EXHIBIT 10.10
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ACQUISITION OF STOCK
OF
MJD COMMUNICATIONS, INC.
STOCK PURCHASE AGREEMENT
Dated as of March 6, 1997
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TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS............................................... 1
ARTICLE II
ACQUISITION OF SHARES..................................... 9
2.1 Acquisition and Issuance of Shares................... 9
2.2 Closing.............................................. 9
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BUYERS.............. 10
3.1 Status............................................... 10
3.2 Authorization and Binding Obligation................. 10
3.3 No Conflicts, etc.................................... 10
3.4 Brokers, Finders, etc................................ 11
3.5 Acquisition for Investment........................... 11
3.6 Investment Suitability............................... 11
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF MJD AND THE
COMPANY................................................... 11
4.1 Authorization and Binding Obligation................. 11
4.2 Title to Shares...................................... 12
4.3 Capital Stock........................................ 12
4.4 Status............................................... 13
4.5 No Conflicts, etc.................................... 14
4.6 Governmental Approvals and Authorizations............ 15
4.7 Compliance with Laws................................. 15
4.8 Real Property........................................ 16
4.9 Title to and Condition of Personal Property.......... 18
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Page
4.10 Intellectual Property............................... 19
4.11 Contracts........................................... 19
4.12 Personnel Information............................... 20
4.13 Employee Benefit Plans.............................. 21
4.14 Litigation.......................................... 22
4.15 Transaction with Affiliates......................... 23
4.16 Financial Statements, etc........................... 23
4.17 Absences of Undisclosed Liabilities................. 23
4.18 Absence of Changes or Events........................ 23
4.19 Insurance........................................... 25
4.20 Taxes............................................... 25
4.21 Environmental Matters............................... 26
4.22 Financing Statements................................ 27
4.23 Investments......................................... 27
4.24 Pending Acquisitions................................ 27
4.25 Broker, Finders, etc................................ 28
4.26 Bank Accounts....................................... 28
4.27 Local Exchange Related Matters...................... 28
4.28 Tariffs............................................. 28
4.29 Investment Company Act.............................. 29
4.30 Disclosure.......................................... 29
ARTICLE V
COVENANTS OF MJD AND THE COMPANY.......................... 29
5.1 Information Prior to Closing......................... 29
5.2 Conduct of Business.................................. 29
5.3 Third-Party Consents................................. 32
5.4 Sale and Issuance of Additional Shares............... 32
5.5 Renewal of Contracts................................. 32
5.6 No Inconsistent Action............................... 32
5.7 No Solicitation...................................... 33
5.8 Financial Statements................................. 33
5.9 Estoppel Certificates; Consent and Waiver............ 33
5.10 Consummation of Pending Acquisitions................ 34
5.11 Notice of Material Developments..................... 34
5.12 Further Actions..................................... 34
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Page
ARTICLE VI
CONDITIONS PRECEDENT TO THE BUYERS' OBLIGATION TO
CLOSE..................................................... 34
6.1 Representations, Warranties and Covenants............ 34
6.2 Governmental Consents................................ 35
6.3 Third-Party Consents................................. 35
6.4 Updated Tariff Schedule.............................. 35
6.5 Certificates......................................... 35
6.6 Adverse Proceedings.................................. 35
6.7 Financing Statements................................. 36
6.8 Additional Indebtedness.............................. 36
6.9 Fleet Repurchase; ALTA Repayment..................... 36
6.10 MJD Contribution.................................... 37
6.11 Management, Consulting and Severance Arrangements... 38
6.12 Equity Documents.................................... 38
6.13 No Material Adverse Effect.......................... 38
6.14 Amendment of Articles of Incorporation.............. 38
6.15 Reconstitution of Boards of Directors............... 39
6.16 Transaction and Advisory Fees....................... 39
6.17 Deliveries.......................................... 39
ARTICLE VII
CONDITIONS PRECEDENT TO THE COMPANY'S OBLIGATION
TO CLOSE.................................................. 39
7.1 Representations, Warranties and Covenants............ 39
7.2 Governmental Consents................................ 39
7.3 Certificates......................................... 40
7.4 Adverse Proceedings.................................. 40
7.5 Equity Documents..................................... 40
7.6 Deliveries........................................... 40
ARTICLE VIII
THE CLOSING............................................... 40
8.1 Documents to be Delivered by MJD and the Company..... 40
8.2 Documents to be Delivered by the Buyers.............. 41
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Page
ARTICLE IX
TAXES, FEES AND EXPENSES.................................. 42
ARTICLE X
SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
COVENANTS................................................. 42
ARTICLE XI
INDEMNIFICATION........................................... 42
11.1 Indemnification by MJD.............................. 42
11.2 Indemnification Procedures.......................... 44
11.3 Claims Termination Date............................. 45
11.4 Exclusive Remedy.................................... 45
ARTICLE XII
TERMINATION RIGHTS........................................ 46
12.1 Termination......................................... 46
12.2 Liability........................................... 47
ARTICLE XIII
OTHER PROVISIONS.......................................... 47
13.1 Publicity........................................... 47
13.2 Compliance with HSRA................................ 47
13.3 Benefit and Assignment.............................. 47
13.4 No Third-Party Beneficiaries........................ 48
13.5 Entire Agreement.................................... 48
13.6 Waiver.............................................. 48
13.7 Headings............................................ 48
13.8 Severability........................................ 48
13.9 Arbitration......................................... 49
13.10 Choice of Law...................................... 49
13.11 Notices............................................ 49
13.12 Counterparts....................................... 51
13.13 Further Assurances................................. 51
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SCHEDULES
4.3 Capital Stock
4.4 Status
4.5 No Conflicts
4.6 Governmental Approvals and Authorizations
4.8 Real Property
4.9 Title to Personal Property
4.10 Intellectual Property
4.11 Contracts
4.12 Personnel Information
4.13 Employee Benefit Plans
4.14 Litigation
4.15 Transaction with Affiliates
4.16 Indebtedness and Financial Statements
4.17 Absence of Undisclosed Liabilities
4.18 Absence of Changes or Events
4.19 Insurance
4.20 Taxes
4.21 Environmental Matters
4.22 Financing Statements
4.23 Investments
4.24 Pending Acquisitions
4.26 Bank Accounts
4.27 Access Lines
4.28 Tariffs
5.2(b) Conduct of Business
5.9 Estoppel Certificates
5.10 Consummation of Pending Acquisitions
6.3 Third-Party Consents
EXHIBITS
Exhibit A Registration Rights Agreement
Exhibit B Stockholders' Agreement
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STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of the 6th day of March, 1997,
among MJD Communications, Inc., a Delaware corporation (the "Company"), MJD
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Partners, L.P., a Delaware limited partnership ("MJD"), Carousel Capital
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Partners, L.P., a Delaware limited partnership ("Carousel"), Xxxxx Investment
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Associates V, L.P., a Delaware limited partnership ("KIA V"), and Xxxxx Equity
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Partners V, L.P., a Delaware limited partnership ("KEP V", and together with KIA
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V, "Xxxxx").
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RECITALS
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WHEREAS, the Company desires to issue, and Carousel, KIA V and KEP V
desire to acquire, an aggregate of 43,794 shares of the Company's Class A Voting
common stock, par value $.01 per share (the "Shares"), on the terms and
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conditions and for the consideration described in this Agreement;
NOW, THEREFORE, in consideration of the mutual promises, covenants,
representations and warranties made herein and of the mutual benefits to be
derived herefrom, the parties hereto intending legally to be bound agree as
follows:
ARTICLE I
DEFINITIONS
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The following terms when used herein have the meanings assigned to
them below. The singular shall include the plural, and the masculine shall
include the feminine and neuter, as the context requires. "Includes" or "is
including" shall mean "including, but not limited to".
1.1 "Affiliate" means a Person that (i) directly, or indirectly
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through one or more intermediaries, controls, or is controlled by, or is under
common control with, the Person specified or (ii) is a member of the immediate
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family of the Person specified.
1.2 "Agreement" means this Stock Purchase Agreement, including the
Exhibits and Schedules hereto.
1.3 "ALTA" means ALTA Subordinated Debt Partners II, L.P., a Delaware
limited partnership, ALTA Subordinated Debt Partners III, L.P., a Delaware
limited partnership, and their respective successors and assigns.
1.4 "ALTA Repayment" has the meaning set forth in Section 6.9 hereof.
1.5 "Applicable Law" means all applicable provisions of all (i)
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constitutions, treaties, statutes, laws (including, but not limited to, the
common law), rules, regulations, ordinances, codes or orders of any Governmental
Authority, (ii) Governmental Approvals and (iii) orders, decisions, rulings,
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injunctions, judgments, awards and decrees or consents of or agreements with any
Governmental Authority.
1.6 "Business Day," whether or not initially capitalized, means every
day of the week excluding Saturdays, Sundays and federal holidays.
1.7 "Buyers" means Carousel, KIA V and KEP V.
1.8 "Buyers Indemnitees" has the meaning set forth in Section 11.1(a)
hereof.
1.9 "Carousel" has the meaning set forth in the preamble to this
Agreement.
1.10 "Claims Termination Date" means the first anniversary of the
Closing Date.
1.11 "Closing" has the meaning set forth in Section 2.2 hereof.
1.12 "Closing Date" means the date on which the Closing occurs.
1.13 "Code" means the Internal Revenue Code of 1986, as amended,
together with all regulations and rulings issued thereunder by any Governmental
Authority.
1.14 "Collective Bargaining Agreements" means the collective
bargaining and other labor agreements set forth on Schedule 4.12 Part(b) hereto.
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1.15 "Common Stock" means the Company's Class A Voting common stock,
par value $.01 per share.
1.16 "Company" has the meaning set forth in the preamble to this
Agreement.
1.17 "Computer Programs" means all computer software, firmware,
programs and source disks, program documentation, tapes, manuals, forms, guides
and other materials with respect thereto.
1.18 "Consulting Agreement" means the Consulting Agreement, dated as
of January 2, 1995, by and between the Company and Bugger Associates, Inc., as
amended to the date hereof.
1.19 "Contracts" means (i) all contracts, agreements, commitments and
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orders for the sale, purchase or barter of materials, supplies, goods or
services or any combination of the foregoing, relating to the assets or business
of the Company or any Subsidiary or to which the Company or any Subsidiary is a
party, (ii) all leases for the use of personal property in connection with the
--
assets or business of the Company or any Subsidiary or to which the Company or
any Subsidiary is a party, (iii) all franchise or similar agreements relating to
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the assets or business of the Company or any Subsidiary or to which the Company
or any Subsidiary is a party, (iv) all Real Property Leases, (v) all loan
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agreements, indentures, letters of credit, mortgages, security agreements,
pledge agreements, notes, guarantees or other instruments relating to the assets
or business of the Company or any Subsidiary or to which the Company or any
Subsidiary is a party, (vi) all partnership, joint venture or other arrangements
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involving a sharing of profits or expenses relating to the assets or business of
the Company or any Subsidiary or to which the Company or any Subsidiary is a
party, (vii) all contracts, agreements or other arrangements to which the
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Company or any Subsidiary is a party with any holder of any capital stock or
other equity interest of the Company or any such Subsidiary (other than the
Company or another Subsidiary), (viii) all employment, consulting and severance
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contracts, agreements or other arrangements to which the Company or any
Subsidiary is a party, (ix) all leases, easements, rights of way, pole
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attachment agreements, license agreements for joint use of poles, and other
property rights to such earth stations, utility poles, real property, fixtures
and other similar items which pertain to the assets or business of the Company
or any Subsidiary and (x) all other written or oral contracts and agreements of
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whatever nature which pertain to the assets or business of the Company or any
Subsidiary or to which the Company or any Subsidiary is a party, including, but
not limited to, those contracts and agreements set forth on Schedules 4.8, 4.11
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and 4.12 hereto. Notwithstanding the
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foregoing, the term "Contract" shall not include any purchase order, related
group of purchase orders or contracts entered into in the ordinary course of
business which provide for payment of less than $50,000 in the aggregate.
1.20 "Environmental Laws" means all applicable local, state and
federal statutes and regulations relating to the protection of human health and
safety or the environment.
1.21 "ERISA" means the Employee Retirement Income Security Act of
1974, as amended, together with the regulations and rulings issued thereunder by
any Governmental Authority.
1.22 "Executive Officers" means the Chairman, the President, the
Chief Executive Officer, the Chief Financial Officer, the Chief Operating
Officer, the Vice Presidents and the Treasurer of the general partner of MJD,
the Company and each Subsidiary.
1.23 "Financial Advisory Agreements" means the Financial Advisory
Agreements, each dated as of the Closing Date, between the Company and each of
Xxxxx and Carousel or any of their respective Affiliates, in form and substance
reasonably satisfactory to the Buyers.
1.24 "Financial Statements" means (i) the audited consolidated and
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consolidating balance sheets of the Company and subsidiaries as of December 31,
1994 and the related statements of operations and cash flows for the fiscal year
then ended, audited by Coopers & Xxxxxxx L.L.P., (ii) the audited consolidated
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and consolidating balance sheets of the Company and subsidiaries as of December
31, 1995 and the related statements of operations and cash flows for the fiscal
year then ended, audited by KPMG Peat Marwick LLP, (iii) the unaudited
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consolidated balance sheet of the Company and subsidiaries as of December 31,
1996 and the related statement of operations for the fiscal year then ended and
(iv) the unaudited consolidated balance sheets of the Company and subsidiaries
--
as of March 31, 1996, June 30, 1996 and September 30, 1996 and the related
statements of operations for the fiscal quarters then ended.
1.25 "Fleet" means Fleet Venture Resources, Inc., a Rhode Island
corporation, Fleet Equity Partners VI, L.P., a Delaware limited partnership,
Xxxxxxxx Partners II, L.P., a Delaware limited partnership, and their respective
successors and assigns.
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1.26 "Fleet Repurchase" has the meaning set forth in Section 6.9
hereof.
1.27 "GAAP" means United States generally accepted accounting
principles consistently applied.
1.28 "Government Approvals" has the meaning set forth in Section 4.6
hereof.
1.29 "Governmental Authority" means any nation or government, any
state or other political subdivision thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, including, but not limited to, any government authority, agency,
board, commission, court, department or instrumentality of the United States,
any State of the United States or any political subdivision thereof, and any
tribunal or arbitrator of competent jurisdiction, and any self-regulatory
organization.
1.30 "Hazardous Substance" means asbestos-containing material and any
and all hazardous or toxic substances, materials or wastes as defined or listed
under the Resource Conservation and Recovery Act, the Toxic Substances Control
Act, the Comprehensive Environmental Response, Compensation and Liability Act or
any comparable state statute or any regulation promulgated under any of such
federal or state statutes or under any other Environmental Law.
1.31 "HSRA" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended, and the regulations adopted thereunder.
