to the Purchaser complete and correct copies of all such
agreements, if any ("EMPLOYMENT AND LABOR AGREEMENTS"). The
Company has not breached or otherwise failed to comply with any
provisions of any Employment or Labor Agreement.
(d) Except as set forth on Schedule 2.10 hereto, a. there is no
unfair labor practice charge or complaint pending before the
National Labor Relations Board ("NLRB"), (ii) there is no labor
strike, material slowdown or material work stoppage or lockout
actually pending or, to the Sellers' or Company's knowledge,
threatened, against or affecting the Company, and the Company
has not experienced any strike, material slowdown or material
work stoppage, lockout or other collective labor action by or
with respect to employees of the Company, (iii) there are no
charges with respect to or relating to the Company pending
before the Equal Employment Opportunity Commission, the
Department of Labor or any state, local or foreign agency
responsible for the prevention of unlawful employment
practices, and (iv) the Company has not received formal notice
from any Federal, state, local or foreign agency responsible
for the enforcement of labor or employment laws of an intention
to conduct an investigation of the Company and, to the
knowledge of the Sellers and Company, no such investigation is
in progress.
7
2.11. ABSENCE OF CERTAIN CHANGES. Except as set forth in Schedule 2.11,
since December 31, 1998, there has been no (a) Material Adverse Change in the
business, properties, financial statements, business prospects, condition
(financial or otherwise) or results of operations of the Company, (b) theft,
damage, destruction, removal or loss of assets or properties, whether covered
by insurance or not, having a Material Adverse Effect on the business,
properties, business prospects, condition (financial or otherwise) or results
of operations of the Company, (c) declaration, setting aside or payment of
any dividend or distribution (whether in cash, stock or property) in respect
of the Shares, or any redemption of the Shares, (d) increase in the
compensation payable to or to become payable by the Company to its employees,
officers, directors, consultants or independent contractors except in the
ordinary course of business, (e) entry by the Company into any Contract not
in the ordinary course of business, including, without limitation, any
borrowing or capital expenditure, (f) change in accounting methods or
principles used by the Company, except for any such change which is
necessitated by a change in GAAP, or required by the FCC, VSCC or RTB (which
such changes shall be set forth on Schedule 2.11 hereto), (g) operation of
the Company's business other than in the ordinary course, (h) sale,
assignment or transfer of any assets or properties of the Company except in
the ordinary course of business, (i) amendment or termination of any of the
Company's Permits or Contracts, (j) waiver or release of any material right
or claim of the Company, (k) labor dispute or union activity which affects
the operation of the Company, and (l) agreement by either the Sellers or the
Company to take any of the actions described in the preceding clauses (a)
through (k), except as contemplated by this Agreement.
2.12. CONTRACTS.
(a) Generally.
Except as listed on Schedule 2.12, the Company is not a party to any
Contract relating to:
(i) Bonus, pension, profit sharing, retirement, stock option,
employee stock purchase or other plans providing for
deferred compensation.
(ii) Collective bargaining agreements or any other Contract
with any labor union.
(iii) Hospitalization or medical insurance or other welfare
benefit plans or practices.
(iv) Loans to its employees, officers, directors, shareholders
or Affiliates.
(v) The borrowing or loaning of money to or from any Person or
the mortgaging, pledging or otherwise placing a Lien on
any asset of the Company, including, but not limited to,
any Contract with respect to the Company's indebtedness.
8
(vi) A guarantee of any obligation.
(vii) The ownership, lease (whether as lessee or lessor) or
operation of any property, real or personal.
(viii) Intangible property (including Proprietary Rights).
(ix) Warranties with respect to its services rendered or its
products sold or leased.
(x) Registration or preemptive rights with respect to any
securities.
(xi) Prohibitions preventing it from freely engaging in any
business.
(xii) The purchase, acquisition, disposition or supply of
inventory and/or other property and assets.
(xiii) Employees, independent contractors, consultants, or other
agents.
(xiv) Sales, commissions, advertising or marketing.
(xv) Unconditional purchase or payment obligations.
(xvi) Agreements between the Sellers and customers of the
Business.
(xvii) Agreements pertaining to the providing of internet access
or service by the Company.
(xviii) Leases, licenses, easements, rights of way, pole
attachment agreements, license agreements for joint use
of poles and other agreements regarding property rights
to earth stations, utility poles, real property, fixtures
and other similar items used in the operation of the
Business.
(xix) The grant or franchise of telephone franchise rights.
(xx) Any investment or subsidiary of the Company, including,
but not limited to, those shown on Schedule 2.4 hereto.
(xxi) Any other Contract not of the type covered by any of the
foregoing items of this Section 2.12(a) requiring total
payments by the Company in excess of ten thousand dollars
($10,000).
(b) Compliance.
The Company has performed all material obligations required to be
performed by it, and is not in receipt of any claim of default or breach or
notice of audit, under any Contract to which it is subject (including, without
limitation, those required to be disclosed on Schedule 2.12). Except as
disclosed on Schedule 2.12, no event has occurred which with the passage of time
or the giving of notice or both would result in a material default, breach or
event of non-
9
compliance by the Company under any Contract to which it is subject. Except as
disclosed on Schedule 2.12, the Company has no present expectation or intention
of not fully performing all of its obligations under any Contract to which it is
subject and has no knowledge of any breach or anticipated breach by any other
party to any Contract to which it is subject.
2.13 TRUE AND COMPLETE COPIES. The Sellers and the Company have
delivered to the Purchaser true and complete copies of all Contracts and
documents listed in the Schedules to this Agreement, as well as of all minute
books and stock books of the Company and of each of its subsidiaries. Such
minute books and stock books are current and contain the true and complete
records kept of such companies.
2.14 TITLE AND RELATED MATTERS.
(a) Owned Property, Liens.
Set forth on Schedule 2.14(a) is a description of all real and
personal property owned or used by the Company. The Company has valid and
marketable title to all such property, free and clear of all Liens, except
Permitted Liens. All properties used in the Company's business operations as of
July 31, 1999 are reflected in the Unaudited Financial Statements in accordance
with and to the extent required by GAAP and, as of the date hereof, are fully
set forth on Schedule 2.14(a) hereto. Sellers and the Company have delivered,
with respect to any real property owned by the Company, true and complete copies
of all deeds, title policies, environmental assessments, surveys, and other
title documents relating to such real property. Further, the Company has valid,
good and marketable title to each of its investments set forth on Schedule 2.4
hereto, free and clear of all Liens, except as set forth on Schedule 2.14(a)
hereto.
(b) Leased Property.
Set forth on Schedule 2.14(b) is a description of all real and
personal property leased by the Company. Except as otherwise set forth on
Schedule 2.14(b), the Company's leases are in full force and effect and are
valid and enforceable in accordance with their respective terms. There exists no
event of default or event which constitutes or would constitute (with notice or
lapse of time or both) a default by the Company or any other Person under any
such lease, and neither the Sellers nor the Company have received notice of such
default or event. All rent and other amounts due and payable with respect to
each of the Company's leases have been paid through the date of this Agreement.
Except as set forth on Schedule 2.14(b), neither the Sellers nor the Company
have received notice that the landlord with respect to any real property or
personal property lease would refuse to renew such lease upon expiration of the
period thereof upon substantially the same terms, except for rent increases
consistent with past experience or current market rates. The Sellers have
delivered to the Purchaser, with respect to any leased real or personal
property, true and complete copies of all such leases and all amendments,
supplements thereto or memoranda thereof.
(c) Regulatory/Zoning Compliance.
Except as set forth on Schedule 2.14(c), the real property owned or
leased by the Company and the buildings, structures and improvements included
within such real property (collectively, the "IMPROVEMENTS") comply with all
material applicable restrictions, building
10
ordinances and zoning ordinances and all Regulations of the applicable health
and fire departments. No alteration, repair, improvement or other work which
could give rise to a Lien has been performed with respect to such Improvements
within the last one hundred twenty-nine (129) days. The Company's owned or
leased real property and its continued use, occupancy and operation as currently
used, occupied and operated does not constitute a nonconforming use under any
Regulation or Order affecting such real property, and the continued existence,
use, occupancy and operation of such Improvements is not dependent on any
special permit, exception, approval or variance. There is no pending or, to the
Sellers' or Company's knowledge, threatened or proposed action or proceeding by
any Authority to modify the zoning classification of, to condemn or take by the
power of eminent domain (or to purchase in lieu thereof), to classify as a
landmark, to impose special assessments on or otherwise to take or restrict in
any way the right to use, develop or alter all or any part of the Company's
owned or leased real property.
(d) Utilities.
The real property owned or leased by the Company has access,
sufficient for the conduct of the Company's Business as presently conducted and
proposed to be conducted, to public roads and to all utilities, including
electricity, sanitary and storm sewer, potable water, natural gas and other
utilities used in the operation of the Company's Business as presently
conducted. Access to all such public roads and utilities will be available after
the Closing Date in the same manner and to the same extent as at the Closing
Date.
(e) Condition.
Except as set forth on Schedule 2.14(e), since December 31, 1998,
the Company has not sold, transferred, leased, distributed or disposed of any of
its assets or properties, except for (i) transactions in the ordinary and
regular course of business, or (ii) as otherwise consented to in writing by the
Purchaser. The Company owns, or has all rights necessary to use, all properties
and assets necessary for the conduct of its business as presently conducted. The
assets and properties owned, leased or used by the Company in the conduct of the
Business are in good condition (reasonable wear and tear excepted), are suitable
for their respective uses, and comply with all applicable Regulations. Further
such assets and properties constitute all of the assets and properties necessary
for the Company to conduct its Business as now conducted.
2.15 LITIGATION. Except as set forth on Schedule 2.15, there is (a)
no Claim pending or, to the Sellers' knowledge, threatened against the Company,
(b) no Claim by the Company pending or threatened against any Person, (c) no
outstanding Order relating to the Company, and (d) no Claim by any Person
relating to the Shares.
2.16 TAX MATTERS.
(a) Generally.
Except as set forth on Schedule 2.16, Peoples, Peoples Services and
all their subsidiaries have timely filed all Federal, state, local and foreign
tax reports, returns, information returns and any other documents required to be
filed by each (collectively, "TAX RETURNS") and have duly paid all Taxes shown
to be due and payable on such Tax Returns and all estimated or advance payments
required by law. All Taxes for periods ending on or prior to or including the
Closing Date have been or will be as of the Closing Date fully paid or reserved
against on the Unaudited Financial Statements and on the books of Peoples,
Peoples Services and all their subsidiaries, as appropriate, in accordance with
GAAP. All Taxes which are required to be withheld or collected by Peoples,
Peoples Services and all their subsidiaries have been duly
11
withheld or collected and, to the extent required, have been paid to the proper
Federal, state, local or foreign authorities or properly segregated or deposited
as required by applicable Regulations. There are no Liens for Taxes upon any
property or assets of Peoples, Peoples Services or any of their subsidiaries
except for Liens for Taxes not yet due and payable or for Taxes being contested
in a manner permitted by applicable law (all as disclosed on Schedule 2.16
hereto). Except as disclosed on Schedule 2.16, neither Peoples, Peoples Services
nor any of their subsidiaries have requested an extension of time within which
to file any Tax Return and none have waived the statute of limitations on the
right of the IRS or any other taxing authority to assess or collect additional
Taxes or to contest the information reported on any Tax Return. All Taxes owed
by any affiliated group of which Peoples, Peoples Services or any of their
subsidiaries has at any time been a member (whether or not shown on any Tax
Return) have been paid for each taxable period during which Peoples, Peoples
Services or any of their subsidiaries was a member of the affiliated group.
Neither Peoples, Peoples Services nor any of their subsidiaries has any
liability for the unpaid Taxes of any Person under Treasury Regulation Section
1.1502-6 (or any similar provision of state, local or foreign law), as a
transferee or successor, by contract, or otherwise.
(b) Good Faith.
All Tax Returns described in Section 2.16(a) have been prepared in
good faith and are correct and complete in all respects, and there is no basis
for assessment of any addition to the Taxes shown thereon.
(c) Claims.
Except as disclosed on Schedule 2.16, (i) there are no proceedings,
examinations or claims currently pending by any taxing Authority in connection
with any Tax Returns described in Section 2.16(a) nor with respect to the
periods to which such Tax Returns relate, and (ii) there are no unresolved
issues or unpaid deficiencies or outstanding or proposed assessments relating to
any such proceedings, examinations, claims or Tax Returns. None of the Tax
Returns described in Section 2.16(a) currently is under audit or has been
audited. The items relating to the Business, properties and operations of the
Company on the Tax Returns filed by the Company (including the supporting
schedules filed therewith), copies of which have been supplied to the Purchaser,
state accurately, in all respects, the information requested with respect to
Peoples, Peoples Services and their subsidiaries, which information was derived
from the books and records of the Company.
(d) Course of Business.
The Company has not taken any action in anticipation of the Closing
that would have the effect of deferring any liability for Taxes of Peoples,
Peoples Services or any of their subsidiaries to any period (or portion thereof)
ending after the Closing Date.
(e) Withholdings.
All payments for withholding Taxes, unemployment insurance and other
amounts required to be withheld and deposited or paid to any relevant taxing
Authorities have been so withheld, deposited or paid by or on behalf of Peoples,
Peoples Services and all of their subsidiaries, as appropriate.
(f) Partnerships.
12
Except as disclosed on Schedule 2.16, the Company is not subject to
any joint venture, partnership or other arrangement or Contract which is treated
as a partnership for Federal income tax purposes. Any tax-sharing agreement
between the Company and any other Person shall terminate as of the Closing Date
and any such tax-sharing agreement is fully disclosed on Schedule 2.16 hereto.
(g) Accounting Method Adjustments.
Except as disclosed on Schedule 2.16, the Company will not be
required to recognize after the Closing Date any taxable income in respect of
accounting method adjustments required to be made under any Regulation relating
to Taxes, including without limitation, the Tax Reform Act of 1986 and the
Revenue Act of 1987.
(h) Tax Exemptions.
None of the assets of the Company constitutes tax-exempt bond
financed property or tax-exempt use property within the meaning of Section 168
of the IRC, and the Company is not subject to a lease, safe harbor lease or
other arrangement as a result of which the Company is treated as the owner of
leased property for Federal income tax purposes.
(i) Tax Return Reviews.
An accurate and complete description of the most recent review, if
any, of the Tax Returns of the Company by the IRS or any other taxing Authority
is set forth on Schedule 2.16.
(j) Power of Attorney.
Except as set forth on Schedule 2.16 hereto, no power of attorney
has been granted by the Company with respect to any matter, including, without
limitation, the payment of Taxes, which is currently in force.
(k) True and Complete Copies.
The Sellers and the Company have delivered to the Purchaser true
and complete copies of all Tax Returns filed by the Company with respect to its
1994, 1995, 1996, 1997 and 1998 fiscal years.
2.17 BANK AND BROKERAGE ACCOUNTS. Set forth on Schedule 2.17 hereto
is a list of all of the bank and brokerage accounts maintained by the Company
and the authorized signatories for each such account.
2.18 COMPLIANCE WITH APPLICABLE LAWS, REGULATIONS AND ORDERS. The
Company has been and is presently in material compliance with all laws,
ordinances, codes, rules, Regulations and Orders applicable to the conduct of
its Business, including, without limitation, all Regulations relating to health,
sanitation, fire, zoning, building and occupational safety.
2.19 EMPLOYEE BENEFIT PLANS.
(a) Set forth on Schedule 2.19 hereto is a true and complete list of:
(i) each employee pension benefit plan, as defined in Section
3(2) of the Employee Retirement Income Security Act of 1974
("ERISA"), maintained by
13
the Company or to which the Company or the Sellers are required to
make contributions ("PENSION BENEFIT PLAN"); and
(ii) each employee welfare benefit plan, as defined in Section
3(1) of ERISA, maintained by the Company or to which the
Company or the Sellers are required to make contributions
("WELFARE BENEFIT PLAN").
True and complete copies of all Pension Benefit Plans and Welfare
Benefit Plans (collectively, "ERISA PLANS") have been delivered to Purchaser
together with, as applicable with respect to each such ERISA Plan, trust
agreements, summary plan descriptions, all IRS determination letters or
applications therefor with respect to any Pension Benefit Plan intended to be
qualified pursuant to Section 401(a) of the Internal Revenue Code of 1986, as
amended (the "CODE"), and valuation or actuarial reports, accountant's opinions,
financial statements, IRS Form 5500s (or 5500-C or 5500-R) and summary annual
reports for the last three years.