1.32 "Indebtedness" means with respect to the Company or any
Subsidiary (i) all indebtedness of the Company or such Subsidiary for money
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borrowed (including the current portion of any long-term indebtedness) or for
the deferred purchase price of property, (ii) any other indebtedness of the
--
Company or such Subsidiary which is evidenced by a note, bond, debenture or
similar instrument, (iii) all interest, fees, premiums and other charges or
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amounts payable of any kind with respect to any indebtedness referred to in
clauses (i) and (ii) above, (iv) all guarantees and arrangements of the Company
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or such Subsidiary guaranteeing or intending to guarantee any indebtedness of
any other Person and (v) all obligations of the Company or such Subsidiary under
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any lease of property, real or personal, the obligations in respect of which are
required in accordance with GAAP to be capitalized on a balance sheet of the
lessee.
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1.33 "Indemnified Party" has the meaning set forth in Section 11.2(a)
hereof.
1.34 "Intellectual Property" means United States (federal and state)
trademarks, service marks, trade names, trade dress, copyrights, and similar
rights, including registrations and applications to register or renew the
registration of any of the foregoing, United States patent and patent
applications, and inventions, processes, designs, formulae, trade secrets, know-
how, confidential business and technical information, Computer Programs, data
and documentation, and all similar intangible property rights, tangible
embodiments of any of the foregoing (in any medium including electronic media),
and licenses or permits to use any of the foregoing.
1.35 "Intellectual Property Assets" has the meaning set forth in
Section 4.10 hereof.
1.36 "Xxxxx" has the meaning set forth in the preamble to this
Agreement.
1.37 "KEP V" has the meaning set forth in the preamble to this
Agreement.
1.38 "KIA V" has the meaning set forth in the preamble to this
Agreement.
1.39 "Knowledge of MJD" means the actual knowledge of the Executive
Officers.
1.40 "Liens" means all debts, liens, security interests, mortgages,
pledges, judgments, trusts, adverse claims, liabilities, encumbrances and other
impairments of title, other than, in the case of Sections 4.5, 4.9, 4.10 and
5.2(b)(v) hereof only, any Permitted Encumbrance.
1.41 "Losses" has the meaning set forth in Section 11.1 hereof.
1.42 "Management Services Agreement" means the Management Services
Agreement, dated as of January 1, 1997, by and between MJD Partners, Inc. and
the Company, as amended to the date hereof.
1.43 "Material Adverse Effect" means (i) a material adverse effect on
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the business, assets, properties, liabilities, revenues, costs and expenses,
income before
6
provision for income taxes, operations, prospects or condition, financial or
otherwise, of the Company and the Subsidiaries, taken as a whole, or (ii) any
--
material impairment of the ability of any party hereto to consummate the
transactions contemplated by this Agreement. In determining whether any
individual event would result in a Material Adverse Effect, notwithstanding that
such event does not of itself have such effect, a Material Adverse Effect shall
be deemed to have occurred if the cumulative effect of such event and all other
then existing events would result in a Material Adverse Effect.
1.44 "MJD" has the meaning set forth in the preamble to this
Agreement.
1.45 "MJD Exchange Documents" has the meaning set forth in Section
6.10 hereof.
1.46 "MJD Partners Shares" means the shares of Common Stock owned by
MJD on the date hereof, together with any additional shares of Common Stock
acquired by MJD after the date hereof.
1.47 "Multiemployer Plan" has the meaning set forth in Section 4.13
hereof.
1.48 "Notes" means the Unsecured Subordinated Notes issued by the
Company in favor of each of Bugger Associates, Inc., Xxxxx Xxxxxxxx, Xxxxxx X.
Xxxxxxx and Xxxx X. Xxxxxx.
1.49 "Owned Real Property" means all real property and interests in
real property owned by the Company or any Subsidiary, together with all
structures, facilities, improvements, fixtures, equipment and items of property
located thereon or attached or appurtenant thereto, and all easements and other
appurtenances for the benefit thereof.
1.50 "Permitted Encumbrances" means (i) liens for Taxes, assessments,
-
water and sewer charges, license fees, and all other fees, special assessments
and charges assessed or imposed by a public body upon the Company's or any
Subsidiary's assets or any part thereof or the operation thereof, provided such
fees, assessments or Taxes are not yet due and payable (or such Taxes are being
contested in good faith in appropriate proceedings and for which adequate
reserves have been established in accordance with GAAP), (ii) Liens on the
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Company's or any Subsidiary's assets or properties pursuant to the terms of any
Indebtedness (other than any Liens relating to
7
any obligation described in Section 6.9 hereof) and (iii) other encumbrances
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which do not materially impair or adversely effect the use for which the asset
or business in question is currently utilized or the value of such asset or
business.
1.51 "Person" means an individual, corporation, partnership, limited
liability company, association, trust or other entity or organization, including
any Governmental Authority.
1.52 "Plan" has the meaning set forth in Section 4.13 hereof.
1.53 "Purchase Price" has the meaning set forth in Section 2.1
hereof.
1.54 "Real Property Lease" means any lease, sublease, license or
occupancy agreement, including any amendments thereto, pursuant to which the
Company or any Subsidiary is the lessee, sublessee, licensee or occupant of real
property, together with all easements and other appurtenances for the benefit
thereof.
1.55 "Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the Closing Date, among the Company, Carousel, KIA V, KEP
V, MJD and the other stockholders of the Company party thereto, substantially in
the form of Exhibit A hereto.
1.56 "Securities Act" means the Securities Act of 1933, as amended.
1.57 "Shares" has the meaning set forth in the preamble to this
Agreement.
1.58 "Stockholders' Agreement" means the Stockholders' Agreement,
dated as of the Closing Date, among the Company, Carousel, KIA V, KEP V, MJD,
MJD Partners, Inc., Bugger Associates, Inc., Xxxxxx X. Xxxxxxxxx, Xxxxx
Xxxxxxxx, Xxxxxx X. Xxxxxxx, Xxxx X. Xxxxxx and the other stockholders of the
Company party thereto, substantially in the form of Exhibit B hereto.
1.59 "Subsidiary" means MJD Holdings Corp. and any other corporation,
partnership, limited liability company or other entity of which the Company or
MJD Holdings Corp. owns, directly or indirectly, at least a majority of the
securities or other ownership interests having by the terms thereof ordinary
voting power to elect a majority of the board of directors or other persons
performing similar functions of such corporation, partnership, limited liability
company or other entity, including, but not limited to, (i) Big Xxxxx Telecom,
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Inc., Bluestem Telephone
8
Company, Breadbasket Enterprises, Inc., C&E Acquisition Corp., Columbine
Acquisition Corp., Kadoka Telephone Co., MJD Services Corp., MJD Ventures, Inc.,
MJD Telecom, Inc., Northland Telephone Company of Maine, Inc., Odin Telephone
Exchange, Inc., Xxxxxx Telephone Company, ST Broadcasting Company, Inc., ST
Communications, Inc., ST Computer Resources, Inc., STE/NE Acquisition Corp.
(d/b/a Northland Telephone Co. of Vermont, Inc.), ST Enterprises, Ltd., STE
Finance Company, Inc., ST Long Distance, Inc., ST Paging, Inc. and Sunflower
Telephone Company, Inc. and (ii) Chautauqua & Erie Telephone Corporation and C-R
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Communications, Inc. upon the closing of the relevant pending acquisition set
forth on Schedule 4.24 hereto.
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1.60 "Tax" means any federal, state or local income, alternative,
minimum, accumulated earnings, personal holding company, franchise,
unincorporated business, capital stock, profits, windfall profits, gross
receipts, sales, use, value added, transfer, registration, stamp, premium,
excise, customs duties, severance, environmental (including taxes under
section 59A of the Code), real property, personal property, ad valorem,
occupancy, license, occupation, employment, payroll, social security,
disability, unemployment, workers' compensation, withholding, estimated or
similar tax, duty, fee, assessment or other governmental charge or deficiencies
thereof (including all interest and penalties thereon and additions thereto).
ARTICLE II
ACQUISITION OF SHARES
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2.1 Acquisition and Issuance of Shares. Subject to the terms and
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conditions hereof, the Company shall issue all of the Shares to the Buyers and
the Buyers shall acquire all of the Shares from the Company for an aggregate
purchase price of $15,000,000 (the "Purchase Price"), payable in cash at the
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Closing in the manner set forth in Section 2.2 hereof.
2.2 Closing. The closing of the issuance and acquisition of the
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Shares (the "Closing") shall take place at the offices of Debevoise & Xxxxxxxx,
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000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 at 10:00 a.m. on the next Business
Day that is five days after the condition set forth in Section 6.3 hereof has
been satisfied (or waived by the Buyers), or on such other date as the parties
may agree to in writing. Notwithstanding the foregoing, the Closing shall not
take place prior to the date that is 30 days after receipt by the Buyers of the
audited consolidated and consolidating
9
balance sheets and related statements of operations and cash flows referred to
in Section 5.8(b) hereof. At the Closing:
(a) the Company shall deliver to Carousel, free and clear of any
Liens, stock certificates representing 21,897 Shares;
(b) the Company shall deliver to Xxxxx, free and clear of any Liens,
stock certificates representing 21,897 Shares;
(c) Carousel shall pay $7,500,000 of the Purchase Price to the
Company for its Shares so delivered by the Company, by wire transfer of
immediately available funds to the account of the Company designated at
least two business days prior to the Closing Date; and
(d) Xxxxx shall pay $7,500,000 of the Purchase Price to the Company
for their Shares so delivered by the Company, by wire transfer of
immediately available funds to the account of the Company designated at
least two business days prior to the Closing Date.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BUYERS
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Each of the Buyers severally as to itself represents and warrants to
the Company as follows:
3.1 Status. Such Buyer is a limited partnership duly organized,
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validly existing and in good standing under the laws of the State of Delaware.
3.2 Authorization and Binding Obligation. Such Buyer has all
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necessary partnership power and authority to enter into and perform its
obligations under this Agreement, the Stockholders' Agreement, the Registration
Rights Agreement and the transactions contemplated hereby and thereby. The
execution, delivery and performance of this Agreement, the Stockholders'
Agreement and the Registration Rights Agreement by such Buyer has been duly and
validly authorized by all necessary partnership action on its part and this
Agreement has been duly executed and delivered by such Buyer. This Agreement
constitutes, and once executed by such Buyer the Stockholders' Agreement and the
Registration Rights Agreement will constitute, the legal, valid and binding
obligation of such Buyer, enforceable against
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such Buyer in accordance with their respective terms, except as limited by laws
affecting the enforcement of creditors' rights generally or equitable
principles.
3.3 No Conflicts, etc. The execution, delivery and performance by
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such Buyer of this Agreement, the Stockholders' Agreement and the Registration
Rights Agreement and the consummation of the transactions contemplated hereby
and thereby, do not and will not conflict with, contravene, result in a
violation or breach of or default under (with or without the giving of notice or
the lapse of time, or both), create in any other Person a right or claim of
termination, amendment, modification, acceleration or cancellation of, or result
in or require the creation of any Lien (or any obligation to create any Lien) on
any of the properties or assets of such Buyer under (a) any Applicable Law, (b)
- -
any provision of the certificate of limited partnership or agreement of limited
partnership of such Buyer, or (c) any contract, agreement or other instrument to
-
which such Buyer is a party or by which its properties or assets may be bound,
except, in the case of clause (c), for violations, breaches and defaults that,
individually and in the aggregate, would not cause a Material Adverse Effect.
3.4 Brokers, Finders, etc. All negotiations relating to this
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Agreement and the transactions contemplated hereby have been carried on without
the participation of any Person acting on behalf of such Buyer or any of its
Affiliates in such manner as to, and the transactions contemplated hereby will
not otherwise, give rise to any valid claim against the Company or any
Subsidiary for any brokerage or finder's commission, fee or similar
compensation.
3.5 Acquisition for Investment. Such Buyer is acquiring the Shares
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solely for investment, with no present intention to resell the Shares in
violation of applicable securities laws. Such Buyer hereby acknowledges that
the Shares have not been registered pursuant to the Securities Act and may not
be transferred in the absence of such registration or an exemption therefrom
under such Act.
3.6 Investment Suitability. Such Buyer has sufficient knowledge and
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experience in financial and business matters so as to be capable of evaluating
the merits and risks of its investment in the Shares, and such Buyer is capable
of bearing the economic risks of such investment, including a complete loss of
its investment in the Shares.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF MJD AND THE COMPANY
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MJD and the Company jointly and severally represent and warrant to
each of the Buyers as follows:
4.1 Authorization and Binding Obligation. Each of MJD and the
------------------------------------
Company has all necessary partnership or corporate power and authority, as the
case may be, to enter into and perform its obligations under this Agreement, the
Stockholders' Agreement, the Registration Rights Agreement and the MJD Exchange
Documents and the transactions contemplated hereby and thereby. The execution,
delivery and performance of this Agreement, the Stockholders' Agreement, the
Registration Rights Agreement and the MJD Exchange Documents by each of MJD and
the Company has been duly and validly authorized by all necessary partnership or
corporate action, as the case may be, on its part and this Agreement has been
duly executed and delivered by MJD and the Company. This Agreement constitutes,
and once executed by MJD and the Company the Stockholders' Agreement, the
Registration Rights Agreement and the MJD Exchange Documents will constitute,
the legal, valid and binding obligation of each of MJD and the Company,
enforceable against each of MJD and the Company in accordance with their
respective terms, except as limited by laws affecting the enforcement of
creditors' rights generally or equitable principles.
4.2 Title to Shares. Upon the delivery of and payment for the Shares
---------------
at the Closing as provided for in this Agreement, each of the Buyers will
acquire good and valid title to all such Shares being sold to it by the Company,
free and clear of all Liens, other than any Liens created by or on behalf of
such Buyer.
4.3 Capital Stock. Immediately prior to the Closing, the authorized
-------------
capital stock of the Company will consist of 130,000 shares of Common Stock, of
which 38,370 shares will be issued and outstanding and owned of record by the
Persons indicated on Schedule 4.3 hereto, 125,000 shares of Class B Nonvoting
------------
common stock, par value $.01 per share, of which no shares will be issued and
outstanding, 70,000 shares of Series A 11% Cumulative Redeemable Convertible
Voting preferred stock, par value $.01 per share, of which 70,000 shares will be
issued and outstanding and owned of record by the Persons indicated on Schedule
--------
4.3 hereto, 55,000 shares of Series B 11% Cumulative Redeemable Convertible
---
Nonvoting preferred stock, par value $.01 per share, of which no shares will be
issued and outstanding, and 290,000 shares of Series C 14% Cumulative Redeemable
Nonvoting
12
preferred stock, par value $.01 per share, of which 183,060 shares will be
issued and outstanding and owned of record by the Persons indicated on
Schedule 4.3 hereto. Immediately following the Closing and after giving effect
------------
to the transactions contemplated by this Agreement, the authorized capital stock
of the Company will consist of 130,000 shares of Common Stock, of which 87,588
shares will be issued and outstanding on a fully-diluted basis and owned of
record by the Persons indicated on Schedule 4.3 hereto, 125,000 shares of Class
------------
B Nonvoting common stock, par value $.01 per share, of which no shares will be
issued and outstanding, and 13,500 shares of Series C 14% Cumulative Redeemable
Nonvoting preferred stock, par value $.01 per share, of which 13,016.40 shares
will be issued and outstanding and owned of record by the Persons indicated on
Schedule 4.3 hereto. Schedule 4.3 hereto also lists (a) the authorized capital
------------ ------------ -
stock of each Subsidiary and (b) all of the issued and outstanding capital stock
-
and other equity interests of MJD, the Company and the Subsidiaries, together
with the name and address of each holder thereof and the amount owned by such
holder. All issued and outstanding capital stock and other equity interests of
MJD, the Company and the Subsidiaries have been duly authorized and validly
issued, are fully paid and non-assessable and are, and from the date hereof (or,
in the case of Chautauqua & Erie Telephone Corporation and C-R Communications,
Inc., the date of the closing of the acquisition of such entity by the Company
or a Subsidiary, as the case may be) through the Closing Date will be, owned
beneficially and of record by the Persons indicated on Schedule 4.3 hereto, free
------------
and clear of all Liens, except as set forth on Schedule 4.3 hereto. There are
------------
no preemptive or similar rights on the part of any holders of capital stock or
other equity interests of MJD, the Company or any Subsidiary, except as set
forth on Schedule 4.3 hereto. Except as set forth in Schedule 4.3 hereto, no
------------ ------------
subscriptions, options, warrants, calls, conversions or other rights,
agreements, commitments, arrangements or understandings of any kind obligating
MJD, the Company or any Subsidiary, contingently or otherwise, to issue or sell,
or cause to be issued or sold, any capital stock or other equity interest of
MJD, the Company or any Subsidiary, or securities convertible into or
exchangeable for any capital stock or other equity interest of MJD, the Company
or any Subsidiary, are outstanding, and no authorization therefor has been
given. Except as set forth in Schedule 4.3 hereto, there are no outstanding
------------
contractual obligations of MJD, the Company or any Subsidiary to repurchase,
redeem or otherwise acquire any of its outstanding capital stock or other
equity interests. Except as set forth in Schedule 4.3 hereto, no holder of any
------------
outstanding capital stock or other equity interest of MJD, the Company or any
Subsidiary has the right to cause MJD, the Company or such Subsidiary to
repurchase or redeem such capital stock or other equity interest.
4.4 Status. (a) Each of MJD, the Company and the Subsidiaries is a
------
limited partnership or corporation, as the case may be, duly organized, validly
existing
13
and in good standing under the laws of its respective state of formation
or incorporation, as the case may be, which state is set forth on
Schedule 4.4 Part(a) hereto, and has full partnership or corporate power and
--------------------
authority, as the case may be, to conduct its business and to own or lease and
to operate its properties as and in the places where such business is conducted
and such properties are owned, leased or operated. The Company was incorporated
under the laws of the State of Delaware on February 25, 1991.
(b) Each of the Company and the Subsidiaries is duly qualified or
licensed to do business and is in good standing in each of the jurisdictions
specified in Schedule 4.4 Part(b), which includes each jurisdiction in which the
--------------------
nature of its business or the properties owned or leased by it makes such
qualification or licensing necessary.
(c) True and complete copies of the articles of incorporation, by-
laws and other organizational documents of the Company and each Subsidiary, as
amended to and including the date hereof, have been delivered to the Buyers.
Neither the Company nor any Subsidiary is in violation of any provision of its
articles of incorporation, by-laws or other organizational documents. The
stock books and stock transfer records of the Company and each Subsidiary, true
and complete copies of which have been made available to the Buyers, contain
true and complete records of all issuances and transfers of capital stock and
other equity interests of the Company and the Subsidiaries. The minute books,
covering the last three fiscal years and the period since the end of the last
fiscal year, of the Company and each Subsidiary, which have been made available
to the Buyers, correctly reflect in all material respects (i) all corporate
-
actions taken by the stockholders of each such entity that such stockholders
were required by Applicable Law to take, (ii) all corporate actions taken by the
--
board of directors of each such entity that such board of directors was required
by Applicable Law to take and (iii) all other corporate actions taken by the
---
stockholders and the board of directors of each such entity from the date of its
formation to and including the date hereof.
(d) Schedule 4.4 Part(d) hereto lists the name of the officers and
--------------------
directors of the Company and each Subsidiary.
(e) Schedule 4.4 Part(e) hereto lists the principal business
--------------------
activities of the Company and each Subsidiary and the principal geographical
area served by the Company and each Subsidiary.
14
4.5 No Conflicts, etc. Except as set forth in Schedule 4.5 hereto,
----------------- ------------
the execution, delivery and performance by MJD and the Company of this
Agreement, the Stockholders' Agreement, the Registration Rights Agreement and
the MJD Exchange Documents and the consummation of the transactions contemplated
hereby and thereby, do not and will not conflict with, contravene, result in a
violation or breach of or default under (with or without the giving of notice or
the lapse of time, or both), create in any other Person a right or claim of
termination, amendment, modification, acceleration or cancellation of, or result
in or require the creation of any Lien (or any obligation to create any Lien) on
any of the properties or assets of MJD, the Company or any Subsidiary under (a)
-
any Applicable Law, (b) any provision of the certificate of limited partnership,
-
agreement of limited partnership, articles of incorporation, by-laws or other
organizational documents, as the case may be, of MJD, the Company or any
Subsidiary, or (c) any Contract or any contract, agreement or other instrument
-
to which MJD is a party or by which any of MJD's, the Company's or any
Subsidiary's properties or assets may be bound, except, in the case of clause
(c), for violations, breaches and defaults that, individually and in the
aggregate, would not cause a Material Adverse Effect. Except for the
requirements of the HSRA or as specifically disclosed in Schedule 4.6 hereto, no
------------
Governmental Approval or other consent of or registration or filing with any
Person is required to be obtained or made by MJD, the Company or any Subsidiary
in connection with the execution and delivery of this Agreement, the
Stockholders' Agreement, the Registration Rights Agreement or the MJD Exchange
Documents or the consummation of the transactions contemplated hereby or
thereby.
4.6 Governmental Approvals and Authorizations. Except as set forth
-----------------------------------------
in Schedule 4.6 hereto and except for the requirements of the HSRA, all
------------
approvals, permits, qualifications, authorizations, licenses, franchises,
consents, orders, registrations and other approvals (collectively, the
"Governmental Approvals") of and registrations and filings with all Governmental
-----------------------
Authorities which are (a) necessary in order to permit the Company and the
-
Subsidiaries to carry on their respective businesses or for the lawful
consummation of the transactions contemplated by this Agreement, including, but
not limited to, the Governmental Approvals of the state, counties and
municipalities served or anticipated to be served by the Company or any
Subsidiary after the Closing, or (b) material to the installation, conduct and
-
operation of the respective businesses of the Company and the Subsidiaries have
been obtained or made and are in full force and effect, except where the failure
to make any such registration or filing or to obtain or maintain any such
Governmental Approval in full force and effect would not cause a Material
Adverse Effect. Each such registration and filing and each of the Governmental
Approvals is listed in Schedule 4.6 hereto and the Company or MJD has delivered
------------
or made available to the Buyers true and complete
15
copies of all such registrations and filings and Governmental Approvals,
including any and all amendments and other modifications to such items. There
has been no material violation, cancellation, suspension, revocation or default
of any Governmental Approval or any notice of violation, cancellation,
suspension, revocation, default or dispute affecting any Governmental Approval,
and, to the Knowledge of MJD, no basis exists for any such action, including,
but not limited to, as a result of the consummation of the transactions
contemplated by this Agreement.
4.7 Compliance with Laws. Neither MJD nor the Company nor any
--------------------
Subsidiary is in conflict with or in violation or breach of or default in any
material respect under (i) any Applicable Law or (ii) any provision of its
- --
organizational documents and neither MJD nor the Company nor any Subsidiary has
received any written notice or, to the Knowledge of MJD, any other notice
alleging any such conflict, violation, breach or default. Without limiting
the generality of the foregoing, neither the Company nor any Subsidiary nor any
of their respective officers or directors, or, to the Knowledge of MJD, any
employee, stockholder or other representative of the Company or any Subsidiary,
has, directly or indirectly, made or authorized any payment, contribution, or
gift of money, property or services in violation of any Applicable Law (i) as a
-
kickback or bribe to any Person or (ii) to any political organization or the
--
holder of, or any aspirant to, any elective or appointed office of any
Governmental Authority. There are no outstanding judgments, orders, writs or
decrees of any Governmental Authority binding upon the Company or any Subsidiary
or any of their respective assets.
4.8 Real Property. (a) Schedule 4.8 Part (a) hereto contains a
------------- ---------------------
complete and correct list of all Owned Real Property with a book value in excess
of $100,000, together with a description of each parcel of such Owned Real
Property. Except as set forth in Schedule 4.8 Part (a) hereto, the Company and
---------------------
the Subsidiaries have good and marketable fee title in the Owned Real Property,
including the buildings, structures and other improvements thereon, free and
clear of all Liens, except for Permitted Encumbrances and for utility and
similar easements that do not individually or in the aggregate materially impair
or adversely effect the use for which such Owned Real Property is currently
utilized or the value of such Owned Real Property. The Company or MJD has
delivered to the Buyers true and correct copies of any material title insurance
commitments, title insurance policies and surveys in MJD's, the Company's or any
Subsidiary's possession relating to each parcel of Owned Real Property.
(b) Schedule 4.8 Part (b) hereto contains a complete and correct list
---------------------
of all Real Property Leases (i) relating to real property on which switching
-
equipment is
16
located, (ii) which require annual rental or similar payments of more than
--
$50,000 or (iii) which the Company deems material to the business or operations
---
of the Company or any Subsidiary, setting forth the address, landlord
and tenant for each such Real Property Lease, describing the premises and all
improvements leased pursuant to each such Real Property Lease, listing the
expiration date of, the current annual rent paid under each such Real Property
Lease and whether such Real Property Lease contains any renewal or purchase
options. Except for the Owned Real Property and the Real Property Leases, no
real property is used or occupied by the Company or any Subsidiary.
(c) Except as set forth on Schedule 4.8 Part (c) hereto, each parcel
---------------------
of Owned Real Property and the current use and operation of such real property
conform in all material respects to all restrictive covenants, conditions,
easements, building, subdivision, zoning and similar codes and federal, state
and local laws, regulations, rules, orders and ordinances and neither MJD nor
the Company nor any Subsidiary has received any written notice of any material
violation or claimed violation of any such restrictive covenant, condition or
easement, or any building, subdivision, zoning or similar code, or any federal,
state or local law, regulation, rule, order or ordinance. Except as set forth on
Schedule 4.8 Part (c) hereto, no current use of the Owned Real Property by the
---------------------
Company or any Subsidiary is dependent on a non-conforming use or other
Governmental Approval, the absence of which would cause a Material Adverse
Effect. The improvements on the Owned Real Property are in good working
condition and repair, reasonable wear and tear excepted. Each parcel of Owned
Real Property is assessed for real estate tax purposes as a wholly independent
lot.
(d) Except as set forth on Schedule 4.8 Part (d) hereto, the
---------------------
improvements upon each parcel of real property leased by the Company or any
Subsidiary and the current use and operation of such real property conform in
all material respects to all restrictive covenants, conditions, easements,
building, subdivision, zoning and similar codes and federal, state and local
laws, regulations, rules, orders and ordinances and neither MJD nor the Company
nor any Subsidiary has received any written notice of any violation or claimed
violation of any such restrictive covenant, condition or easement, or any
building, subdivision, zoning or similar code, or any federal, state or local
law, regulation, rule, order or ordinance. Except as set forth on Schedule 4.8
------------
Part (d) hereto, the premises which are the subject of the Real Property Leases
--------
are zoned for the purposes for which they are currently being used by the
Company and the Subsidiaries. The improvements on the real property premises
which are the subject of the Real Property Leases are in good working condition
and repair.
17
(e) There is no pending or, to the Knowledge of MJD, threatened or
contemplated action to take by eminent domain or otherwise to condemn any
portion of the Owned Real Property or any portion of any premises which are the
subject of the Real Property Leases and neither MJD nor the Company nor any
Subsidiary has received written notice thereof. There exists no writ,
injunction, decree, order or judgment, nor any litigation, pending or to the
Knowledge of MJD, threatened, relating to the ownership, use, lease, occupancy
or operation of the Owned Real Property or any of the premises which are the
subject of the Real Property Leases, except for the existence of which would not
individually or in the aggregate materially impair or adversely effect the use
for which such real property is currently utilized or the value of such real
property.
(f) Each Real Property Lease is legal, valid, binding, enforceable
and in full force and effect. Neither the Company nor any Subsidiary nor, to
the Knowledge of MJD, any other party is in material default, violation or
breach under any Real Property Lease, and, to the Knowledge of MJD, no event has
occurred and is continuing that constitutes or, with notice or the passage of
time or both, would constitute a material default, violation or breach
thereunder. No material amount payable under any Real Property Lease is past
due. Neither MJD nor the Company nor any Subsidiary has received any written
notice of a material default, offset or counterclaim under any Real Property
Lease or any other communication asserting non-compliance with any Real Property
Lease. Except as set forth on Schedule 4.8 Part(f) hereto, the Company and the
--------------------
Subsidiaries have the exclusive right to use and occupy the premises leased
under each Real Property Lease. The Company and the Subsidiaries enjoy peaceful
and undisturbed possession of the premises leased by the Company and the
Subsidiaries under each Real Property Lease. Except as set forth on Schedule
--------
4.8 Part (f) hereto, the Company and each Subsidiary has good and valid title to
------------
the leasehold estate under its respective Real Property Leases, free and clear
of all Liens, except for lessors' interests in the Real Property. The Company
or MJD has delivered to the Buyers complete and correct copies of the Real
Property Leases listed on Schedule 4.8 Part (b) hereto, together, in the case of
---------------------
any subleases or similar occupancy agreements, with copies of all overleases.
4.9 Title to and Condition of Personal Property. (a) The Company
-------------------------------------------
and each Subsidiary has good and valid title to all tangible personal property
which it owns, including all tangible personal property reflected in the
unaudited consolidated balance sheet of the Company and subsidiaries as of
December 31, 1996 included in the Financial Statements as being owned by the
Company and such Subsidiary, except for tangible personal property disposed of
in the ordinary course of business and consistent with prior practice since
December 31, 1996, in each case free and clear of all Liens,
18
except as set forth on Schedule 4.9 hereto. Except as set forth in
------------
Schedule 4.9 hereto, the tangible personal property of the Company and the
------------
Subsidiaries is, in the aggregate, all of the tangible personal property
required to conduct the business of the Company and the Subsidiaries as
presently conducted. The Company and the Subsidiaries have maintained all such
material tangible personal property in good repair, working order and operating
condition, subject only to ordinary wear and tear.
(b) On the Closing Date, the Company will own or have the right to
use, directly or indirectly, all assets, properties, rights, franchises, claims
and agreements of every kind and description necessary to conduct the business
and operations of the Company and the Subsidiaries as presently conducted.