(b) With respect to the ERISA Plans, except as set forth on
Schedule 2.19:
(i) there is no ERISA Plan which is a "multiemployer" plan
as that term is defined in Section 3(37) of ERISA
("MULTIEMPLOYER PLAN");
(ii) no event has occurred or (to the knowledge of the Sellers
or Company) is threatened or about to occur which would
constitute a prohibited transaction under Section 406 of
ERISA or under Section 4975 of the Code;
(iii) each ERISA Plan has operated since its inception in
accordance with the reporting and disclosure requirements
imposed under ERISA and the Code and has timely filed
Form 5500 (or 5500-C or 5500-R) and predecessors thereof;
and
(iv) no ERISA Plan is liable for any Federal, state, local or
foreign Taxes.
(c) Each Pension Benefit Plan intended to be qualified under
Section 401(a) of the Code:
(i) has been qualified, from its inception, under Section
401(a) of the Code, and the trust established thereunder
has been exempt from taxation under Section 501(a) of
the Code and is currently in compliance with applicable
Federal laws;
(ii) has been operated, since its inception, in accordance
with its terms and there exists no fact which would
adversely affect its qualified status; and
(iii) is not currently under investigation, audit or review by
the IRS and (to the knowledge of the Sellers or Company)
no such action is contemplated or under consideration and
the IRS has not asserted that any Pension Benefit Plan is
not qualified under Section 401(a) of the Code or that
any trust established under a Pension Benefit Plan is not
exempt under Section 501(a) of the Code.
14
(d) With respect to each Pension Benefit Plan which is a defined
benefit plan under Section 414(j) and each defined contribution
plan under Section 414(i) of the Code:
(i) no liability to the Pension Benefit Guaranty Corporation
("PBGC") under Sections 4062-4064 of ERISA has been
incurred by the Company since the effective date of
ERISA and all premiums due and owing to the PBGC have
been timely paid;
(ii) the PBGC has not notified the Company or any Pension
Benefit Plan of the commencement of proceedings under
Section 4042 of ERISA to terminate any such plan;
(iii) no event has occurred since the inception of any Pension
Benefit Plan or (to the knowledge of the Sellers or
Company) is threatened or about to occur which would
constitute a reportable event within the meaning of
Section 4043(b) of ERISA;
(iv) No Pension Benefit Plan ever has incurred any
"accumulated funding deficiency" (as defined in Section
302 of ERISA and Section 412 of the Code); and
if any of such Pension Benefit Plans were to be terminated
on the Closing Date (A) no liability under Title IV of ERISA would
be incurred by the Company and (B) all benefits accrued to the day
prior to the Closing Date (whether or not vested) would be fully
funded in accordance with the actuarial assumptions and method
utilized by such plan for valuation purposes.
(e) With respect to each Pension Benefit Plan, Schedule 2.19
contains a list of all Pension Benefit Plans to which ERISA
has applied which have been or are being terminated, or for
which a termination is contemplated, and a description of
the actions taken by the PBGC and the IRS with respect thereto.
(f) The aggregate of the amounts of contributions by the Company to
be paid or accrued under Pension Benefit Plans is not expected
to exceed approximately $170,000 for the 1999 fiscal year, all
of which has been or will be properly accrued or reserved for
on the Financial Statements and Unaudited Financial Statements.
To the extent required in accordance with GAAP, the Company's
Financial Statements reflect in the aggregate an accrual of all
amounts of employer contributions accrued but unpaid by the
Company under the ERISA Plans as of the date of the Financial
Statements.
(g) With respect to any Multiemployer Plan (1) the Company has not,
since its formation, made or suffered a "complete withdrawal"
or "partial withdrawal" as such terms are respectively defined
in Sections 4203 and 4205 of ERISA; (2) there is no withdrawal
liability of the Company under any Multiemployer Plan, computed
as if a "complete withdrawal" by the Company had occurred under
each such Plan as of December 31, 1998; and (3) the Company has
not received notice to the effect that any
15
Multiemployer Plan is either in reorganization (as defined in
Section 4241 of ERISA) or insolvent (as defined in Section 4245
of ERISA).
(h) With respect to the Welfare Benefit Plans:
(i) There are no liabilities of the Company under Welfare
Benefit Plans with respect to any condition which
relates to a claim filed on or before the Closing Date.
(ii) No claims for benefits are in dispute or in litigation.
(i) Set forth on Schedule 2.19 hereto is a true and complete list
of:
(i) each employee stock purchase, employee stock option,
employee stock ownership, deferred compensation,
performance, bonus, incentive, vacation pay, holiday pay,
insurance, severance, retirement, excess benefit or other
plan, trust or arrangement which is not an ERISA Plan
whether written or oral, which the Company maintains or
is required to make contributions to; and
(ii) each other agreement, arrangement, commitment and
understanding of any kind, whether written or oral, with
any current or former employee, officer, director or
consultant of the Company pursuant to which payments may
be required to be made at any time following the date
hereof (including, without limitation, any employment,
deferred compensation, severance, supplemental pension,
termination or consulting agreement or arrangement).
(j) True and complete copies of all of the written plans,
arrangements and agreements referred to on Schedule 2.19
("COMPENSATION COMMITMENTS") have been provided to Purchaser
together with, where prepared by or for the Company, any
valuation, actuarial or accountant's opinion or other financial
reports with respect to each Compensation Commitment for the
last three years. An accurate and complete written summary has
been provided to Purchaser with respect to any Compensation
Commitment which is unwritten.
(k) Each Compensation Commitment:
(i) since its inception, has been implemented in all
material respects in accordance with its terms;
(ii) is not currently under investigation, audit or review by
the IRS or any other Federal or state agency and (to the
knowledge of the Sellers and Company) no such action is
contemplated or under consideration;
(iii) has no liability for any Federal, state, local or foreign
Taxes;
(iv) has no claims subject to dispute or litigation;
16
(v) has met all applicable requirements, if any, of the
Code; and
(vi) has been implemented since its inception in material
compliance with the reporting and disclosure requirements
imposed under ERISA and the Code.
2.20 INTELLECTUAL PROPERTY. Schedule 2.20 sets forth a complete and
accurate list of the Proprietary Rights owned or used by the Company. The
Company has no written documents or oral arrangements relating to the Company's
ownership or use of the Proprietary Rights other than as listed on Schedule
2.20. No other Person has any rights to such Proprietary Rights, except pursuant
to agreements or licenses specified on Schedule 2.20. To the Sellers' and
Company's knowledge, no other Person is infringing, violating or
misappropriating any such Proprietary Right. If necessary, the Company owns or
holds valid licenses to use all Proprietary Rights used in the operation of its
business as presently conducted and proposed to be conducted, with all such
licenses being specified on Schedule 2.20.
2.21 ENVIRONMENTAL MATTERS. The Company has obtained all
Environmental Permits required in connection with the operation of its business.
The Company is and has been, and is capable of continuing to be, in compliance
in all respects with (i) the terms and conditions of all such Environmental
Permits and (ii) all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables of any
applicable Environmental Law or Regulation, Order, code, plan, decree, judgment,
injunction or demand letter issued, entered, promulgated or approved thereunder.
The Company currently possesses and maintains such Environmental Permits in its
name, and no amendments or modifications to such Environmental Permits or
filings with any permitting Authority are required to permit the acquisition of
the Shares as contemplated hereby. In addition, except as set forth on Schedule
2.21:
(a) Generally.
No notice, notification, demand, request for information, citation,
summons or Order has been issued, no complaint has been filed, no penalty has
been assessed and no investigation or review is pending or, to the Sellers' and
Company's knowledge, threatened by any Authority or other entity with respect to
the Company relating to any Environmental Permit, license or authorization
required in connection with the conduct of the business of the Company or with
respect to the generation, treatment, storage, recycling, transportation,
disposal or Release of any substance regulated under Environmental Laws
("HAZARDOUS MATERIALS").
(b) Property.
(i) The Company has not handled any Hazardous Material on
any property now or previously owned or leased by the
Company.
(ii) No PCB or asbestos is or has been present at any property
now or previously owned or leased by the Company.
(iii) Thereare no underground storage tanks for Hazardous
Materials, active or abandoned, at any property now or
previously owned or leased by the Company.
(iv) Therehas been no Release of Hazardous Materials at, on or
under any property now or previously owned or leased by
the Company.
17
(c) Transportation.
The Company has not (i) transported or arranged for the
transportation of any Hazardous Material to any location which is listed on the
National Priorities List under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA"), listed for
possible inclusion on the National Priorities List by the Environmental
Protection Agency in the Comprehensive Environmental Response and Liability
Information System ("CERCLIS") or on any similar state list or which is the
subject of Federal, state or local enforcement actions or other investigations
or (ii) stored, treated, transported or disposed, or arranged for storage,
treatment, transport or disposal of any Hazardous Materials, other than in
compliance with Environmental Law.
(d) Notification of Release.
No oral or written notification of a Release of a Hazardous Material
has been filed by or on behalf of the Company, and no property now or previously
owned or leased by the Company is listed or proposed for listing on the National
Priorities List under CERCLA, on CERCLIS or on any similar state list of sites
requiring investigation or clean-up.
(e) Liens.
There are no Liens arising under or pursuant to any Environmental
Laws on any of the real property owned or leased by the Company, and no
government actions have been taken or are threatened which could subject any of
such properties to such Liens. The Company is not required to place any notice
or restriction relating to the presence of Hazardous Materials at any property
owned by it in any deed to such property.
(f) Site Assessments.
Except as set forth on Schedule 2.21, there have been no Phase I or
Phase II environmental site assessments conducted by or which are in the
possession of the Sellers or the Company in relation to any property or facility
now or previously owned or leased by the Company.
2.22 CAPITAL EXPENDITURES AND INVESTMENTS. The Company has no
outstanding Contracts or commitments for capital expenditures and investments,
except as set forth on Schedule 2.22 attached hereto, which Schedule includes a
list of all disbursements on account of capital expenditures and investments by
the Company since December 31, 1998. There has been no order or ruling from the
VSCC or any other regulatory body and none is threatened or expected by the
Company requiring or recommending that the Company undertake any capital
expenditures or investments. Attached to Schedule 2.22 are copies of the
Company's 1999 and 2000 fiscal years capital expenditures budgets (by project)
and, with respect to the 1999 budget, a comparison of the actual expenditures to
budget (by project) year to date.
2.23 DEALINGS WITH AFFILIATES. Schedule 2.23 sets forth a complete
and accurate list of all oral or written Contracts between the Company and any
one or more of its Affiliates. Except as set forth on Schedule 2.23, since
December, 31, 1998, the Company has not made any payments, loaned any funds or
property or made any credit arrangement with any Affiliate or employee except
for the payment of employee salaries in the ordinary course of business.
2.24 INSURANCE. The Company currently is covered by insurance
policies which provide for coverages that are usual and customary as to amount
and scope in the business of the Company. Descriptions of all such policies,
including the names of the insurer and the insured,
18
the amount of premiums, and the types and amounts of coverage, are set forth on
Schedule 2.24. All of such policies are in full force and effect, all premiums
with respect thereto have been paid or accrued therefor, and no notice of
cancellation or termination has been received with respect to any such policy.
Such policies are sufficient for compliance with (i) all applicable Regulations
and (ii) all Contracts to which the Company is a party. The Company has not
breached or otherwise failed to perform its obligations under any of such
policies, nor has the Company received any adverse notice from any of the
insurers party to such policies with respect to any alleged breach or failure in
connection with any of such policies which would have a Material Adverse Effect
on the Company. Such policies will not terminate or lapse by reason of the
execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby. Except as set forth on Schedule 2.24, there are no pending
or, to the Sellers' or Company's knowledge, threatened claims under any policy
relating to the Company. Also set forth on Schedule 2.24 is a true and complete
listing of any and all claims made by the Company under any policy since
December 31, 1996.
2.25 COMMISSIONS. Except as set forth on Schedule 2.25 hereto, there
are and will be no claims for brokerage commissions, finder's fees, fees for
fairness opinions or financial advisory services or similar compensation in
connection with the transactions contemplated by this Agreement based on any
arrangement or agreement made by or on behalf of the Sellers, the Company, or
any of their Affiliates (collectively, "Commissions"). Any and all such
Commissions shall be paid solely by the Sellers, and not by Peoples, Peoples
Services or the Purchaser.
2.26 PERMITS AND REPORTS. Schedule 2.26 hereto sets forth a list of
all permits, licenses, registrations, certificates, franchises, Orders,
approvals or other authorizations from any Authority or other Person including,
without limitation, the FCC and the VSCC and any municipalities ("PERMITS")
issued to or held by the Company in connection with its operations or the
Business. Such Permits are the only Permits that are required for the Company to
conduct its business as presently conducted and proposed to be conducted. Each
such Permit is in full force and effect, and the Company has not received notice
that any suspension, cancellation or modification of the terms of any such
Permit is threatened. The Company is in full compliance with the terms of each
such Permit, and each of the Company and the Sellers are not aware of any reason
not set forth in said Permit why any such Permit would not be renewed, upon
substantially the same terms as currently exist, upon expiration of such Permit.
Except to the extent set forth on Schedule 2.26 hereto, no other Person is
currently operating or providing telephone service within the Business'
telephone exchange area and, to the Sellers' and Company's knowledge, no Person
is anticipating or contemplating doing so. Except as set forth on Schedule 2.26,
no authorization, consent or notification of or filing with any Authority is
necessary in connection with the execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby, and each Permit issued
to or held by the Company will continue in full force and effect following the
Closing Date. Except as set forth on Schedule 2.26, (i) all returns, reports,
applications, statements and other documents required to be filed by the Company
with the FCC, the VSCC and any other regulatory or governmental authority or
municipality (including taxing authorities) with respect to the Business on or
before the date hereof have been duly filed or properly extended as permitted by
law (details of such extensions, if any, are set forth on Schedule 2.26 hereto)
and are true and complete in all material respects, and (ii) all reporting
requirements of the FCC, the VSCC and other regulatory or governmental
authorities or municipalities (including taxing authorities) having jurisdiction
thereof have been complied with in all material respects. A listing of all
returns, reports, applications, statements and other documents which are unique
to the Business and which were filed by the Company within the past three (3)
years with the FCC, the VSCC and any other regulatory or governmental authority
(including taxing authorities) or municipality is attached hereto as Schedule
2.26; true and complete copies of all such returns, reports, applications,
19
statements and other documents set forth on Schedule 2.26 have been previously
provided to the Purchaser by the Sellers. The transactions contemplated by this
Agreement shall not cause the Business' study area to change. Peoples is
currently an average schedule company and neither the Company nor the Sellers
know of any reason such study area or average schedule company status should not
continue to be available to the Company after the Closing Date.
2.27 ABSENCE OF UNDISCLOSED LIABILITIES. The Company does not have
any liability of any nature whatsoever (whether known or unknown, due or to
become due, accrued, absolute, contingent or otherwise), including, without
limitation, any unfunded obligation under employee benefit plans or arrangements
as described in Section 2.19 hereof or liabilities for Taxes (as defined in
Section 2.16 hereof) or liabilities for under-reporting, under-billing or
under-collection of revenues or underpayment of revenues to a third party or
liabilities relating to investments or subsidiaries, except for (i) liabilities
stated or reserved against in the Financial Statements, (ii) current liabilities
incurred in the ordinary course of business and consistent with past practice
after the date of the Financial Statements which, individually and in the
aggregate, do not have, and cannot reasonably be expected to have, a Material
Adverse Effect, and (iii) liabilities disclosed on Schedule 2.27 hereto. All
obligations and liabilities relating in any way to the Company's investments and
subsidiaries (including future capital contributions or guaranty commitments)
are set forth on Schedule 2.4 hereto, setting forth the maximum amount of the
Company's potential obligations and the expected payment schedule therefor. The
Company is not a party to any Contract, or subject to any articles of
incorporation or bylaw provision, any other corporate limitation or any legal
requirement which has, or can reasonably be expected to have, a Material Adverse
Effect. Any and all long term obligations and liabilities of the Company as of
the date hereof are set forth on Schedule 2.27 hereto.
2.28 YEAR 2000 COMPLIANCE. The Company has (a) initiated a review
and assessment of all areas within its Business and operations that could be
adversely affected by the "Year 2000 Problem" (that is, the risk that computer
applications used by the Company may be unable to recognize and perform properly
date-sensitive functions involving certain dates prior to, including and any
date after December 31, 1999), (b) developed a plan and timeline for addressing
the Year 2000 Problem on a timely basis, and (c) to date implemented that plan
in accordance with that timetable. The Sellers and the Company reasonably
believe that all computer applications that are material to the Company's
Business and operations will on a timely basis be able to perform properly
date-sensitive functions for all dates before, including and after January 1,
2000. A true and complete copy of such plan and timeline has been provided to
Purchaser.