4.10 Intellectual Property. Schedule 4.10 hereto contains a complete
--------------------- -------------
and correct list and description of all Intellectual Property which is used in,
or otherwise material to, the business of the Company and the Subsidiaries as
presently conducted (the "Intellectual Property Assets"). Each Intellectual
----------------------------
Property Asset is either owned or validly licensed by the Company and the
Subsidiaries and Schedule 4.10 hereto identifies which Intellectual Property
-------------
Assets are so owned, which are so licensed and which entity is the owner or
licensee of each such Intellectual Property Asset. The Company or MJD has
delivered to the Buyers copies of all material documents and true and complete
memoranda describing the terms of any oral agreements regarding Intellectual
Property Assets, if any, establishing such rights, licenses or other authority.
There is no pending or, to the Knowledge of MJD, threatened proceeding or
litigation affecting, or with respect to, any Intellectual Property Assets. The
Company and each Subsidiary is in material compliance with the terms of any
license of an Intellectual Property Asset and neither MJD nor the Company nor
any Subsidiary has received any written notice of, and to the Knowledge of MJD
there is not, any infringement or unlawful use of the Intellectual Property
Assets. The conduct of the business of the Company and the Subsidiaries as
presently conducted does not infringe in any material respect with the rights of
any third party in respect of any Intellectual Property. Except as disclosed in
Schedule 4.10 hereto, each Intellectual Property Asset owned by the Company and
-------------
the Subsidiaries is owned free and clear of all Liens. Except as disclosed in
Schedule 4.10 hereto, neither the Company nor any Subsidiary has sold, licensed
-------------
or otherwise disposed of any of the Intellectual Property Assets to any Person
and neither the Company nor any Subsidiary has agreed to indemnify any Person
for any patent, trademark or copyright infringement. Schedule 4.10 hereto lists
-------------
all of the Intellectual Property Assets which have been registered with, filed
in or issued by, as the case may be, the United States Patent and Trademark
Office and United States Copyright Office or other filing offices, domestic or
foreign.
19
4.11 Contracts. (a) Schedule 4.11 hereto lists all Contracts as of
--------- -------------
the date of this Agreement, except Real Property Leases which are listed in
Schedule 4.8 Part (b) hereto, Collective Bargaining Agreements which are listed
---------------------
in Schedule 4.12 Part(a) hereto, Contracts relating to employment or consulting
---------------------
which are listed in Schedule 4.12 Part(c) hereto, Plans which are listed in
---------------------
Schedule 4.13 hereto and the policies relating to insurance which are listed in
-------------
Schedule 4.19 hereto.
-------------
(b) The Company or MJD has delivered to the Buyers true and complete
copies of all written Contracts and true and complete memoranda describing
the terms of all oral Contracts listed in Schedule 4.11 hereto, together with a
-------------
complete and correct copy or description, as the case may be, of all amendments
thereto. All material liabilities and obligations under such Contracts can be
ascertained from such copies or memoranda. Each Contract is valid, in full
force and effect, binding and enforceable by the Company or the Subsidiary party
thereto in accordance with its respective terms. The Company and the
Subsidiaries have complied in all material respects with the terms of all
Contracts, including, but not limited to, all such terms requiring the filing of
statements (financial or otherwise) and the payment of any amounts, and are not
in default under any Contract, except for defaults that, individually and in the
aggregate, would not be material to the Company, any Subsidiary or the business
of the Company or any Subsidiary. Except as set forth on Schedule 4.11 hereto,
-------------
neither the Company nor any Subsidiary has granted or been granted any material
waiver or forbearance with respect to any of the Contracts since January 1,
1994. To the Knowledge of MJD, no other contracting party is in material
default under any of the Contracts. The Contracts which are listed in Schedules
---------
4.8 Part (b), 4.11, 4.12, 4.13 and 4.19 hereto include all those Contracts,
---------------------------------------
agreements, commitments and similar understandings necessary to conduct the
business and operations of the Company and the Subsidiaries as presently
conducted in all material respects.
4.12 Personnel Information. (a) Schedule 4.12 Part (a) hereto
--------------------- ----------------------
contains a true and complete payroll list of all individuals employed by the
Company or any Subsidiary and all officers, directors, sales representatives,
independent contractors and other personnel providing services to the Company or
any Subsidiary in connection with the operation of the business thereof as of
December 31, 1996.
(b) Except as set forth in Schedule 4.12 Part(b) or 4.13 hereto,
-----------------------------
neither the Company nor any Subsidiary is a party to or bound by any collective
bargaining or other labor agreement, and there are no labor unions or other
organizations representing, or, to the Knowledge of MJD, purporting to
represent or attempting to represent any employees employed by the Company or
any Subsidiary. The Company or MJD
20
has provided to the Buyers true and complete copies of each collective
bargaining or other labor agreement listed in Schedule 4.12 Part (b)
----------------------
hereto. Except as set forth on Schedule 4.12 Part (b) hereto, since January 1,
----------------------
1994, there has not occurred or, to the Knowledge of MJD, been threatened
any material strike, slowdown, picketing, work stoppage, concerted
refusal to work overtime or other similar labor activity with respect to any
employees or former employees of the Company or any Subsidiary. Except as set
forth on Schedule 4.12 Part (b) hereto, there are no material labor disputes
----------------------
currently subject to any grievance procedure, arbitration or litigation and
there is no representation petition pending or, to the Knowledge of MJD,
threatened with respect to any employee of the Company or any Subsidiary. The
Company and each Subsidiary has complied in all material respects with all
Applicable Laws pertaining to the employment or termination of employment of its
employees, including, but not limited to, all such Applicable Laws relating to
labor relations, equal employment opportunities, fair employment practices,
prohibited discrimination or distinction and other similar employment
activities.
(c) Except as set forth on Schedule 4.12 Part(c) hereto, there are no
---------------------
Contracts between the Company or any Subsidiary, on the one hand, and any
employee, consultant, officer, director or other Person performing services for
the Company or any Subsidiary, on the other hand, relating to employment or
performance of services for the Company or any Subsidiary or compensation
therefor.
4.13 Employee Benefit Plans. Schedule 4.13 hereto contains a true and
---------------------- -------------
complete list of each employee benefit plan, within the meaning of section 3(3)
of ERISA, and each other employment, severance, retention, change in control,
incentive or deferred compensation, stock or other equity based, retirement,
welfare, fringe benefit or other similar plan, program, agreement,
understanding, arrangement, trust or other funding arrangement, whether or not
subject to the provisions of ERISA, which is (x) maintained or contributed to by
-
the Company or any Subsidiary or to which the Company or any Subsidiary is a
party or is obligated to contribute or by which the Company or any Subsidiary is
bound and (y) under which any employee, former employee or retiree of the
-
Company or any Subsidiary is eligible to participate or derive a benefit, other
than any such plan, program, agreement, understanding, arrangement, trust or
other funding arrangement (A) which may be terminated upon no more than 30 days'
-
notice without any liability or obligation of the Company or any Subsidiary or
(B) which provides for annual payments not exceeding $50,000 in the aggregate
--
(the "Plans"). Except as set forth on Schedule 4.13 hereto, (a) neither the
----- ------------- -
Company nor any Subsidiary has incurred or reasonably expects to incur (either
directly or indirectly, including as a result of any indemnification obligation)
any material liability or obligation under or pursuant to Title I or IV of ERISA
(including,
21
without limitation, under section 4069 of ERISA or by reason of the termination
of a plan subject to Title IV of ERISA maintained by any Person who, at the time
of such termination, was a member of the same controlled group of corporations
(within the meaning of section 414(b) and (c) of the Code) as the Company or
such Subsidiary) or the penalty, excise tax or joint and several liability
provisions of the Code relating to employee pension benefit plans and no event,
transaction or condition has occurred or exists which could result in
any such liability of the Company or any Subsidiary or, following the Closing,
any of the Buyers, (b) each Plan intended to be qualified under section 401(a)
-
of the Code, and the trust (if any) forming a part thereof, has received a
favorable determination letter from the Internal Revenue Service as to its
qualification under the Code and no fact or condition exists which could
reasonably be expected to result in the disqualification of any such Plan, (c)
-
there are no material pending or, to the Knowledge of MJD, threatened claims by
or on behalf of any of the Plans, by or on behalf of any employee or former
employee of the Company or any Subsidiary or otherwise involving any such Plan
or the assets of any Plan (other than routine claims for benefits), (d) no
-
condition exists and no event has occurred with respect to any Plan that is a
multiemployer plan (as defined in section 4001(a)(3) of ERISA) (a "Multiemployer
-------------
Plan") which presents a risk of the incurrence by the Company or any Subsidiary
----
of any material complete or partial withdrawal liability under Subtitle E of
Title IV of ERISA and (e) no Multiemployer Plan is in "reorganization" or
-
"insolvent" within the meaning of section 4241 or 4245 of ERISA, respectively.
Each of the Plans has been operated and administered in all material respects in
accordance with all Applicable Laws, including but not limited to ERISA and the
Code. No Plan is a "multiple employer plan" within the meaning of section 4063
or 4064 of ERISA. All material contributions required to have been made by the
Company and each Subsidiary to or in respect of any Plan pursuant to Applicable
Law (including, but not limited to, ERISA and the Code) have been made within
the time prescribed thereby. With respect to each Plan that is subject to the
minimum funding requirements of section 412 of the Code or section 302 of ERISA,
other than a Multiemployer Plan, the "accumulated benefit obligations," within
the meaning of the Financial Accounting Standards Board Statement No. 87, under
each such Plan, determined as of December 31, 1996 on the basis of reasonable
actuarial assumptions, did not exceed the fair market value of the assets of
such Plan, determined as of December 31, 1996. The Company or MJD has provided
or made available to the Buyers true and complete copies of all written Plans,
descriptions of all unwritten Plans, and all trust, other funding arrangements
and other material documents in respect thereof.
4.14 Litigation. Except as set forth in Schedule 4.14 hereto, there
---------- -------------
is no claim, litigation, proceeding or investigation pending or, to the
Knowledge of MJD, threatened, against or affecting the business or any of the
assets of the Company or any
22
Subsidiary or which seeks to enjoin or prohibit, or otherwise questions the
validity of, any action taken or to be taken in connection with this Agreement.
Except as set forth in Schedule 4.14 hereto, to the Knowledge of MJD, there has
-------------
been no investigation of the Company or any Subsidiary conducted by any grand
jury or Governmental Authority since January 1, 1992.
4.15 Transaction with Affiliates. Except as set forth in Schedule
--------------------------- --------
4.15 hereto, neither MJD nor any of Xxxxxx X. Xxxxxxxxx, Bugger Associates,
----
Inc., Xxxxx Xxxxxxxx, Xxxxxx X. Xxxxxxx, Xxxx X. Xxxxxx or any of their
Affiliates, nor any Affiliate of MJD, the Company or any Subsidiary (other than
the Company or another Subsidiary) owns any assets used or useful in, or
otherwise material to, the business of the Company and the Subsidiaries as
presently conducted or is a party to any Contract.
4.16 Financial Statements, etc. Schedule 4.16 hereto contains true
------------------------- -------------
and complete copies of the Financial Statements. The Financial Statements are
true and correct in all material respects and have been prepared in accordance
with GAAP. The Financial Statements contain adequate reserves for uncollectible
accounts receivable and accurately reflect and fairly present in all material
respects the financial condition, position, results of operations and, as
appropriate, cash flows of the Company and its subsidiaries as of the dates and
for the periods indicated.
4.17 Absences of Undisclosed Liabilities. Except as specifically
-----------------------------------
disclosed in Schedule 4.17 hereto and except for (a) liabilities as and to the
------------- -
extent reflected or reserved against on the unaudited consolidated and
consolidating balance sheets of the Company and its subsidiaries as of December
31, 1996 included in the Financial Statements, (b) immaterial liabilities
-
incurred since December 31, 1996, in the ordinary course of business, consistent
with past practice, of the Company and the Subsidiaries, (c) ordinary course
-
liabilities incurred under any Contract not required to be disclosed on any
Schedule to this Agreement because of any applicable dollar threshold contained
in this Agreement, and (d) liabilities incurred by the Company or any Subsidiary
-
since the date of this Agreement under any Contract entered into or renewed as
permitted by Section 5.2(b)(viii) hereof, neither the Company nor any Subsidiary
has any liabilities or obligations of any nature, whether known or unknown,
absolute, accrued, contingent or otherwise and whether due or to become due.
4.18 Absence of Changes or Events. Except as disclosed in Schedule
---------------------------- --------
4.18 hereto, since December 31, 1996, there has not been any material adverse
----
change in the business, assets, properties, liabilities, revenues, costs and
expenses, income, operations, prospects or condition, financial or otherwise, of
the Company and the Subsidiaries, taken as a whole. Without limiting the
foregoing, except as set forth on
23
Schedule 4.18 hereto, since December 31, 1996, neither the Company nor any
-------------
Subsidiary has:
(a) purchased, sold or leased, or agreed to purchase, sell or lease,
any material asset, except for sales of obsolete equipment in the ordinary
course of business, consistent with past practices;
(b) granted or committed to grant any bonus, commission or other form
of incentive compensation or increased or committed to increase the
compensation or fees payable to or in respect of any employee, director,
officer, sales representative, independent contractor, consultant or
Affiliate of the Company or any Subsidiary except as set forth on Schedule
--------
4.12 hereto or to the extent required under the express terms of any
----
employment, consulting or management agreement set forth on Schedule 4.12
-------------
Part (c) hereto or any collective bargaining agreement as in effect on the
--------
date hereof;
(c) entered into, adopted or amended, or committed to enter into,
adopt or amend, any employment, consulting, retention, change-in-control,
severance, collective bargaining, bonus or other incentive compensation,
profit-sharing, health or other welfare, stock option or other equity,
pension, retirement, vacation, severance, deferred compensation or other
employment, compensation or benefit plan, policy, agreement, trust, fund or
arrangement for the benefit of any employee, officer, director, sales
representative, independent contractor, agent, consultant or Affiliate of
the Company or any Subsidiary (whether or not legally binding);
(d) made any loans to any Person, except advances to employees and
representatives of the Company or any Subsidiary in the ordinary course of
business for travel and similar purposes;
(e) written off any receivables, except in the ordinary course of
business, consistent with past practices;
(f) declared, made, set aside or paid any dividend, distribution, or
payment on, or any purchase or redemption of, any capital stock or other
equity interests of the Company or any Subsidiary, or made any commitment
therefor;
(g) issued or sold any capital stock or other equity interests of the
Company or any Subsidiary, or any subscriptions, options, warrants, calls,
conversions or other rights, agreements, commitments, arrangements or un-
24
derstandings of any kind obligating the Company or any Subsidiary,
contingently or otherwise, to issue or sell, or cause to be issued or sold,
any capital stock or other equity interest of the Company or any
Subsidiary;
(h) made any material change (for book or Tax purposes) in any method
of accounting or accounting practice;
(i) suffered the loss of any key employee or key independent
contractor or, other than in the ordinary course of business, consistent
with past practices, retained any new key employees or independent
contractors;
(j) allowed any material permit issued to the Company or any
Subsidiary to lapse or terminate; or
(k) entered into any material transaction not in the ordinary course
of business or agreed (whether or not in writing) to do any of the
foregoing.
4.19 Insurance. The assets owned by the Company and the Subsidiaries
---------
are insured against loss, damage or injury in amounts listed in Schedule 4.19
-------------
hereto, which shows all insurance policies held by the Company and the
Subsidiaries relating to the business of the Company and the Subsidiaries,
including, but not limited to, keyman life insurance policies, if any, on the
Company's or any Subsidiary's executive officers, together with the policy
limits, the type of coverage, the location of the property covered, annual
premium, premium payment dates and expiration date of each of the policies.
Copies of all such insurance policies have been furnished to the Buyers. All
such insurance policies are in full force and effect and all premiums due
thereon have been paid. The insurance coverage provided by such policies is
reasonably adequate for the business engaged in by the Company and each of the
Subsidiaries.
4.20 Taxes. (a) Except as set forth on Schedule 4.20 Part (a)
----- ----------------------
hereto, (i) the Company and each Subsidiary have duly and timely filed all Tax
-
returns and forms required to be filed, (ii) all such returns and forms are true
--
and correct in all material respects, (iii) the Company and each Subsidiary have
---
paid in full or discharged all Taxes required to be paid or chargeable as a Lien
upon its assets (other than Taxes that are being contested in good faith in
appropriate proceedings and for which adequate reserves have been established in
accordance with GAAP) and (iv) the Company and each Subsidiary have duly and
--
timely withheld all Taxes required to be withheld in connection with the assets
or business of the Company and such Subsidiary,
25
and such withheld Taxes have been either duly and timely paid to the proper
Governmental Authority or properly set aside in accounts for such purpose.
(b) Except as set forth in Schedule 4.20 Part (b) hereto, neither the
----------------------
Company nor any Subsidiary (i) is a party to or bound by or has any obligation
-
under any Tax allocation, sharing, indemnity or similar agreement or
arrangement, (ii) is or has been a member of any group of companies filing a
--
consolidated, combined or unitary income Tax return, (iii) is currently the
---
beneficiary of any extension of time within which to file any Tax return or (iv)
--
has waived any statute of limitations or otherwise agreed to any extension of
the period for assessment or collection with respect to Taxes, which waiver or
agreement is currently in force.
(c) Except as set forth on Schedule 4.20 Part (c) hereto, (i) neither
---------------------- -
the Company nor any Subsidiary is currently under audit with respect to Taxes by
any Governmental Authority and there has been no claim or issue (other than a
claim or issue that has been finally settled) concerning any liability for Taxes
of the Company or any Subsidiary asserted in writing by any Governmental
Authority and (ii) there are no outstanding adjustments for income Tax purposes
--
applicable to the Company or any Subsidiary required as a result of changes in
methods of accounting.
(d) Schedule 4.20 Part (d) hereto lists all income Tax returns that
----------------------
have been filed with respect to the Company and any Subsidiary that have not yet
been audited or are currently the subject of audit.
(e) Except as set forth in Schedule 4.20 Part (e) hereto, neither the
----------------------
Company nor any Subsidiary will, as a result of the transactions contemplated by
this Agreement, make or become obligated to make any parachute payment as
defined in section 280(G) of the Code.
4.21 Environmental Matters. (a) Except as set forth on Schedule 4.21
--------------------- -------------
Part (a) hereto, the Company's and each Subsidiary's operation and use of the
--------
Owned Real Property and the premises which are the subject of the Real Property
Leases are in compliance in all material respects with all Environmental Laws.
The Company and the Subsidiaries have obtained all environmental, health and
safety permits material to the operation of the business of the Company and the
Subsidiaries as presently conducted, and all such permits are in full force and
effect and the Company and each Subsidiary is in material compliance with the
terms and conditions of each such permit. There are no outstanding Liens on any
interest in any of the Owned Real Property or Real Property Leases under any
Environmental Laws. Neither MJD, nor the Company nor any Subsidiary has
received any notice of, nor to the Knowledge of MJD are there,
26
any administrative or judicial investigations, proceedings or actions with
respect to violations, alleged or proven, of Environmental Laws by the Company
or any Subsidiary or any of its tenants or subtenants, or otherwise involving
the Owned Real Property or the Real Property Leases or the operations conducted
on the premises subject to the Real Property Leases.
(b) Except as set forth on Schedule 4.21 Part (b) hereto, there has
----------------------
been no release (nor, to the Knowledge of MJD, is there any substantial threat
of a release) of any Hazardous Substance at or from the Owned Real Property or
the premises which are the subject of the Real Property Leases in amounts or
concentrations requiring remediation under or that would violate current
Environmental Laws or that would create any material liability to any third
Person. Except as set forth on Schedule 4.21 Part (b) hereto, there are no
----------------------
Hazardous Substances present on the Owned Real Property or the premises which
are the subject of Real Property Leases except for ordinary quantities of
properly stored Hazardous Substances found in consumer or commercial products
that are used in the normal course of the business of the Company and the
Subsidiaries. Except as set forth on Schedule 4.21 Part (b) hereto, there are
----------------------
no underground storage tanks, or underground piping associated with such tanks,
on the Owned Real Property or on the premises which are the subject of the Real
Property Leases. MJD has provided the Buyers with copies of all environmental
reports relating to the Owned Real Property or the premises which are the
subject of the Real Property Leases that are in MJD's, the Company's or any
Subsidiary's possession.
(c) All Losses of the Company and any of the Subsidiaries associated
with the implementation of all remedial and corrective action in accordance with
all Environmental Laws related to the matters set forth on Schedule 3.33 to the
Securities Purchase Agreement, dated as of June 30, 1994, as amended, among the
Company, ST Enterprises, Ltd. and Fleet will not exceed $200,000 in the
aggregate.
4.22 Financing Statements. The material assets owned by the Company
--------------------
and the Subsidiaries are and have been located in the states of Colorado,
Illinois, Kansas, Maine, New Hampshire, North Carolina, South Dakota and
Vermont, since they were acquired by the Company or any Subsidiary. All
financing statements and similar instruments filed by any party with respect to
such assets are listed in Schedule 4.22 hereto.
-------------
4.23 Investments. Except as set forth on Schedule 4.23 hereto,
----------- -------------
neither the Company nor any Subsidiary owns, directly or indirectly, any shares
of capital stock or other equity interests (or any interest convertible into
capital stock or other equity interest) in any corporation, partnership, joint
venture, limited liability company
27
or other entity, or has any commitment to contribute to the capital of, make
loans to, or share in the losses of, any enterprise.
4.24 Pending Acquisitions. MJD has delivered to the Buyers true and
--------------------
complete copies of all Contracts and transaction documents relating to any
pending acquisition by the Company or any Subsidiary. Schedule 4.24 hereto
-------------
lists all such pending acquisitions by the Company or any Subsidiary and, as of
the date hereof, their status and anticipated closing dates. All
representations and warranties made by or on behalf of the Company or any
Subsidiary in any such Contracts or transaction documents are true and correct
in all material respects on the date hereof with the same effect as though such
representations and warranties had been made on the date hereof. To the
Knowledge of MJD, all representations and warranties made in any such Contracts
or transaction documents by or on behalf of any party thereto other than the
Company or any Subsidiary are true and correct in all material respects on the
date hereof with the same effect as though such representations and warranties
had been made on the date hereof.
4.25 Broker, Finders, etc. All negotiations relating to this
--------------------
Agreement and the transactions contemplated hereby have been carried on without
the participation of any Person acting on behalf of MJD, the Company or any
Subsidiary or any of their respective Affiliates in such manner as to, and the
transactions contemplated hereby will not otherwise, give rise to any valid
claim against the Company or any Subsidiary for any brokerage or finder's
commission, fee or similar compensation.
4.26 Bank Accounts. Schedule 4.26 hereto sets forth a complete and
------------- -------------
correct list in all material respects containing the names of each bank in which
the Company or any Subsidiary has an account or safe deposit or lock box and the
account or box number, as the case may be.
4.27 Local Exchange Related Matters. Schedule 4.27 hereto sets forth
------------------------------ -------------
a list containing the name of the Company and each Subsidiary and the number of
access lines served by the Company and such Subsidiary as of the date hereof.
The Company and the Subsidiaries serve an aggregate of no fewer than 34,017
access lines, as of December 31, 1996, and no single end user of the Company or
any Subsidiary accounts for more than 10% of the Company's or such Subsidiary's
gross revenues. Except as set forth on Schedule 4.27 hereto, no other wireline
-------------
telephone company, other access provider or other Person competes, or to the
Knowledge of MJD, has any plans to compete, with the Company or any Subsidiary
in any local exchange market served by the Company or such Subsidiary. To the
Knowledge of MJD, there are no pending or proposed changes to any law, rule or
regulation governing the Company or
28
any Subsidiary which, were such changes to become Applicable Law, would
reasonably be expected to cause a Material Adverse Effect, except as set forth
on Schedule 4.27 hereto.
-------------
4.28 Tariffs. Schedule 4.28 hereto sets forth all material tariffs,
------- -------------
charges and rates on file with or imposed by the Federal Communications
Commission, the National Exchange Carrier Association, any public utility
commission or other Governmental Authority applicable to the Company or any
Subsidiary.
4.29 Investment Company Act. Neither the Company nor any Subsidiary
----------------------
nor any Affiliate is a "registered investment company" within the meaning of the
Investment Company Act of 1940, as amended.
4.30 Disclosure. This Agreement and each certificate or other
----------
instrument or document furnished by or on behalf of MJD or the Company to the
Buyers or any of their respective agents or representatives pursuant hereto or
in connection herewith, taken as a whole, do not contain any untrue statement of
a material fact or omit to state a material fact required to be stated herein or
therein or necessary to make the statements contained herein or therein in light
of the circumstances under which they were made, not misleading, it being
understood that, no representation or warranty is made with respect to any
projections or other prospective financial information. Except for matters
affecting the telephony industry generally, neither MJD nor the Company knows of
any fact that has had or resulted in, or could be expected to become or result
in, a Material Adverse Effect.
ARTICLE V
COVENANTS OF MJD AND THE COMPANY
--------------------------------
5.1 Information Prior to Closing. During the period from the date
----------------------------
hereof to the Closing Date, MJD and the Company covenant and agree to cause the
management of MJD, the Company and the Subsidiaries to be made available to the
Buyers and their authorized representatives and provide the Buyers and their
accountants, legal counsel and other authorized representatives reasonable
access during normal business hours to, and permit such Persons to review, the
properties, books, Contracts, accounts and records of the Company and the
Subsidiaries, and to provide such other information to the Buyers and their
authorized representatives as shall have been reasonably requested by the Buyers
or such authorized representatives concerning the Company, any Subsidiary or the
assets or business of the Company or any
29
Subsidiary. The rights of the Buyers under this Section shall not be exercised
in such a manner as to interfere unreasonably with the conduct of the business
of MJD, the Company or any Subsidiary.
5.2 Conduct of Business. (a) During the period from the date hereof
-------------------
to the Closing Date, MJD covenants and agrees to cause the Company and the
Subsidiaries to carry on their businesses in, and only in, the ordinary course
of business, in substantially the same manner as heretofore conducted, and to
use their reasonable best efforts to preserve intact their present business
organization, keep available the services of their present officers and
significant employees, sales agents and independent contractors, and preserve
their relationships with customers, suppliers and others having business
dealings with them, to the end that their goodwill and going business shall be
maintained following the Closing.
(b) Without limiting the generality of the foregoing, except as
expressly permitted by this Agreement or with the prior written consent of the
Buyers or except as set forth on Schedule 5.2(b) hereto, MJD covenants and
---------------
agrees that it will not permit the Company or any Subsidiary, and the Company
covenants and agrees that it will not and will not permit any Subsidiary, to do
or agree to do, on or after the date hereof, any of the following, on or before
the Closing:
(i) Amend its respective articles of incorporation, by-laws or
other organizational documents;
(ii) Issue, sell, transfer, assign, pledge, convey or dispose of,
any capital stock or equivalent equity interests, including, but not
limited to, any subscriptions, options, warrants, calls, conversions or
other rights, agreements, commitments, arrangements or understandings of
any kind obligating MJD, the Company or any Subsidiary, contingently or
otherwise, to issue or sell, or cause to be issued or sold, any capital
stock or other equity interest of the Company or any Subsidiary;
(iii) Repurchase or redeem any shares of capital stock or declare any
dividend or make any distribution with respect to its capital stock or
equivalent equity interests;
(iv) Sell, assign, lease or otherwise transfer or dispose of any
material assets, unless the same shall be replaced with assets of equal or
greater value and utility;
30
(v) Create, assume or permit to exist any Lien upon its assets,
except for those in existence on the date of this Agreement and except for
those additional Liens created in the ordinary course of business
consistent with past practice that constitute Permitted Encumbrances;
(vi) Cause or permit by any act, or failure to act, any of the
Governmental Approvals to expire, be surrendered, adversely modified, or
otherwise terminated;
(vii) Waive any right under any Contract or license relating to its
assets or business as presently conducted, except in the ordinary course of
business consistent with past practice;
(viii) Enter into or renew any Contract other than in the ordinary
course of business consistent with past practice, except for any Contract,
the amount of which has been provided for in the consolidated budget, dated
November 5, 1996, of the Company, a copy of which has been delivered to the
Buyers;
(ix) Fail to timely make all material payments required to be paid
under any Contract when due and otherwise pay all liabilities and satisfy
all obligations (except those being contested in good faith by appropriate
proceedings, for which adequate reserves have been created), in each case
in a manner consistent with past practice;
(x) Fail to maintain its inventories of spare parts and expendable
supplies, if any, at levels consistent with past practice;
(xi) Increase or modify or agree to increase or modify the
compensation, bonuses or other benefits or perquisites for any of the
employees of the business of the Company or any Subsidiary, except in the
ordinary course of business consistent with past practice or pursuant to
any employment agreements, Plans or collective bargaining agreements as set
forth on Schedule 4.11, 4.12 or 4.13 hereto;
---------------------------
(xii) Fail to remove, cure, correct and repair prior to the Closing
any material deficiencies in its assets and any material violations under
applicable statutes, rules, regulations, engineering standards or building,
fire or zoning laws or regulations;
31
(xiii) Fail to maintain consistent with past practice insurance
policies on the business of the Company and the Subsidiaries and their
assets comparable in amount to that in effect on the date of this
Agreement;
(xiv) Fail to maintain its books and records in accordance with
GAAP;
(xv) Enter into or renew any Contract with MJD, MJD Partners, Inc.,
the Company, any Subsidiary, any of Xxxxxx X. Xxxxxxxxx, Bugger Associates,
Inc., Xxxxx Xxxxxxxx, Xxxxxx X. Xxxxxxx, Xxxx X. Xxxxxx or any of their
Affiliates, or any Affiliate of MJD, MJD Partners, Inc., the Company or any
Subsidiary;
(xvi) Enter into or adversely modify the terms of any Contract,
binding commitment or letter of intent relating to the acquisition of the
assets or securities of any Person;
(xvii) Incur any indebtedness for money borrowed in excess of
$1,000,000; or
(xviii) Take or fail to take any commercially reasonable action that
would cause any of its representations and warranties not to be true and
correct on the Closing Date in the manner required under Section 6.1
hereof.