2.29 DISCLOSURE. Neither this Agreement nor any of the attachments,
Schedules, Exhibits, written statements, documents, certificates or other items
prepared for or supplied to the Purchaser by or on behalf of the Sellers or the
Company with respect to the transactions contemplated hereby contains any untrue
statement of a material fact or omits any material fact necessary to make each
statement contained herein or therein not misleading.
III. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby represents and warrants to the Sellers as follows:
3.1 CORPORATE ORGANIZATION. The Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation, with full corporate power and authority to own,
operate and lease its properties and to conduct its business as presently
conducted and proposed to be conducted. The Purchaser is qualified to do
business and is in good standing in every jurisdiction in which the conduct of
its business, the ownership
20
or lease of its properties, or the execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby requires it to be so
qualified.
3.2 AUTHORIZATION. The Purchaser has full corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The Board of Directors of the Purchaser has
duly authorized the execution, delivery and performance of this Agreement, and
no other corporate proceedings on its part are necessary to authorize the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby. This Agreement constitutes a legal, valid
and binding obligation of the Purchaser enforceable against the Purchaser in
accordance with its terms, subject to equitable considerations and the effect of
bankruptcy and other laws affecting the rights of creditors generally.
3.3 NO VIOLATION. Except as set forth on Schedule 3.3 hereto, the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby by the Purchaser do not and will not (a)
conflict with or result in a breach of the terms, conditions or provisions of,
(b) constitute a default or event of default under (with due notice, lapse of
time or both), (c) result in the creation of any Lien upon the Purchaser or its
capital stock (except upon the Shares as part of Purchaser's financing of this
transaction) or assets pursuant to, (d) give any third party the right to
accelerate any obligation under, (e) result in a violation of or (f) require any
authorization, consent, approval, exemption or other action by, or notice to,
any Person pursuant to the charter or bylaws of the Purchaser, any applicable
Regulation (including, without limitation, the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976), any Order to which the Purchaser is subject or any
Contract to which the Purchaser or any of its properties are subject. The
Purchaser has complied with all applicable Regulations and Orders in connection
with the execution, delivery and performance of this Agreement and the
transactions contemplated hereby, subject to the requirements which are
conditions to the Closing.
3.4 INVESTMENT INTENT. The Purchaser represents and warrants to the
Sellers that it is purchasing the Shares for investment purposes and not with a
view to distribution thereof and agrees that it shall not make any sale,
transfer, or other disposition of the Shares in violation of the Securities Act
of 1933, as amended, or the Regulations thereunder or under any other applicable
securities laws.
IV. COVENANTS OF THE SELLERS AND THE COMPANY
Subject to the provisions of Section 4.14 hereof, from and after December
31, 1998 until the Closing Date, each of the Sellers and the Company agree that
they shall have acted and shall act, or refrain from acting where so required,
to comply (and in the case of the Sellers, to cause the Company to comply) with
the following (the term "Company" as used in this Article IV shall mean and
include Peoples, Peoples Services and any and all of their subsidiaries and
Affiliates):
4.1 REGULAR COURSE OF BUSINESS.
(a) Generally.
The Company shall operate its business diligently and in good faith,
consistent with past management practices, shall maintain all of its properties
in customary repair, order and condition, shall maintain (except for expiration
due to lapse of time or cancellation by another party pursuant to the terms
thereof) in the ordinary course of business all leases and Contracts in effect
without change except as expressly provided herein and shall comply with the
provisions of all Regulations, Orders and Permits applicable to the Company and
the conduct of
21
its business. The Company shall maintain its financial and accounting records in
a manner consistent with that employed at December 31, 1998.
(b) Compensation.
The Company shall not hire any employee and shall not grant any
increase in the compensation of any employee, officer, board member, consultant
or independent contractor.
(c) Insurance.
The Company shall maintain current its insurance policies with the
coverage and in the amounts set forth on Schedule 2.24.
(d) Claims.
The Company shall promptly notify the Purchaser of any Claims that
may be commenced against it, as well as of any threatened, suspected or expected
Claims of which the Company or the Sellers may be aware.
(e) Supplement.
From time to time prior to the Closing Date, the Sellers shall
promptly notify the Purchaser of any changes with respect to the information set
forth in this Agreement or the Schedules hereto and of any matters hereafter
arising which, if in existence at the date hereof, would have been required to
be set forth in this Agreement or the Schedules hereto.
4.2 AMENDMENTS. No change or amendment shall be made to the charter
or bylaws of the Company, and the Company shall not merge into or consolidate
with any other Person or change the character of its Business.
4.3 CAPITAL CHANGES. The Company shall not issue, sell, purchase or
redeem any shares of its capital stock of any class or issue or sell any
securities convertible into, or options, warrants or other rights to subscribe
for, any shares of its capital stock. The Company shall not pledge or otherwise
encumber any shares of its capital stock, nor shall the Company allow the
transfer of any shares of its capital stock on its stock transfer ledger or
other books and records.
4.4 DIVIDENDS. The Company shall not declare, pay or set aside for
payment any dividend or other distribution in respect of its capital stock.
4.5 CAPITAL EXPENDITURES; TRANSACTIONS WITH AFFILIATES. The Company
shall not make any capital expenditures, or commitments with respect thereto,
except as provided on Schedule 2.22. Further, the Company shall timely make the
capital expenditures set forth on Schedule 2.22 or discuss with the Purchaser,
after written notice of the Company's proposed changes, its reasons for not so
performing. The Company shall also make capital expenditures in the ordinary
course consistent with past practices. The Company shall not make or accept any
loan or advance to or from any of its Affiliates or Affiliates of the Sellers.
4.6 BORROWING. The Company shall not incur, assume or guarantee any
indebtedness or obligation not reflected on the Financial Statements, except for
amounts not to exceed ten thousand dollars ($10,000) in the ordinary course of
business. Further, the Company shall not incur, assume or guarantee any
indebtedness or obligation of any of its subsidiaries or investments.
4.7 PROPERTY. The Company shall not sell, transfer, or dispose of any
of its assets and properties, other than in the ordinary course of business, or
allow any of its assets and properties to become subject to a Lien.
22
4.8 OTHER COMMITMENTS. Except as set forth in this Agreement or
permitted in writing by the Purchaser from and after the date hereof, the
Company shall not enter into any transaction, make any commitment or incur any
obligation other than in the ordinary course of business.
4.9 INTERIM FINANCIAL INFORMATION, INVESTMENT K-1S. Except as set
forth in Schedule 4.9 hereof, from and after the date hereof, the Company shall
supply the Purchaser with a copy of its internal monthly Unaudited Financial
Statements within forty-five (45) days after the end of each month.
Additionally, the Company shall supply the Purchaser with a copy of the
Financial Statements for the fiscal year ending December 31, 1999 as provided in
Section 2.9 hereof. Further, the Company shall provide the Purchaser with any
and all financial statements, K-1s and/or reports received with respect to
investments set forth on Schedule 2.4 hereto promptly following receipt thereof
by the Company or the Sellers.
4.10 CONSENTS AND AUTHORIZATIONS. The Sellers and the Company shall,
promptly after the date hereof, commence efforts to obtain the consents, waivers
and authorizations listed on Schedules 2.3 and 2.26 hereto. The Sellers and the
Company shall diligently pursue and use their best efforts to obtain such
consents, waivers and authorizations as promptly as practicable prior to the
Closing Date.
4.11 ACCESS. Each of the Sellers and the Company shall afford to the
Purchaser and its counsel, accountants, agents and other authorized
representatives and to financial institutions specified by the Purchaser
reasonable access during business hours to the Company's plants, properties,
books and records in order that the Purchaser may have full opportunity to make
such reasonable investigations as it shall desire to make of the affairs of the
Company. The Company shall cause its officers, employees and auditors to furnish
such additional financial and operating data and other information as the
Purchaser or its lender shall from time to time reasonably request.
4.12 NOTICE OF TRANSFER. Each of the Sellers and the Company shall
cooperate in providing any required notices to the appropriate Authority
regarding any issues of ownership or control or change thereof (including,
without limitation, any such issues relating to the Permits).
4.13 PAYMENT OF STAMP TAX. All transfer (including any real estate
transfer tax), documentary, sales, use, stamp, registration and other such Taxes
and fees (including any penalties and interest) incurred in connection with this
Agreement shall be borne one-half (1/2) by the Sellers (collectively) and
one-half (1/2)by the Purchaser when due, and the parties will file on a timely
basis all necessary Tax Returns and other documentation with respect to all such
transfer, documentary, sales, use, stamp, registration and other Taxes and fees,
and, if required by applicable Regulation, will, and will cause its Affiliates
to, join in the execution of any such Tax Returns and other documentation.
4.14 DISCLOSURE. To the extent the Company shall have taken any
actions contrary to any of the covenants set forth in this Article IV, from and
after December 31, 1998 and prior to the date hereof, such actions are set forth
on Schedule 4.14 hereto. From and after the date hereof, the Company shall not
take any actions contrary to any of the covenants set forth in this Article IV
without the prior written consent of the Purchaser, which consent shall not be
unreasonably withheld.
4.15 COOPERATION WITH PURCHASER. Each of the Sellers and the Company
shall cooperate with Purchaser as shall be necessary for Purchaser to consummate
this transaction and to obtain financing therefor, including giving access to
the Company's properties and business records as shall be necessary for
Purchaser to, among other things, obtain surveys of the real property, a title
commitment with respect to the real property and/or environmental assessments.
23
V. COVENANTS OF THE PURCHASER
5.1 CONSENTS AND AUTHORIZATIONS. The Purchaser shall, promptly after
the date hereof, commence efforts to obtain the consents, waivers and
authorizations listed on Schedule 3.3. The Purchaser shall diligently pursue and
use its best efforts to obtain such consents, waivers and authorizations as
promptly as practicable prior to the Closing Date. Purchaser shall, at its
expense, manage the process of obtaining, with the Sellers and the Company's
assistance, all government consents and approvals required to carry out the
transactions contemplated by this Agreement.
5.2 EMPLOYEES. For a period of eighteen (18) months following the
Closing, the Purchaser shall cause the Company to continue to employ, with the
exception of X. Xxxxxxxxxx, XX, all of those employees set forth on Schedule
2.10 hereto (the "RETAINED EMPLOYEES"); provided, however, that the Company
shall retain the right to terminate any employee at any time for cause. During
such eighteen (18) month period, each of the Retained Employees shall be
compensated at a level which is at least equal to such Retained Employee's
salary level at the time of Closing, and no such Retained Employee shall be
required to relocate his or her office outside of the Exchange.
VI. OTHER AGREEMENTS
The parties hereto further agree as follows:
6.1 AGREEMENT TO DEFEND. In the event any claim of the nature
specified in Section 7.4 or Section 8.3 hereof is commenced, whether before or
after the Closing Date, the parties hereto agree to cooperate and use all
reasonable efforts to defend against and respond thereto.
6.2 FURTHER ASSURANCES. On the terms and subject to the conditions of
this Agreement, the parties hereto shall use all reasonable efforts at their own
expense to take, or cause to be taken, all action, and to do, or cause to be
done, all things necessary, proper or advisable under applicable Regulations to
consummate and make effective as promptly as possible the transactions
contemplated by this Agreement, and to cooperate with each other in connection
with the foregoing, including, without limitation, using all reasonable efforts
(a) to obtain all necessary waivers, consents and approvals from other parties
to loan agreements, leases, mortgages and other Contracts, (b) to obtain all
necessary consents, approvals and authorizations as are required to be obtained
under any Regulations or in connection with any Permits, (c) to lift or rescind
any injunction or restraining order or other Order adversely affecting the
ability of the parties to consummate the transactions contemplated hereby and
(d) to fulfill all conditions to the obligations of the parties under this
Agreement. Each of the parties hereto further covenants and agrees that it shall
use all reasonable efforts to prevent a threatened or pending preliminary or
permanent injunction or other Order.
6.3 CONSENTS. Without limiting the generality of Section 6.2, each of
the parties hereto shall use all reasonable efforts to obtain all waivers,
Permits, authorizations, consents and approvals of, or notice to, all Persons
and Authorities necessary, proper or advisable in connection with the
consummation of the transactions contemplated by this Agreement prior to the
Closing Date.
6.4 NO SOLICITATION OR NEGOTIATION. Unless and until this Agreement
is terminated, neither the Sellers nor the Company shall, and each shall use
best efforts to cause its
24
Affiliates, and the directors, officers, employees, representatives, agents,
advisors, accountants, shareholders and attorneys of each of them, not to
initiate or solicit, directly or indirectly, any inquiries or the making of any
proposal with respect to, or engage in negotiations concerning, or provide any
confidential information or data to any Person with respect to, or have any
discussions with any Person relating to, any acquisition, business combination
or purchase of all or any significant asset of, or any equity interest in,
directly or indirectly, the Company, or otherwise facilitate any effort or
attempt to do or seek any of the foregoing and shall immediately cease and cause
to be terminated any existing activities, discussions or negotiations with any
parties conducted heretofore with respect to any of the foregoing.
6.5 NO TERMINATION OF THE OBLIGATIONS BY SUBSEQUENT DISSOLUTION. Each
of the parties hereto specifically agrees that its obligations hereunder,
including, without limitation, obligations pursuant to this Article VI, shall
not be terminated by the dissolution of such party, whether by operation of law,
Regulations or otherwise.
6.6 PUBLIC ANNOUNCEMENTS. Prior to the Closing Date, no party hereto
nor any Affiliate, representative or shareholder of such party, shall disclose
any of the terms of this Agreement to any third party, except as required by law
or in connection with a securities filing, or to obtain the consents, waivers
and authorizations listed on Schedules 2.3, 2.26 and 3.3 and in connection with
the Purchaser's financing of the transactions contemplated hereby, without the
other parties' prior written consent. Prior to the Closing Date, the form,
content and timing of all press releases, public announcements or publicity
statements (but excluding disclosures necessitated by any securities filing)
with respect to this Agreement and the transactions contemplated hereby shall be
subject to the prior approval of both the Sellers and the Purchaser, which
approval shall not be unreasonably withheld; PROVIDED, HOWEVER, that either
party may withhold such approval in its sole discretion with respect to any of
the foregoing which discloses any of the financial terms of this transaction.
Prior to the Closing Date, no press releases, public announcements or publicity
statements shall be released by either party without such prior mutual
agreement. Notwithstanding the foregoing, prior to the Closing Date, except as
otherwise required by law or in connection with a securities filing, no party
hereto will disclose the Purchase Price or the manner in which the Purchase
Price is calculated, without the prior written consent of the Purchaser and the
Sellers. Additionally, the parties agree that the Company may, following the
execution of this Agreement, announce the existence of the pending sale
transaction contemplated by this Agreement to the Company's employees. The
Purchaser shall, at the request of the Sellers and the Company, participate in
any such announcement to the Company's employees as the Sellers and the Company
determine appropriate.
6.7 RECORDS AND INFORMATION.
(a) Retention of Records.
Except as otherwise required by Regulation or agreed to in writing,
the Sellers and the Purchaser shall each retain, and shall cause their
respective Affiliates to retain, for a period of at least four (4) years, or the
period required by applicable Regulation, following the Closing Date, all
records, books, contracts, instruments, computer data and other data and
information (collectively, "INFORMATION") relating to the Company.
(b) Access to Information.
From and after the Closing Date, the Sellers shall afford to the
Purchaser and its authorized accountants, counsel and other designated
representatives reasonable access (including using reasonable efforts to give
access to Persons or firms possessing Information) and duplicating rights during
normal business hours to all Information within the Sellers' possession relating
to the Company, insofar as such access is reasonably required by the
25
Purchaser. Similarly, the Purchaser shall afford to the Sellers and their
authorized accountants, counsel, and other designated representatives reasonable
access (including reasonable efforts to give access to Persons or firms
possessing Information) and duplicating rights during normal business hours to
Information within the Purchaser's possession relating to the Company or its
business as conducted prior to the Closing Date, insofar as such access is
reasonably required by the Sellers.
(c) Delivery of Corporate Records.
The Sellers shall arrange, as soon as practicable following the
Closing Date, to the extent not previously delivered in connection with the
transactions contemplated herein, for transportation at the Sellers' cost to the
Purchaser of the records in the Sellers' possession relating to the Company,
including, without limitation, the corporate minute books, stock ledgers and
certificates and corporate seals of the Company, and all Contracts and
litigation files relating to the Company, except to the extent (i) such items
are already in the possession of the Purchaser or the Company or (ii) it is
necessary or appropriate for the Sellers to retain such records for use in
preparation of Tax Returns under the provisions hereof. The Sellers may make and
retain copies of all or any of such records or documents at the Sellers'
expense.
(d) Witnesses.