5.3 Third-Party Consents. MJD covenants and agrees that it will
--------------------
cause the Company and each Subsidiary, and the Company covenants and agrees that
it will and will cause each Subsidiary, to use all reasonable best efforts to
obtain the consent of any third parties or Governmental Authorities required to
be obtained or made in connection with the transactions contemplated by this
Agreement.
5.4 Sale and Issuance of Additional Shares. MJD covenants and agrees
--------------------------------------
that it will cause the Company and each Subsidiary, and the Company covenants
and agrees that it will and will cause each Subsidiary, to use all reasonable
efforts to obtain, contemporaneously with the Governmental Approvals required to
be obtained pursuant to Section 5.3 hereof, the consent of all Governmental
Authorities necessary for the sale and issuance of additional shares of the
Company's capital stock to one or more of the Buyers following the Closing as
contemplated by the Stockholders' Agreement, except for any Governmental
Approval required by the HSRA.
5.5 Renewal of Contracts. MJD covenants and agrees that it will
--------------------
cause the Company and each Subsidiary, and the Company covenants and agrees that
it will
32
and will cause each Subsidiary, to use all reasonable best efforts to renew any
Contract which by its terms expires or terminates between the date of this
Agreement and the Closing Date, provided that any such renewal shall be on terms
and conditions which are consistent with past practice.
5.6 No Inconsistent Action. MJD covenants and agrees that it will
----------------------
not permit the Company or any Subsidiary, and the Company covenants and agrees
that it will not and will not permit any Subsidiary, to take any action which is
inconsistent in any material respect with their obligations under this Agreement
or that would hinder or delay in any material respect the consummation of the
transactions contemplated by this Agreement.
5.7 No Solicitation. MJD covenants and agrees that it will not
---------------
permit the Company or any Subsidiary, and the Company covenants and agrees that
it will not and will not permit any Subsidiary, to, directly or indirectly, (a)
-
solicit, initiate or encourage submission of any proposal or offer from any
Person relating to any acquisition or purchase of the business of the Company or
any Subsidiary, any assets of the Company or any Subsidiary (other than the sale
of assets in the ordinary course of business consistent with past practices) or
any capital stock or other equity interest of the Company or any Subsidiary or
(b) participate in any discussions or negotiations regarding, or furnish to any
-
Person any information with respect to, or otherwise cooperate in any way, or
assist or participate in, facilitate or encourage, any effort or attempt by any
Person to do or seek any of the foregoing. MJD covenants and agrees that it will
cause the Company and each Subsidiary, and the Company covenants and agrees that
it will and will cause each Subsidiary, to promptly notify the Buyers in writing
if any such offer or proposal is made.
5.8 Financial Statements. MJD covenants and agrees that it will
--------------------
cause the Company and the Subsidiaries, and the Company covenants and agrees
that it will and will cause each Subsidiary, to deliver to the Buyers (a),
-
within 30 days after the end of each month until the Closing Date, unaudited
consolidated balance sheets of each of the Company, MJD Holdings Corp., MJD
Services Corp., MJD Ventures, Inc. and ST Enterprises, Ltd. and their respective
Subsidiaries for the month then ended and the related statements of operations
for the month then ended and (b), prior to May 15, 1997, audited consolidated
-
and consolidating balance sheets of each of the Company, MJD Services Corp., MJD
Ventures, Inc. and ST Enterprises, Ltd. and their respective Subsidiaries as of
December 31, 1996 and the related statements of operations and cash flows for
the fiscal year then ended, audited, in each case, by KPMG Peat Marwick LLP.
All financial statements furnished pursuant to this Section shall be true and
complete in all material respects and fairly present in all material respects
the financial
33
condition, position, results of operations and cash flows, as appropriate, as of
the dates and for the periods covered by such statements. MJD covenants and
agrees that it will cause the Company and each Subsidiary, and the Company
covenants and agrees that it will and will cause each Subsidiary, to furnish to
the Buyers any and all other information concerning the financial condition of
the Company and any Subsidiary that the Buyers may reasonably request.
5.9 Estoppel Certificates; Consent and Waiver. MJD covenants and
-----------------------------------------
agrees that it will cause the Company and each Subsidiary, and the Company
covenants and agrees that it will and will cause each Subsidiary, to use all
reasonable best efforts to obtain estoppel certificates containing customary
provisions and consents and waivers from any landlord with respect to the Real
Property Leases listed in Schedule 5.9 hereto.
------------
5.10 Consummation of Pending Acquisitions. Except as set forth on
------------------------------------
Schedule 5.10 hereto, MJD covenants and agrees that it will cause the Company
-------------
and each Subsidiary, and the Company covenants and agrees that it will and will
cause each Subsidiary, to use all reasonable best efforts to consummate the
pending acquisitions set forth on Schedule 4.24 hereto on or prior to the
-------------
Closing Date in accordance with the terms of the existing acquisition
agreements.
5.11 Notice of Material Developments. From the date hereof until the
-------------------------------
Closing, MJD and the Company covenant and agree that they will give prompt
written notice to the Buyers of any (a) material development affecting the
-
business, assets, properties or results of operations of the Company or any
Subsidiary or (b) event or circumstance which would render any representation or
-
warranty of MJD or the Company contained in this Agreement untrue or inaccurate
in any material respect if made on or as of the date thereof or as of the
Closing Date. No disclosure by MJD or the Company pursuant to this Section 5.11
shall be deemed to amend or supplement any schedule hereto or to prevent or cure
any misrepresentation, breach of warranty or breach of covenant.
5.12 Further Actions. MJD covenants and agrees that it will cause the
---------------
Company and each Subsidiary, and the Company covenants and agrees that it will
and will cause each Subsidiary, to use all reasonable best efforts to take or
cause to be taken all actions, and to do or cause to be done all other things,
necessary, proper or advisable in order to fulfill and perform their obligations
in respect of this Agreement or otherwise to consummate and make effective the
transactions contemplated hereby.
34
ARTICLE VI
CONDITIONS PRECEDENT TO THE BUYERS' OBLIGATION TO CLOSE
-------------------------------------------------------
The obligations of the Buyers hereunder are, at their option, subject
to satisfaction, at or prior to the Closing Date, of each of the following
conditions:
6.1 Representations, Warranties and Covenants. (a) All of the
-----------------------------------------
representations and warranties of MJD and the Company contained in or made
pursuant to this Agreement and in any schedule, instrument, certificate,
agreement or document delivered pursuant to this Agreement shall be true and
correct in all material respects on the date hereof and on and as of the Closing
Date with the same effect as though such representations and warranties had been
made on and as of such dates.
(b) All of the terms, covenants and conditions to be complied with
and performed by MJD, the Company or the Subsidiaries on or prior to Closing
Date shall have been complied with or performed in all material respects.
6.2 Governmental Consents. Any applicable waiting period under the
---------------------
HSRA shall have expired or been earlier terminated without receipt of any
objection or the commencement or threat of any litigation by any Governmental
Authority of competent jurisdiction to restrain the consummation of the
transactions contemplated by this Agreement.
6.3 Third-Party Consents. MJD, the Company and the Subsidiaries
--------------------
shall have obtained and shall have delivered to the Buyers all third-party
consents and consents of Governmental Authorities listed in Schedule 6.3 hereto,
------------
without any condition adverse in any material respect to the Buyers, the
Company or any of the Subsidiaries.
6.4 Updated Tariff Schedule. MJD and the Company shall have
-----------------------
delivered to the Buyers an updated Schedule 4.28 hereto, which shall be true and
-------------
correct in all material respects as of the Closing Date, and the Buyers shall be
reasonably satisfied that such updated schedule does not reflect the occurrence
of any events which would cause the condition contained in Section 6.13 hereof
not to be satisfied.
6.5 Certificates. Each of MJD and the Company shall have delivered
------------
to the Buyers a certificate, dated the Closing Date and signed by an authorized
officer or
35
partner of each such Person, to the effect that the conditions set forth in
Section 6.1 hereof have been fulfilled.
6.6 Adverse Proceedings. No action, suit, proceeding, litigation or
-------------------
investigation shall be pending or threatened by any Governmental Authority which
questions the validity or legality of this Agreement or any action taken or to
be taken in connection herewith or the consummation of the transactions
contemplated hereby. No injunction or other order issued by a court of
competent jurisdiction restraining or prohibiting the consummation of the
transactions contemplated by this Agreement shall be in effect.
6.7 Financing Statements. Except for Permitted Encumbrances, MJD and
--------------------
the Company shall secure the release of all Liens of any nature whatsoever on
the Company's or the Subsidiaries' assets and business, including those Liens
listed in Schedule 4.22 hereto, and shall deliver copies of such releases to the
-------------
Buyers at Closing, including but not limited to, releases or terminations under
the Uniform Commercial Code and any other applicable federal, state or local
statutes or regulations of any financing or similar statements filed against any
such assets in (a) the jurisdictions in which such assets are and have been
-
located since such assets were acquired by the Company or any Subsidiary and (b)
-
any other location specified or required by applicable federal, state or local
statutes or regulations.
6.8 Additional Indebtedness. The Company and/or the Subsidiaries
-----------------------
shall have obtained additional Indebtedness pursuant to loan documentation in
form and substance reasonably satisfactory to the Buyers, which together with
the amount of the Purchase Price and the projected consolidated cash balances of
the Company and the Subsidiaries, shall be adequate to enable the Company and
the Subsidiaries to effect the Fleet Repurchase, the ALTA Repayment and the
acquisition of Chautauqua & Erie Telephone Corporation and to pay all taxes,
fees and expenses in connection with the foregoing and the transactions
contemplated by this Agreement.
6.9 Fleet Repurchase; ALTA Repayment. MJD and the Company shall have
--------------------------------
caused, pursuant to documentation in form and substance reasonably satisfactory
to the Buyers, (a) all direct and indirect equity interests in the Company of
-
any Person other than MJD, Bugger Associates, Inc., Xxxx X. Xxxx, Xxxxxx X.
Xxxxxxx, Xxxxxx X. Xxxxx, Xx., Xxxx X. Xxxxxx, Xxxx Xxxxxxxxx MP Plan, Xxxxxxx
Xxxxxxxxx and Xxxxx Xxxxx Xxxxxxxxx to have been repurchased without liability
to any of the Buyers, the Company or the Subsidiaries (the "Fleet Repurchase")
----------------
and (b) all obligations in respect of all subordinated notes issued to ALTA,
-
Xxxxx XxXxxxxx and/or Xxxxxxx Xxxxxx by the Company or any Subsidiary to have
been satisfied and such notes to have been
36
cancelled without liability to any of the Buyers, the Company or the
Subsidiaries (the "ALTA Repayment"); it being understood that the Common Stock
--------------
Purchase Warrants held as of the date hereof by ALTA, Xxxxx XxXxxxxx and/or
Xxxxxxx Xxxxxx in respect of ST Enterprises, Ltd. and Xxxxxx Telephone Company,
as the case may be, described on Schedule 4.3 hereto under sections II D and K
------------
thereof shall remain outstanding following the Closing Date in accordance with
their terms on the date hereof. As a result of the Fleet Repurchase, (a) the
-
Securityholders' Agreement, dated as of June 30, 1994, as amended, among the
Company, Xxxxxx X. Xxxxxxxxx, Xxxx X. Xxxxxx, Xxxxx Xxxxxxxx, Bugger Associates,
Inc., ALTA and Fleet, together with the related Option Agreement (including all
options granted thereunder) and Registration Rights Agreement, and (b) all
-
Contingent Class A Voting Common Stock Purchase Warrants issued pursuant to the
Securities Purchase Agreement, dated as of June 30, 1994, as amended, by and
among the Company, ST Enterprises, Ltd. and Fleet shall each have been
terminated on terms reasonably satisfactory to the Buyers without liability to
any of the Buyers, the Company or the Subsidiaries. As a result of the ALTA
Repayment, (a) the Stock Pledge Agreements, each dated as of June 30, 1994,
-
among ALTA and each of the Company and ST Enterprises, Ltd., (b) the Guarantees,
-
each dated as of June 29, 1994, in favor of ALTA by each of Breadbasket
Enterprises, Inc., ST Broadcasting Company, Inc., ST Communications, Inc., ST
Computer Resources Inc. and ST Paging, Inc. and (c) the Real Estate Mortgage and
-
Security Agreements, each dated as of April 24, 1995, among ALTA and Sunflower
Telephone Company shall each have been terminated on terms reasonably
satisfactory to the Buyers without liability to any of the Buyers, the Company
or the Subsidiaries. The Company shall withhold any Tax required to be withheld
in connection with the Fleet Repurchase and the ALTA Repayment.
6.10 MJD Contribution. MJD and the Company shall have caused,
----------------
pursuant to documentation in form and substance satisfactory to the Buyers (the
"MJD Exchange Documents"), (a) all of the capital stock of MJD Holdings Corp. to
---------------------- -
have been acquired by the Company in exchange for shares of Common Stock in a
transaction intended to qualify as a reorganization under section 368(a)(1)(B)
of the Code, (b) (i) the unpaid principal amount outstanding on the Closing Date
- -
in respect of the Notes shall have been acquired by the Company as a
contribution to capital as agreed to by the parties hereto on or prior to the
Closing Date, (ii) the accrued and unpaid interest on such Notes to have been
--
paid to the holders thereof as agreed to by the parties hereto on or prior to
the Closing Date and (iii) such Notes to have been cancelled without liability
---
to the Buyers, the Company or the Subsidiaries, and (c) each issued and
-
outstanding share of the Company's Series A 11% Cumulative Redeemable
Convertible Voting preferred stock, par value $.01 per share, except for those
shares which are the subject of the Fleet Repurchase, to have been exchanged for
1.0355
37
shares of Common Stock on or prior to the Closing Date, provided that after
--------
giving effect to the foregoing conversions and exchanges, the exercise of
options obligating the Company to issue or sell any shares of its capital stock
to any Person and the exercise of the outstanding Class A Voting Common Stock
Purchase Warrants (such warrants shall be amended on or prior to the Closing
Date on terms satisfactory to the Buyers), the Buyers shall own immediately
following the Closing no less than 50% of the issued and outstanding shares of
capital stock of the Company as determined on a fully diluted basis. The Buyers,
the Company and the Subsidiaries shall have no Tax liability in respect of the
transactions contemplated by this Section 6.10.
6.11 Management, Consulting and Severance Arrangements. MJD shall
-------------------------------------------------
have caused (a) the Management Services Agreement to be amended and restated
-
substantially in the form of Exhibit D to the Stockholders' Agreement, (b),
-
pursuant to documentation in form and substance reasonably satisfactory to the
Buyers, the Management Services Agreement, dated as of January 3, 1997, between
MJD Holdings Corp. and MJD to have been terminated without liability to any of
the Buyers, the Company or the Subsidiaries, (c), pursuant to documentation in
-
form and substance reasonably satisfactory to the Buyers, the Consulting
Agreement to have been terminated without liability to any of the Buyers, the
Company or the Subsidiaries and (d), pursuant to documentation in form and
-
substance reasonably satisfactory to the Buyers, the severance arrangements
referred to in Schedule 4.12 hereto under section (c) D thereof to have been
-------------
terminated without liability to any of the Buyers, the Company or the
Subsidiaries and the Company to have entered into severance arrangements with
Xxxx X. Xxxx, Xxxxxx X. Xxxxxxx, Xxxxxx X. Xxxxx, Xx. and Xxxx X. Xxxxxx on
terms (i) reasonably satisfactory to the Buyers, Xxxx X. Xxxx, Xxxxxx X.