At all times from and after the Closing Date, each of the Sellers
and the Purchaser shall use reasonable efforts to make available to the other,
upon written request, its and its Affiliates' officers, directors, employees and
agents as witnesses to the extent that such Persons may reasonably be required
in connection with any legal, administrative or other proceedings in which the
requesting party may from time to time be involved, at no cost; PROVIDED,
however, that a party producing such witnesses shall be entitled to receive from
the requesting party, upon presentation therefor, payment for such out-of-pocket
costs and disbursements as may be reasonably incurred in producing such
witnesses.
6.8 INSURANCE POLICIES AND CLAIMS ADMINISTRATION.
(a) Insurance Coverage Prior to the Closing Date.
The Sellers shall be responsible for the administration of all
claims under the Company's insurance policies relating to periods prior to the
Closing Date. If any claim is asserted against the Company relating to periods
prior to the Closing Date, the Sellers shall, if requested by the Purchaser,
promptly assert and pursue coverage and payment for such claim with the
appropriate insurance carrier, and the Purchaser shall, and shall cause the
Company to, provide reasonable cooperation and assistance to Sellers in
asserting and pursuing such coverage. In particular, the Purchaser shall, upon
request by Sellers, cause the Company to file all necessary claims and take all
such other action as may reasonably be requested by Sellers to pursue such
coverage. As between the Sellers, on the one hand, and the Purchaser and the
Company, on the other hand, the Purchaser and the Company shall be entitled to
recover all insurance proceeds with respect to any claim, except to the extent
the Sellers have previously provided indemnification therefor to the Purchaser
or the Company under this Agreement. If the Purchaser shall pursue coverage and
payment for any claim relating to periods prior to the Closing Date on behalf of
the Company, then the Sellers shall provide reasonable cooperation and
assistance to the Company and the Purchaser.
(b) Insurance Coverage After the Closing Date.
26
Each party shall be responsible for establishing and maintaining its
own property and casualty insurance (including, without limitation, primary and
excess general liability, automobile, workers' compensation, property, director
and officer liability, fire, crime, surety and other similar insurance policies)
for the activities and claims of such party and its Affiliates on and after the
Closing Date; provided, however, the Purchaser shall, if it so desires, continue
the Company's policies in place as at the Closing Date and the Sellers shall be
obligated to obtain new insurance policies on any of the operations and assets
distributed to any of them as Excluded Assets as provided herein.
6.9 OTHER TAX MATTERS.
(a) Tax Returns.
The Purchaser, the Sellers, the Company and their successors shall
cooperate in the preparation of all Tax Returns and reports and shall make
available all necessary records and timely take all action necessary to allow
for the preparation and filing of all Tax Returns and reports. Within ten (10)
days following the Closing, the Sellers shall deliver or shall cause to be
delivered to the Purchaser all books, records, returns, schedules, work papers,
and other documents (including without limitation, appraisals and other
background information) which are in the possession of the Sellers or which are
not on the Company premises, and which relate to any Taxes of the Company for
any taxable period. Prior to the delivery of the materials described in the
preceding sentence, the Sellers shall cooperate with the Purchaser in providing
access to such materials as is reasonably required by the Purchaser.
The parties hereto agree that the Sellers shall prepare, and pay (but only
to the extent not fully paid or reserved against on the Financial Statements or
the Unaudited Financial Statements) all Taxes arising therefrom, all Tax Returns
for the Company for the periods on or before the Closing Date and for all Taxes
arising as a result of the transactions contemplated by this Agreement (except
as provided in Section 4.13 hereof). Upon mutual agreement between the Sellers
and the Purchaser, the Company may prepare any such required Tax Returns. The
Purchaser shall prepare, and pay all Taxes arising therefrom, all Tax Returns
for the Company for the periods after the Closing Date.
(b) Information.
The Purchaser and the Sellers agree to furnish or cause to be
furnished to each other, as promptly as practicable, such information (including
access to books and records) and assistance relating to the Company as is
reasonably requested for the filing of any Tax Return, in determining a Tax
liability or right to refund, for the preparation of any audit or other
proceeding, and for the prosecution of any claim, suit or proceeding relating to
a proposed Tax adjustment. The Purchaser and the Sellers shall cooperate with
each other in the conduct of any Tax audit or other Tax proceedings involving
the Company. The parties shall execute and deliver such powers of attorney and
other documents as are reasonably requested to carry out the administration of
the Tax provisions of this Agreement.
VII. CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER
The obligations of the Purchaser under this Agreement shall be subject to
the satisfaction of each of the following conditions unless waived in writing by
the Purchaser:
7.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Sellers and the Company contained in Article II hereof and
elsewhere in this Agreement and all
27
information contained in any Exhibit, Schedule or attachment hereto shall be
true and correct in all material respects when made and on the Closing Date as
though then made. The Sellers and the Company shall have performed and complied
in all material respects with all agreements, covenants and conditions required
by this Agreement to be performed and complied with by them prior to the Closing
Date. The Sellers shall have delivered to the Purchaser a certificate, dated the
Closing Date, in a form reasonably satisfactory to the Purchaser, certifying to
the foregoing, and providing such supplemental information, agreements and
disclosures as shall be necessary to make such representations and warranties as
accurate on the Closing Date as on the date originally given. The Sellers shall
deliver to the Purchaser all of the certificates, stock powers and other
documentation referenced in Section 9.2 hereof, evidencing the transfer to the
Purchaser of clear title to all of the Shares at the Closing, all in form and
substance satisfactory to the Purchaser and its counsel in their sole
discretion.
7.2 CONSENTS AND APPROVALS. The Sellers, the Company and the
Purchaser shall have obtained all consents, approvals, Orders, qualifications,
licenses, Permits, regulatory approvals (including but not limited to any
necessary consent, approval, exemption or notice as required by (A) the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976 (B) the Virginia State
Corporation Commission, and (C) the Towns of Gretna and Hurt, Virginia, and such
other municipalities as may be necessary) and other authorizations, whether
specified on Schedules 2.3, 2.26 and 3.3 hereto or not, and shall have given all
notices, required by all applicable Regulations, Orders and Contracts binding on
any of the Sellers, the Company or the Purchaser or any of their respective
properties and assets, with respect to the execution, delivery and performance
of this Agreement, the financing and consummation of the transactions
contemplated herein and the conduct of the Business of the Company in the same
manner after the Closing Date as before the Closing Date.
7.3 NO MATERIAL ADVERSE CHANGE. There shall have been no Material
Adverse Change in the business, properties, Financial Statements, Unaudited
Financial Statements, Schedules to this Agreement, business prospects,
regulatory climate, condition (financial or otherwise) or results of operations
of the Company since December 31, 1998 through the Closing Date. The Purchaser
shall have received a certificate, dated the Closing Date, from the Sellers, in
a form reasonably satisfactory to the Purchaser, certifying to the foregoing.
7.4 NO PROCEEDING OR LITIGATION. No Order or Regulation shall be in
effect and no litigation shall have been consummated or threatened which would
prevent the consummation of the transactions contemplated hereby.
7.5 SECRETARY'S CERTIFICATE. The Purchaser shall have received a
certificate, signed by the Secretaries of Peoples and Peoples Services dated the
Closing Date, as to the charter (attaching a Secretary of State certified copy
thereof, with all amendments) and bylaws of Peoples and Peoples Services,
respectively, and the resolutions adopted by the shareholders and directors of
Peoples and Peoples Services in connection with this Agreement in a form
reasonably satisfactory to the Purchaser.
7.6 CERTIFICATES OF GOOD STANDING. At the Closing, the Company shall
have delivered to the Purchaser certificates issued by the appropriate
governmental authorities evidencing the good standing of Peoples, Peoples
Services and each of their subsidiaries in their respective jurisdictions of
incorporation and in each jurisdiction in which each is qualified to do business
as a foreign corporation as of a date not more than fifteen (15) days prior to
the Closing Date.
7.7 OPINION OF SELLERS' COUNSEL. The Sellers shall deliver at
Closing an opinion of counsel to the Sellers addressed to the Purchaser and the
Purchaser's lender in substantially the form attached hereto as Exhibit 7.7.
7.8 CONTINUATION OF X. Xxxxxxxxxx, III EMPLOYMENT AGREEMENT.
Following the Closing, the Purchaser shall cause the Company to continue the
employment agreement currently in place between Peoples and X. Xxxxxxxxxx, III
for the remainder of the initial five (5) year term
28
thereof. X. Xxxxxxxxxx, III shall execute an agreement, in substantially the
form attached hereto as Exhibit 7.8, restating the terms and conditions thereof
(the "RESTATED EMPLOYMENT AGREEMENT").
7.9 NONCOMPETITION AGREEMENT. X. Xxxxxxxxxx, XX shall enter into a
Noncompetition Agreement with the Company and the Purchaser in substantially the
form attached here as Exhibit 7.9 (the "NONCOMPETITION AGREEMENT").
7.10 X. XXXXX EMPLOYMENT AGREEMENT. X. Xxxxx shall enter into an
Employment Agreement in substantially the form attached hereto as Exhibit 7.10
(the "X. XXXXX EMPLOYMENT AGREEMENT").
7.11 RESIGNATIONS. The Sellers shall have caused all directors and
officers of Peoples and Peoples Services and all of their subsidiaries to have
resigned. Further, X. Xxxxxxxxxx, XX shall have resigned as an employee of the
Company.
7.12 OTHER DOCUMENTS. The Purchaser shall have been furnished with
such other and further documents and certificates, including certificates of the
Sellers, Peoples' and Peoples Services' officers, directors and others, as the
Purchaser shall reasonably request to evidence compliance with the conditions
set forth in this Agreement.
7.13 LIENS. The Sellers shall have removed all Liens on the Shares
and/or on the assets and properties of the Company other than Permitted Liens.
7.14 DELIVERY OF MINUTE BOOKS. The Sellers shall deliver at Closing
all original minute books, corporate seals and stock transfer records of
Peoples, Peoples Services and of all their direct and indirect subsidiaries, as
well as original evidence of all their respective investments.
7.15 DELIVERY OF FINANCIAL STATEMENTS. The Sellers shall deliver the
Financial Statements for the fiscal year ended December 31, 1999, to the
Purchaser as provided in Section 2.9 hereof, and shall deliver the Unaudited
Financial Statements on a monthly basis from and after the date hereof as soon
as such Unaudited Financial Statements shall have been prepared, all as provided
in Section 4.9 hereof.
7.16 AMENDMENT TO LEASE AGREEMENTS. Each of the Company's lease
agreements (collectively, the "LEASES") set forth on Schedule 2.14(b) hereto
shall be amended in a manner mutually satisfactory to the Purchaser and the
Lessors thereunder.
7.17 RENEWAL OF FRANCHISES. The Sellers shall have renewed for at
least ten (10) years from the date of Closing the telephone franchise agreements
granted by the Towns of Gretna and Hurt, Virginia, and shall have similarly
renewed any other franchise agreements currently in existence or required in
connection with the Company's Business as presently conducted.
7.18 COMPLETION OF NATAL PROJECT. The Company's Natal capital
improvement project (with respect to the installation of a new Nortel remote, as
more particularly disclosed on Schedule 2.22) shall be completed, operational
and fully paid for by the Company.
7.19 COMPLETION OF ENVIRONMENTAL ACTIONS. The Company shall have
fully complied with and completed all recommended actions detailed in that
certain letter of Engineering Consulting Services, Ltd. as dated November 19,
1999, a copy of which is attached to Schedule 2.21 hereto, and the Company shall
have fully paid all amounts due to Engineering Consulting Services, Ltd., any
Authority and/or any other third party in connection therewith.
29
VIII. CONDITIONS TO THE OBLIGATIONS OF THE SELLERS
The obligations of the Sellers under this Agreement shall be subject to
the satisfaction of each of the following conditions unless waived in writing by
Sellers:
8.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Purchaser contained in Article III hereof and elsewhere in
this Agreement and all information contained in any Exhibit, Schedule or
attachment hereto shall be true and correct in all material respects when made
and on the Closing Date as though then made, except as expressly provided herein
or therein. The Purchaser shall have performed and complied in all material
respects with all agreements, covenants and conditions required by this
Agreement to be performed and complied with by it prior to the Closing Date. An
officer of the Purchaser in his capacity as such shall have delivered to the
Sellers a certificate, dated the Closing Date, in a form reasonably satisfactory
to the Sellers, certifying to the foregoing, and providing such supplemental
information, agreements and disclosures as shall be necessary to make such
representations and warranties as accurate on the Closing Date as on the date
originally given.
8.2 CONSENTS AND APPROVALS. The Purchaser, the Sellers and the
Company shall have obtained all consents, approvals, orders, qualifications,
licenses, Permits, regulatory approvals, (including but not limited to any
necessary consent, approval, exemption or notice as required by the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976), and other authorizations,
whether specified on Schedules 2.3, 2.26 and 3.3 hereto or not, and shall have
given all notices, required by all applicable Regulations, Orders and Contracts
binding on the Purchaser, the Sellers or the Company or any of their respective
properties and assets with respect to the execution, delivery and performance of
this Agreement.
8.3 NO PROCEEDING OR LITIGATION. No Order or Regulation shall be in
effect and no litigation shall have been consummated or threatened which would
prevent the consummation of the transactions contemplated hereby.
8.4 SECRETARY'S CERTIFICATE. The Sellers shall have received a
certificate, signed by the Secretary of the Purchaser, dated the Closing Date,
as to the charter and bylaws of the Purchaser and the resolutions adopted by the
directors of the Purchaser in connection with this Agreement in a form
reasonably satisfactory to the Sellers.
8.5 OPINION OF PURCHASER'S COUNSEL. The Purchaser shall deliver at
Closing an opinion of counsel to the Purchaser addressed to the Sellers in
substantially the form attached hereto as Exhibit 8.5.
8.6 RESTATED EMPLOYMENT AGREEMENT. The Purchaser shall have caused
the Company to enter into the Restated Employment Agreement with X. Xxxxxxxxxx,
III.
8.7 NONCOMPETITION AGREEMENT. The Purchaser and E. FitzgeraldIV
shall have entered into the Noncompetition Agreement.
8.8 X. XXXXX EMPLOYMENT AGREEMENT. The Purchaser shall have caused
the Company to enter into the X. Xxxxx Employment Agreement with X. Xxxxx.
8.9 AMENDMENT TO LEASE AGREEMENTS. Each of the Company's Leases
shall be amended in a manner mutually satisfactory to the Purchaser and the
Lessors thereunder.
IX. CLOSING
9.1 CLOSING. Unless this Agreement shall have been terminated or
abandoned pursuant to the provisions of Article X hereof, a closing of the
transactions contemplated by this Agreement (the "CLOSING") shall be held on or
before March 31, 2000, (or on such date either before or after March 31, 2000 as
the parties hereto shall mutually agree, which shall be on the first day of the
month which is at least ten (10) days after receipt of all VSCC, FCC,
30
Xxxx-Xxxxx-Xxxxxx and other approvals required as a precondition to Closing)
(the "CLOSING DATE") in the offices of the Sellers' counsel; provided, that the
Closing shall occur as soon as practicable after the satisfaction of the
conditions contained in Articles VII and VIII hereof.
9.2 CLOSING DATE PAYMENT AND RECEIPT OF SHARES. On the Closing Date
(i) the Sellers will assign and transfer to the Purchaser good and valid title
in and to the Shares, free and clear of all Liens, by delivering to the
Purchaser stock certificates representing the Shares, duly endorsed for transfer
or accompanied by duly executed stock powers endorsed in blank with requisite
stock transfer tax stamps, if any, attached; (ii) the Purchaser shall, by wire
transfer of same-day funds, deposit in an escrow account Escrow Funds of Three
Hundred Thousand Dollars ($300,000), all as provided in Section 11.9 hereof;
(iii) the Purchaser shall, by wire transfer of same-day funds, pay to the
Sellers (care of the Xxxxxx & Xxxxx Trust Account), in accordance with their
Percentage Interests, the amount of the Adjusted Purchase Price for all of the
Shares, less the Escrow Funds; and (iv) the parties shall deliver to each other
the documents required under this Agreement to be delivered at the Closing.
X. TERMINATION AND ABANDONMENT
10.1 METHODS OF TERMINATION. This Agreement may be terminated and the
transactions herein contemplated may be abandoned at any time:
(a) Mutual Consent.
By mutual written consent of the Purchaser and the Sellers.
(b) Sellers' Failure to Perform.
By the Purchaser if as of the Closing Date any of the conditions
specified in Article VII hereof have not been satisfied (and remain so
unsatisfied for more than ten (10) days after the Purchaser has notified the
Sellers in writing thereof) or if any of the Sellers or the Company are
otherwise in default in any material respect under this Agreement (and remains
in default for more than ten (10) days after the Purchaser has notified the
Sellers in writing of such default) or if at any time prior to the Closing Date
it becomes apparent to the Purchaser (on reasonable grounds) that any of the
Sellers or the Company will be unable to satisfy one or more of the
representations and warranties in Article II hereof or one or more of the
covenants or agreements in Articles IV, VI or VII hereof,
(c) Purchaser's Failure to Perform.
By the Sellers if as of the Closing Date any of the conditions
specified in Article VIII hereof have not been satisfied (and remain so
unsatisfied for more than ten (10) days after the Sellers have notified the
Purchaser in writing thereof) or if the Purchaser is otherwise in default in any
material respect under this Agreement (and remains in default for more than ten
(10) days after the Sellers have notified the Purchaser in writing of such
default) or if at any time prior to the Closing Date it becomes apparent to the
Sellers (on reasonable grounds) that the Purchaser will be unable to satisfy one
or more of its representations and warranties in Article III hereof or one or
more of the covenants or agreements in Articles V, VI or VIII hereof.
(d) Failure to Close by March 31, 2000.
By either party in the event the Closing has not occurred by March
31, 2000, unless such failure to close shall be due to a breach of this
Agreement by the party seeking to
31
terminate the Agreement, or such failure to close shall be due to the nonreceipt
of approval from the VSCC, which approval has been diligently sought, in which
last case this date shall be extended for one hundred twenty (120) days
automatically.
(e) Material Adverse Change.
By the Purchaser if a Material Adverse Change shall be shown or
indicated (in the sole discretion of the Purchaser) in any of the Unaudited
Financial Statements delivered after the date hereof or in the December 31, 1999
Financial Statements or otherwise with respect to any of the conditions to
Closing set forth in Section 7.3 hereof, and written notice of termination of
this Agreement shall have been given by the Purchaser within thirty (30)
business days of the Purchaser's receipt of such Unaudited Financial Statements
or December 31, 1999 Financial Statements or the Purchaser's discovery of such
Material Adverse Changes.
(f) Remedies.
In the event of any failure to perform as described in this Section
10.1, the nonbreaching party shall have such remedies for breach of contract as
are allowed by law in addition to or in substitution of the right of
termination.
10.2 PROCEDURE UPON TERMINATION. If this Agreement is terminated as
provided herein:
(a) Return of Records.
Each party shall as promptly as practicable redeliver to the party
furnishing the same, all data, information and other written material (including
all copies thereof) of any other party relating to the transactions contemplated
hereby, whether obtained before or after the execution hereof.
(b) Confidentiality.
All information received by any party hereto with respect to the
business of any other party (other than information which is a matter of public
knowledge or which has heretofore been or is hereafter published in any
publication for public distribution or filed as public information with any
governmental authority) shall not at any time be used by such party, or
disclosed to third parties.
XI. SURVIVAL OF TERMS; INDEMNIFICATION
11.1 SURVIVAL; LIMITATIONS. All of the terms and conditions of this
Agreement, together with the representations, warranties and covenants contained
herein or in any instrument or document delivered or to be delivered pursuant to
this Agreement and the agreements of the parties to indemnify each other as set
forth in this Article XI shall survive the execution of this Agreement and the
Closing Date notwithstanding any investigation heretofore or hereafter made by
or on behalf of any party hereto and shall continue for, and all claims with
respect thereto shall be made prior to the end of, eighteen (18) months from the
Closing Date (the "INDEMNIFICATION PERIOD"); provided, however, that with
respect to the representations set forth in Sections 2.7 and 2.8 hereof, the
Indemnification Period shall survive in perpetuity, and provided further that
with respect to any income tax liability of Peoples, Peoples Services or any of
their subsidiaries or Affiliates attributable to any activities or transactions
occurring by any of them on or prior to the Closing Date, the agreement of the
Sellers to indemnify the Purchaser and
32
its Affiliates shall survive until, and all claims with respect thereto shall be
made prior to, the expiration of the applicable statute of limitations
prescribed by Section 6501 of the IRC, as such statutes of limitations may have
been or be extended by agreement from time to time.
11.2 INDEMNIFICATION BY THE SELLERS. After the Closing Date, subject
to the limitations set forth in Section 11.1 hereof, the Purchaser and its
Affiliates (including, without limitation, Peoples and Peoples Services) and
their respective officers, directors, employees, shareholders, representatives
and agents shall be indemnified and held harmless jointly and severally by the
Sellers, their respective heirs, successors, representatives and assigns,
against and in respect of any and all damage, loss, liability, cost or expense
(including, unless otherwise provided herein, the reasonable fees and expenses
of counsel and any Tax liability resulting from any indemnity payment made
hereunder) resulting from, or in respect of, any of the following:
(a) Misrepresentation or Breach.
Any misrepresentation or breach of warranty of any of the Sellers or
the Company, or nonfulfillment of any obligation on the part of the Company (to
be performed on or prior to the Closing) or any of the Sellers under this
Agreement, or contained in any Schedule or Exhibit to this Agreement or from any
misrepresentation in or omission from any certificate, Schedule, Exhibit,
related agreement, Financial Statement, Unaudited Financial Statement, or
instrument delivered by or on behalf of the Sellers or the Company hereunder.
(b) Taxes.
All Taxes of the Sellers, of Peoples, Peoples Services or any of
their subsidiaries or Affiliates or with respect to their investments, including
but not limited to any and all investments sold or otherwise disposed of prior
to the Closing Date, Peoples' interest in the Virginia Independent Telephone
Alliance, L.C., and Peoples Services' interest in the Virginia PCS Alliance,
L.C., attributable to any period prior to or on the Closing Date.
(c) Other Claims.
Any Claim of a third party arising out of the business or operations
of the Company prior to or on the Closing Date or any Claim relating to the
Excluded Liabilities or Excluded Assets either prior to or after the Closing
Date, or any Claim resulting from or arising out of the ownership, management or
use of the Shares and/or the business of the Company prior to or on the Closing
Date.
(d) Related Expenses.
All expenses and costs, including but not limited to legal fees,
reasonably paid or incurred in connection with any such indemnified Claim.
11.3 INDEMNIFICATION BY THE PURCHASER. After the Closing, subject to
the limitations set forth in Section 11.1, the Sellers and their respective
heirs, successors, representatives and assigns shall be indemnified and held
harmless by the Purchaser against and in respect of any and all damage, loss,
liability, cost or expense (including, unless otherwise provided herein, the
reasonable fees and expenses of counsel and any Tax liability resulting from any
indemnity payment made hereunder) resulting from, or in respect of, any of the
following:
(a) Misrepresentation or Breach.
33
Any misrepresentation or breach of warranty of the Purchaser, or
nonfulfillment of any obligation on the part of the Company (to be performed
after the Closing) or the Purchaser under this Agreement, or contained in any
Schedule or Exhibit to this Agreement or from any misrepresentation in or
omission from any certificate, Schedule, Exhibit, related agreement or
instrument delivered by or on behalf of the Purchaser hereunder.
(b) Taxes.
All Taxes of the Purchaser or of the Company attributable to any
period after the Closing Date.
(c) Other Claims.
Any Claim of a third party arising out of the business or operations
of the Company after the Closing Date, or any Claim resulting from or arising
out of the ownership, management
(d) Related Expenses.
All expenses and costs, including but not limited to legal fees,
reasonably paid or incurred in connection with any such indemnified Claim.
11.4 THIRD PARTY CLAIMS.
(a) Generally.
Except as otherwise provided in this Agreement, the following
procedures shall be applicable with respect to indemnification for third party
Claims. Promptly after receipt by the party seeking indemnification hereunder
(hereinafter referred to as the "INDEMNITEE") of notice of the commencement of
any action or the assertion of any Claim, liability or obligation by a third
party (whether by legal process or otherwise), against which Claim, liability or
obligation another party to this Agreement (hereinafter the "INDEMNITOR") is, or
may be, required under this Agreement to indemnify such Indemnitee, the
Indemnitee shall, if a claim thereon is to be, or may be, made against the
Indemnitor, immediately notify the Indemnitor in writing of the commencement or
assertion thereof and give the Indemnitor a copy of such Claim or process and
all legal pleadings. The Indemnitee's failure to give timely notice as required
by this Section 11.4(a) shall not serve to eliminate or limit the Indemnitor's
obligation to indemnify the Indemnitee unless such failure prejudices the rights
of the Indemnitor, and then only to the extent of such prejudice. Moreover, the
Indemnitee shall have the right to take any actions or steps it deems reasonable
to avoid the occurrence of any prejudice to the rights of the Indemnitee. The
Indemnitor shall have the right to assume the defense of such action with
counsel of reputable standing unless with respect to such action (A) injunctive
or equitable remedies have been sought therein in respect of the Indemnitee or
its business or (B) such action is for an alleged amount of less than Five
Thousand Dollars ($5,000); PROVIDED, that the Indemnitee and counsel to the
Indemnitee shall have the right to participate in the defense of any and all
Claims pursuant to the provisions of Section 11.4(b) hereof. The Indemnitor and
the Indemnitee shall reasonably cooperate in the defense of such Claims. If the
Indemnitee shall be required by judgment or a settlement agreement to pay any
amount in respect of any obligation or liability against which the Indemnitor
has agreed to indemnify the Indemnitee under this Agreement, the Indemnitor
shall immediately pay such amount to the Indemnitee in order to enable the
Indemnitee to make such payment, and otherwise shall promptly reimburse the
Indemnitee in an amount equal to the amount of such payment, in either case,
plus all reasonable
34
out-of-pocket expenses (including legal fees and expenses) incurred by such
Indemnitee at the specific request of the Indemnitor, as provided above, or as
otherwise authorized by Section 11.4(b) hereof, in connection with such
obligation or liability subject to this Article XI. No Indemnitor, in the
defense of any such Claim, shall, except with the consent of the Indemnitee,
consent to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such Indemnitee of a release from all liability with respect to such Claim.
In the event that the Indemnitor does not accept the defense of any matter for
which it is entitled to assume such defense as provided in this Section 11.4(a),
the Indemnitee shall have the full right to defend against any such Claim and
shall be entitled to settle or agree to pay in full such Claim in its sole
discretion. With respect to any matter as to which the Indemnitor is not
entitled to assume the defense pursuant to the terms of this Section 11.4(a),
the Indemnitee shall not enter into any settlement for which an indemnification
Claim will be made hereunder without the approval of the Indemnitor, which shall
not be unreasonably withheld.
(b) Counsel.
An Indemnitee shall have the right to employ its own counsel, but
the fees and expenses of such counsel shall be at the expense of the Indemnitee,
unless (i) the employment of such counsel shall have been authorized in writing
by the Indemnitor in connection with the defense of such Claim and the
Indemnitor has agreed in writing to pay such fees and expenses, or (ii) the
Indemnitor shall not have employed counsel in the defense of such Claim (which
counsel may be in-house counsel unless and until a lawsuit has been commenced).
In either of which events, such fees and expenses of not more than one
additional counsel for the Indemnitee shall be borne by the Indemnitor.
11.5 OTHER CLAIMS.
(a) In the event an Indemnitee should have a claim under this
Article XI against an Indemnitor that does not involve a third party Claim,
the Indemnitee shall promptly give notice (the "INDEMNITEE NOTICE") and the
details thereof, including copies of all relevant information and documents,
to the Indemnitor within a period of thirty (30) days following the
discovery of the claim by the Indemnitee (the "CLAIM NOTICE PERIOD"). The
failure by any Indemnitee to give the Indemnitee Notice within the Claim
Notice Period shall not impair the Indemnitee's rights hereunder except to
the extent that the Indemnitor demonstrates that it has been prejudiced
thereby. The Indemnitor will notify the Indemnitee within a period of ten
(10) days after the receipt of the Indemnitee Notice by the Indemnitor (the
"INDEMNITY RESPONSE PERIOD") whether the Indemnitor disputes its liability to
the Indemnitee under this Article XI with respect to such Claim. If the
Indemnitor notifies the Indemnitee that it does not dispute the Claim
described in such Indemnitee Notice or fails to notify the Indemnitee within
the Indemnity Response Period whether the Indemnitor disputes the claim
described in such Indemnitee Notice, the actual damages as finally determined
will be conclusively deemed to be a liability of the Indemnitor under this
Article XI and the Indemnitor shall pay the amount of such damages to the
Indemnitee on demand. If the Indemnitor notifies the Indemnitee within the
Indemnity Response Period that the Indemnitor disputes its liability with
respect to such Claim, the Indemnitor and the Indemnitee will proceed in good
faith to negotiate a resolution of such dispute, and if not resolved through
negotiations within a period of thirty (30) days from the date of such notice
or such longer period as may be
35
agreed to by the parties in writing, such dispute shall be resolved by
arbitration in accordance with Section 11.5(b) hereof.
(b) Any dispute required to be submitted to arbitration pursuant to
this Section 11.5 shall be finally and conclusively determined in accordance
with the Commercial Arbitration Rules of the American Arbitration Association
(the "RULES OF ARBITRATION") then in effect by the decision of three (3)
arbitrators (the "BOARD OF ARBITRATION") selected in accordance with the
Rules of Arbitration. The Board of Arbitration shall meet in Charlotte, North
Carolina and shall render a decision in writing (concurred in by a majority
of the members of the Board of Arbitration) with respect to and stating the
amount, if any, which the Indemnitor is required to pay to the Indemnitee in
respect of the claim made by the Indemnitee. The decision of the Board of
Arbitration shall be rendered as soon as practical following commencement of
proceedings with respect thereto. The Board of Arbitration shall cause its
written decision to be delivered to the Indemnitee and the Indemnitor. Any
decision made by the Board of Arbitration shall be final, binding and
conclusive on the Indemnitee and the Indemnitor and entitled to be enforced
to the fullest extent permitted by law and entered in any court of competent
jurisdiction.
The parties hereto hereby consent to the jurisdiction of the
foregoing Board of Arbitration and to the jurisdiction of any local, state or
Federal court located in the State of North Carolina for the purpose of
enforcing the decision or award of the Board of Arbitration or otherwise. The
parties hereto agree that all service of process may be made on any such party
by personal delivery or by registered or certified mail addressed to the
appropriate party at the address for such party set forth in this Agreement.
All fees, costs and expenses of the prevailing party in any
arbitration, including, but not limited to, attorneys' fees, shall be paid by
the losing party and shall be awarded to the prevailing party as part of the
decision of the Board of Arbitration. For purposes hereof, a "PREVAILING PARTY"
shall mean the party which substantially prevails in its position in
arbitration. Each and every arbitration proceeding commenced pursuant to this
Section 11.5(b) shall be consolidated with any arbitration proceedings
simultaneously or previously commenced (but not concluded) under this Section
11.5(b).
11.6 CONTINUED LIABILITY FOR INDEMNITY CLAIMS. The liability of any
Indemnitor hereunder with respect to Claims hereunder shall continue for so long
as any Claims for indemnification may be made hereunder pursuant to this Article
XI and, with respect to any such indemnification Claims duly and timely made,
thereafter until the Indemnitor's liability therefore is finally determined and
satisfied.
11.7 BASKET AMOUNT.
(a) Indemnification by the Sellers.
Notwithstanding anything to the contrary herein, Sellers will have
no liability (for indemnification or otherwise) with respect to the matters
described in Section 11.2 of this Agreement until the total of all damages
suffered by the Purchaser and/or its Affiliates exceeds Fifty Thousand Dollars
($50,000.00)(the "Basket Amount"), and then only for the amount by which such
damages exceed the Basket Amount.
(b) Indemnification by the Purchaser.
36
Further, notwithstanding anything to the contrary herein, Purchaser
will have no liability (for indemnification or otherwise) with respect to the
matters described in Section 11.3 of this Agreement (other than the
nonfulfillment, in whole or in part, of any obligation on the part of the
Purchaser under this Agreement which relates to the payment of the Adjusted
Purchase Price) until the total of all damages suffered by the Sellers and/or
their Affiliates exceeds the Basket Amount and then only for the amount by which
such damages exceed the Basket Amount.
(c) Aggregation.
Notwithstanding the foregoing, to the extent indemnification is
sought under Sections 11.2(a) or 11.3(a) of this Agreement, any and all
misrepresentations or breaches or nonfullfilments shall be aggregated for
purposes of determining if the Basket Amount has been met. By way of example,
and not by way of limitation, if Sellers shall have failed to perform three
obligations of the type referred to in Section 2.12(b) hereof, each causing
damages of $20,000, then payment in the amount of $10,000 shall be made to
Purchaser as provided herein (representing the excess of such damages over the
Basket Amount of $50,000).