-
Xxxxxxx, Xxxxxx X. Xxxxx, Xx. and Xxxx X. Xxxxxx and (ii) substantially similar
--
to those in effect on the date hereof in the event of a termination of
employment.
6.12 Equity Documents. MJD and the Company shall have executed and
----------------
delivered to the Buyers the Stockholders' Agreement, the Registration Rights
Agreement, the Financial Advisory Agreements and any related agreements.
6.13 No Material Adverse Effect. No event, occurrence, fact,
--------------------------
condition, change, development or effect, including, but not limited to,
competitive, technological or federal, state, county or municipal regulatory
developments, shall exist or have occurred or come to exist since the date of
this Agreement that, individually or in the aggregate, has had or resulted in,
or could reasonably be expected to become or result in, a Material Adverse
Effect.
38
6.14 Amendment of Articles of Incorporation. All actions shall have
--------------------------------------
been taken so that following the Closing the articles of incorporation of the
Company shall be amended on terms satisfactory to the Buyers to provide that the
capital stock of the Company will consist of 130,000 shares of Common Stock,
125,000 shares of Class B Nonvoting common stock, par value $.01 per share, and
13,500 shares of Series C 14% Cumulative Redeemable Nonvoting preferred stock,
par value $.01 per share. The amended articles of incorporation of the Company
shall provide that such preferred stock shall (a) have a liquidation preference
-
of $10.00 per share, plus accrued and unpaid interest, (b) be nonvoting, (c)
- -
have no other preferential rights over any other class of capital stock of the
Company and (d) be redeemable by the Company, in its sole discretion, for $10.00
-
per share, plus accrued and unpaid interest, upon (i) a change of control of the
-
Company, (ii) a public offering of any of the capital stock of the Company under
--
the Securities Act of 1933, as amended, and the rules and regulations
thereunder, (iii) a sale of all or substantially all of the shares of Common
---
Stock now or hereafter owned by the Buyers or (iv) a sale of all or
--
substantially all of the Company's and the Subsidiaries' assets.
6.15 Reconstitution of Boards of Directors. All actions shall have
-------------------------------------
been taken so that immediately following the Closing the board of directors of
the Company and the Subsidiaries shall be reconstituted in accordance with the
terms of the Stockholders' Agreement.
6.16 Transaction and Advisory Fees. Each of (a) Carousel or an
----------------------------- -
Affiliate thereof and (b) Xxxxx or an Affiliate thereof shall have received by
-
wire transfer of immediately available funds (x) a transaction fee of $200,000
-
in consideration of its services with respect to the consummation of the
transactions contemplated by this Agreement and (y) the first quarterly payment
-
of $12,500 in consideration of its services under its respective Financial
Advisory Agreement.
6.17 Deliveries. MJD and the Company shall have made all the
----------
deliveries set forth in Section 8.1 hereof.
ARTICLE VII
CONDITIONS PRECEDENT TO THE COMPANY'S OBLIGATION TO CLOSE
---------------------------------------------------------
The obligations of the Company are, at its option, subject to
satisfaction, at or prior to the Closing Date, of each of the following
conditions:
39
7.1 Representations, Warranties and Covenants. (a) All
-----------------------------------------
representations and warranties of the Buyers contained in or made pursuant to
this Agreement and in any schedule, instrument, certificate, agreement or
document delivered pursuant to this Agreement shall be true and correct in all
material respects on the date hereof and on and as of the Closing Date with the
same effect as though such representations and warranties had been made on and
as of such dates.
(b) All the terms, covenants and conditions to be complied with and
performed by the Buyers on or prior to the Closing Date shall have been complied
with or performed in all material respects.
7.2 Governmental Consents. Any applicable waiting period under the
---------------------
HSRA shall have expired or been earlier terminated without receipt of any
objection or the commencement or threat of any litigation by any Governmental
Authority of competent jurisdiction to restrain the consummation of the
transactions contemplated by this Agreement.
7.3 Certificates. Each of the Buyers shall have delivered to the
------------
Company a certificate, dated the Closing Date and signed by an authorized
officer or partner of each such Person, to the effect that the conditions set
forth in Section 7.1 hereof have been fulfilled.
7.4 Adverse Proceedings. No action, suit, proceeding, litigation or
-------------------
investigation shall be pending or threatened by any Governmental Authority which
questions the validity or legality of this Agreement or any action taken or to
be taken in connection herewith or the consummation of the transactions
contemplated hereby. No injunction or other order issued by a court of
competent jurisdiction restraining or prohibiting the consummation of the
transactions contemplated by this Agreement shall be in effect.
7.5 Equity Documents. Each of the Buyers shall have executed and
----------------
delivered to the Company the Stockholders' Agreement and the Registration Rights
Agreement.
7.6 Deliveries. The Buyers shall have made all the deliveries set
----------
forth in Section 8.2 hereof.
40
ARTICLE VIII
THE CLOSING
-----------
8.1 Documents to be Delivered by MJD and the Company. At the
------------------------------------------------
Closing, MJD and the Company shall deliver or cause to be delivered to the
Buyers the following:
(a) certificates representing the Shares as provided in Section 2.2
hereof;
(b) certificate of each of MJD and the Company, dated the Closing
Date, in form and substance reasonably satisfactory to the Buyers,
certifying to the fulfillment of the conditions set forth in Section 6.1
hereof;
(c) opinions of (i) Paul, Hastings, Xxxxxxxx & Xxxxxx LLP, (ii)
- --
Meyer, Capel, Hirschfeld, Muncy, Xxxx & Aldeen, P.C., (iii) Xxxxx X.
---
Xxxxxxxxx, Chartered, (iv) Xxxxxx, Xxxxxxxx & Branch PA, (v) Xxxx & Xxxxxxx
-- -
PA, (vi) Xxxxxx, Xxxxxxxxx & Xxxxxxxxx, Ltd., (vii) Preti, Flaherty,
-- ---
Xxxxxxxx & Pachios, LLC, (viii) Xxxxxxx Xxxxxx L.L.C., (ix) Xxxxxx, Xxxxxxx
---- --
& Xxxxx and (x) Blooston, Mordkofsky, Xxxxxxx & Xxxxxxx, counsel to the
-
Company, dated the Closing Date, in form and substance reasonably
satisfactory to the Buyers;
(d) certified copies of all corporate proceedings of MJD and the
Company in connection with the transactions contemplated by this Agreement
and all documents and instruments incident thereto, in form and substance
reasonably satisfactory to the Buyers and their counsel; and
(e) such other documents and legal opinions as may reasonably be
requested by the Buyers' counsel.
8.2 Documents to be Delivered by the Buyers. At the Closing, the
---------------------------------------
Buyers shall deliver or cause to be delivered to the Company the following:
(a) immediately available wire-transferred funds as provided in
Section 2.2 hereof;
(b) certificate of each of the Buyers, dated the Closing Date, in
form and substance reasonably satisfactory to the Company, certifying to
the fulfillment of the conditions specified in Section 7.1 hereof;
41
(c) opinion of Xxxxxxx Xxxxxxxxx Xxxxxxx & Xxxxxxx, L.L.P., counsel
to Carousel, dated the Closing Date, in form and substance reasonably
satisfactory to the Company;
(d) opinion of Debevoise & Xxxxxxxx, counsel to Xxxxx, dated the
Closing Date, in form and substance reasonably satisfactory to the Company;
and
(e) such other documents as may be reasonably requested by the
Company's counsel.
ARTICLE IX
TAXES, FEES AND EXPENSES
------------------------
The Company shall pay all of the reasonable fees and expenses incurred
by each party hereto in connection with the preparation, negotiation and closing
of this Agreement and the transactions contemplated hereby, whether or not the
transactions contemplated hereby shall be consummated. Without limiting the
generality of the foregoing, (a) all use, stamp, stock transfer and registration
-
taxes and fees, (b) all governmental filing or grant fees, including, but not
-
limited to, the HSRA filing fee, (c) all accountants' and attorneys' fees and
-
(d) all recordation and transfer taxes and fees, including, but not limited to,
-
realty transfer, and documentary taxes and fees, incurred in connection with the
execution, delivery or performance of this Agreement and the transactions
contemplated hereby, shall be paid by the Company.
ARTICLE X
SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS
-----------------------------------------------------
Except as otherwise specifically set forth herein, the
representations, warranties and covenants contained in this Agreement or in any
certificate, document or instrument delivered pursuant to this Agreement shall
survive the Closing and continue in effect through the Claims Termination Date.
Any investigation by or on behalf of any party hereto shall not constitute a
waiver as to enforcement of any representation, warranty or covenant.
42
ARTICLE XI
INDEMNIFICATION
---------------
11. Indemnification by MJD. (a) Notwithstanding the Closing and
----------------------
subject to the limitations set forth herein, MJD covenants and agrees to defend,
indemnify and hold harmless the Buyers, their respective Affiliates (including,
but not limited to, the Company and the Subsidiaries following the Closing) and
the officers, directors, partners, employees, agents, advisers and
representatives of each such Person (collectively, the "Buyers Indemnitees")
------------------
from and against, and pay or reimburse the Buyers Indemnitees for, any and all
claims, demands, liabilities, obligations, losses, fines, costs, expenses,
royalties, proceedings, deficiencies or damages (whether or not resulting from
third party claims), including interest and penalties with respect thereto and
out-of-pocket expenses and reasonable attorneys' and accountants' fees and
expenses incurred in the investigation or defense of any of the same or in
asserting, preserving or enforcing any of their respective rights hereunder
(collectively, "Losses"), resulting from or arising out of:
------
(i) any inaccuracy of any representation or warranty (other than
Section 4.21(c) hereof) when made or deemed made by MJD or the Company
herein or in any schedule hereto or any certificate, document or other
instrument delivered in connection herewith;
(ii) any matters referred to in Section 4.21(c) hereof in excess of
$200,000; or
(iii)any failure of MJD or the Company to perform any covenant or
agreement hereunder or fulfill any other obligation in respect hereof.
For purposes of Section 11.1(a)(i) hereof, MJD shall only be liable to the
Buyers Indemnitees for Losses resulting from or arising out of any inaccuracy in
any representation or warranty if an Executive Officer had actual knowledge that
such representation or warranty was inaccurate when made or deemed made.
(b) Notwithstanding anything in this Agreement to the contrary, MJD's
obligation to indemnify the Buyers Indemnitees shall be subject to all of the
following limitations:
(i) MJD shall not be required to make any indemnification under
Sections 11.1(a)(i) and (iii) hereof until the aggregate amount of Losses
43
resulting from or arising out of the matters referred to in Sections
11.1(a)(i) and (iii) hereof exceeds $2,500,000; provided that if the
--------
aggregate amount of such Losses exceeds such amount, MJD shall be required
to indemnify the Buyers Indemnitees for all Losses indemnifiable under
Sections 11.1(a)(i) and (iii) hereof without regard to such $2,500,000
limitation.
(ii) Any amounts owed to the Buyers Indemnitees by MJD pursuant to
Section 11.1(b)(i) shall be limited to $15,000,000, which amount may be
satisfied, at the sole option of MJD, by payment in cash or by the
cancellation of all or a portion of the MJD Partners Shares pursuant to
clause (iii) of this Section 11.1(b) and MJD shall have no other liability
or responsibility for indemnification hereunder. Any such cash payment
shall be treated as an adjustment to the Purchase Price.
(iii) In the event that any of the Buyers Indemnitees shall be
entitled to indemnification for any Loss under this Article XI and MJD
shall have elected to satisfy all or a part of such Loss with MJD Partners
Shares, (A) MJD shall promptly deliver to the Company for cancellation that
-
number of MJD Partners Shares, rounded up or down to the nearest whole
share, equal to the amount of such Loss and (B) the Company shall promptly
-
cancel such MJD Partners Shares. For purposes of this clause (iii) of
Section 11.1(b), the value of each MJD Partners Share shall equal the fair
market value of such share as agreed in writing among the parties hereto
or, if such agreement is not reached within 15 Business Days following a
binding determination regarding the entitlement of any Buyers Indemnitee to
indemnification for such Loss, as determined by an appraisal of the Company
(after giving effect to such Loss) and the MJD Partners Shares, conducted
by Xxxxxxxx Xxxxx Xxxxxx & Xxxxx or such other recognized independent
valuation consultant or appraiser of national standing selected by MJD and
reasonably satisfactory to the Buyers Indemnitees, the fees and expenses of
which shall be borne by the Company. Any such appraisal of the fair market
value of any MJD Partners Share shall be (A) the fair market value of the
-
entire equity interest of the Company taken as a whole (after giving effect
to such Loss), without additional premiums for control or discounts for
minority interests or restrictions on transfer, divided by (B) the number
-
of outstanding shares of capital stock of the Company, calculated on a
fully-diluted basis. In accordance with the Stockholders' Agreement, each
stock certificate representing MJD Partners Shares shall, for so long as
MJD has any indemnification obligations under this Article XI, bear upon
its face a legend reflecting MJD's indemnification obligations under this
Article XI.
44
11.2 Indemnification Procedures. (a) In the case of any claim
--------------------------
asserted by a third party against a party entitled to indemnification under this
Agreement (the "Indemnified Party"), notice shall be given by the Indemnified
-----------------
Party to MJD promptly after such Indemnified Party has actual knowledge of any
claim as to which indemnity may be sought, and the Indemnified Party shall
permit MJD (at MJD's expense) to assume the defense of any claim or any
litigation resulting therefrom, provided that (i) the counsel for MJD who shall
-
conduct the defense of such claim or litigation shall be reasonably satisfactory
to the Indemnified Party, (ii) the Indemnified Party may participate in such
--
defense at such Indemnified Party's expense, and (iii) the omission by any
---
Indemnified Party to give notice as provided herein shall not relieve MJD of its
indemnification obligation under this Agreement except to the extent that such
omission results in a failure of actual notice to MJD and MJD is materially
damaged as a result of such failure to give notice. Except with the prior
written consent of the Indemnified Party, MJD, in the defense of any such claim
or litigation, shall not consent to entry of any judgment or order, interim or
otherwise, or enter into any settlement that provides for injunctive or other
nonmonetary relief affecting the Indemnified Party or that does not include as
an unconditional term thereof the giving by each claimant or plaintiff to such
Indemnified Party of a release from all liability with respect to such claim or
litigation. In the event that the Indemnified Party shall in good faith
determine that the conduct of the defense of any claim subject to
indemnification hereunder or any proposed settlement of any such claim by MJD
might be expected to affect adversely the Indemnified Party's tax liability or
the ability of the Company or any of the Subsidiaries to conduct its business,
or that the Indemnified Party may have available to it one or more defenses or
counterclaims that are inconsistent with one or more of those that may be
available to MJD in respect of such claim or any litigation relating thereto,
the Indemnified Party shall have the right at all times to take over and assume
control over the defense, settlement, negotiations or litigation relating to any
such claim at the sole cost of MJD, provided that if the Indemnified Party does
so take over and assume control, the Indemnified Party shall not settle such
claim or litigation without the written consent of MJD, such consent not to be
unreasonably withheld. In the event that MJD does not accept the defense of any
matter as above provided, the Indemnified Party shall have the full right to
defend against any such claim or demand and shall be entitled to settle or agree
to pay in full such claim or demand. Notwithstanding the foregoing, MJD shall
still provide indemnification to the Indemnified Party. In any event, MJD and
the Indemnified Party shall cooperate in the defense of any claim or litigation
subject to this Section 11.2(a) and the records of each shall be available to
the other with respect to such defense.