11.8 RIGHT OF OFFSET. From and after the Closing Date through the
longer of (a) the Indemnification Period or (b) any continuation thereof as
provided in Section 11.6, the Purchaser shall have the right to set off against
any and all payments due from the Purchaser to any or all of the Sellers under
their respective Noncompetition and/or Employment Agreements any amount for
which the Purchaser is entitled to indemnification by the Sellers under this
Article XI.
11.9 ESCROW OF LIQUID ASSETS.
(a) ESTABLISHMENT OF ESCROW ACCOUNT. Three Hundred Thousand Dollars
($300,000) of the Adjusted Purchase Price otherwise payable to the Sellers
for their Shares hereunder (inclusive of any investment earnings thereon, the
"ESCROW FUNDS") shall be maintained in an escrow account (the "ESCROW
ACCOUNT"), with Centura Bank (the "ESCROW AGENT"), pursuant to the terms and
provisions of an Escrow Agreement to be executed at Closing in substantially
the form attached hereto as Exhibit 11.9 hereto (the "ESCROW AGREEMENT").
(b) PURPOSE OF ESCROW ACCOUNT. The Company formerly owned a
Twenty-Five Percent (25%) interest in 360 Communications of Danville Limited
Partnership ("360"). The Sellers and the Company acknowledge that the IRS is
currently conducting audits of the tax returns filed on behalf of 360 with
respect to 360's 1993 and 1994 tax years. The subject of such audits is set
forth in two 60 Day Letters from the IRS to the Company, each dated March 8,
1999 and identified by reference codes CP:E:ESS 03081999-0327 and CP:E:ESS
03081999-0330, respectively (collectively, with all attachments thereto, the
"60 DAY LETTERS"), and in the June 3, 1999 Protest Letter to the IRS by 360's
Tax Matters Partner (the "PROTEST Letter")(the subject matter of such audits,
as specifically set forth in the 60 Day Letters and/or the Protest Letter, is
hereinafter referred to as the "360 AUDIT ISSUES").
The Company sold all of its interest in 360 in 1998. The Company and the
Sellers acknowledge, however, that the 360 Audit Issues may result in the
payment of taxes, penalties, fees, fines and/or other expenses (including legal
fees) by the Company with respect to the tax
37
years 1993, 1994, 1995, 1996, 1997 and 1998 (any and all such taxes, penalties,
fees, fines and/or other expenses pertaining to or arising from the 360 Audit
Issues are hereinafter referred to collectively as the "360 AUDIT PAYABLES").
The Sellers acknowledge that under the terms of Sections 11.1 and 11.2
hereof, they are liable for the 360 Audit Payables. However, due to the ongoing
nature of the IRS audits, it is not possible at this time to determine with
certainty the amount of the 360 Audit Payables. Further, the Purchaser does not
desire to have to seek such indemnification and the Sellers do not desire to be
in a position of having to seek payment from one another to cover indemnity
obligations at such time as the amount of the 360 Audit Payables becomes known.
Therefore, the Sellers and the Purchaser have agreed that a reasonable estimate
of the 360 Audit Payables is $300,000, and have agreed to establish the Esrow
Account and set aside the Escrow Funds for the payment of the 360 Audit Payables
at such time as the IRS audits are resolved.
(c) TERM OF ESCROW; ADMINISTRATION. The term of the Escrow
Agreement (the "ESCROW TERM") shall commence upon the Closing and continue
until the sooner of a. the exhaustion of the Escrow Funds as a result of the
payment of the 360 Audit Payables, (ii) the final resolution of all IRS
audits with respect to all of the 360 Audit Issues for the tax years 1993
through 1998, or (iii) the expiration of the applicable statutes of
limitations (including any extensions thereof) with respect to all of the 360
Audit Issues for the tax years 1993 through 1998. During the Escrow Term, the
Purchaser (acting on its own behalf or through the Company) shall be
responsible for and have sole authority with respect to all correspondence,
negotiations and settlements with the IRS regarding the 360 Audit Issues. The
Purchaser and the Sellers agree to provide each other with reasonable
cooperation throughout the continuation of all audits regarding the 360 Audit
Issues, so as to keep one another informed of the current status of such
audits and to assist one another with any necessary data production, document
preparation or negotiations.
(d) ESCROW AS SOLE REMEDY. The Sellers agree that the Basket
Amount set forth in Section 11.7 hereof shall not apply with respect to the
360 Audit Payables. The Purchaser agrees that the 360 Audit Payables shall be
paid solely from the Escrow Funds and that to the extent the 360 Audit
Payables exceed the Escrow Funds, the Purchaser shall not be entitled to seek
indemnification from the Sellers with respect to any such excess.
XII. GENERAL PROVISIONS
12.1 AMENDMENT AND MODIFICATION. Subject to applicable Regulations,
this Agreement may be amended, modified and supplemented at any time with
respect to any of the terms contained herein, by a written agreement signed by
all of the parties hereto.
12.2 WAIVER. The failure of any party hereto to comply with any
obligation, covenant, agreement or condition herein may be waived in writing by
the other parties hereto, but such waiver shall not operate as a waiver of, or
estoppel with respect to, any subsequent or other failure. Whenever this
Agreement requires or permits consent by or on behalf of any party hereto, such
consent shall be given in writing.
12.3 CERTAIN DEFINITIONS.
38
"ADJUSTED PURCHASE PRICE" shall have the meaning ascribed to such term in
Section 1.2 hereof.
"AFFILIATE" shall mean, with regard to any Person, any Person which,
directly or indirectly, controls, is controlled by, or is under common control
with, such Person and, with respect to any Person who is an individual, the
spouse, ancestors and descendants (lineal or by marriage) thereof. "CONTROL"
(including, with correlative meaning, the terms "CONTROLLED BY" and "UNDER
COMMON CONTROL WITH"), as used with respect to any Person, means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership of voting
securities, by Contract or otherwise.
"AGREEMENT" shall have the meaning ascribed to such term in the preamble
hereof.
"AUTHORITY" shall mean any governmental authority, including, without
limitation, the FCC and the VSCC and all municipalities in which Peoples,
Peoples Services and/or any of their subsidiaries or Affiliates engage in
business, and any other governmental, regulatory or administrative body, agency,
commission, board of arbitrators, or any court or judicial authority, whether
Federal, state, local or foreign.
"BASE PURCHASE PRICE" shall have the meaning ascribed to such term in
Section 1.2 hereof.
"BUSINESS DAY" shall mean any day that is not a Saturday or Sunday and
that in Gretna, Virginia, or Charlotte, North Carolina, is not a day on which
banking institutions are generally authorized or obligated by Regulation to
close.
"CERCLA" shall have the meaning ascribed to such term in Section 2.21(c)
hereof.
"CERCLIS" shall have the meaning ascribed to such term in Section 2.21(c)
hereof.
"CLAIM" shall mean any action, written claim, complaint, lawsuit, written
demand, suit, notice of a violation, litigation, proceeding, arbitration or
other dispute noticed in writing, or otherwise, whether civil, criminal,
administrative or otherwise, by any Authority or other Person.
"CLOSING" shall have the meaning ascribed to such term in Section 9.1
hereof.
"CLOSING DATE" shall have the meaning ascribed to such term in Section 9.1
hereof.
"CLOSING BALANCE SHEET" shall have the meaning ascribed to such term in
Section 1.3 hereof.
"COMPANY" shall have the meaning ascribed to such term in the preamble
hereof, but with respect to all representations, warranties, covenants and
agreements contained herein or in any Exhibit or Schedule hereto shall mean
Peoples, Peoples Services and all of their subsidiaries and Affiliates.
"CONTRACT" shall mean any agreement, contract, commitment, instrument or
other binding arrangement or understanding, whether written or oral.
39
"ENVIRONMENTAL LAW" shall mean any Regulation or Order, including, but not
limited to, any term or condition included in a validly issued Permit to
construct or operate a facility subject to any Regulation or Order, which
relates to or otherwise imposes liability or standards of conduct concerning
environmental matters, mining or reclamation of mined land, discharges,
emissions, releases or threatened releases of noises, odors or any pollutants,
contaminants or hazardous or toxic wastes, substances or materials, whether as
matter or energy, into ambient air, water or land or otherwise relating to the
manufacture, processing, generation, distribution, use, treatment, storage,
disposal, cleanup, transport or handling of pollutants, contaminants or
hazardous wastes, substances or materials, including (but not limited to)
CERCLA, the Superfund Amendments and Reauthorization Act of 1986, as amended,
the Resource Conservation and Recovery Act of 1976, as amended, the Toxic
Substances Control Act of 1976, as amended, the Federal Water Pollution Control
Act Amendments of 1972, the Clean Water Act of 1977, as amended, any so-called
"SUPERLIEN" law and any other similar Regulation by any Authority in effect on
or before the Closing Date.
"ENVIRONMENTAL PERMIT" shall mean a Permit relating to or required by any
Environmental Law.
"ERISA" shall have the meaning ascribed to such term in Section 2.19
hereof.
"ERISA PLANS" shall have the meaning ascribed to such term in Section 2.19
hereof.
"FCC" shall mean the Federal Communications Commission.
"FINANCIAL STATEMENTS" shall have the meaning ascribed to such term in
Section 2.9 hereof.
"GAAP" shall mean United States generally accepted accounting principles,
consistently applied, as in existence at the date hereof and/or at the Closing
Date.
"HAZARDOUS MATERIALS" shall have the meaning ascribed to such term in
Section 2.21(a) hereof.
"IMPROVEMENTS" shall have the meaning ascribed to such term in Section
2.14(c) hereof.
"INDEMNITEE" shall have the meaning ascribed to such term in Section
11.4(a) hereof.
"INDEMNITOR" shall have the meaning ascribed to such term in Section
11.4(a) hereof.
"IRC" or the "CODE" means the Internal Revenue Code of 1986, as amended,
and the regulations promulgated thereunder.
"IRS" means the Internal Revenue Service.
"LIEN" shall mean any security interest, lien, mortgage, pledge,
hypothecation, encumbrance, claim, easement, restriction (on transfer or
otherwise) or interest of another Person of any kind or nature.
"MATERIAL ADVERSE CHANGE" shall mean any developments or changes which
would have a Material Adverse Effect.
40
"MATERIAL ADVERSE EFFECT" shall mean, with respect to any Person, any
circumstances, state of facts or matters which could reasonably be expected,
either individually or in conjunction with any other circumstance, state of
facts or matter, to have a material adverse effect in respect of such Person's
business, business prospects, properties, assets, regulatory climate, condition
(financial or otherwise) or results of operations.
"NET WORKING CAPITAL" shall have the meaning ascribed to such term in
Section 1.2 hereof.
"ORDER" shall mean any judgment, decree (consent or otherwise), order,
injunction (preliminary or permanent), stipulation, ruling, decree or consent of
or by an Authority.
"PCB" shall mean polychlorinated biphenyls.
"PERCENTAGE INTERESTS" shall have the meaning ascribed to such term in
Section 1.3 hereof.
"PERMITS" shall have the meaning ascribed to such term in Section 2.26
hereof.
"PERMITTED LIENS" shall mean (i) statutory Liens for Taxes not yet due and
payable, (ii) such imperfections or irregularities of title, liens, easements,
charges or encumbrances as do not interfere with the present use of the
properties or assets subject thereto or affected thereby, do not otherwise
impair present business operations at such properties, or do not have a Material
Adverse Effect on the value of such properties and assets and (iii) Liens
existing at the Closing Date with respect to the Total Long Term Debt, but only
to the extent such particular items of Total Long Term Debt are accounted for in
determining the Adjusted Purchase Price, and such Liens are fully disclosed on
Schedule 2.14(a) hereto.
"PERSON" shall mean any corporation, partnership, joint venture,
organization, entity, Authority or natural person, together with any and all
heirs, successors, representatives and assigns thereof.
"PENSION BENEFIT PLAN" shall have the meaning ascribed to such term in
Section 2.19 hereof.
"PRICE PER SHARE" shall have the meaning ascribed to such term in Section
1.2 hereof.
"PROPRIETARY RIGHTS" shall mean all (i) patents, patent applications,
patent disclosures and all related continuation, continuation-in-part,
divisional, reissue, reexamination, utility, model, certificate of invention and
design patents, registrations and applications for registrations, (ii)
trademarks, service marks, logos, trade names and corporate names and
registrations and applications for registration thereof and (iii) copyrights and
registrations and applications for registration thereof.
"PURCHASER" shall have the meaning ascribed to such term in the preamble
hereof.
"REGULATION" shall mean any law, statute, regulation, ordinance,
requirement, rule, executive order or binding action of or by an Authority.
"RELEASE" shall have the meaning ascribed to such term in Section 9601(22)
of Title 42 of the United States Code.
41
"SELLER" or "SELLERS" shall have the meaning ascribed to such term in the
preamble hereof.
"SHARES" shall have the meaning ascribed to such term in the recitals
hereof.
"TAX RETURNS" shall have the meaning ascribed to such term in Section
2.16(a) hereof.
"TAX" or "TAXES" means any income, gross receipt, net proceeds,
alternative or add-on minimum, AD VALOREM, value added, estimated, turnover,
sales, use, property, personal property (tangible and intangible), stamp,
leasing, lease, user, excise, duty, franchise, transfer, license, withholding,
payroll, employment, foreign, fuel, excess profits, occupational and interest
equalization, windfall profits, severance and other taxes, charges, fees, levies
or other assessments of any kind whatsoever (including interest, penalties,
fines and additions thereto) imposed by any taxing Authority, Federal, state,
local or foreign.
"TOTAL LONG TERM DEBT" shall have the meaning defined in the Financial
Statements, computed in accordance with GAAP, consistently applied. By way of
example and not limitation, "Total Long Term Debt" shall specifically not
include future capital contribution requirements and/or guarantees of
indebtedness by the Company with respect to the Virginia PCS Alliance, L.C..
"UNAUDITED FINANCIAL STATEMENTS" shall have the meaning ascribed to such
term in Section 2.9 hereof.
"VSCC" shall mean the Virginia State Corporation Commission.
"WELFARE BENEFIT PLAN" shall have the meaning ascribed to such term in
Section 2.19 hereof.
12.4 NOTICES. All notices, claims, requests, demands or other
communications required or permitted hereunder shall be in writing and shall be
deemed to have been duly given when delivered by hand, by first class certified
mail, return receipt requested, with postage paid, or by receipted overnight
courier service to the intended recipient at the address specified below or at
such other address as shall be designated by such party in any notice to the
other parties.
NOTICES TO PURCHASER: WITH A COPY TO:
-------------------- --------------
MJD Ventures, Inc. Xxxxxxxxx Xxxxxx Xxxxxx & Xxxxxx,
000 Xxxx Xxxxxxxx Xxxxxx P.A.
Suite 250 000 X. Xxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000 Suite 2020
ATTN: Xxxxxx X. Xxxxxxx, Vice Chairman Xxxxxxxxx, XX 00000-0000
and Executive Vice President ATTN: Xxxxxxx X. Xxxx, Esq.
(000) 000-0000 (Phone) (000) 000-0000 (Phone)
(000) 000-0000 (Fax) (000) 000-0000 (Fax)
xxxx.xxxxxxx@xxx.xxx(E-Mail) xxx@xxxx.xxx (E-Mail)
42
NOTICES TO THE
COMPANY AND TO THE SELLERS WITH A COPY TO:
-------------------------- --------------
Xx. X. X. Xxxxxxxxxx, XX Xxxxxx & Xxxxx
0000 Xxxx Xxxxxx Xx. 0000 Xxxxxxxxx Xxxx
Xxxxxx, XX 00000 X.X. Xxx 0000
(000) 000-0000 (Phone) Xxxxxxxxx, XX 00000
ATTN: Xxxxxxxx X. Xxxxxxxx, Esq.
(000)000-0000 (Phone)
(000) 000-0000 (Fax)
xxxxxxxxx@XxxxxxXxxxx.xxx (E-Mail)
12.5 ASSIGNMENT. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any of
the parties hereto without the prior written consent of the other parties
hereto; PROVIDED, that the Purchaser may, without the prior written consent of
the Sellers or any other party hereto, assign its rights and obligations
hereunder and under any other Contracts or documents executed or delivered in
connection herewith to (i) an Affiliate of the Purchaser, including but not
limited to MJD Communications, Inc. or MJD Services Corp., or (ii) its lenders
as collateral in connection with the financing of the transactions contemplated
hereby. No such assignment shall relieve the assignor of such assignor's
liability for any and all continuing obligations hereunder, however.
12.6 GOVERNING LAW. This Agreement shall be governed by the laws of
the State of Virginia, without regard to its principles of conflict of laws.
12.7 COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
12.8 HEADINGS. The Article and Section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
12.9 ENTIRE AGREEMENT. This Agreement embodies the entire agreement
and understanding of the parties hereto with regard to the subject matter hereof
and supersedes all prior agreements, representations, warranties, promises,
covenants, arrangements and understandings, oral or written, express or implied,
among the parties with respect to such subject matter. There are no agreements,
representations, warranties, promises, covenants, arrangements or understandings
among the parties with respect to such subject matter other than those expressly
set forth or referred to herein.
12.10 NO BENEFIT. This Agreement shall not be construed so as to
confer any right or benefit upon any Person other than the signatories to this
Agreement and each of their respective successors and permitted assigns.
12.11 DELAYS OR OMISSIONS. No delay or omission to exercise any
right, power or remedy accruing to any party hereto upon any breach or default
of another party hereto under this Agreement shall impair any such right, power
or remedy of such party nor shall it be construed to be a waiver of any such
breach or default or an acquiescence therein or of or in any similar breach or
default thereafter occurring. All remedies, whether under this Agreement, by
Regulation or otherwise, afforded to any party shall be cumulative and not
alternative.
43
12.12 SEVERABILITY. Unless otherwise provided herein, if any
provision of this Agreement shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
12.13 EXPENSES. Each of the parties hereto shall bear its own
expenses, including, without limitation, legal fees, taxes and expenses, with
respect to this Agreement and the transactions contemplated hereby (which, with
respect to such expenses incurred by or on behalf of the Sellers or the Company,
shall be paid by the Sellers and not by the Company). Notwithstanding the
foregoing, in the event a breach of Section 6.4 hereof occurs and the
transactions contemplated hereby are not consummated, the Sellers shall pay to
the Purchaser the Purchaser's out-of-pocket fees, including, without limitation,
legal fees and expenses, incurred in connection with the transactions
contemplated hereby. Additionally, notwithstanding the foregoing, (A) with
respect to any Xxxx-Xxxxx-Xxxxxx filing necessitated by the transactions
contemplated herein, (1) the Purchaser shall pay any and all applicable filing
fees, and (2) each of the parties shall bear its own fees and expenses otherwise
incurred in connection with the preparation of such filing, and (B) with respect
to compliance with any notice and/or approval requirements of the Virginia State
Corporation Commission necessitated by the transactions contemplated herein, any
and all legal fees, filing fees and expenses of regulatory counsel incurred in
connection therewith shall be paid one-half (1/2) by the Purchaser and one-half
(1/2) by the Sellers (collectively).
12.14 TIME OF THE ESSENCE. Time is strictly of the essence with
respect to the provisions of this Agreement.
12.15 INJUNCTIVE RELIEF. The parties hereby agree that any remedy at
law for any breach of the provisions of this Agreement shall be inadequate and
that the nonbreaching party shall be entitled to injunctive relief in addition
to any other remedy which such nonbreaching party might have at law or in
equity.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
44
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
45
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
MJD VENTURES, INC.
/s/ Xxxxxx X. Xxxxxxx
----------------------------------------
By: Xxxxxx X. Xxxxxxx
Title: Vice Chairman and Executive Vice
President
/s/ X.X. Xxxxxxxxxx, III (SEAL)
-----------------------------------
X.X. XXXXXXXXXX, III
/s/ X.X. Xxxxxxxxxx, XX (SEAL)
-----------------------------------
X.X. XXXXXXXXXX, XX
/s/ Xxx X. Xxxxx (SEAL)
-----------------------------------
XXX X. XXXXX
PEOPLES MUTUAL TELEPHONE COMPANY
/s/ Xx Xxxxxxxxxx IV
----------------------------------------
By: Xx Xxxxxxxxxx IV
Title: President
/s/ F. Xxx Xxxxxxxxxx (SEAL)
-----------------------------------
F. XXX XXXXXXXXXX
/s/ Xxxxxx X. Xxxxx (SEAL)
-----------------------------------
XXXXXX X. XXXXX
/s/ Xxxx Xxxxx (SEAL)
-----------------------------------
Xxxx XXXXX
/s/ Xxxxxx X. Xxxxxxxxxxx (SEAL)
-----------------------------------
XXXXXX X. XXXXXXXXXXX
46
/s/ Xxxxx X. Xxxxxxxxxx (SEAL)
-----------------------------------
XXXXX X. XXXXXXXXXX
/s/ Xxx X. Xxxxx, custodian (SEAL)
-----------------------------------
XXX X. XXXXX, CUSTODIAN FOR
XXXXXX X. XXXXX
/s/ Xxx X. Xxxxx, custodian (SEAL)
-----------------------------------
XXX X. XXXXX, CUSTODIAN FOR
XXXXXXX X. XXXXX
/s/ X.X. Xxxxxxxxxx XX, custodian
----------------------------------------
(SEAL)
X.X. XXXXXXXXXX, XX, CUSTODIAN FOR
XXXXXXXX XXXXX XXXXXXXXXX
/s/ X.X. Xxxxxxxxxx XX, custodian
----------------------------------------
(SEAL)
X.X. XXXXXXXXXX, XX, CUSTODIAN FOR
XXXXXX X. XXXXXXXXXX, V
/s/ Xxxxxxx X. Xxxxx, Custodian
----------------------------------------
(SEAL)
XXXXXXX X. XXXXX, CUSTODIAN FOR
LINDSAY XXXXXX XXXXX
/s/ Xxxxxxx X. Xxxxx, Custodian
----------------------------------------
(SEAL)
XXXXXXX X. XXXXX, CUSTODIAN FOR
WINNIE XXXXX XXXXX
/s/ Xxxxxx X. Xxxxxxxxxxx, custodian
----------------------------------------
(SEAL)
XXXXXX X. XXXXXXXXXXX, CUSTODIAN FOR
XXXXXXX XXXXXXXXXX XXXXXXXXXXX
47
/s/ Xxxxxx X. Xxxxxxxxxxx, custodian
----------------------------------------
(SEAL)
XXXXXX X. XXXXXXXXXXX, CUSTODIAN FOR
XXXXX XXXXXXX XXXXXXXXXXX
/s/ Xxxxxx X. Xxxxxxxxxxx, custodian
----------------------------------------
(SEAL)
XXXXXX X. XXXXXXXXXXX, CUSTODIAN FOR
XXXXXX XXXXXX XXXXXXXXXXX
48
Exhibit 7.7
Opinion of Sellers' Counsel
(attached)
[LETTERHEAD OF XXXXXX & XXXXX]
_____________, 2000
MJD Ventures, Inc.
000 Xxxx Xxxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxxxx, XX 00000
[LENDERS TO BE DETERMINED.]
________________________________
________________________________
________________________________
Re: Peoples Mutual Telephone Company
Ladies and Gentlemen:
We have served as counsel to Peoples Mutual Telephone Company, its
shareholders, subsidiaries and affiliates (Peoples Mutual Telephone Company with
its subsidiaries and affiliates collectively, the "Company"), each a Virginia
corporation or a resident of the state of Virginia, North Carolina or Maryland,
as the case may be, in connection with the preparation, execution and delivery
of the
Stock Purchase Agreement dated as of December 10, 1999 among MJD
Ventures, Inc. ("MJD"), the Company and the shareholders of the Company
individually (such shareholders shall be referred to collectively herein as the
"Shareholders"), relating to the purchase of all of the shares of capital stock
of Peoples Mutual Telephone Company (the "Shares") owned by the Shareholders
(such
Stock Purchase Agreement, together with all Schedules thereto and all
Exhibits executed by the Company and/or any or all of the Shareholders in
connection therewith, referred to collectively hereinafter as the "Agreement").
This opinion is delivered to you pursuant to Section 7.7 of the Agreement. All
capitalized terms used herein have the meaning assigned to them in the Agreement
except as otherwise provided herein.
In connection with the opinions expressed below, we have examined and are
familiar with originals or copies, certified or otherwise identified to our
satisfaction, of such documents, corporate records and other writings of the
Company, certificates of public officials or officers of the Company, and such
other documents and writings as were deemed necessary or appropriate for the
opinions hereinafter expressed.
In making such examination and rendering the opinions set forth below, we
have assumed the genuineness of all signatures, the authenticity of all
documents submitted to us as originals and the conformity to authentic original
documents of all documents submitted to us as certified, conformed or
photostatic copies, and the authenticity of the originals of such documents and
the legal capacity of all natural persons.
MJD Ventures, Inc.
_____________________
_______________, 2000
Page 2
For purposes of our opinion, we have assumed that the Agreement and all
other instruments and documents executed and delivered pursuant thereto have
been duly authorized, executed and delivered by all of the parties thereto other
than the Company and the Shareholders.
Whenever a statement herein is qualified by the phrases "known to us" or
"to our best knowledge", or similar phrases, it is intended to indicate that
during the course of our representation of the Company and the Shareholders and
the transactions contemplated by the Agreement, and having made inquiry of the
Shareholders and of certain officers of the Company as to such matters, no
information that would give us actual knowledge of the inaccuracy of such
statement has come to our attention. However, we have not undertaken any
independent investigation or review to determine the accuracy of any such
statement. No inference as to our knowledge of any matters bearing on the
accuracy of any such statement should be drawn from our representation of the
Company and the Shareholders.
Our opinions as hereinafter expressed are subject to the following
qualifications:
1. Our opinions are subject to the effect of bankruptcy, fraudulent
conveyance, insolvency, reorganization, arrangement, moratorium and other
similar laws;
2. Our opinions are subject to limitations imposed by laws and judicial
decisions relating to or affecting the rights of creditors or secured creditors
generally or general principles of equity (regardless of whether enforcement is
considered in proceedings at law or in equity) upon the enforceability of any of
the remedies, covenants and other provisions of the Agreement and upon the
availability of injunctive relief or other equitable remedies;
3. We express no opinion as to the creation or enforceability of security
interests or as to the recoverability of attorneys' fees and legal expenses;
4. We express no opinion as to the laws or the effect or applicability of
the laws of any jurisdiction other than the laws of the United States and the
State of Virginia;
5. The opinions expressed herein are as of the date hereof, and we
undertake no responsibility to advise you of changes occurring after the date of
this letter.
Based upon the foregoing and subject to further assumptions, limitations
and qualifications set forth below, we are of the opinion that:
1. Peoples Mutual Telephone Company and each of its subsidiaries
is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Virginia with full
corporate power and authority to carry on the business in which
it is presently engaged and to own, lease and operate its
properties as now being conducted and to perform its
obligations under the Agreement. The Shareholders are all
residents of Virginia, North Carolina or Maryland, as set forth
on Schedule 2.7 to the Agreement.
MJD Ventures, Inc.
_____________________
_______________, 2000
Page 3
2. The execution and delivery of the Agreement has been duly
authorized and approved by the Company's board of directors and
the Shareholders. The Agreement is a valid and binding
obligation of the Company and the Shareholders, enforceable in
accordance with its terms, subject to limitations and
qualifications noted above. All persons who have executed this
Agreement on behalf of the Company have been duly authorized to
do so by all necessary action of the Company and its
Shareholders.
3. The authorized capital stock of Peoples Mutual Telephone
Company consists of 12,000 shares of $25.00 par value common
stock, of which 9,832 shares are issued and outstanding (the
"Peoples Telephone Capital Stock"). Each Shareholder is the
lawful owner of the number of shares of the Peoples Telephone
Capital Stock reported in the Agreement. Peoples Mutual
Telephone Company has no other class of stock authorized or
issued and outstanding. All of the issued and outstanding
shares of the Peoples Telephone Capital Stock are duly and
validly issued and outstanding, are fully paid and
nonassessable, were issued in compliance with all state and
Federal laws and are held of record and beneficially by the
Shareholders, all as more fully set forth on Schedule 2.7 to
the Agreement. To the extent Schedule 2.7 to the Agreement
indicates that any Shareholder holds shares of Peoples
Telephone Capital Stock in the capacity of custodian, such
custodian is duly authorized to execute the Agreement and take
all actions contemplated thereby on behalf of the beneficial
owner of such shares. The delivery by the Shareholders to
Purchaser at Closing of certificates representing the Peoples
Telephone Capital Stock will pass good and marketable title to
all of the Peoples Telephone Capital Stock to Purchaser free
and clear of all Liens, encumbrances, claims, restrictions and
equities of any kind, other than as disclosed on Schedule 2.7
of the Agreement. There are no outstanding warrants, options,
rights, puts, calls or other commitments of any nature relating
to the Peoples Stock, and there are no outstanding securities
or debt obligations of the Company convertible into shares of
capital stock of the Company. To our best knowledge, none of
the issued and outstanding shares of capital stock of the
Company was issued in violation of preemptive rights. No shares
of capital stock of the Company are held in the treasury of the
Company.
4. The foregoing opinions are equally applicable to the capital
stock of each affiliate or subsidiary of the Corporation
hereinafter set forth, except that the authorized, issued and
outstanding capital stock of such corporations are as follows:
3
MJD Ventures, Inc.
_____________________
_______________, 2000
Page 4
Issued and
Authorized Outstanding
Corporation Capital Stock Capital Stock
----------- ------------- -------------
Peoples Mutual Services Company Five Hundred (500) one (1) share issued
shares, no par common to Peoples Mutual
stock Telephone Company on
June 4, 1997, by
Certificate No. 1
5. The execution, delivery and performance of the Agreement and
the consummation of the transactions contemplated by the
Agreement will not: a. violate or result in a breach of or
default or acceleration under the Articles of Incorporation or
Bylaws of the Company, as such have been amended, or, to our
best knowledge, any instrument or agreement to which the
Company or the Shareholders are a party or are bound which
would have a material adverse effect on the Company's
properties or operations; (ii) to our best knowledge, violate
any judgment, order, injunction, decree or award against or
binding upon the Company or upon the Peoples Telephone Capital
Stock or other securities, property or business of the Company
which would have a material adverse effect on the Company's
properties or operations; (iii) to our best knowledge, result
in the creation of any material lien, charge or encumbrance
upon the properties or assets of the Company or the Peoples
Telephone Capital Stock; or (iv) violate any law or regulation
of any jurisdiction relating to the Company or the Peoples
Telephone Capital Stock or other securities, property or
business of the Company, assuming all required regulatory
approvals have been obtained in connection with the
transactions contemplated by the Agreement as provided in the
Agreement.
6. To our best knowledge, there is no litigation, claim or
proceeding, pending or threatened against the Company or the
Shareholders, or against any of their respective assets or
properties, or relating to the ownership of any or all of the
Peoples Telephone Capital Stock, or which questions the
validity or enforceability of the Agreement, or which could
prevent, hinder or delay consummation of the Agreement or any
of the transactions contemplated thereby.
7. To our best knowledge, there is not pending any threatened or
existing claim, unsatisfied judgment, litigation, governmental
investigation or proceeding before any court, arbitrator or
Federal, state or other governmental commission, board or other
agency by or against the Company or the Shareholders or
adversely affecting the operations or
49
MJD Ventures, Inc.
_____________________
_______________, 2000
Page 5
financial condition of the Company or its business, property,
business prospects or assets.
8. To our best knowledge, the Shareholders and the Company have
given all notices to and have obtained from all local, state
and Federal regulatory authorities any and all approvals,
consents, permits and authorizations required in order to
consummate the transactions contemplated in the Agreement.
(i) Upon completion of the transactions contemplated by the
Agreement, no Person, other than the Purchaser, shall have any
ownership or other right in and/or to the Peoples Telephone Capital
Stock or to the capital stock of Peoples Mutual Services Company or
any subsidiaries thereof.
The opinions expressed herein are solely for your benefit in connection
with the Agreement and, without our express written consent, neither our
opinions nor this opinion letter may be assigned, quoted or relied upon for any
other purpose. No other person or entity may rely upon or claim reliance upon
this opinion, and it is not to be quoted in whole or in part or otherwise
referred to by any governmental agency or other person or entity without prior
written consent of this firm.
Very truly yours,
By:_________________________________
Name:______________________________
Title:_____________________________
5
Exhibit 7.8
Restated Employment Agreement
(attached)
Exhibit 7.9
Noncompetition Agreement
(attached)
2
Exhibit 7.10
X. Xxxxx Employment Agreement
(attached)
3
Exhibit 8.5
Opinion of Purchaser's Counsel
(attached)
XXXXXXXXX XXXXXX XXXXXX & XXXXXX, P.A.
ATTORNEYS AT LAW
XXXXXXXXX XXXXX XXXXXXXX, XXXXX 0000
000 XXXXX XXXXXXX XXXXXX
XXXXXXXXX, XXXXX XXXXXXXX 00000-0000
XXXXXXX X. XXXXX
XXXXX X. XXXXX
XXXXXXX X. XXXXXX
C. XXXXX XXXXXX, XX. TELEPHONE
XXXXXXX X. XXXX 000-000-0000
XXXXXX X. XXXXXX
XXXX X. XXXXXXX III
XXXXXXX X. XXXXXXXX III
XXXXXXX X. XXXXXXX, XX. FACSIMILE
XXXXX X. XXXXXX 000-000-0000
XXXXXX X. XXXXXX, XX.
XXXXXXX X. XXXXXXXXX, XX.
XXXXXX XXXXXX III
April 3, 2000
Shareholders of Peoples Mutual Telephone Company
000 Xxxxx Xx.
Xxxxxx, XX 00000-0000
Ladies and Gentlemen:
We have acted as counsel to MJD Ventures, Inc., a Delaware corporation
("MJD" or the "Purchaser"), in connection with the purchase by the Purchaser of
all of the capital stock of Peoples Mutual Telephone Company (collectively with
all subsidiaries and affiliates thereof, the "Company") from X.X. Xxxxxxxxxx,
III, X.X. Xxxxxxxxxx, XX and Xxx X. Xxxxx and all other holders thereof
(collectively, the "Shareholders" or the "Sellers"), pursuant to a
Stock
Purchase Agreement entered into as of December 10, 1999 by, between and among
the Purchaser, the Company, and the Sellers (such
Stock Purchase Agreement,
together with all Schedules thereto and all Exhibits executed by the Company
and/or MJD in connection therewith, referred to collectively hereinafter as the
"Agreement").
This opinion is being delivered to you pursuant to Section 8.5 of the
Agreement. Capitalized terms used herein which are not otherwise defined herein
shall have the meanings set forth in the Agreement.
In connection with this transaction, we have reviewed the Articles of
Incorporation and Bylaws (the "Organizational Documents") of the Purchaser, the
Agreement and such other instruments and documents as are executed and delivered
pursuant to the Agreement, and have examined such other records and information
Shareholders of Peoples Mutual Telephone Company
April 3, 2000
Page 2
and have conducted such other investigations as we have deemed necessary to
render the opinion set forth below. As to facts material to our opinion, we have
relied upon the factual representations of the Purchaser in the Agreement,
certificates from certain state authorities and on those certificates delivered
at Closing.
We have assumed the conformity of all copies to the originals of all
documents reviewed by us, the genuineness of all signatures (other than those of
the shareholders directors and officers of the Purchaser) and the authenticity
of all documents submitted to us (whether originals or copies).
For the purposes of our opinion, we have assumed that the Agreement and
all other instruments and documents executed and delivered pursuant thereto have
been duly authorized, executed and delivered by all of the parties thereto other
than the Purchaser.
Whenever a statement herein is qualified by the phrases "known to us" or
"to our knowledge", or similar phrases, it is intended to indicate that during
the course of our representation of the Purchaser and the transactions
contemplated by the Agreement, and having made inquiry of certain officers of
the Purchaser as to such matters, no information that would give us actual
knowledge of the inaccuracy of such statement has come to our attention.
However, we have not undertaken any independent investigation or review to
determine the accuracy of any such statement. No inference as to our knowledge
of any matters bearing on the accuracy of any such statement should be drawn
from our representation of the Purchaser.
Based upon the foregoing, and subject to the assumptions and
qualifications herein set forth, it is our opinion that:
1. MJD is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware with full corporate power and
authority to carry on the business in which it is engaged, to own, lease and
operate its properties, and to enter into and to perform its obligations under
the Agreement.
2. The execution and delivery of the Agreement was duly authorized and
approved by the Board of Directors of MJD. The Agreement is a valid and binding
obligation of MJD enforceable in accordance with its terms, except that (i) such
enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium
or
Shareholders of Peoples Mutual Telephone Company
April 3, 2000
similar laws now or hereafter in effect relating to creditors' rights in the
event of future bankruptcy, insolvency or reorganization of the Purchaser,
and (ii) the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the discretion
of the court before which any proceeding therefor may be brought. All persons
who have executed the Agreement on behalf of MJD have been duly authorized to
do so by all necessary corporate action.
3. To our knowledge, MJD has given all notices to and has obtained from
all local, state and Federal regulatory authorities any approvals, consents,
permits and authorizations required in order to consummate the transactions
contemplated in the Agreement.
The opinions expressed herein are based upon and limited to matters
governed by the laws of the State of North Carolina and the State of Delaware,
and we express no opinion as to any matter governed by the laws of any other
jurisdiction. We are not authorized to practice law in the State of Delaware and
the opinions set forth herein are rendered solely upon our review of applicable
provisions of Delaware corporation law as currently published in standard
compilations and such consultations with Delaware local counsel as we have
deemed necessary or appropriate.
This opinion is given as of the date hereof and we assume no obligation to
update or supplement this opinion to reflect any facts or circumstances which
may hereafter come to our attention or any changes in laws which may hereafter
occur. This opinion is limited to matters herein, and no opinion may be inferred
or implied beyond the matters expressly stated herein.
This opinion is being furnished to you in connection with the transactions
contemplated by the Agreement. This opinion is solely for your benefit and is
not to be used, circulated, quoted or otherwise referred to for any other
purpose nor relied upon by any other person or entity without our prior written
consent.
Finally, the opinions expressed herein represent our reasonable judgment
as to the matters of law addressed herein, based upon the facts presented or
assumed, and are not, and should not be construed or considered as, a guaranty.
Very truly yours,
XXXXXXXXX XXXXXX XXXXXX & XXXXXX, P.A.
Exhibit 11.9
Escrow Agreement
(attached)
Schedule 1.4
Excluded Assets and Liabilities
ASSETS:
LIABILITIES:
Schedule 2.3
No Violations
[Xxxx-Xxxxx-Xxxxxx filing is required.]
Schedule 2.4
Subsidiaries and Investments
[Please provide details with respect to the following, as well as all
other subsidiaries, affiliates or investments:]
RUS Telephone Bank Class B Stock
RUS Telephone Bank Class C Stock
Peoples Mutual Services Company Capital Stack
Communications Satellite Capital Stock
Ownership Interest in Virginia Independent Telephone Alliance
Ownership Interest in Virginia PCS Alliance, L.C.
(Please give details regarding capital call and guaranty obligations)
Trigon Healthcare, Inc. Capital Stock
Illuminet Holdings, Inc; Capital Stock
Ascent Entertainment Group, Inc. Capital Stock
Split Dollar Life Insurance [Will this be an excluded asset? Should there be
a purchase price adjustment?]
Section 2.5
Capital Stock
Schedule 2.6
Corporate Books
Directors and Officers for Peoples Mutual Telephone Company:
Directors:
Officers: President
Vice President
Secretary/Treasurer
For Peoples Mutual Services Company:
Directors:
Officers: President
Vice President
Secretary/Treasurer
Schedule 2.7
List of Shareholders/No Liens on Shares
----------------------------------------------------------------------------------------------------------
PEOPLES MUTUAL TELEPHONE COMPANY
COMMON STOCK
----------------------------------------------------------------------------------------------------------
NAME FEDERAL ID NUMBER SHARES OWNED % OF STOCK
---- ----------------- ------------ ----------
OWNERSHIP
---------
----------------------------------------------------------------------------------------------------------
F. Xxx Xxxxxxxxxx ###-##-#### 806 8.20%
X.X. Xxx 000
Xxxx Xxxx, XX 00000
----------------------------------------------------------------------------------------------------------
Xxxxxx X.Xxxxx ###-##-#### 201 2.04%
0000 Xxxxxx Xxxxx
Xxxxxxxxxx, XX 00000
----------------------------------------------------------------------------------------------------------
Xxxx Xxxxx ###-##-#### 372 3.78%
0000 Xxxxxxxxx Xxxx
Xxx Xxxx, XX 00000-0000
----------------------------------------------------------------------------------------------------------
Xxxxxx X. Xxxxxxxxxxx ###-##-#### 392 3.99%
00 Xxxxxxxx Xxxxx
Xxxxxxxxxxxx, XX 00000
----------------------------------------------------------------------------------------------------------
X.X. Xxxxxxxxxx, XX ###-##-#### 3463 35.23%
0000 Xxxx Xxxxxx Xxxx
Xxxxxx, XX 00000
----------------------------------------------------------------------------------------------------------
Xxx X. Xxxxx ###-##-#### 3296 33.53%
0000 Xxxx Xxxxxx Xxxx
Xxxxxx, XX 00000
----------------------------------------------------------------------------------------------------------
X.X. Xxxxxxxxxx, III ###-##-#### 24 0.24%
X.X. Xxx 000
Xxxxxx, XX 00000-0000
----------------------------------------------------------------------------------------------------------
Xxxxx X. Xxxxxxxxxx ###-##-#### 24 0.24%
X.X. Xxx 000
Xxxxxx, XX 00000-0000
----------------------------------------------------------------------------------------------------------
Xxx X. Xxxxx, Custodian for ###-##-#### 241 2.45%
Xxxxxx X. Xxxxx
0000 Xxxx Xxxxxx Xxxx
Xxxxxx, XX 00000
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
PEOPLES MUTUAL TELEPHONE COMPANY
COMMON STOCK
----------------------------------------------------------------------------------------------------------
NAME FEDERAL ID NUMBER OWNED % OF STOCK
---- ----------------- ----- ----------
OWNERSHIP
---------
----------------------------------------------------------------------------------------------------------
Xxx X. Xxxxx, Custodian for ###-##-#### 241 2.45%
Xxxxxxx X. Xxxxx
0000 Xxxx Xxxxxx Xxxx
Xxxxxx, XX 00000
----------------------------------------------------------------------------------------------------------
X.X. Xxxxxxxxxx, XX, Custodian for ###-##-#### 241 2.45%
Xxxxxxxx Xxxxx Xxxxxxxxxx
0000 Xxxx Xxxxxx Xxxx
Xxxxxx, XX 00000
----------------------------------------------------------------------------------------------------------
X.X. Xxxxxxxxxx, XX, Custodian for ###-##-#### 241 2.45%
Xxxxxx X. Xxxxxxxxxx, V
0000 Xxxx Xxxxxx Xxxx
Xxxxxx, XX 00000
----------------------------------------------------------------------------------------------------------
Xxxxxxx X. Xxxxx, Custodian for ###-##-#### 56 0.59%
Lindsay Xxxxxx Xxxxx
0000 Xxxxxxxxx Xxxx
Xxx Xxxx, XX 00000-0000
----------------------------------------------------------------------------------------------------------
Xxxxxxx X. Xxxxx, Custodian for ###-##-#### 58 0 59%
Winnie Xxxxx Xxxxx
0000 Xxxxxxxxx Xxxx
Xxx Xxxx, XX 00000-0000
----------------------------------------------------------------------------------------------------------
Xxxxxx X. Xxxxxxxxxxx, Custodian ###-##-#### 58 0.59%
for Xxxxxxx Xxxxxxxxxx Xxxxxxxxxxx
00 Xxxxxxxx Xxxxx
Xxxxxxxxxxxx, XX 00000
----------------------------------------------------------------------------------------------------------
Xxxxxx X. Xxxxxxxxxxx, Custodian ###-##-#### 58 O.59%
for Xxxxx Xxxxxxx Xxxxxxxxxxx
00 Xxxxxxxx Xxxxx
Xxxxxxxxxxxx, XX 00000
----------------------------------------------------------------------------------------------------------
Xxxxxx X. Xxxxxxxxxxx, Custodian ###-##-#### 58 0.59%
for Xxxxxx Xxxxxx Xxxxxxxxxxx
00 Xxxxxxxx Xxxxx
Xxxxxxxxxxxx, XX 00000
----------------------------------------------------------------------------------------------------------
TOTAL 9832 100.00%
----------------------------------------------------------------------------------------------------------
Total shares authorized by
charter--12,000 shares
----------------------------------------------------------------------------------------------------------
Schedule 2.10
Employee
a. PEOPLES MUTUAL TELEPHONE COMPANY
Full-time Employees:
Part-time Employees:
x. XXXXXXX MUTUAL SERVICES COMPANY
Full-time Employees:
Part-time Employees:
VACATION SCHEDULE
The following persons who will remain Company employees post-Closing have
the following amounts of vacation per year:
[Please provide.]
Schedule 2.11
Certain Changes
[PLEASE PROVIDE DETAILS REGARDING LIQUIDATION OF INTEREST IN 360
COMMUNICATIONS.]
Distribution of Excluded Assets and Liabilities prior to Closing as set forth on
Schedule 1.4
Schedule 2.12
Contracts
[PLEASE PROVIDE DETAIL REGARDING RUS/RTB DEBT OBLIGATIONS, AS WELL AS INTERNET
RESELLER AGREEMENT WITH GAMEWOOD DATA SYSTEMS, INC. AND ALL OTHER APPLICABLE
CONTRACTS.]
Schedule 2.14(a)
Owned property, Liens
A. Real Property:
[PLEASE PROVIDE LEGAL DESCRIPTIONS FOR ALL OWNED REAL PROPERTY.]
[PLEASE PROVIDE INFORMATION REGARDING ALL MORTGAGEE/UCC FILINGS WITH
RUS/RTB.]
B. Personal Property:
[PLEASE PROVIDE A COPY OF PERSONAL PROPERTY LIST.]
(PLEASE PROVIDE INFORMATION REGARDING ALL PLEDGES TO RUS/RTB.]
Schedule 2.14(b)
Leased Property
Schedule 2.14(c)
Regulatory/Zoning Compliance
Schedule 2.14(e)
Condition
Schedule 2.15
Litigation
Schedule 2.l6
Tax Matters
[PLEASE PROVIDE DETAILS WITH RESPECT TO ALL DEFERRED TAXES.]
Schedule 2.17
Bank and Brokerage Accounts
PEOPLES MUTUAL TELEPHONE COMPANY:
[PLEASE PROVIDE NAME OF BANK, ADDRESS, ACCOUNT NUMBER, CURRENT
BALANCE (AND THE DATE THEREOF) AND CONTACT PERSON AND TELEPHONE
NUMBER.]
[PLEASE PROVIDE THE SAME FOR ALL BROKERAGE/INVESTMENT ACCOUNTS.]
PEOPLES MUTUAL SERVICES COMPANY:
[PLEASE PROVIDE NAME OF BANK, ADDRESS, ACCOUNT NUMBER, CURRENT
BALANCE (AND THE DATE THEREOF) AND CONTACT PERSON AND TELEPHONE
NUMBER.]
[PLEASE PROVIDE THE SAME FOR ALL BROKERAGE/INVESTMENT ACCOUNTS.]
Schedule 2.19
Employee Benefit Plans
[Please provide details regarding profit-sharing plan.]
Schedule 2.20
Intellectual Property
Schedule 2.21
Environmental Matters
Schedule 2.22
Capital Expenditures and Investments
[PLEASE PROVIDE DETAILS REGARDING $400,0OO CAPITAL IMPROVEMENT AT NATAL
REMOTE (NEW BUILDING, SWITCH, CIRCUIT EQUIPMENT AND CABLE).]
[PLEASE ATTACH COPIES OF 1999 BUDGET (WITH DETAILS REGARDING YEAR TO DATE
EXPENDITURES) AND 2000 BUDGET]
Schedule 2.23
Dealings with Affiliates
[PLEASE PROVIDE DETAILS REGARDING ANY TRANSACTIONS WITH PEOPLES MUTUAL
SERVICES COMPANY.]
Schedule 2.24
Insurance
Schedule 2.25
Brokerage Commission
[PLEASE SCHEDULE OBLIGATION TO XXXXXXXXXX CAPITAL CORPORATION.]
Schedule 2.26
Permits
Schedule 2.27
Absence of Undisclosed Liabilities/Corporate Debt
Any and all of the foregoing may be prepaid, in whole or in part, on any
regular payment date, without prepayment penalty or premium.
Schedule 3.3
Consents and Authorizations of Purchaser
Approval of the Virginia State Corporation Commission is required.
Approval of the Towns of Gretna and Hurt, Virginia, and any and all other
municipalities as may be required in connection with the Company's telephone
franchises.
An application to the FCC is required in connection with the Company's
radio maintenance license.
Approval of a change of control of the Company is required pursuant to the
RUS Loan Agreements, as more specifically set forth in Schedule 2.3 hereto.
Approval of a change of control of People Mutual Telephone Company is
required pursuant to the guaranty agreements executed by the Company in favor
of the RTFC (of certain indebtedness of the Virginia PCS Alliance, L. C.), as
more specifically set forth in Schedule 2.3 hereto.
Approval of the Board of Directors of MJD Ventures, Inc. has been
obtained.
Xxxx-Xxxxx-Xxxxxx filing is required.
Schedule. 4.9
Interim Financial Information
Schedule 4.14
Article IV Disclosure Statement