(b) In case any event shall occur which would otherwise entitle any
party to assert any claim for indemnification hereunder, no Loss shall be deemed
to
45
have been sustained by such party to the extent of any proceeds received by such
party from any insurance policies with respect thereto, net of any increase in
premiums or other costs associated with such insurance recovery.
11.3 Claims Termination Date. All claims for indemnification under
-----------------------
this Agreement must be asserted on or prior to the Claims Termination Date.
11.4 Exclusive Remedy. The indemnification provisions of this
----------------
Article XI shall be the sole and exclusive remedy of the Buyers Indemnitees with
respect to any Loss under this Agreement.
ARTICLE XII
TERMINATION RIGHTS
------------------
12.1 Termination. (a) This Agreement may be terminated by the
-----------
Buyers, on the one hand, or MJD and the Company, on the other hand, if the party
seeking to terminate is not in material default or breach of this Agreement,
upon written notice to the other upon the occurrence of any of the following:
(i) by the Buyers or MJD and the Company:
(A) if the Closing has not occurred by August 1, 1997; provided that
--------
in the event the Closing has not occurred by August 1, 1997 solely as a
result of the failure to receive any Governmental Approval required for the
lawful consummation of the transactions contemplated by this Agreement
without any condition adverse in any material respect to the Buyers, the
Company or any of the Subsidiaries, any party hereto may extend such
termination date to a date no later than December 31, 1997;
(B) if there shall be in effect any final judgment, final decree or
order that would prevent or make unlawful the Closing; or
(C) if any event shall occur or exist that otherwise shall have made
it impossible to satisfy a condition precedent to the terminating party's
obligations to consummate the transactions contemplated by this Agreement,
unless the occurrence or existence of such event shall be due to the
failure of such party to perform or comply with any of the agreements,
covenants or conditions hereof to be performed or complied with by such
party prior to the Closing.
46
(ii) by the Buyers:
(A) if documentation in form and substance reasonably satisfactory to
the Buyers to effect the Fleet Repurchase shall not have been entered into
by Fleet and the Company on or before April 30, 1997;
(B) if within 10 Business Days after receipt by the Buyers of the
audited consolidated and consolidating balance sheets and related
statements of operations and cash flows referred to in Section 5.8(b)
hereof, the Buyers shall determine that such financial statements differ
materially from the unaudited financial statements of the Company and
subsidiaries as of and for the fiscal year ended December 31, 1996 included
in the Financial Statements or the forecasts previously delivered to the
Buyers with respect to the Company's and the Subsidiaries' financial
condition, position, results of operations and cash flows for the fiscal
year ended December 31, 1996; or
(C) if MJD or the Company is in material breach of any
representation, warranty, covenant or agreement contained in this Agreement
and such breach is not cured within 10 Business Days of written notice of
such breach.
(iii) by MJD or the Company:
(A) if the Buyers are in material breach of any representation,
warranty, covenant or agreement contained in this Agreement and such breach
is not cured within 10 Business Days of written notice of such breach.
(b) This Agreement may be terminated by the written agreement of the
parties hereto.
12. Liability. The termination of this Agreement under Section
---------
12.1(a) hereof shall not relieve any party of any liability under or for breach
of this Agreement prior to the date of termination.
47
ARTICLE XII
OTHER PROVISIONS
----------------
13.1 Publicity. Except as required by Applicable Law or with the
---------
other parties' express prior written consent, no party to this Agreement nor any
Affiliate of any party shall issue any press release or make any public
statement (oral or written) regarding this Agreement or the transactions
contemplated by this Agreement.
13.2 Compliance with HSRA. MJD, the Company and the Buyers shall make
--------------------
or cause to be made in a timely fashion all filings which are required in
connection with the transactions contemplated hereby under the HSRA, and shall
furnish to the other party all information that the other reasonably requests in
connection with such filings.
13.3 Benefit and Assignment. This Agreement shall be binding upon and
----------------------
shall inure to the benefit of the parties hereto and their respective heirs,
successors and assigns. This Agreement shall not be assignable or otherwise
transferable by any party hereto without the prior written consent of the other
parties hereto, and any purported assignment or other transfer without such
consent shall be void and unenforceable; provided, that each of the Buyers may
--------
assign this Agreement to any Affiliate of such Buyer, or to any lender to such
Buyer or Affiliate thereof as security for obligations to such lender, and
provided, further, that no assignment to any such Affiliate or lender shall in
-------- -------
any way affect such Buyer's obligations or liabilities under this Agreement.
13.4 No Third-Party Beneficiaries. Except as provided in Sections
----------------------------
11.1 and 13.3 hereof, nothing in this Agreement shall confer any rights upon any
Person other than the parties hereto and their respective heirs, successors and
permitted assigns.
13.5 Entire Agreement. This Agreement, the MJD Exchange Documents,
----------------
the Stockholders' Agreement, the Registration Rights Agreement, the Financial
Advisory Agreements and the Exhibits and Schedules hereto embody the entire
agreement and understanding of the parties hereto and supersede any and all
prior agreements, arrangements and understandings relating to the matters
provided for herein, including that certain Discussion Term Sheet delivered to
the Buyers by MJD. No amendment, waiver of compliance with any provision or
condition hereof or consent pursuant to this Agreement shall be effective unless
evidenced by an instrument
48
in writing signed by the party against whom enforcement of any amendment, waiver
or consent is sought.
13.6 Waiver. At any time prior to the Closing Date, the parties
------
hereto may (i) extend the time for performance of any obligations or other acts
-
of the other parties hereto, (ii) waive any inaccuracies in the representations
--
and warranties contained herein or in any document delivered pursuant hereto and
(iii) waive any compliance with any of the agreements or conditions contained
---
herein. Any agreement on the part of any party hereto to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party.
13.7 Headings. The headings set forth in this Agreement are for
--------
convenience only and will not control or affect the meaning or construction of
the provisions of this Agreement.
13.8 Severability. If any provision, including any phrase, sentence,
------------
clause, section or subsection, of this Agreement is invalid, inoperative or
unenforceable for any reason, such circumstances shall not have the effect of
rendering such provision in question invalid, inoperative or unenforceable in
any other case or circumstance, or of rendering any other provision herein
contained invalid, inoperative, or unenforceable to any extent whatsoever.
13.9 Arbitration. Any dispute or difference between the parties
-----------
hereto relating to the interpretation of this Agreement shall be finally settled
by arbitration conducted exclusively in New York, New York before an arbitral
tribunal of three arbitrators, one selected by the Buyers, one selected by MJD,
and the third by the Persons so selected, all in accordance with the Commercial
Arbitration Rules of the American Arbitration Association then in effect. If
either the Buyers or MJD fail to choose an arbitrator within 30 days after
notice of commencement of arbitration, or if the two arbitrators fail to choose
a third arbitrator within 30 days after their appointment, the American
Arbitration Association shall, upon request of either the Buyers or MJD, appoint
the arbitrator or arbitrators to constitute or complete the arbitral tribunal,
as the case may be. Arbitration proceedings hereunder may be initiated by the
Buyers or MJD by making a written request to the American Arbitration
Association, together with any appropriate filing fee, at the office of the
American Arbitration Association in New York, New York. Any order or
determination of the arbitral tribune shall be final and binding upon the
parties to the arbitration. The parties hereto hereby consent to the in
personam jurisdiction of the courts of the State of New York for purposes of
confirming any award and entering judgment thereon.
49
13.10 Choice of Law. The construction and performance of this
-------------
Agreement shall be governed by the laws of the State of New York without regard
to its principles of conflict of laws, and the state and federal courts of New
York shall have exclusive jurisdiction over any controversy or claim arising out
of or relating to this Agreement.
13.11 Notices. All notices, requests, demands, letters, waivers and
-------
other communications required or permitted to be given under this Agreement
shall be in writing and shall be deemed to have been duly given if (a) delivered
-
personally, (b) mailed, certified or registered mail with postage prepaid, (c)
- -
sent by next-day or overnight mail or delivery or (d) sent by fax, as follows:
-
To MJD or the Company:
000 Xxxx Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: Xx. Xxxxxx X. Xxxxxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
With a copy to:
Paul, Hastings, Xxxxxxxx & Xxxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxxx, Esq.
Phone: (000) 000-0000
Fax: (000) 000-0000
To Carousel:
Carousel Capital Partners, L.P.
0000 Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: Xx. Xxxxxx Xxxxxx, III
Xx. Xxxx X. Xxxxxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
With a copy to:
50
Xxxxxxx Xxxxxxxxx Xxxxxxx & Xxxxxxx, L.L.P.
NationsBank Corporate Center
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000-0000
Attention: Xxxxxxx X. Xxxxx, Esq.
Phone: (000) 000-0000
Fax: (000) 000-0000
51
To Xxxxx:
Xxxxx & Company
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxxx, XX, Esq.
Phone: (000) 000-0000
Fax: (000) 000-0000
With a copy to:
Debevoise & Xxxxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxx, Esq.
Phone: (000) 000-0000
Fax: (000) 000-0000
or to such other person or address as any party shall specify by notice in
writing to the party entitled to notice. All such notices, requests, demands,
letters, waivers and other communications shall be deemed to have been received
(w) if by personal delivery on the day after such delivery, (x) if by certified
- -
or registered mail, on the fifth Business Day after the mailing thereof, (y) if
-
by next-day or overnight mail or delivery, on the day delivered or (z) if by
-
fax, on the next day following the day on which such fax was sent, provided that
a copy is also sent by certified or registered mail.
13.12 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which will be deemed an original and all of which together
will constitute one and the same instrument.
13.13 Further Assurances. MJD and the Company shall at any time and
------------------
from time to time after the Closing execute and deliver to the Buyers such
additional instruments, documents, conveyances or assurances and take such other
actions as shall be necessary, or otherwise reasonably be requested by the
Buyers, to confirm and assure the rights and obligations provided for in this
Agreement and render effective the consummation of the transactions contemplated
hereby, or otherwise to carry out the intent and purposes of this Agreement.
52
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first written above.
MJD COMMUNICATIONS, INC.
By:
--------------------------------------
Name:
Title:
MJD PARTNERS, L.P.
By: MJD Partners, Inc., its general partner
By:
--------------------------------------
Name:
Title:
CAROUSEL CAPITAL PARTNERS, L.P.
By: Carousel Capital Company, L.L.C.,
its general partner
By:
--------------------------------------
Name:
Title:
53
XXXXX INVESTMENT ASSOCIATES V,
L.P.
By: Xxxxx Partners, V, L.P., its general
partner
By:
--------------------------------------
Name:
Title:
XXXXX EQUITY PARTNERS V, L.P.
By:
--------------------------------------
Name:
Title:
54
AMENDMENT NO. 1 TO
STOCK PURCHASE AGREEMENT
THIS AMENDMENT NO. 1 (this "Amendment") to the Stock Purchase
Agreement (as defined below) dated as of April 30, 1997, is hereby entered into
by and among MJD Communications, Inc., a Delaware corporation (the "Company"),
MJD Partners, L.P., a Delaware limited partnership ("MJD"), Carousel Capital
Partners, L.P., a Delaware limited partnership ("Carousel"), Xxxxx Investment
Associates V, L.P., a Delaware limited partnership ("KIA V") and Xxxxx Equity
Partners V, L.P., a Delaware limited partnership ("KEP V", and together with KIA
V, "Xxxxx"). Capitalized terms not otherwise defined have the meanings set forth
in the Stock Purchase Agreement.
WHEREAS, MJD, Carousel, Xxxxx and the Company wish to amend the Stock
Purchase Agreement (the "Stock Purchase Agreement) dated as of March 6, 1997 by
and among MJD, Carousel, Xxxxx and the Company;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein and for good and valuable consideration, the receipt
and adequacy of which is hereby acknowledged, the parties hereto agree as
follows:
Section 1. Amendment. The Stock Purchase Agreement is hereby amended
---------
and modified by substituting "May 15, 1997" for "April 30, 1997" in Section
12.1(a)(ii)(A).
Section 2. Effectiveness. The amendment to the Stock Purchase
-------------
Agreement provided for in this Amendment shall become effective as of the date
hereof upon the execution and delivery of one or more counterparts of this
Amendment duly executed by MJD, Carousel, Xxxxx and the Company.
Section 3. Miscellaneous. (a) Except as expressly provided herein,
-------------
the execution, delivery and effectiveness of this Amendment shall not operate as
a waiver of any rights, powers or remedies of MJD, Carousel, Xxxxx or the
Company under the Stock Purchase Agreement, nor constitute a waiver of any
provision of the Stock Purchase Agreement. Except as expressly amended hereby,
the Stock Purchase Agreement shall be unchanged and remain in full force and
effect and the Stock Purchase Agreement as amended hereby is ratified and
confirmed.
(b) This Amendment shall form a part of the Stock Purchase Agreement
for all purposes, and each party to the Stock Purchase Agreement shall be bound
hereby and shall be entitled to the benefits hereof.
(c) This Amendment may be executed in any number of counterparts,
each of which shall be an original and all of which taken together shall
constitute one and the same instrument and any of the parties hereto may execute
this Amendment by signing any such counterpart.
(D) THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK, REGARDLESS OF THE LAWS THAT MIGHT
OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICT OF LAWS THEREOF.
(e) From and after the effectiveness of this Amendment as provided in
Section 2 hereof, all references to the Stock Purchase Agreement in the Stock
---------
Purchase Agreement and in any other agreement in connection with the
transactions thereto shall be deemed to be references to the Stock Purchase
Agreement after giving effect to this Amendment.
2
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed as of the day and year first above written.
MJD COMMUNICATIONS, INC.
By_________________________________
Name:
Title:
MJD PARTNERS, L.P.
By: MJD Partners, Inc., its
general partner
By_________________________________
Name:
Title:
CAROUSEL CAPITAL PARTNERS, L.P.
By: Carousel Capital Company,
L.L.C., its general partner
By_________________________________
Name:
Title:
XXXXX INVESTMENT ASSOCIATES V, L.P.
By: Xxxxx Partners, V, L.P., its
general partner
By_________________________________
Name:
Title:
XXXXX EQUITY PARTNERS V, L.P.
By_________________________________
Name:
Title:
