AGREEMENT AND PLAN OF MERGER between MM MERGER CORP. and MID MAINE COMMUNICATIONS, INC. April 10, 2006
AGREEMENT
AND PLAN OF MERGER
between
MM
MERGER CORP.
and
MID
MAINE COMMUNICATIONS, INC.
April
10,
2006
TABLE
OF CONTENTS
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Page
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| ARTICLE 1 Definitions |
1
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1.1
Definitions.
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1
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| ARTICLE 2 Merger |
1
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2.1
Merger.
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1
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2.2
Certificate of Incorporation and By-Laws.
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2
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2.3
Directors and Officers.
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2
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2.4
Merger Consideration.
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2
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2.5
Certain Definitions.
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2
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2.6
Estimated Merger Consideration; Payment of Indebtedness.
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3
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2.7
Final Determination of Working Capital.
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4
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2.8
Conversion of Common Stock.
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5
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| ARTICLE 3 Representations and Warranties Concerning Communications |
6
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3.1
Organization and Good Standing.
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6
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3.2
Capital Stock.
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7
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3.3
Other Ventures.
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8
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3.4
Noncontravention.
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9
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3.5
Financial Statements.
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9
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3.6
Absence of Certain Changes or Events.
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9
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3.7
Taxes.
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11
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3.8
Employees.
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12
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3.9
Employee Benefit Plans and Other Compensation
Arrangements.
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12
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3.10
Environmental Matters.
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14
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3.11
Permits; Compliance with Laws.
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15
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3.12
Real and Personal Properties.
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16
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3.13
Accounts Receivable.
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17
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3.14
Intellectual Properties.
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17
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3.15
Contracts.
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18
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3.16
Litigation.
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19
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3.17
Brokerage.
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19
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3.18
Insurance.
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19
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3.19
Indebtedness.
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19
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3.20
Inventory.
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20
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3.21
Bank Accounts.
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20
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3.22
Interest in Customers, Suppliers and Competitors.
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20
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3.23
Bankruptcy.
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20
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3.24
Related Transactions.
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20
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3.25
Location of Operations.
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20
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3.26
Disclosure.
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20
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| ARTICLE 4 Representations and Warranties of Acquisition |
20
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4.1
Organization; Authorization.
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20
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4.2
Execution and Delivery; Enforceability.
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21
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4.3
Governmental Authorities; Consents.
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21
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4.4
Brokerage.
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21
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4.5
Reliance; Disclosure.
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21
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4.6
Financing.
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21
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| ARTICLE 5 Conditions Precedent |
21
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5.1
Conditions to Acquisition’s Obligations.
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21
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5.2
Conditions to Communications’ Obligations.
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23
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| ARTICLE 6 The Closing |
24
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| ARTICLE 7 Additional Covenants and Agreements |
25
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7.1
Pre-Closing Covenants and Agreements.
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25
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7.2
Miscellaneous Covenants.
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27
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7.3
Acknowledgements.
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29
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7.4
Tax Matters.
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30
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7.5
Financial Statements.
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30
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| ARTICLE 8 Indemnification |
30
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8.1
Indemnification of Acquisition.
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30
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8.2
Limitations on Indemnification of Acquisition.
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31
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8.3
Indemnification of Participating Stockholders.
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31
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8.4
Limitations on Indemnification of Seller Indemnitees.
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32
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8.5
Procedures Relating to Indemnification.
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32
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8.6
Limitation of Remedies.
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33
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| ARTICLE 9 Certain Definitions |
34
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| ARTICLE 10 Construction; Miscellaneous Provisions |
40
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10.1
Notices.
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40
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10.2
Entire Agreement.
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41
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10.3
Modification.
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41
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10.4
Jurisdiction and Venue.
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41
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10.5
Binding Effect.
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41
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10.6
Headings.
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41
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10.7
Number and Gender; Inclusion.
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41
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10.8
Counterparts.
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42
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10.9
Third Parties.
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42
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10.10
Schedules and Exhibits.
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42
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10.11
Time Periods.
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42
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10.12
Governing Law.
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42
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-ii-
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Schedules
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Exhibits
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2.5.2
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Working
Capital
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Exhibit
A
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Certificate
of Merger
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2.6.2
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Repaid
Closing Indebtedness
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Exhibit
B
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Escrow
Agreement
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2.6.3
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Stockholders
Percentage Interest
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Exhibit
C
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WC
Escrow Agreement
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3.1(a)
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Subsidiaries
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Exhibit
D
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Special
Claim Escrow Agreement
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3.1(b)
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Foreign
Qualifications
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Exhibit
E
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Non-Competition
Agreement
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3.1(c)
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Directors
and Officers
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Exhibit
F
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Written
Consent
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3.2.1
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Stockholders
of Record
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3.5
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Audited
Financials
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3.6
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Absence
of Certain Changes or Events
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3.7
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Taxes
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3.8
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Employees
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3.9(a)
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Employee
Benefit Plans
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3.9(b)
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Plan
Matters
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3.10
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Environmental
Matters
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3.11
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Permits
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3.12(a)
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Real
Property
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3.12(b)
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Real
Property Lease Matters
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3.14(a)
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Intellectual
Property
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3.14(b)
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Intellectual
Property Licenses
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3.14(c)
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Intellectual
Property Matters
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3.15(a)
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Material
Contracts
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3.15(b)
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Contract
Matters
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3.16
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Litigation
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3.18
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Insurance
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3.21
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Bank
Accounts
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3.22
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Interest
in Customers, etc.
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5.1(a)
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Necessary
Consents
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-iii-
AGREEMENT
AND PLAN OF MERGER
THIS
AGREEMENT AND PLAN OF MERGER (“Agreement”)
is
entered into as of the tenth day of April, 2006, among MM MERGER CORP., a
Delaware corporation (“Acquisition”),
MID-MAINE COMMUNICATIONS, INC., a Delaware corporation (“Communications”
or
the
“Company”),
and
on its own behalf, and on behalf of each Participating Stockholder, Richfield
Associates, Inc. (“Stockholders’
Representative”).
RECITALS:
1. Communications
owns (i) all of the issued and outstanding shares of capital stock of Mid-Maine
Telecom, Inc., a Maine corporation (“Telecom”);
and
(ii) all of the issued and outstanding shares of capital stock of Mid-Maine
Telplus, a Maine corporation (“Telplus”
and
together with Telecom and Communications, the “Acquired
Companies”
and
each, an “Acquired
Company”).
2. The
respective Boards of Directors of the Company and Acquisition have each approved
the merger of Acquisition with and into the Company in accordance with the
General Corporation Law of the State of Delaware (the “DGCL”)
and
the provisions of this Agreement (the "Merger").
Now,
therefore, in consideration of the mutual representations, warranties, covenants
and agreements set forth in this Agreement, Acquisition, Communications and
Stockholders’ Representative hereby agree as follows:
ARTICLE
1
Definitions
1.1 Definitions.
Certain
terms used in this Agreement shall have the meanings set forth in
Article 9, or elsewhere herein as indicated in Article 9.
ARTICLE
2
Merger
2.1 Merger. At
the
Effective Time, on the terms and subject to the conditions of this Agreement,
in
accordance with the DGCL, Acquisition shall merge with and into Communications
(the “Merger”)
with
Communications as the surviving corporation in the Merger (the “Surviving
Corporation”).
In
conjunction with the Closing, and to effect the Merger, the parties shall cause
to be filed with the Secretary of State of the State of Delaware a certificate
of merger substantially in the form of Exhibit
A,
executed in accordance with the relevant provisions of the DGCL (the
"Certificate
of Merger")
and
shall make all other filings or recordings required by the DGCL in connection
with the Merger. The Merger shall become effective at such time as the
Certificate of Merger is duly filed with the Secretary of State of the State
of
Delaware (the "Effective
Time").
Upon
consummation of the Merger, the separate corporate existence of Acquisition
shall terminate.
(a) The
certificate of incorporation of Acquisition as in effect at the Effective Time
shall be the certificate of incorporation of the Surviving Corporation until
thereafter amended as provided therein and under the DGCL.
(b) The
by-laws of Acquisition as in effect at the Effective Time shall be the by--laws
of the Surviving Corporation until thereafter amended as provided therein and
under the DGCL.
2.4 Merger
Consideration. The
aggregate consideration payable hereunder (the “Merger
Consideration”)
shall
be an amount equal to the product of: (X) the Participation Factor and (Y)
the
sum of:
(a) Thirty
Seven Million Seven Hundred Fifty Thousand Dollars ($37,750,000) (the
“Cash
Amount”);
(b) minus
an
amount equal to the Closing Indebtedness; and
(c) plus
or
minus,
as
applicable, the amount of the Closing Working Capital Adjustment.
2.5 Certain
Definitions.
2.5.1 “Participation
Factor”
eans
a
fraction (expressed as a decimal), the numerator of which is 3,513.27
minus
the
number of Dissenting Shares and the denominator of which is
3,513.27.
2.5.2 Working
Capital. Working
Capital”
of
Communications and its Subsidiaries is defined on, and shall be calculated
in
accordance with, Schedule 2.5.2.
Any
additional accounts opened in the general ledgers of Communications and its
Subsidiaries after the date hereof with respect to any category of asset or
liability included on Schedule
2.5.2
shall be
included in the calculation of Working Capital consistent with the calculation
set forth on Schedule
2.5.2.
2.5.3 Closing
Working Capital. “Closing
Working Capital”
means
the Working Capital of Communications and its Subsidiaries, on a consolidated
basis, as reflected on the Agreed Closing Statement or the Final Closing
Statement, as the case may be.
2.5.4 Closing
Working Capital Adjustment.
“Closing
Working Capital Adjustment”
means
an amount equal to $630,000 less Closing Working Capital. The Closing Working
Capital Adjustment may be positive or negative, it being understood that an
increase in Working Capital relative to the referenced amount will result in
an
increase in the Merger Consideration and a decrease will result in a reduction
in the Merger Consideration.
2
2.6 Estimated
Merger Consideration; Payment of Indebtedness.
2.6.1 Estimated
Merger
Consideration.
As
soon
as practicable and in no event less than three (3) business days prior to the
Closing Date, after consultation with Acquisition, Stockholders’ Representative,
on behalf of the Participating Stockholders, shall deliver to Acquisition a
certificate setting forth estimates of the Closing Indebtedness, the Closing
Working Capital and the related determination of the Closing Working Capital
Adjustment (the “Closing
Certificate”).
As
used herein, “Estimated
Closing Indebtedness”,
“Estimated
Closing Working Capital”
and
“Estimated
Closing Working Capital Adjustment”
mean
the estimates of the Closing Indebtedness, the Closing Working Capital and
the
Closing Working Capital Adjustment, respectively, set forth in the Closing
Certificate, and “Estimated
Merger Consideration”
means
an amount equal to the Merger Consideration calculated as set forth in Section
2.4, assuming for purposes of such calculation that the Closing Indebtedness
is
equal to the Estimated Closing Indebtedness and that the Closing Working Capital
is equal to the Estimated Closing Working Capital.
2.6.2 Payment
of Indebtedness.
Acquisition
will pay, or cause to be paid, in full at or immediately following the Closing,
the Indebtedness of Communications and its Subsidiaries identified on
Schedule
2.6.2
(collectively, the “Repaid
Closing Indebtedness”),
with
the result that immediately following the Closing there will be no further
obligations (monetary or otherwise) of Communications and its Subsidiaries
with
respect to any such Repaid Closing Indebtedness outstanding immediately prior
to
the Closing. In order to facilitate such repayment, as soon as practicable
before the Closing, Stockholders’ Representative shall cause Communications and
its Subsidiaries to obtain customary payoff letters for the repayment of such
Indebtedness and such other documents reasonably requested by Acquisition,
including recordable form lien releases, which payoff letters will be in a
commercially reasonable form and shall indicate that such lenders have agreed
to
release immediately all applicable Liens relating to the assets and properties
of Communications and its Subsidiaries, including the redelivery of all stock
certificates held pursuant to any such terminated stock pledge agreements
(collectively, the “Pay-Off
Letters”).
2.6.3 Payment
of Estimated Merger Consideration; Escrow Funds.
At the
Closing, Acquisition shall pay and deliver the Estimated Merger Consideration
(as calculated based upon the Closing Certificate) less
the
Escrow Funds, the WC Escrow Funds and the Special Claim Escrow Funds (the
“Closing
Date Payment”)
to the
Participating Stockholders ratably in accordance with their Stockholders
Percentage Interest as identified in Schedule
2.6.3
by means
of a wire transfer of immediately available cash funds to such accounts as
are
directed by Stockholders’ Representative prior to the Closing and by check to
those Participating Stockholders with respect to which wire transfer information
is not provided, upon surrender to the Surviving Corporation of such
Stockholder’s stock certificates duly endorsed in blank or accompanied by a
stock transfer power duly endorsed in blank.
2.6.4 Escrow
Funds.
At
the
Closing, Surviving Corporation, Stockholders’ Representative and Xxxxx Fargo
Bank, National Association (the “Escrow
Agent”)
shall
(i) enter into an escrow agreement, substantially in the form of Exhibit
B
hereto
(the “Escrow
Agreement”),
pursuant to which five percent (5%) of the Cash Amount (the “Escrow
Funds”)
shall
be deposited into escrow for the purpose of providing funds for any payments
due
to the Surviving Corporation after the Closing pursuant to Article 8; (ii)
enter
into an escrow agreement, substantially in the form of Exhibit
C
hereto
(the “WC
Escrow Agreement”),
pursuant to which the WC Escrow Funds shall be deposited into escrow for the
purpose of providing funds for any payments due to the Surviving Corporation
after the Closing pursuant to Section 2.7.3; and (iii) enter into an escrow
agreement, substantially in the form of Exhibit
D
hereto
(the “Special
Claim Escrow Agreement”),
pursuant to which the amount specified in the Special Claim Escrow Agreement
(the “Special
Claim Escrow Funds”)
shall
be deposited into escrow for the purpose of providing funds necessary to contest
and address the particular claim described in the Special Claim Escrow
Agreement, all as set forth in the Special Claim Escrow Agreement.
3
2.7 Final
Determination of Working Capital.
2.7.1 Proposed
Closing Statement Preparation
and
Review.
Within
forty-five (45) days after the Closing Date, the Surviving Corporation shall
prepare, after consultation with Stockholders’ Representative, and deliver to
the Stockholders’ Representative a statement setting forth its determination of
the actual Working Capital as of the Closing Date and the related determination
of the Closing Working Capital Adjustment (the “Proposed
Closing Statement”).
During the fifteen (15) days immediately following delivery of the Proposed
Closing Statement, Stockholders’ Representative shall be entitled to review the
Proposed Closing Statement and any working papers, trial balances and similar
materials relating to the Proposed Closing Statement prepared by the Surviving
Corporation, and the Surviving Corporation shall provide the Stockholders’
Representative with access at the Surviving Corporation’s principal office,
during normal business hours, to the Surviving Corporation’s personnel,
properties, books and records. The Proposed Closing Statement prepared by the
Surviving Corporation shall become final and binding (the “Agreed
Closing Statement”)
upon
the parties hereto on the sixteenth day following receipt thereof by the
Stockholders’ Representative, unless the Stockholders’ Representative gives
written notice to the Surviving Corporation of its objection to the Proposed
Closing Statement (a “Notice
of Objection”)
prior
to such sixteenth day. Any Notice of Objection shall specify in reasonable
detail the nature of any objection so asserted.
2.7.2 Closing
Statement Dispute Resolution.
During
the fifteen (15) days immediately following the delivery of any Notice of
Objection, the Surviving Corporation and the Stockholders’ Representative shall
seek in good faith to resolve in writing any differences which they may have
with respect to any matter specified in such Notice of Objection. During such
period, the Surviving Corporation and the Stockholders’ Representative shall
each have access to the other party’s working papers, trial balances and similar
materials prepared in connection with the other party’s preparation of the
Proposed Closing Statement and the Notice of Objection, as the case may be.
The
matters set forth in any such written resolution shall be final and binding
on
the parties hereto on the date of such written resolution.
At
the
end of the fifteen day period referred to in this Section 2.7.2, the parties
shall mutually engage and submit such dispute to, and the same shall be finally
resolved in accordance with the provisions of this Agreement by, Ernst &
Young, LLP, or such other accounting firm of national reputation as shall be
mutually acceptable to the Surviving Corporation and Stockholders’
Representative (the “Independent
Accountants”).
The
Independent Accountants shall determine and report in writing to the Surviving
Corporation and Stockholders’ Representative as to the resolution of all
disputed matters submitted to the Independent Accountants and the effect of
such
determinations on the Proposed Closing Statement within twenty (20) days after
such submission or such longer period as the Independent Accountants may
reasonably require, and such determinations shall be final, binding and
conclusive as to the Surviving Corporation, the Participating Stockholders,
Stockholders’ Representative and their respective Affiliates. The statement
setting forth such final and binding determination as of the Closing Date is
hereinafter referred to as the “Final
Closing Statement”.
The
fees and disbursements of the Independent Accountants shall be payable one-half
by the Surviving Corporation, on the one hand, and one-half by reducing the
amount of the WC Escrow Funds, on the other hand.
4
2.7.3 Payment
of Purchase Price Adjustment.
If
the
Closing Working Capital Adjustment as of the Closing Date set forth in the
Agreed Closing Statement or the Final Closing Statement, as the case may be,
is
greater than the Estimated Closing Working Capital Adjustment set forth in
the
Closing Certificate, the Stockholders’ Representative and the Surviving
Corporation shall direct the escrow agent under the WC Escrow Agreement to
distribute to the Participating Stockholders (pro rata according to their
respective Stockholders Percentage Interest) all of the funds in the WC Escrow
Account and the Surviving Corporation shall promptly pay the difference between
the Closing Working Capital Adjustment set forth in the Agreed Closing Statement
or the Final Closing Statement, as the case may be, and the Estimated Closing
Working Capital Adjustment set forth in the Closing Certificate to Stockholders’
Representative for the benefit of the Participating Stockholders by means of
a
wire transfer and Stockholders’ Representative shall disburse the amount so
received to the Participating Stockholders (pro rata according to their
respective Stockholders Percentage Interest); provided,
however,
that the
obligation of Surviving Corporation shall not exceed the amount originally
deposited into the Escrow Agreement. If the Estimated Closing Working Capital
Adjustment set forth in the Closing Statement is greater than the Closing
Working Capital Adjustment as of the Closing Date set forth in the Final Closing
Statement, then the Stockholders’ Representative and the Surviving Corporation
shall direct the escrow agent under the WC Escrow Agreement to distribute to
the
Surviving Corporation an adjustment equal to the amount of such excess from
the
WC Escrow Account and the balance of the WC Escrow Amount after such
disbursement to the Participating Stockholders (pro rata according to their
respective Stockholders Percentage Interest); provided
that if
the amount of such excess exceeds the amount of the WC Escrow Funds, the
Stockholders’ Representative and the Surviving Corporation shall direct the
escrow agent under the Escrow Agreement to distribute to the Surviving
Corporation the difference between such excess and the WC Escrow Funds from
the
Escrow Account. For Tax purposes, any payment made under this Agreement,
including pursuant to Article 8, shall be treated as an adjustment to the Merger
Consideration.
2.8 Conversion
of Common Stock. At
the
Effective Time, by virtue of the Merger and without any action on the part
of
Acquisition, Communications, or any stockholder of Communications or
Acquisition:
(a) Each
share of Common Stock issued and outstanding immediately prior to the Effective
Time (“Shares”),
other
than Shares to be canceled pursuant to Section (d) hereof and Dissenters’
Shares, shall be converted into the right to receive an amount of cash equal
to
the Merger Consideration (payable in the amounts and at the times and subject
to
adjustment as provided in this Agreement) divided by the total number of Shares
held by Participating Stockholders.
5
(b) All
of
the Shares to be converted into cash pursuant to this Section shall no longer
be
outstanding and shall automatically be canceled and cease to exist at the
Effective Time, and each certificate representing Share shall thereafter
represent the right to receive the amount of cash determined in accordance
with
the provisions of paragraph (a).
(c) Shares
outstanding immediately prior to the Effective Time and held by a holder who
has
not voted in favor of the Merger or consented thereto in writing and who has
demanded appraisal for such Shares in accordance with Section 262 of the DGCL
(“Dissenters’
Shares”),
shall
not be converted into a right to receive the Merger Consideration unless such
holder fails to perfect within the period prescribed by the DGCL or withdraws
or
otherwise loses such holder’s right to appraisal under the DGCL. If, after the
Effective Time, such holder fails to perfect or withdraws or loses such holder’s
right to appraisal, such Dissenters’ Shares shall be treated as if they had been
converted as of the Effective Time into a right to receive the Merger
Consideration without interest or dividends thereon, and for such purposes
the
Participation Factor and resulting Merger Consideration shall be recalculated.
The Company shall give Acquisition prompt notice of any written demands received
by the Company for appraisal of Shares, and, prior to the Effective Time,
Acquisition shall have the right to participate in negotiations and proceedings
with respect to such demands. Prior to the Effective Time, the Company shall
not, except with the prior written consent of Acquisition, make any payment
with
respect to, or settle or offer to settle, any such demands.
(d) At
the
Effective Time, any Shares that are owned by Communications as treasury stock
shall be canceled and shall cease to exist, and no cash or other consideration
shall be delivered in exchange therefor.
(e) Each
share of common stock of Acquisition issued and outstanding immediately prior
to
the Effective Time shall be converted into and become one validly issued, fully
paid and nonassessable share of common stock, par value $0.01 per share, of
the
Surviving Corporation.
ARTICLE
3
Representations
and Warranties Concerning Communications
Communications
represents and warrants to Acquisition that, except as set forth on the
Disclosure Schedule, annexed hereto and made a part hereof, the following
statements contained in this Article 3 are true, correct and complete at
and as of the date of this Agreement.
3.1 Organization
and Good Standing. Communications
is a corporation duly organized, validly existing and in good standing under
the
laws of the State of Delaware. Schedule
3.1(a)
contains
a list of each of Communication’s Subsidiaries. Telecom is a corporation duly
organized, validly existing and in good standing under the laws of the State
of
Maine, and Telplus is a corporation duly organized, validly existing and in
good
standing under the laws of the State of Maine. Communications and each of its
Subsidiaries has all requisite corporate power and authority to own and lease
its assets and to operate its business as the same are now being owned, leased
and operated. Schedule
3.1(b)
contains
a list of each jurisdiction in which Communications and its Subsidiaries are
qualified or licensed to do business as a foreign corporation. Communications
and each of its Subsidiaries is duly qualified or licensed to do business as
a
foreign corporation in, and is in good standing in, each jurisdiction in which
the nature of its business or its ownership of its properties requires it to
be
so qualified or licensed, except where the failure to be so qualified or
licensed would not have a Material Adverse Effect. Schedule
3.1(c)
sets
forth a true and complete list of: (a) all directors and officers of each of
Communications and its Subsidiaries, and
(b)
all powers of attorney granted by each of Communications
and its Subsidiaries
to any
third party that are currently in effect. Communications has delivered or made
available to Acquisition a true, complete and correct copy of the Certificate
of
Incorporation and the Bylaws, each as currently in effect, for itself and each
of its
Subsidiaries, as well as all stock records and all corporate minute books and
records of Communications and each of its Subsidiaries. Such stock records
accurately reflect all share transactions and the current stock ownership of
Communications and each of its Subsidiaries. The corporate minute books and
records of Communications and its Subsidiaries contain true and complete copies
of all resolutions adopted by the stockholders or the board of directors (or
any
committees thereof) of Communications and its Subsidiaries, and any other action
formally taken by Communications and its Subsidiaries.
6
3.2 Capital
Stock.
3.2.1 Capital
Stock of Communications.
The
total
number of shares of capital stock of all classes which the Company has the
authority to issue is Twenty Thousand (20,000), all of which are classified
as
common shares, with a par value of $0.01 per share. Of such authorized shares,
a
total of Three Thousand Five Hundred Thirteen and 27/100 (3,513.27) Shares
are
issued and outstanding. The Shares are currently owned of record as set forth
on
Schedule 2.6.3.
All of
the Shares have been duly authorized and validly issued, are fully paid and
nonassessable and free and clear of any Liens (other than a Lien in favor of
CoBank, ACB and the Stockholders’ Agreement), and were issued in compliance with
all applicable federal and state securities laws and any preemptive rights
or
rights of first refusal of any Person. Except for that certain Stockholders’
Agreement dated as of November 4, 1998, as amended by First Amendment to
Stockholders’ Agreement dated as of March 5, 2006 (as so amended, the
“Stockholders’
Agreement”)
(a)
there are no voting trusts, proxies, or other agreements or understandings
with
respect to the voting of any shares of capital stock of Communications, (b)
there does not exist nor is there outstanding any right or security granted
or
issued to any Person to cause Communications to issue or sell any shares of
capital stock of Communications to any Person (including any warrant, stock
option, convertible debt obligation, subscription for stock or securities
convertible into stock of Communications, or any other similar right, security,
instrument or agreement), and (c) there is no obligation, contingent or
otherwise, of Communications (i) to repurchase, redeem or otherwise acquire
any
share of the capital stock or other equity interests of Communications or any
of
its Subsidiaries or (ii) provide funds to, or make any investment in (in the
form of a loan, capital contribution or otherwise), or provide any guarantee
with respect to the obligations of any other Person (other than the other
Acquired Companies). There are no outstanding or authorized stock appreciation,
phantom stock, profit participation or similar rights with respect to
Communications or any of its Subsidiaries.
7
3.2.2 Capital
Stock of Telecom.
The
authorized capital stock of Telecom consists of One Hundred (100) shares of
common stock, no par value per share, all of which shares have been issued
to
Communications (the “Telecom
Shares”).
All
of the Telecom Shares have been duly authorized and validly issued, are fully
paid and nonassessable, and were issued in compliance with all applicable
federal and state securities laws and any preemptive rights or rights of first
refusal of any Person. There are no voting trusts, proxies, or other agreements
or understandings with respect to the voting of any shares of capital stock
of
Telecom. There does not exist nor is there outstanding any right, security,
or
other agreement granted to, issued to, or entered into with, any Person to
cause
Telecom to issue or sell any shares of capital stock of Telecom to any Person
(including any warrant, option, call, preemptive right, convertible debt
obligation, subscription for stock or securities convertible into stock of
Telecom or any other similar right, security instrument or agreement). There
is
no obligation, contingent or otherwise, of Telecom to (a) repurchase, redeem
or
otherwise acquire any share of the capital stock or other equity interests
of
Communications or any of its Subsidiaries (including Telecom), or (b) provide
funds to, or make any investment in (in the form of a loan, capital contribution
or otherwise), or provide any guarantee with respect to the obligations of
any
other Person (other than the other Acquired Companies). Except for a lien in
favor of CoBank, ACB, Communications has good and marketable title to all of
the
Telecom Shares free and clear of all Liens.
3.2.3 Capital
Stock of Telplus.
The
authorized capital stock of Telplus consists of One Hundred (100) shares of
common stock, no par value per share, all of which shares have been issued
to
Communications (the “Telplus
Shares”).
All
of the Telplus Shares have been duly authorized and validly issued, are fully
paid and nonassessable, and were issued in compliance with all applicable
federal and state securities laws and any preemptive rights or rights of first
refusal of any Person. There are no voting trusts, proxies, or other agreements
or understandings with respect to the voting of any shares of capital stock
of
Telplus. There does not exist nor is there outstanding any right, security,
or
other agreement granted to, issued to, or entered into with, any Person to
cause
Telplus to issue or sell any shares of capital stock of Telplus to any Person
(including any warrant, option, call, preemptive right, convertible debt
obligation, subscription for stock or securities convertible into stock of
Telplus or any other similar right, security instrument or agreement). There
is
no obligation, contingent or otherwise, of Telplus to (a) repurchase, redeem
or
otherwise acquire any share of the capital stock or other equity interests
of
Communications or any of its Subsidiaries (including Telplus), or (b) provide
funds to, or make any investment in (in the form of a loan, capital contribution
or otherwise), or provide any guarantee with respect to the obligations of
any
other Person (other than the other Acquired Companies). Except for a lien in
favor of CoBank, ACB, Communications has good and marketable title to all of
the
Telplus Shares free and clear of all Liens.
3.3 Other
Ventures. Other
than a joint venture between Telplus and MaineCom Services, Inc. pursuant to
a
Term Sheet Regarding Interconnection and Development of Network dated June
4,
1999, as amended by Additional Agreement Between Mid-Maine Telplus and MaineCom
Services dated April 30, 2001, none of Communications or any of its Subsidiaries
owns of record or beneficially any equity ownership interest in any other
Person, nor is it a partner or member of any partnership, limited liability
company or joint venture.
8
3.4 Noncontravention. Neither
the execution and delivery of this Agreement, nor the consummation of the
transactions contemplated hereby, will (i) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge or other
restriction of any governmental entity to which any of Communications or its
Subsidiaries is subject or (ii) conflict with, result in a breach of, constitute
(with due notice or lapse of time or both) a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
not renew or cancel, or require any notice or consent under any agreement,
contract, lease, license, instrument or other arrangement to which
Communications or any of its Subsidiaries is a party, by which Communications
or
any of its Subsidiaries is bound or to which any of their assets are subject
(or
result in the imposition of any Lien upon any of their assets). Neither the
execution and delivery of this Agreement, nor the consummation of the
transactions contemplated hereby, will violate any provision of the charter
or
bylaws of Communications or any of its Subsidiaries. Other than in connection
with the necessary notices to and approvals or consents, if any, of the FCC
and
MPUC, none of Communications or its Subsidiaries is required to give notice
to,
file with or obtain authorization, consent or approval of any governmental
entity in order for Communications and its Subsidiaries to perform their
respective obligations under this Agreement.
3.5 Financial
Statements. Attached
hereto as Schedule
3.5
are true
and complete copies of the audited consolidated financial statements of
Communications as of and for the fiscal years ended December 31, 2003, December
31, 2004 and December 31, 2005, consisting of the balance sheet at such dates
and the related statements of income, stockholders’ equity and cash flow for
said periods, opined upon by Berry, Dunn, XxXxxx & Xxxxxx, Communication’s
independent public accountants (collectively, the “Audited
Financial Statements”).
The
Audited Financial Statements have been prepared in accordance with GAAP,
consistently applied, and present fairly, in all material respects, the
consolidated financial position of the Acquired Companies as of the dates
indicated and the results of operations for the periods then ended. The balance
sheet as of December 31, 2005, which is included in the Audited Financial
Statements is herein referred to as the “Acquisition
Balance Sheet.”
3.6 Absence
of Certain Changes or Events. Except
as
set forth in Schedule
3.6,
since
December 31, 2005:
(a) there
has
not occurred any event or circumstance that constitutes a Material Adverse
Effect;
(b) none
of
Communications or its Subsidiaries has entered into any transaction that was
not
in the ordinary course of business;
(c) there
has
not been any material change in the Tax reporting or accounting policies or
practices of Communications or any of its Subsidiaries including practices
with
respect to the payment of accounts payable or the collection of accounts
receivable and none of Communications or any of its Subsidiaries has settled
or
compromised any material Tax liability or made any material Tax
election;
9
(d) none
of
Communications or any of its Subsidiaries has incurred any Indebtedness other
than pursuant to the agreements, notes and instruments described on Schedule 3.19,
or
assumed, guaranteed, or endorsed the Indebtedness of any other Person, or
canceled, released, compromised or waived any debt owed to it or claim possessed
by it, other than in the ordinary course of business, except for any
Indebtedness or claims which are reflected in the Audited Financial Statements;
(e) none
of
Communications or any of its Subsidiaries has suffered any theft, damage,
destruction or loss of or to any tangible asset or assets or physical property
having a value in excess of Fifty Thousand Dollars ($50,000) individually or
Two
Hundred Fifty Thousand Dollars ($250,000) in the aggregate.
(f) none
of
Communications or any of its Subsidiaries has made, granted, or committed to
make or grant any bonus or any wage, salary or compensation increase to any
director, officer, employee or consultant, other than salary increases and
bonuses in the ordinary course of business, or any increase of any benefit
provided under any employee benefit plan or arrangement, and none of
Communications or any of its Subsidiaries has amended or terminated any existing
employee benefit plan or arrangement or adopted any new employee benefit plan
or
arrangement;
(g) none
of
Communications or any of its Subsidiaries has sold, assigned, transferred or
subjected to any Lien, or have committed to sell, assign, transfer or subject
to
any Lien, any tangible or intangible assets having a current book value in
excess of Fifty Thousand Dollars ($50,000) individually or Two Hundred Fifty
Thousand Dollars ($250,000) in the aggregate, except for sales of inventory
in
the ordinary course of business;
(h) none
of
Communications or any of its Subsidiaries has purchased or leased, or has
committed to purchase or lease, any asset for an amount in excess of Fifty
Thousand Dollars ($50,000) individually or One Hundred Fifty Thousand Dollars
($150,000) in the aggregate, except purchases of inventory and supplies in
the
ordinary course of business, consistent with past practice;
(i) except
as
set forth in Communication’s work order log, none of Communications or any of
its Subsidiaries has made or authorized any capital expenditures or commitment
for capital expenditures in an amount in excess of One Hundred Thousand Dollars
($100,000) individually or Two Hundred Fifty Thousand Dollars ($250,000) in
the
aggregate;
(j) there
has
been no declaration or payment of a dividend, or any other declaration, payment
or distribution of any type or nature to the Stockholders in respect of their
Common Stock, whether in cash or property, and no purchase or redemption of
any
Common Stock;
10
(k) there
has
been no loan by Communications or any of its Subsidiaries, or guaranty by
Communications or any of its Subsidiaries of any loan, to any employee of
Communications or any of its Subsidiaries in excess of Twenty Five Thousand
Dollars ($25,000);
(l) none
of
Communications or any of its Subsidiaries has ceased to transact business with
any customer that, as of the date of such cessation, represented more than
five
percent (5%) of the annual gross revenues of Communications;
(m) there
has
been no amendment or termination of any Materal Contract, except in the ordinary
course of business;
(n) none
of
Communications or its Subsidiaries has entered into any agreement (i) involving
the payment of any commission, other than in the ordinary course of business
or
(ii) limiting the operation of their businesses; and
(o) there
has
been no agreement or commitment by Communications or any of its Subsidiaries
to
do any of the foregoing.
3.7 Taxes. All
Taxes
owed by Communications or any of its Subsidiaries have been paid, other than
Taxes which are not yet due or are being contested in good faith by appropriate
proceedings, and for which, in each case, adequate reserves have been
established on the Acquisition Balance Sheet or in the books and records of
Communications and its Subsidiaries. All Tax Returns required to be filed by
Communications or any of its Subsidiaries have been duly and timely filed and
are true, correct and complete in all material respects. Except as set forth
on
Schedule
3.7,
there
are no Tax claims, deficiencies, audits or proceedings pending or, To the
Knowledge of Communications, threatened in connection with Communications or
any
of its Subsidiaries. There are not currently in force any waivers or agreements
binding upon Communications or any of its Subsidiaries for the extension of
time
for the assessment or payment of any Tax. Each of Communications or any of
its
Subsidiaries has properly withheld and paid all Taxes required to have been
withheld and paid in connection with amounts paid or owing to any Person. None
of Communications or any of its Subsidiaries is a party to or bound by any
Tax
allocation or Tax sharing agreement with any other Person or has any contractual
obligation to indemnify any other Person with respect to Taxes. None of
Communications or any of its Subsidiaries has
been
a member of an affiliated group filing a consolidated federal income Tax Return
(other than a group the common parent of which was Communications) nor does
Communications or any of its Subsidiaries have any liability for the Taxes
of
any Person under Treas. Reg. § 1.1502-6 (or any similar provision of state,
local, or foreign law), as a transferee or successor, by contract, or otherwise.
Communications files a consolidated federal income Tax Return on its behalf
and
on behalf of its Subsidiaries. Neither Communications nor any of its
Subsidiaries has requested any extension of time within which to file any Tax
Return, which Tax Return has not since been filed. No claim has ever been made
by a tax authority in a jurisdiction where Communications or any of its
Subsidiaries do not file any Tax Returns that Communications or any of its
Subsidiaries is or may be subject to Tax in such jurisdiction. There are no
Liens for Taxes upon any assets of Communications or any of its Subsidiaries,
except Liens for Taxes not yet due. Neither Communications nor any of its
Subsidiaries has been either a “distributing corporation” or a “controlled
corporation” as defined in Section 355(a)(1)(A) of the Code in a distribution of
shares qualifying under Section 355 of the Code (i) in the two years prior
to
the date of this Agreement or (ii) in a distribution that could otherwise
constitute part of a “plan” or “series of related transactions” (as defined in
Section 355(e) of the Code) in conjunction with the Merger. Schedule
3.7
lists
each partnership (or entity or other arrangement treated as a partnership for
U.S. federal income tax purposes) in which Communications or any of its
Subsidiaries owns a beneficial interest
11
3.8 Employees. Except
as
set forth in Schedule
3.8,
at no
time since January 1, 2003 has there been any pending or, To the Knowledge
of
Communications, threatened controversies or claims by any employee or former
employee of any of Communications or any of its Subsidiaries with respect to
his
or her employment or any benefits incident thereto. To the Knowledge of
Communications, neither Communications nor any of its Subsidiaries is currently
under review, audit, investigation, or prosecution by or subject to any order,
consent decree, or conciliation agreement from any federal, state, or local
governmental agency with respect to any employment or labor practices, including
but not limited to, the U.S. Department of Labor, the U.S. Office of Federal
Contract Compliance, the National Labor Relations Board, the U.S. Occupational
Safety and Health Administration, or the state or local counterparts. To the
Knowledge of Communications, Communications and each of its Subsidiaries has
attempted to comply in good faith with all applicable federal, state, and local
labor and employment laws, including laws regulating wage and hour practices
and
prohibiting discrimination in the terms and conditions of employment. Neither
Communications nor any of its Subsidiaries is a party to any collective
bargaining agreement or employee grievance procedure or dispute resolution
mechanism nor, To the Knowledge of Communications, is there pending or underway
any union organizational activities or proceedings with respect to employees
of
Communications or any of its Subsidiaries. Schedule 3.8
includes
a complete list of all manager level or above employees and all employees of
Communications or any of its Subsidiaries who received total salary (including
bonus) of at least Fifty Thousand Dollars ($50,000) during calendar year 2005.
There is no labor strike, slowdown or stoppage pending or, To the Knowledge
of
Communications, threatened against Communications or any of its Subsidiaries.
Except as disclosed in Schedule
3.15(a),
To the
Knowledge of Communications, no employee or former employee of Communications
or
any of its Subsidiaries has any employment, change in control, or similar
agreement with Communications or any of its Subsidiaries that would affect
or be
affected by the Merger. Except as disclosed in Schedule
3.15(a),
To the
Knowledge of Communications, no employee or former employee is subject to any
employment agreement, non-disclosure agreement, non-solicitation agreement,
non-competition agreement, or invention assignment agreement with another Person
that is in any way inconsistent with such employee’s or former employee’s
employment with Communications or any of its Subsidiaries.
3.9 Employee
Benefit Plans and Other Compensation Arrangements. Set
forth
on Schedule 3.9(a)
is a
list of all material employee benefit plans (including, but not limited to,
employee benefit plans as defined in Section 3(3) of ERISA), with respect
to which Communications or any of its Subsidiaries currently is the sponsor
or
is obligated to make contributions under the plan terms (the “Plans”).
12
Except
as
set forth on Schedule 3.9(b):
(a) none
of
the Plans is a “multiemployer plan” (as defined in ERISA § 3(37)), a
pension plan subject to Title IV of ERISA or Code § 412, a multiple
employer welfare arrangement as defined in ERISA § 3(40), a multiple
employer plan maintained by more than one employer as defined in Code
§ 413(c) or a plan funded in whole or in part through a voluntary
employees’ beneficiary association under Code § 501(c)(9);
(b) each
of
the Plans that is intended to be tax-qualified under Section 401(a) of the
Code has received a favorable determination or opinion letter from the Internal
Revenue Service as to its qualification and is so qualified in all material
respects, except that no representation is made with respect to any formal
qualification requirement with respect to which the remedial amendment period
under Section 401(b) of the Code has not yet expired;
(c) to
the
extent required (either as a matter of law or to obtain the intended tax
treatment and tax benefits), all Plans comply in form and in operation in all
material respects with the requirements of ERISA, the Code and any other
applicable laws. With respect to each such Plan, all contributions, premium
payments and other payments required to be made as of the date of this Agreement
have been made, and a proper accrual has been made on the books of
Communications and its Subsidiaries for all contributions, premium payments
and
other payments due in the current fiscal year but not made as of the date of
this Agreement;
(d) no
director, officer, employee or other fiduciary (as defined in ERISA
§ 3(21)) of Communications or any of its Subsidiaries has committed any
breach of fiduciary responsibility imposed by ERISA or any other applicable
law
with respect to the Plans which would subject Communications or any of its
Subsidiaries, Acquisition or any affiliate of Acquisition to any material
liability under ERISA or any applicable law. There have been no prohibited
transactions (as defined in ERISA § 406 or Code § 4975) with respect
to any Plan.
(e) there
are
no pending or, To the Knowledge of Communications, threatened claims by or
on
behalf of any of the Plans, by any employee or beneficiary covered under any
Plan or otherwise involving any Plan (other than routine claims for benefits);
(f) no
Plan,
separately or in the aggregate, requires or would result in the payment of
any
“excess parachute payments” within the meaning of Section 280G of the Code,
and the consummation of the transactions contemplated by this Agreement will
not
be a factor in causing payments to be made by Acquisition or Communications
or
any of its Subsidiaries that are not deductible (in whole or in part) under
Section 280G of the Code;
13
(g) neither
the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby, disregarding any termination of employment
which may occur on or after the Closing, will (i) result in any material
payment (including, without limitation, severance, unemployment compensation,
golden parachute or otherwise) becoming due to any director, officer or any
employee of Communications or any of its Subsidiaries from Acquisition,
Communications or any of its Subsidiaries under any Plan or otherwise, (ii)
materially increase any benefits otherwise payable under any Plan, or (iii)
result in any acceleration of the time of payment or vesting of any such
benefits to any material extent; and
(h) neither
Communications nor any of its Subsidiaries has any actual or potential liability
for death or medical benefits after separation from employment, other than
health care continuation benefits described in Code § 4980B or applicable
state law (“COBRA benefits”).
3.10 Environmental
Matters. Except
as
set forth in Schedule
3.10
with
respect to Communications and its Subsidiaries:
(a) To
the
Knowledge of Communications, Communications and its Subsidiaries are in
compliance in all material respects with all applicable Environmental Laws.
There has been no exposure of any person or property to any Hazardous Material
in a manner which has caused or could reasonably be expected to cause an adverse
environmental, health or safety effect to any such person or
property.
(b) Communications
and its Subsidiaries are in compliance in all material respects with all
covenants and conditions of any environmental permits. No circumstances exist
which could cause any environmental permit to be revoked, modified, or rendered
non-renewable upon payment of the permit fee. All environmental permits and
all
other consent and clearances required by any Environmental Law or any agreement
to which Communications or any of its Subsidiaries are bound as a condition
to
the performance and enforcement of any permit or other legal obligation, have
been obtained or will be obtained prior to the Closing.
(c) To
the
Knowledge of Communications, no Hazardous Materials are present on, in, under,
migrating to or from any Real Property, or, were present on any other real
property at the time it ceased to be owned, operated, occupied, controlled
or
leased by Communications or any of its Subsidiaries. There has been no
generation, Treatment, Storage, Release, Disposal or transport of any Hazardous
Material, regardless of quantity, at, on, under, or from any of the Real
Property by Communications or any of its Subsidiaries except in conformance
with
all applicable Laws;
(d) There
are
no friable asbestos or urea formaldehyde-containing materials that have been
incorporated into or used on the buildings or any improvements that are a part
of the Real Property, or into other assets or products of Communications or
any
of its Subsidiaries;
14
(e) There
are
no electrical transformers, capacitors, fluorescent light fixture with ballasts,
or other equipment containing polychlorinated biphenyls on the Real
Property;
(f) To
the
Knowledge of Communications, neither Communications or any of its Subsidiaries
has at any time sent any Hazardous Materials to a site that, pursuant to any
applicable Law (A) has been placed or proposed for placement on the
National Priorities List or any similar state list, or (B) is subject to or
the source of an order, demand or request from a government authority to take
“response,” “corrective,” “removal,” or “remedial” action, as defined in any
applicable Law, or to pay for the costs of any such action at any
location;
(g) Neither
Communications or any of its Subsidiaries has received any notice, order or
other communication from any Governmental Authority, citizens’ group, employee
or other individual or entity claiming that the Acquired Companies are, or
may
be, liable for personal injury or property damage related to any Release,
Treatment, Storage or Disposal of, or exposure to, any Hazardous Material;
(h) There
are
no underground storage tanks or related piping, or surface impoundments located
on, under or at the Real Property;
(i) Communications
is not aware of any fact or circumstance, which could result in any
environmental liability which could reasonably be expected to result in a
Material Adverse Effect for Communications or any of its Subsidiaries;
and
(j) Communications
has delivered to Acquisition or made available for inspection by Acquisition
and
its agents, representatives and employees all records of Communications or
any
of its Subsidiaries concerning any Hazardous Materials relating to the business,
including but not limited to all environmental audits, environmental
assessments, and environmental investigations of any Real Property.
Communications has complied with all environmental disclosure obligations
imposed by applicable Law with respect to the transactions contemplated by
this
Agreement.
3.11 Permits;
Compliance with Laws. Except
as
set forth on Schedule
3.11,
Communications and each of its Subsidiaries is in compliance with (i) all
applicable Laws, (ii) any court or administrative order or process applicable
to
the operation of its business as currently conducted, including, without
limitation, those of the FCC, MPUC, Occupational Safety and Health
Administration, Equal Employment Opportunity Commission and National Labor
Relations Board. Except as set forth in Schedule
3.11,
Communications and each of its Subsidiaries: (x) possesses all licenses,
permits, registrations, permanent certificates of occupancy, authorizations,
variances, exemptions, orders, approvals and certificates from any governmental
authority required under applicable Law with respect to the operation of its
business as currently conducted (collectively, “Permits”),
(y)
has made in a timely manner all necessary filings, including any tariffs and
interconnection agreements, required by such Permits or otherwise with respect
to the operation of its business as currently conducted, and (z) is in
compliance with the terms of all Permits. Except as set forth on Schedule
3.11,
since
the date of the Acquisition Balance Sheet, neither Communications or any of
its
Subsidiaries has received any oral or written notice from any Person or entity
alleging noncompliance with any applicable Law or the terms of any Permit.
Neither Communications or any of its Subsidiaries is aware of or has received
notification that the operation of its business or any of its Permits is the
subject of investigation by any governmental authority of appropriate
jurisdiction, or that any of its Permits is in jeopardy of being materially
amended, restricted, rescinded or terminated. None of the Permits will lapse,
terminate, expire or in any way be adversely impacted or affected by or as
a
result of the performance of this Agreement, or the consummation of the
transactions contemplated hereby.
15
3.12 Real
and Personal Properties.
(a) Schedule 3.12(a)
identifies (i) all of the real property owned by Communications or any of
its Subsidiaries (collectively, the “Owned
Real Property”),
and
(ii) all of the real property demised by leases or subleases, true and
complete copies of which are attached to Schedule
3.12(a)
(collectively, the “Leases”)
to
Communications or its Subsidiaries (collectively, the “Leased
Real Property,”
and
together with the Owned Real Property, the “Real
Property”).
Except as set forth on Schedule
3.12(a),
there
are no parties in possession of any portion of the Real Property other than
Communications or its Subsidiaries, whether as lessees, sublessees, tenants
at
will or trespassers.
(b) Except
as
set forth on Schedule
3.12(b),
the
Leases are valid, binding and in full force and effect, enforceable against
each
of the parties thereto, and Communications and each of its Subsidiaries holds
a
valid and existing leasehold interest under each of the Leases to which it
is a
party for the terms set forth therein, respectively. None of Communications
or
its Subsidiaries are in default under any Lease, and, To the Knowledge of
Communications, no events have occurred and no circumstances exist which, if
unremedied, and whether with or without notice or the passage of time or both,
would result in such a default, except in each case for such defaults as would
not have a Material Adverse Effect.
(c) Communications
and its Subsidiaries own, with good and marketable title, each parcel of Owned
Real Property, and tangible personal property and assets used in its business
as
currently conducted, free and clear of all Liens, except for Permitted Liens.
The condition of the tangible personal property is sufficient, in all material
respects, for the operation of the business as currently conducted by
Communications and its Subsidiaries.
(d) To
the
Knowledge of Communications, the current uses of all buildings and other
structures utilized by Communications or any of its Subsidiaries and located
on
the Real Property substantially conform with all applicable federal, state
and
local governmental building, zoning, health, safety, platting, subdivision
or
other Laws, and restrictive covenants to which the Real Property is subject
are
being violated by Communications or its Subsidiaries.
16
3.13 Accounts
Receivable. The
accounts receivable reflected on the Acquisition Balance Sheet and accounts
receivable arising after the date of the Acquisition Balance Sheet and reflected
on the books and records of Communications and its Subsidiaries arose out of
bona fide, arm’s length transactions, represent valid obligations arising from
services actually provided and, to the Knowledge of Communications, are
collectible in the ordinary course of business at the recorded amounts thereof,
consistent with past practices. The accounts receivable reflected on the
Acquisition Balance Sheet are stated thereon in accordance with GAAP,
consistently applied, subject to (a) normal year end adjustments, and (b) the
absence of disclosures normally made in footnotes.
3.14 Intellectual
Properties. Schedule
3.14(a)
sets
forth a complete and correct list of all patented or registered Intellectual
Property and pending patent applications or other applications for registration
of Intellectual Property, material unregistered trademarks, service marks,
trade
names, material unregistered copyrights, corporate names, logos and slogans,
Internet domain names and material software included in the Company Intellectual
Property. Schedule
3.14(b)
sets
forth all written material licenses pursuant to which Communications or any
of
its Subsidiaries is a party either as a licensee or licensor and any other
material agreements under which Communications or any of its Subsidiaries grant
or receive any rights to Intellectual Property.
Except
as
set forth in Schedule
3.14(c):
(a) Communications
and each of its Subsidiaries owns and possesses all, right, title and interest
in and to, or has a valid and enforceable right or license to use the Company
Intellectual Property as currently being used;
(b) except
for the Permitted Liens, the Company Intellectual Property is not subject to
any
Liens and is not subject to any restrictions or limitations regarding use or
disclosure other than pursuant to written license agreements applicable
thereto;
(c) the
Company Intellectual Property owned by Communications or its Subsidiaries and,
To the Knowledge of Communications, the Company Intellectual Property used
by
Communications or any of its Subsidiaries, is valid, subsisting, in full force
and effect, and has not been cancelled, expired or abandoned;
(d) To
the
Knowledge of Communications: (i) neither Communications or any of its
Subsidiaries has infringed, misappropriated or otherwise conflicted with, any
Intellectual Property of any third party; (ii) the conduct of the businesses
as
currently conducted by Communications and each of its Subsidiaries does not
infringe upon any Intellectual Property owned or controlled by any third party;
and (iii) none of the Acquired Companies has received any written notice
regarding any of the foregoing (including, without limitation, any demands
or
offers to license any Intellectual Property from any third party);
17
(e) To
the
Knowledge of Communications: (i) no third party has infringed, misappropriated
or otherwise conflicted with any of the Company Intellectual Property; and
(ii)
no such claims have been brought or threatened against any third party by
Communications or any of its Subsidiaries; and
(f) (i)
all
licenses listed on Schedule 3.14(b)
are in
full force and effect and, To the Knowledge of Communications, are enforceable
in accordance with their respective terms; (ii) Communications and each of
its
Subsidiaries has performed all obligations required to be performed by them
pursuant to the licenses and agreements listed on Schedule
3.14(b);
(iii)
there is no existing or, To the Knowledge of Communications, threatened default
under or violation of any of the licenses or agreements listed on Schedule
3.14(b)
by any
other party thereto and (iv) the Merger will not result in the termination
of
any of the licenses and agreements listed on Schedule
3.14(b).
3.15 Contracts. Schedule 3.15(a)
lists
all of the currently effective written agreements or binding oral agreements
of
the following types to which Communications or any of its Subsidiaries is a
party or by which any properties or assets of Communications or any of its
Subsidiaries is bound or are subject:
(a) contracts
or group of related contracts with remaining payment obligations (whether as
revenue to or an expense of Communications or any of its Subsidiaries) in excess
of Fifty Thousand Dollars ($50,000) on an annual basis;
(b) contracts
relating to the borrowing of money by Communications or any of its Subsidiaries,
the granting by Communications or any of its Subsidiaries of a Lien on any
of
its assets, or any guaranty by Communications or any of its Subsidiaries of
any
obligation in respect of borrowed money or otherwise;
(c) employment,
confidentiality and non-competition agreements with any employee, officer,
consultant or management advisor;
(d) contracts
not otherwise disclosed herein which limit the freedom of Communications or
any
of its Subsidiaries to engage in any business or compete with any
Person;
(e) contracts
pursuant to which Communications or any of its Subsidiaries is a lessor or
a
lessee of any personal or real property, or holds or operates any tangible
personal property owned by another Person, except for any such leases under
which the aggregate annual rent or lease payments do not exceed Twenty Five
Thousand Dollars ($25,000);
18
(f) contracts
or commitments for the purchase or sale of capital assets in excess of Seventy
Five Thousand Dollars ($75,000); and
(g) interconnection
agreements and other contracts for the provision or acquisition of facilities
and/or services related to the conduct of telecommunications, information or
Internet access services.
Correct
and complete copies of each contract required to be identified on Schedule 3.15(a),
including amendments thereto (collectively, the “Material
Contracts”)
have
been made available to Acquisition. All of the Material Contracts are in full
force and effect and, To the Knowledge of Communications, are enforceable in
accordance with their respective terms. Except as set forth on Schedule
3.15(b),
neither
Communications or its Subsidiaries nor, to the Knowledge of Communications,
any
other party to any of the Material Contracts (i) is in default under (nor does
there exist any condition that, with notice or lapse of time or both, would
cause such a default under) any of the Material Contracts or (ii) has waived
any
right it may have under any of the Material Contracts.
3.16 Litigation. Except
as
set forth on Schedule
3.16,
there
are no actions, suits, arbitrations, proceedings, investigations or claims
of
any kind whatsoever, at law or in equity, pending or, To the Knowledge of
Communications, threatened in writing, against Communications or any of its
Subsidiaries, nor is there any judgment, decree, injunction or order of any
governmental entity or arbitrator outstanding against Communications or any
of
its Subsidiaries.
3.17 Brokerage. Except
for fees or expenses which have already been paid, no Person is or will become
entitled, by reason of any agreement or arrangement entered into or made by
or
on behalf of Communications or any of its Subsidiaries, to receive any
commission, brokerage, finder’s fee or other similar compensation in connection
with the consummation of the transactions contemplated by this Agreement, except
for Xxxxxxx & Associates, L.P.
3.18 Insurance. Communications
and its Subsidiaries maintain all insurance policies that are required or
customarily maintained for the conduct of their business or the ownership of
their respective property (both real and personal), including, without
limitation, workers compensation, and property and casualty insurance.
Schedule 3.18
contains
an accurate and complete list of all insurance policies currently owned, held
by
or applicable to Communications or any of its Subsidiaries (or its respective
assets or business), true and complete copies of which have been provided to
Acquisition. All such policies required to be disclosed on Schedule
3.18
are in
full force and effect, all premiums that are due and payable with respect
thereto have been paid, and no notice of cancellation or termination has been
received with respect to such policies. Neither Communications or any of its
Subsidiaries (i) is in default under any such policies or (ii) has failed to
present any notice or material claim thereunder in a due and timely fashion.
Such policies are valid, outstanding and enforceable policies and will remain
in
effect after the Closing and the applicable limits under such policies have
not
been exhausted.
3.19 Indebtedness. Schedule 2.6.2
sets
forth a listing of all Indebtedness of Communications and its Subsidiaries
as of
the date of this Agreement.
19
3.20 Inventory. All
inventory of Communications and its Subsidiaries consists of items of a quantity
and quality historically useable in the ordinary course of
business.
3.21 Bank
Accounts. Schedule
3.21
sets
forth a listing of each bank or other financial institution in which
Communications or any of its Subsidiaries has an account, safe deposit box
or
lock box arrangement, the name of the entity in whose name such account, box
or
arrangement is held, the identifying numbers or symbols of the account, box
or
arrangement and the name of each person authorized to draw thereon or to have
access thereto.
3.22 Interest
in Customers, Suppliers and Competitors. Except
as
set forth on Schedule
3.22,
no
officer or director of Communications or any of its Subsidiaries, no Stockholder
owning five percent (5%) or more of the Common Stock and, to the Knowledge
of
Communications, no spouse, parent, sibling or lineal descendent of any of the
foregoing, has any direct or indirect interest in any customer, supplier or
competitor of Communications or any of its Subsidiaries, or in any Person from
whom or to whom Communications or any of its Subsidiaries lease any real or
personal property, or in any other Person with whom Communications or any of
its
Subsidiaries is doing business, directly or indirectly (including as a debtor
or
creditor), whether in existence or proposed.
3.23 Bankruptcy. None
of
Communications or any of its Subsidiaries has filed a petition or request for
reorganization or protection or relief under the bankruptcy laws of the United
States or any state or territory thereof, made any general assignment for the
benefit of creditors, or consented to the appointment of a receiver or trustee,
including a custodian under the United States bankruptcy laws, whether such
receiver or trustee was appointed in a voluntary or involuntary
proceeding.
3.24 Related
Transactions. Except
as
set forth on Schedule
3.22,
no
officer or director of Communications or any of its Subsidiaries and no
Stockholder, is now, or has been during the last three (3) fiscal years, a
party
to any transaction or contract with Communications or any of its
Subsidiaries.
3.25 Location
of Operations. None
of
Communications or any of its Subsidiaries conducts or has applied to conduct
any
business operations outside of the State of Maine.
3.26 Disclosure. This
Agreement, including the schedules, attachments or exhibits hereto, does not
contain any untrue statement of a material fact or omit a material fact
necessary to make any statements contained herein or therein, taken as a whole,
in light of the circumstances in which they were made, not misleading.
ARTICLE
4
Representations
and Warranties of Acquisition
Acquisition
represents and warrants to Communications for the benefit of the Participating
Stockholders that the following statements contained in this Article 4 are
true, complete and correct at and as of the date of this Agreement.
4.1 Organization;
Authorization. Acquisition
is a corporation duly organized, validly existing and in good standing under
the
laws of the State of Delaware. Acquisition has all requisite power and authority
to execute, deliver and perform this Agreement and each other agreement,
instrument and document to be executed and delivered by or on behalf of
Acquisition in connection herewith.
20
4.2 Execution
and Delivery; Enforceability. This
Agreement has been, and each other document, instrument or agreement to be
executed and delivered by Acquisition in connection herewith, will upon such
delivery be, duly executed and delivered by Acquisition and constitutes, or
will
upon such delivery constitute, the legal, valid and binding obligation of
Acquisition, enforceable in accordance with its terms.
4.3 Governmental
Authorities; Consents. Except
for approval from the FCC or MPUC, no consent, approval or authorization of
any
governmental authority or any other Person is required to be obtained by
Acquisition in connection with Acquisition’s execution, delivery and performance
of this Agreement or any other document, instrument or agreement to be executed
and delivered by Acquisition in connection herewith or the consummation of
the
transactions contemplated hereby or thereby, other than consents, approvals
and
authorizations already obtained.
4.4 Brokerage. No
Person
is or will become entitled, by reason of any agreement or arrangement entered
into or made by or on behalf of Acquisition, to receive any commission,
brokerage, finder’s fee or other similar compensation in connection with the
consummation of the transactions contemplated by this Agreement, except for
CIBC
World Markets Corp., the fees and expenses of which are solely the
responsibility of Acquisition.
4.5 Reliance;
Disclosure. In
making
its decision to consummate the Merger, Acquisition has not relied upon any
representation, warranty or other statement by or on behalf of Communications
and its Subsidiaries, express or implied, except as expressly set forth in
this
Agreement. To the knowledge of Acquisition, none of the representations or
warranties of Communications and its Subsidiaries set forth in this Agreement
is
untrue or misleading.
4.6 Financing. Acquisition
has entered into commitment letters with General Electric Capital Corporation,
true and complete copies of which have been provided to Communications (the
“Commitment
Letters”),
the
proceeds of which will be sufficient to permit Acquisition to consummate the
transactions contemplated by this Agreement. As of the date hereof, Acquisition
is not aware of any facts or circumstances that create a reasonable basis for
Acquisition to believe that the lenders would not be able to fund the
transactions contemplated by this Agreement in accordance with the terms of
the
Commitment Letters.
ARTICLE
5
Conditions
Precedent
5.1 Conditions
to Acquisition’s Obligations. The
obligation of Acquisition to consummate the closing of the transaction
contemplated in this Agreement is subject to the satisfaction or waiver, at
or
before the Closing, of the following conditions set forth in this
Section 5.1:
(a) the
FCC
and MPUC shall have approved the Merger, including but not limited to, by giving
consent to any and all assignments or transfers of control of Permits, and
all
applicable appeal periods shall have expired or otherwise been terminated,
and
all filings, authorizations and approvals and consents set forth on Schedule
5.1(a)
shall
have been made with or obtained from all applicable governmental authorities
or
other Persons, as the case may be;
21
(b) no
event,
development, circumstance or occurrence shall have occurred since December
31,
2005 that individually or in the aggregate has had, or would reasonably be
expected to have, a Material Adverse Effect.
(c) there
shall be no suit, action, investigation or proceeding pending or threatened
before any court, agency or other governmental authority by which it is sought
to restrain, delay, prohibit, invalidate, set aside or impose any conditions
upon the Closing, in whole or in part, and no injunction, judgment, order,
decree or ruling with respect thereto shall be in effect;
(d) (i)
the
representations and warranties of Communications contained in Article 3 shall
be
true and correct in all material respects (except for such representations
and
warranties which are qualified by their terms by a reference to materiality,
which representations and warranties as so qualified shall be true in all
respects) at and as of the Closing as though then made; and (ii) Communications
has performed or caused to have been performed in all material respects all
of
the covenants and agreements required by this Agreement to be performed by
Communications or any of its Subsidiaries prior to the Closing; Acquisition
shall have received a certificate signed by the President of Communications
as
to the matters set forth in clauses (i) and (ii);
(e) Acquisition
shall have received the written resignation, effective as of the Closing, of
each director and officer of the Subsidiaries;
(f) Acquisition
shall have received the Pay-Off Letters;
(g) Acquisition
shall have received a certificate of good standing as of the most recent
practicable date from the Secretary of State of the states where Communications
and each of the Subsidiaries is incorporated, as well as foreign qualification
certificates for each jurisdiction listed on Schedule
3.1;
(h) There
shall not be more than one hundred seventy five (175) Dissenting Shares;
(i) Acquisition
shall have received a certificate from the Secretary of Communications
certifying that votes approving the Merger were duly adopted by the directors
and shareholders of Communications;
(j) Acquisition
shall have received each other document required to be delivered to Acquisition
pursuant to this Agreement, including the Certificate of Merger, the Escrow
Agreement, the Special Claim Escrow Agreement and the WC Escrow Agreement;
and
22
(k) the
conditions set forth in the Commitment Letters shall have been satisfied or
waived and the funding referred to therein shall be available to Acquisition
on
terms no less favorable to Acquisition than are set forth in the Commitment
Letters, provided
that the
failure to obtain such satisfaction or waiver is not a result of the failure
of
Acquisition to carry out its obligations to the financial institutions as set
out in such letters and such failure by Acquisition has not been primarily
caused by a breach by Acquisition of its obligations under this Agreement;
(l) Communications
shall have executed and delivered to Acquisition an affidavit, dated as of
the
Closing Date, sworn under penalty of perjury and in form and substance required
by Section 1445(b)(3) of the Code and Section 1.1445-2(c)(3) of the Treasury
Regulations, certifying that Communications is not and has not been a “United
States real property holding corporation” (as defined in Section 897(c)(2) of
the Code) during the applicable period specified in Section 897(c)(1)(A)(ii)
of
the Code; and
(m) Xxxx
Xxxxxxxx shall have entered into a non-competition agreement substantially
in
the form of Exhibit
E.
(n) Communications
shall have remediated the environmental matter disclosed on Section 3.10 of
the
Disclosure Schedule to the reasonable satisfaction of Acquisition, including
without limitation by obtaining approval of the sufficiency of the actions
taken
by Communications from the State of Maine Department of Environmental
Protection.
(o) Communications
shall have terminated its line of credit agreement with TD Banknorth, repaid
any
amounts outstanding thereunder and obtained a Pay-Off Letter with respect
thereto.
Any
agreement or document to be delivered to Acquisition pursuant to this
Section 5.1, the form of which is not attached to this Agreement as an
exhibit, shall be in form and substance reasonably satisfactory to
Acquisition.
5.2 Conditions
to Communications’ Obligations. The
obligations of Communications to consummate the closing of the transaction
contemplated in this Agreement are subject to the satisfaction, at or before
the
Closing, of the following conditions set forth in this
Section 5.2:
(a) the
FCC
and MPUC shall have approved the Merger, including but not limited to by giving
consent to any and all assignments or transfers of control of Permits, and
all
applicable appeal periods shall have expired or otherwise been terminated,
and
all filings, authorizations and approvals and consents set forth on Schedule
5.1(a)
shall
have been made with or obtained from all applicable governmental authorities
or
other Persons, as the case may be;
(b) there
shall be no suit, action, investigation or proceeding pending or threatened
before any court, agency or other governmental authority by which it is sought
to restrain, delay, prohibit, invalidate, set aside or impose any conditions
upon the Closing, in whole or in part, and no injunction, judgment, order,
decree or ruling with respect thereto shall be in effect;
23
(c) (i)
the
representations and warranties of Acquisition contained in Article 4 shall
be
true and correct in all material respects (except for such representations
and
warranties which are qualified by their terms by a reference to materiality,
which representations and warranties as so qualified shall be true in all
respects) at and as of the Closing as though then made; and (ii) Acquisition
has
performed or caused to have been performed in all material respects all of
the
covenants and agreements required by this Agreement to be performed by
Acquisition prior to the Closing; Communications shall have received a
certificate of Acquisition as to the matters set forth in clauses (i) and
(ii);
(d) Acquisition
shall have (i) delivered the Estimated Merger Consideration in accordance with
Section 2.6.3; and (ii) deposited the Escrow Funds, Special Claim Escrow
Funds and WC Escrow Funds in escrow pursuant to Sections 2.6.4 hereof;
(e) Acquisition
shall have satisfied the Repaid Closing Indebtedness in accordance with
Section 2.6.2;
(f) The
Stockholders’ Representative shall have received a certificate from the
Secretary of Acquisition certifying that votes approving the Merger were duly
adopted by the directors and shareholders of Acquisition; and
(g) Stockholders’
Representative or Communications shall have received each other document
required to be delivered by Acquisition pursuant to this Agreement, including
the Certificate of Merger, the Escrow Agreement, the Special Claim Escrow
Agreement and the WC Escrow Agreement.
Any
agreement or document to be delivered by Acquisition pursuant to this
Section 5.2, the form of which is not attached to this Agreement as an
exhibit, shall be in form and substance reasonably satisfactory to Stockholders’
Representative.
ARTICLE
6
The
Closing
The
consummation of the Merger and transactions contemplated herein (the
“Closing”)
will
take place on the date that is no later than the third (3rd) business day
following the satisfaction or waiver (to the extent permitted by applicable
Law)
of all of the conditions set forth in Article 5 hereof and shall take place
at
the offices of Xxxxxx & Xxxxxxx LLP, 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000, or at such other time and place as to which Acquisition and
Communications may agree in writing. The date on which the Closing actually
occurs is referred to herein as the “Closing
Date.”
The
parties agree that the Effective Time shall occur on the Closing Date. The
transfers and deliveries described in Article 5 shall be mutually interdependent
and shall be regarded as occurring simultaneously, and, any other provision
of
this Agreement notwithstanding, no such transfer or delivery shall become
effective or shall be deemed to have occurred until all of the other transfers
and deliveries provided for in Article 5 shall also have occurred or been waived
in writing by the party entitled to waive the same, it being understood that
Stockholders’ Representative shall have the authority to waive on behalf of
Communications or any Participating Stockholder any delivery required at or
before the Closing by Acquisition hereunder.
24
ARTICLE
7
Additional
Covenants and Agreements
7.1 Pre-Closing
Covenants and Agreements.
7.1.1 Conduct
of Business. During
the period between the date of this Agreement until the earlier to occur of
the
termination of this Agreement in accordance with Section 7.1.4 or the Closing
Date (the “Pre-Closing
Period”),
except as otherwise expressly provided for in this Agreement or except to the
extent Acquisition otherwise consents, Communications shall, and shall cause
each of its Subsidiaries to: (i) be operated in the ordinary course of business,
consistent with past practice, (ii) use commercially reasonable efforts to
preserve intact its respective business organizations and relationships with
Persons doing business with Communications or its Subsidiaries, as applicable
and (iii) continue to make maintenance capital expenditures in accordance with
past practice. Without limiting the generality of the foregoing, except as
contemplated by this Agreement, during the Pre-Closing Period, without the
prior
written consent of Acquisition, which consent will not be unreasonably withheld
or delayed, Communications shall not (i) intentionally take, and shall not
permit any of its Subsidiaries to take intentionally, or agree (whether in
writing or otherwise) to take, any action that would result in a violation
of
Section 3.6 hereof, (ii) authorize or effect any change in the charter or bylaws
of Communications or its Subsidiaries or (iii) make any change in the terms
of
employment applicable to any of its directors, officers or employees outside
the
ordinary course of business with the exception of voluntary resignations of
employees.
7.1.2 Access. During
the Pre-Closing Period, Communications shall provide and shall cause its
Subsidiaries to provide to Acquisition and its representatives reasonable access
to the personnel, facilities and records of Communications and its Subsidiaries
and to permit Acquisition and its representatives to conduct such necessary
inspections as Acquisition may reasonably request.
7.1.3 Satisfaction
of Closing Conditions. During
the Pre-Closing Period and subject to the terms and conditions of this
Agreement, Communications, on the one hand, and Acquisition, on the other hand,
will use commercially reasonable, good faith efforts to take or cause to be
taken all actions and to do or cause to be done all things necessary under
the
terms of this Agreement or under applicable Laws to consummate the transactions
contemplated by this Agreement. The parties shall cooperate with each other
so
as to obtain as soon as practicable after the date hereof all necessary
regulatory or other consents, clearances, authorizations and approvals required
under Article 5. In
this
regard, each party (a) shall use commercially reasonable best efforts to make
one or more appropriate filings with the FCC and MPUC with respect to the
transaction contemplated hereby as soon as practicable following the execution
of this Agreement, (b) shall cooperate and coordinate such filing with the
other
party, and (c) shall cooperate with the other party diligently to pursue all
approvals required from either the FCC or MPUC, including by means of any
supplementary filings requested; provided,
however,
that
neither party shall be obligated to commence any litigation or extend the
Outside Closing Date.
25
7.1.4 Exclusivity. Communications
agrees that following the date of this Agreement, neither Communications, nor
any of its Subsidiaries, nor any of their respective Affiliates, officers,
directors, representatives or agents will directly or indirectly, solicit,
initiate, consider, facilitate, encourage or accept or furnish to any other
Person any information with respect to, any other proposals from any other
Person relating to any acquisition or purchase of all or any substantial portion
of the capital stock of Communications or any of its Subsidiaries or all or
substantially all of the assets of Communications or any of its Subsidiaries.
Communications shall immediately cease and cause to be terminated all existing
discussions, conversations, negotiations and other communications with any
Person conducted heretofore with respect to any of the foregoing.
7.1.5 Stockholder
Efforts. Immediately
following the execution of this Agreement, Communications shall use commercially
reasonable, good faith efforts to cause the holders of Common Stock listed
on
Schedule
2.6.3
to
execute and deliver to Communications a written consent in substantially the
form attached hereto as Exhibit
F
in
accordance with Section 228 of the DGCL approving and adopting this Agreement
and the Merger. As promptly as practicable after the date of this Agreement,
Communications will provide to any holder of Common Stock that has not approved
and adopted this Agreement notice of the approval of this Agreement by the
stockholders of Communications required by Sections 228 and 262 of the DGCL.
Communications shall provide Acquisition a reasonable opportunity to review
and
comment on such notice prior to the distribution to its
stockholders.
7.1.6 Termination. This
Agreement may be terminated:
|
(a)
|
by
mutual written consent of Acquisition and Communications at any time
prior
to the Closing;
|
|
(b)
|
by
Acquisition or Communications prior to Closing if a material breach
of any
representation, warranty or covenant of this Agreement has been committed
by the other party and such breach has not been waived or cured within
thirty (30) days after being notified of same; provided,
however,
that no cure period shall be available in respect of a failure on
the part
of Acquisition to make any payment or deposit required to be made
by it at
the Closing;
|
|
(c)
|
by
Acquisition or Communications if the Closing has not occurred (other
than
through the failure of any party seeking to terminate this Agreement
to
comply fully with its obligations under this Agreement and, in the
case of
Acquisition, other than by reason of non-fulfillment of the condition
set
forth in Section 5.1(k)) on or before December 31, 2006 (the “Outside
Closing Date”).
|
If
this
Agreement is terminated pursuant to Section 7.1.6(a), then all provisions of
this Agreement except
Sections 7.2.2 and 7.2.4 shall thereupon become void without any liability
on the part of any party hereto to any other party hereto. If Acquisition
terminates this Agreement because Communications has materially breached or
materially failed to perform its agreements and covenants in this Agreement,
Acquisition shall be entitled to pursue all legal and equitable remedies against
Communications for such breach or failure to perform. If Communications
terminates this Agreement because Acquisition has materially breached or
materially failed to perform its agreements and covenants in this Agreement
or
this Agreement is terminated solely because the condition set forth in Section
5.1(k) has not been met (including termination by Communications pursuant to
Section 7.1.6(c) because such condition has not been met), Acquisition shall
pay
Communications a termination fee of $500,000 as the sole and exclusive remedy
for such breach or termination; provided,
however that
no
fee shall be payable pursuant to this Section 7.1.6 if at the time of
termination of this Agreement pursuant to Section 5.1(k), any of the other
conditions set forth in Section 5.1 could not be met if the financing described
in Section 5.1(k) were made available to Acquisition.
26
7.2 Miscellaneous
Covenants.
7.2.1 Publicity. During
the Pre-Closing Period, any disclosures or announcements relating to this
Agreement or the transactions contemplated hereby will be made only as may
be
agreed upon in writing by Communications and Acquisition, or as may be required
by Law or by any governmental or regulatory authority or the rules and
regulations of any United States or foreign securities exchange.
7.2.2 Expenses. Acquisition
shall pay all fees and expenses incident to the transactions contemplated by
this Agreement which are incurred by Acquisition or its representatives or
are
otherwise expressly allocated to Acquisition hereunder, and Communications
shall
pay, prior to Closing, all fees and expenses incident to the transactions
contemplated by this Agreement which are incurred by Communications or any
of
its Subsidiaries or their respective representatives or are otherwise expressly
allocated to Communications hereunder, including, but not limited to, the fees
and expenses described in Section 3.17.
7.2.3 No
Assignments. No
assignment of all or any part of this Agreement or any right or obligation
hereunder may be made by any party hereto without the prior written consent
of
all other parties hereto, and any attempted assignment without such consent
shall be void and of no force or effect.
7.2.4 Confidentiality
Agreement. Notwithstanding
the execution of this Agreement, the parties acknowledge that the
confidentiality agreement executed by Otelco and Xxxxxxx & Associates, LP,
dated December 2, 2005 (the “Confidentiality
Agreement”),
remains in full force and effect pursuant to the terms thereof, and Acquisition
hereby agrees to be bound by the provisions thereof.
7.2.5 Access
by Stockholders’ Representative. Acquisition
shall, and shall cause each of the Acquired Companies to, for a period of two
(2) years after the Closing Date, during normal business hours, provide
Stockholders’ Representative and its designees and representatives with such
access to the books and records of the Acquired Companies as may be reasonably
requested by Stockholders’ Representative, who shall be entitled, at its
expense, to make extracts and copies of such books and records; provided
that
Stockholders’ Representative agrees that any information designated as
confidential by Acquisition or the Surviving Corporation shall be kept
confidential by Stockholders’ Representative; provided,
however,
that
Stockholders Representative may disclose such information if, such disclosure
is
requested or legally required to be made (by deposition, interrogatories,
requests for information or documents) in legal proceedings, subpoena, civil
investigative demand or other similar process; provided,
further however,
that
Stockholders' Representative gives Surviving Corporation written notice of
the
nature and circumstances of such disclosure promptly upon becoming aware that
the same is or may be required. Acquisition agrees that it shall not, during
such two (2) year period, destroy or cause or permit to be destroyed any
material books or records without first obtaining the consent of Stockholders’
Representative (or providing to Stockholders’ Representative notice of such
intent and a reasonable opportunity to copy such books or records at least
thirty (30) days prior to such destruction).
27
7.2.6 Continuation
of Indemnification. Acquisition
agrees that after the Closing it shall cause Communications and its Subsidiaries
to continue to indemnify and hold harmless each of the present and former
directors, officers, employees and agents of Communications and its
Subsidiaries, in their capacities as such, from and against all damages, costs
and expenses actually incurred or suffered in connection with any threatened
or
pending action, suit or proceeding at law or in equity by any Person or any
arbitration or administrative or other proceeding relating to the businesses
of
Communications or any of its Subsidiaries or the status of such individual
as a
director, officer, employee or agent prior to the Closing, to the fullest extent
permitted by any applicable Law. Acquisition shall cause the persons serving
as
officers and directors of Communications and its Subsidiaries immediately prior
to the Closing Date to be covered for a period of three (3) years from the
Closing Date by the directors’ and officers’ liability insurance policy or
extended discovery insurance maintained by Communication and its Subsidiaries
(provided that Acquisition, the Company or the Subsidiaries may substitute
therefor policies of at least the same coverage and amounts and which contain
terms and conditions that are, when taken as a whole, not less advantageous
to
such directors and officers than the terms and conditions of such existing
policy) with respect to acts or omissions occurring prior to the Closing Date
which were committed by such officers and directors in their capacity as such;
provided,
however,
that
(i) Communications and its Subsidiaries shall not be obligated to make annual
premium payments for such insurance to the extent such premiums exceed 200%
of
the annual premiums paid as of the date hereof for such insurance (the
“Current
Premium”)
and
(ii) such policies may in the sole discretion of the Surviving Corporation
be
one or more “tail” policies for all or a portion of the three (3) years. If such
premium for such insurance required to be maintained pursuant to this Section
7.2.6 would at any time exceed 200% of the Current Premium, then Acquisition
shall cause to be maintained policies of insurance which, in good faith
determination, provide the maximum dollar loss coverage available at an annual
premium equal to 200% of the Current Premium.
If any
of the Acquired Companies merge into, consolidate with or transfer all or
substantially all of their assets to another Person, then and in each such
case,
Acquisition shall make and shall cause the Acquired Companies to make proper
provision so that the surviving or resulting corporation or the transferee
in
such transaction shall assume the obligations of Acquisition and the Acquired
Companies under this Section 7.2.6. This Section 7.2.6 is intended to
benefit each director, officer, agent or employee who has held such capacity
on
or prior to the Closing Date and is either a party to an indemnification
agreement with the Acquired Companies or now or hereafter is entitled to
indemnification or advancement of expenses pursuant to any provisions contained
in the Certificate of Incorporation, Articles of Incorporation, Code of
Regulations or By-Laws as of the date hereof.
28
7.2.7 Stockholders’
Representative. Communications
hereby designates Stockholders’ Representative to execute any and all
instruments or other documents, and to do any and all other acts or things,
after the Merger on behalf of or affecting the Participating Stockholders,
which
Stockholders’ Representative may deem necessary or advisable, or which may be
required pursuant to this Agreement or otherwise, in connection with the
consummation of the transactions contemplated hereby and the performance of
all
obligations hereunder before, at or following the Closing. Without limiting
the
generality of the foregoing, Stockholders’ Representative shall have the full
and exclusive authority to (a) agree with Surviving Corporation with
respect to any matter or thing required or deemed necessary by Stockholders’
Representative in connection with the provisions of this Agreement calling
for
the agreement of Stockholders’ Representative, give and receive notices on
behalf of all Participating Stockholders, and act on behalf of Participating
Stockholders in connection with any matter as to which Participating
Stockholders are or may be obligated or benefited under this Agreement or the
Escrow Agreement, all in the absolute discretion of Stockholders’
Representative, (b) in general, do all things and perform all acts,
including without limitation executing and delivering all agreements,
certificates, receipts, consents, elections, instructions, and other instruments
or documents contemplated by, or deemed by Stockholders’ Representative to be
necessary or advisable in connection with, this Agreement, and (c) take all
actions necessary or desirable in connection with the defense or settlement
of
any indemnification claims pursuant to Article 8 and performance of obligations
under Article 2, including to withhold funds for satisfaction of expenses or
other liabilities or obligations or to withhold funds for potential
indemnification claims made hereunder. All decisions by Stockholders’
Representative shall be binding upon all Participating Stockholders, and no
Participating Stockholder shall have the right to object, dissent, protest
or
otherwise contest the same. Stockholders’ Representative may communicate with
any Participating Stockholder or any other Person concerning its
responsibilities hereunder, but it is not required to do so. Stockholders’
Representative has a duty to serve in good faith the interests of the
Participating Stockholders and to perform its designated role under this
Agreement, but Stockholders’ Representative shall have no financial liability
whatsoever to any Person relating to its service hereunder (including any action
taken or omitted to be taken), except that it shall be liable for harm which
it
directly causes by an act of willful misconduct. Participating Stockholders
shall indemnify and hold harmless Stockholders’ Representative against any loss,
expense (including reasonable attorney’s fees) or other liability arising out of
its service as Stockholders’ Representative under this Agreement, other than for
harm directly caused by an act of willful misconduct. Stockholders’
Representative may resign at any time by notifying Acquisition and Participating
Stockholders in writing.
7.3 Acknowledgements. Acquisition
does not make, and has not made any representations or warranties relating
to
Acquisition or otherwise other than those expressly set forth herein and
Communications does not make, and has not made, any representations or
warranties relating to it or any of its Subsidiaries or the businesses of it
and
its Subsidiaries or otherwise, in connection with the transactions contemplated
hereby other than those expressly set forth herein. It is understood and agreed
that any cost estimate, projection or other prediction, any data, any financial
information or any memoranda or offering materials or presentations, including,
without limitation, any memoranda and materials provided by any representative
of Communications (including, without limitation, Xxxxxxx & Associates,
L.P.) are not and shall not be deemed to be or to include representations or
warranties of Communications. No Person has been authorized by Communications
to
make any representation or warranty relating to Communications or any of its
Subsidiaries or the businesses of Communications or any of its Subsidiaries
or
otherwise in connection with the transaction contemplated hereby and, if made,
such representation or warranty may not be relied upon as having been authorized
by Communications and shall not be deemed to have been made by Communications.
29
7.4 Tax
Matters.
Following the Closing, the Participating Stockholders and the Surviving
Corporation shall, and shall cause the Subsidiaries to, cooperate fully, as
and
to the extent reasonably requested by any other party, in connection with any
audit, litigation or other proceeding with respect to Taxes or the preparation
of any Tax Return. Such cooperation shall include the retention and (upon any
other party’s request) the provision of records and information which are
reasonably relevant to any such Tax matter or required by the Code or other
applicable law and making employees available on a mutually convenient basis
to
provide additional information and explanation of any material provided
hereunder. The Participating Stockholders and the Surviving Corporation agree
(a) to retain all books and records with respect to Tax matters pertinent to
the
Communications and its Subsidiaries relating to any taxable period beginning
before the Closing Date until the expiration of the statute of limitations
of
the respective taxable periods, and to abide by all record retention agreements
entered into with any taxing authority, and (b) to give the other party
reasonable written notice prior to transferring, destroying or discarding any
such books and records and, if the other party so requests, the Participating
Stockholder or the Surviving Corporation, as the case may be, shall allow the
other party to take possession of such books and records. The Participating
Stockholders and the Surviving Corporation further agree, upon request, to
use
commercially reasonable efforts to obtain any certificate or other document
from
any governmental authority or any other Person as may be necessary to mitigate,
reduce or eliminate any Tax that could be imposed (including, but not limited
to, with respect to the transactions contemplated hereby). The Participating
Stockholders and the Surviving Corporation further agree, upon request, to
provide the other party with all information that any party may be required
to
report pursuant to the Code and all regulations promulgated thereunder.
Communications shall prepare and timely file, or cause to be prepared and timely
filed, all Tax Returns required to be filed by Communications and its
Subsidiaries on or before the Closing Date (which Tax Returns shall be prepared
on a basis consistent with the Tax Returns filed by or on behalf of
Communications and its Subsidiaries for the preceding Tax period) and shall
cause Communications and its Subsidiaries to pay all Taxes shown on such Tax
Returns or otherwise due. The Surviving Corporation shall prepare and file,
or
cause to be prepared and filed, all Tax Returns required to be filed by
Communications and its Subsidiaries after the Closing Date.
7.5 Financial
Statements. During
the period from the date of this Agreement to the Closing Date, Communications
shall deliver, or cause to be delivered, to Acquisition as soon as practicable
after the end of each month, unaudited monthly financial statements prepared
in
accordance with Section 3.5 hereof.
ARTICLE
8
Indemnification
8.1 Indemnification
of Acquisition. Subject
to the limitations set forth in this Article 8, from and after the Closing,
the
Participating Stockholders shall, in accordance with their respective
Stockholders Percentage Interests, but only out of and to the extent of the
Escrow Fund, indemnify, defend and hold harmless, to the fullest extent
permitted by law, Surviving Corporation and its officers, directors, employees,
Affiliates, agents, partners, successors and assigns (collectively, the
“Acquisition
Indemnitees”),
from
against and in respect of (i) Losses incurred as a result of any breach or
default in performance by Communications or any of its Subsidiaries of any
covenant or agreement contained in this Agreement, and (ii) Losses incurred
as a
result of any breach of, or any inaccuracy in, any representation or warranty
made by Communications or any of its Subsidiaries contained in this
Agreement.
30
8.2 Limitations
on Indemnification of Acquisition. Notwithstanding
any other provision of this Agreement:
(a) the
Acquisition Indemnitees shall not be entitled to indemnification under this
Article if, and to the extent that, the Losses are reflected on the Final
Adjustment Statement;
(b) and
any
recovery shall be net of the amount of any actual recoveries under any insurance
policy that are available to Surviving Corporation, Communications or its
Subsidiaries or any of their Affiliates in connection with the circumstances
that give rise to the claim for indemnification;
(c) amounts
payable to the Acquisition Indemnitees shall be considered a reduction in the
Merger Consideration; and
(d) in
the
event that an Acquisition Indemnitee makes a claim for indemnification which
is
determined by a court of competent jurisdiction to be without reasonable basis
in law or fact, Acquisition Indemnitees shall bear all reasonable costs and
expenses (including court costs and reasonable attorneys’ and accounting fees)
incurred by Stockholders’ Representative in investigating and defending against
such claim.
In
addition, the Stockholders shall not have any obligation to indemnify the
Acquisition Indemnitees pursuant to Section 8.1 (other than with respect to
breaches or inaccuracies of the representations and warranties contained in
Sections 3.1, 3.2, 3.12, 3.19 and 3.21) unless and until, and only to the extent
that, the aggregate of all such individual Losses incurred or sustained by
the
Acquisition Indemnitees (other than with respect to breaches or inaccuracies
of
the representations and warranties contained in Sections 3.1, 3.2, 3.12, 3.19
and 3.21) exceeds $150,000, at which time the Acquisition Indemnitees shall
be
entitled to indemnity for the full amount of Losses (and not just the amount
in
excess of $150,000). It is understood and agreed that the sole source of payment
for any indemnity under Section 8.1 shall be from the Escrow Funds pursuant
to
the Escrow Agreement.
Regardless
of any investigation made at any time by or on behalf of any party hereto or
of
any information any party may have in respect thereof, no claim for
indemnification pursuant to Section 8.1 shall be valid unless notice thereof
is
delivered to the Stockholders’ Representative on or prior to the close of
business on the first anniversary of the Closing Date.
8.3 Indemnification
of Participating Stockholders. Subject
to the limitations set forth in this Article 8, from and after the Closing,
Surviving Corporation shall indemnify, defend and hold harmless, to the fullest
extent permitted by law, the Participating Stockholders and their respective
officers, directors, employees, Affiliates, agents, partners, successors and
assigns (collectively, the “Seller
Indemnitees”),
from
against and in respect of (i) Losses incurred as a result of any breach or
default in performance by Acquisition of any covenant or agreement contained
in
this Agreement, and (ii) Losses incurred as a result of any breach of, or any
inaccuracy in, any representation or warranty made by Acquisition contained
in
this Agreement. Acquisition does not make and shall not be deemed to have made,
nor is any Seller Indemnitee relying upon, any representation, warranty or
covenant other than those representations, warranties and covenants which are
expressly set forth in this Agreement.
31
8.4 Limitations
on Indemnification of Seller Indemnitees. Notwithstanding
any other provisions of this Agreement, the indemnification of Seller
Indemnitees provided for in this Agreement shall be subject to the limitations
and conditions set forth in this Section 8.4 as follows:
(a) regardless
of any investigation made at any time by or on behalf of any party hereto or
of
any information any party may have in respect thereof, no claim for
indemnification pursuant to Section 8.3 shall be valid unless notice thereof
is
delivered to the Surviving Corporation on or prior to the close of business
on
the first anniversary of the Closing Date; and
(b) in
the
event that a Seller Indemnitee makes a claim for indemnification which is
determined by a court of competent jurisdiction to be without reasonable basis
in law or fact, such Seller Indemnitee shall bear all reasonable costs and
expenses (including court costs and reasonable attorneys’ and accounting fees),
incurred by Surviving Corporation in investigating and defending against such
claim.
8.5 Procedures
Relating to Indemnification.
8.5.1 Third-Party
Claims.
In
order
for a party (the “indemnitee”)
to be
entitled to any indemnification provided for under this Agreement in respect
of,
arising out of, or involving a claim or demand made by any Person against the
indemnitee (a “Third-Party
Claim”),
such
indemnitee must notify the party from whom indemnification hereunder is sought
(the “indemnitor”)
in
writing of the Third-Party Claim within the time period prescribed in Sections
8.2(a) or 8.4(a), as applicable, no later than thirty (30) days after such
claim
or demand is first asserted. Such notice shall state in reasonable detail the
amount or estimated amount of such claim, and shall identify the specific basis
(or bases) for such claim, including the representations, warranties or
covenants in this Agreement alleged to have been breached. Failure to give
such
notification shall not affect the indemnification provided hereunder except
to
the extent the indemnitor shall have been actually prejudiced as a result of
such failure or such notice is given after the dates set forth in Sections
8.2(a) or 8.4(a), as applicable. Thereafter, the indemnitee shall deliver to
the
indemnitor, without undue delay, copies of all notices and documents (including
court papers received by the indemnitee) relating to the Third-Party Claim
so
long as any such disclosure could not reasonably be expected to have an adverse
effect on the attorney-client or any other privilege that may be available
to
the indemnitee in connection therewith.
32
If
a
Third-Party Claim is made against an indemnitee, the indemnitor shall be
entitled to participate, at its expense, in the defense thereof, with counsel
of
its choice reasonably satisfactory to the indemnitee; provided
that
the
indemnitor conducts the defense of such Third-Party Claim actively and
diligently. Notwithstanding the foregoing, if the indemnitor irrevocably admits
to the indemnitee in writing its obligation to indemnify the indemnitee for
all
liabilities and obligations relating to such Third-Party Claim, the indemnitor
may elect to assume and control the defense thereof with counsel selected by
the
indemnitor. If the indemnitor assumes such defense, the indemnitee shall have
the right to participate in the defense thereof and to employ counsel, at its
own expense, separate from the counsel employed by the indemnitor, it being
understood that the indemnitor shall control such defense.
If
the
indemnitor so assumes the defense of any Third-Party Claim, all of the
indemnified parties shall reasonably cooperate with the indemnitor in the
defense or prosecution thereof. Such cooperation shall include, at the expense
of the indemnitor, the retention and (upon the indemnitor’s request) the
provision to the indemnitor of records and information which are reasonably
relevant to such Third-Party Claim, and making employees available on a mutually
convenient basis to provide additional information and explanation of any
material provided hereunder. If the indemnitor has assumed the defense of a
Third-Party Claim, (i) the indemnitee shall not admit any liability with
respect to, or settle, compromise or discharge, such Third-Party Claim without
the indemnitor’s prior written consent (which consent shall not be unreasonably
withheld or delayed); (ii) the indemnitee shall agree to any settlement,
compromise or discharge of a Third-Party Claim which the indemnitor may
recommend and which by its terms releases the indemnitee from any liability
in
connection with such Third-Party Claim; and (iii) the indemnitor shall not,
without the written consent of the indemnitee, enter into any settlement,
compromise or discharge or consent to the entry of any judgment which imposes
any obligation or restriction upon the indemnitee.
8.5.2 Other
Claims.
In
the
event any indemnitee should have a claim against any indemnitor under this
Agreement that does not involve a Third-Party Claim, the indemnitee shall
deliver notice of such claim to the indemnitor and the Escrow Agent (for so
long
as there remain any funds held by the Escrow Agent) promptly following discovery
of any indemnifiable Loss, but in any event not later than the close of business
on the first anniversary of the Closing Date. Failure to give such notification
shall not affect the indemnification provided hereunder except to the extent
the
indemnitor shall have been actually prejudiced as a result of such failure
or
such notice is given after the close of business on the first anniversary of
the
Closing Date. Such notice shall state in reasonable detail the amount or an
estimated amount of such claim, and shall specify the facts and circumstances
which form the basis (or bases) for such claim, and shall further specify the
representations, warranties or covenants alleged to have been breached. Upon
receipt of any such notice, the indemnitor shall notify the indemnitee as to
whether the indemnitor accepts liability for any Loss.
8.6 Limitation
of Remedies. Each
party acknowledges and agrees that, should the Closing occur, the sole and
exclusive remedy with respect to any and all claims relating to this Agreement
or the transactions contemplated hereby shall be pursuant to the indemnification
provisions set forth in this Article 8, and there shall be no recovery against
any Participating Stockholder individually.
33
ARTICLE
9
Certain
Definitions
When
used
in this Agreement, the following terms in all of their tenses, cases and
correlative forms shall have the meanings assigned to them in this
Article 9, or elsewhere in this Agreement as indicated in this
Article 9:
“Acquired
Companies”
means
Communications, Telecom and Telplus, collectively; and each of them separately
may be referred to individually as an “Acquired
Company.”
“Acquisition”
is
defined in the preamble of this Agreement.
“Acquisition
Balance Sheet”
is
defined in Section 3.5.
“Acquisition
Indemnitees”
is
defined in Section 8.1.
An
“Affiliate”
of
a
specified Person means any other Person which, directly or indirectly, through
one or more intermediaries, controls, is controlled by, or is under common
control with such specified Person. For purposes of this definition,
“control”
of
any
Person means possession, directly or indirectly, of the power to direct or
cause
the direction of the management and policies of such Person, whether through
the
ownership of voting capital stock or membership interests, by contract, or
otherwise.
“Agreed
Closing Statement”
is
defined in Section 2.7.1.
“Agreement”
means
this Agreement and Plan of Merger, as may be amended from time to
time.
“Audited
Financial Statements”
is
defined in Section 3.5.
“Acquisition
Balance Sheet”
is
defined in Section 3.5.
“Cash
Amount”
is
defined in Section 2.4.
“Certificate
of Merger”
is
defined in Section 2.1.
“Closing”
and
“Closing
Date”
is
defined in Article 6.
“Closing
Certificate”
is
defined in Section 2.6.1.
“Closing
Date Payment”
is
defined in Section 2.6.3.
“Closing
Indebtedness”
means
the Indebtedness of Communications or any of its Subsidiaries as of the Closing
Date as reflected on the Agreed Closing Statement or the Final Closing
Statement, as the case may be.
“Closing
Working Capital”
is
defined in Section 2.5.3.
“Closing
Working Capital Adjustment”
is
defined in Section 2.5.4.
34
“Code”
means
the United States Internal Revenue Code of 1986, as amended, and the regulations
thereunder.
“Commitment
Letters”
is
defined in Section 4.6.
“Common
Stock”
means
the common stock of the Company.
“Communications”
is
defined in the preamble of this Agreement.
“Company”
is
defined in the preamble of this Agreement.
“Company
Intellectual Property”
means
the Intellectual Property owned or held for use by Communications or any of
its
Subsidiaries.
“Confidentiality
Agreement”
is
defined in Section 7.2.4.
“Current
Premium”
is
defined in Section 7.2.6.
“DGCL”
is
defined in the recitals to this Agreement.
“Disclosure
Schedule”
means
the disclosure schedules annexed hereto and made a part hereof.
“Disposal,”
“Storage,”
and
“Treatment”
shall
have the meanings assigned them at 42 U.S.C. § 6903(3)(33) and (34),
respectively.
“Dissenters’
Shares”
is
defined in Section 2.8(c).
“Effective
Time”
is
defined in Section 2.1.
“Environmental
Laws”
are all
applicable Laws, rules, regulations, orders, treaties, statutes, and codes
promulgated by any governmental entity which prohibit, regulate or control
any
environmental, health or safety activity or Hazardous Material, including,
without limitation, the Comprehensive Environmental Response, Compensation,
and
Liability Act of 1980, the Resource Recovery and Conservation Act of 1976,
the
Federal Water Pollution Control Act, the Clean Air Act, the Hazardous Materials
Transportation Act, the Clean Water Act, the Occupational Safety and Health
Act,
and all comparable laws, rules, regulations, ordinances, orders, treaties,
statutes, and codes of other governmental entities, the regulations promulgated
pursuant to any of the foregoing, and all amendments and modifications of any
of
the foregoing
“ERISA”
means
the Employee Retirement Income Security Act of 1974, as amended, and the
regulations thereunder.
“Escrow
Agent”
is
defined in Section 2.6.4.
“Escrow
Agreement”
is
defined in Section 2.6.4.
“Escrow
Funds”
is
defined in Section 2.6.4.
35
“Estimated
Closing Indebtedness”
is
defined in Section 2.6.1.
“Estimated
Closing Working Capital”
is
defined in Section 2.6.1.
“Estimated
Closing Working Capital Adjustment”
is
defined in Section 2.6.4.
“Estimated
Merger Consideration”
is
defined in Section 2.6.1.
“FCC”
means
the Federal Communications Commission.
“Final
Closing Statement”
is
defined in Section 2.7.3.
“GAAP”
means
generally accepted accounting principles, as in effect in the United States
either from time to time as applied to periods prior to the Closing Date or
as
applied on the Closing Date, as applicable, and in either case, applied on
a
basis consistent with the Acquired Companies past practices.
“Hazardous
Material”
means
any chemical, substance, waste, material, pollutant, or contaminant, regardless
of quantity, the use, Storage, Disposal, Treatment or transportation of which
is
regulated under Environmental Laws.
“Indebtedness”
means,
as at any date of determination thereof, (without duplication): (a) all
obligations (other than inter-company obligations) of Communications or any
of
its Subsidiaries for borrowed money or funded indebtedness or issued in
substitution for or exchange for borrowed money or funded indebtedness
(including obligations in respect of principal, accrued interest, and any
applicable prepayment charges or premiums); (b) any indebtedness evidenced
by
any note, bond, debenture or other debt security; (c) capital leases; (d) any
indebtedness guaranteed by Communications or any of its Subsidiaries (excluding
intercompany debt and guarantees, letters of credit and guarantees by a company
of performance obligations of another); and (e) any obligations with respect
to
the termination of any interest rate hedging or swap agreements.
“Indemnitee”
and
“Indemnitor”
are
defined in Section 8.5.1.
“Independent
Accountants”
is
defined in Section 2.7.2.
“Intellectual
Property”
means
any of the following in any jurisdiction throughout the world (a) patents,
patent applications, provisional patent applications, patent disclosures and
inventions, including any continuations, divisionals, continuations-in-part,
renewals and reissues for any of the foregoing, (b) Internet domain names,
trademarks, service marks, trade dress, trade names, logos and corporate names
and registrations and applications for registration thereof together with all
of
the goodwill associated therewith, (c) copyrights (registered or unregistered)
and copyrightable works and registrations and applications for registration
thereof, (d) mask works and registrations and applications for registration
thereof, (e) material computer software, (specifically excluding all shrink
wrap
software), data, data bases and all documentation related thereto, (f) trade
secrets and other confidential information (including ideas, formulas,
compositions, inventions (whether patentable or unpatentable and whether or
not
reduced to practice), know-how, manufacturing and production processes and
techniques, research and development information, drawings, specifications,
designs, plans, proposals, technical data, copyrightable works, financial and
marketing plans and customer and supplier lists and information) (collectively,
“Trade
Secrets”),
(g)
copies and tangible embodiments thereof (in whatever form or medium) and (h)
all
other intellectual property or proprietary rights.
36
“Law”
means
any common law decision or precedent with application to the activities of
Communications or any of its Subsidiaries and any federal, state, regional,
local or foreign law, statute, ordinance, code, rule, regulation or
order.
“Leased
Real Property”
is
defined in Section 3.12(a).
“Leases”
is
defined in Section 3.12(a).
“Lien”
means
any lien, charge, mortgage, pledge, easement, encumbrance, security interest,
matrimonial or community interest, tenancy by the entirety claim, adverse claim,
or any other title defect or restriction of any kind.
“Loss”
or
“Losses”
means
any and all losses, liabilities, damages, costs, penalties, actions, notices
of
violation, and notices of liability and any claims in respect thereof
(including, without limitation, amounts paid in settlement and reasonable costs
of investigation and legal expenses); provided,
however,
all
Losses relating to any claims for indemnification shall be limited to actual
damages and shall specifically exclude punitive, exemplary, consequential or
any
similar type damages.
“Material
Adverse Effect”
means
a
material adverse effect on (i) the business, condition (financial or otherwise),
assets, liabilities, or results of operations of Communications and its
Subsidiaries, taken as a whole or (ii) the ability of Communications or any
of
its Subsidiaries to consummate the transactions contemplated
hereby.
“Material
Contracts”
is
defined in Section 3.15.
“Merger
Consideration”
is
defined in Section 2.4.
“MPUC”
means
the Maine Public Utilities Commission.
“Notice
of Objection”
is
defined in Section 2.7.1.
“Outside
Closing Date”
is
defined in Section 7.1.6.
“Owned
Real Property”
is
defined in Section 3.12(a).
“Parent”
is
defined in the Recitals to this Agreement.
“Participating
Stockholders”
means
the stockholders of Communications, excluding Persons holding Dissenter’s
Shares.
“Participation
Factor”
is
defined in Section 2.5.1.
“Pay-Off
Letters”
is
defined in Section 2.6.2.
37
“Permits”
is
defined in Section 3.11.
“Permitted
Liens”
means
(a) mechanics’, carriers’, workmen’s, repairmen’s or other like Liens
arising or incurred in the ordinary course of business, (b) Liens arising
under original purchase price conditional sales contracts and equipment leases
with third parties entered into in the ordinary course of business and under
which neither Communications or any of its Subsidiaries is in default,
(c) Liens for current Taxes and utilities not yet due and payable or which
may hereafter be paid without penalty or which are being contested in good
faith
and, in connection therewith, appropriate reserves have been set aside in
accordance with GAAP, (d) imperfections of title or encumbrances, if any,
that do not, individually or in the aggregate, materially impair the continued
use and operation of any asset to which they relate in the conduct of the
business of the Acquired Companies as presently conducted, (e) leases,
subleases and similar agreements set forth on Schedule
3.12(a),
(f)
easements, covenants, rights-of-way and other similar restrictions or conditions
of record or which would be shown by a current accurate survey of any of the
Real Property, and (g) (i) zoning, building and other similar restrictions
imposed by applicable Laws, (ii) Liens that have been placed by any developer,
landlord or other third party on property over which Communications or any
of
its Subsidiaries have easement rights or, on any Real Property, under any lease
or subordination or similar agreements relating thereto, and
(iii) unrecorded easements, covenants, rights-of-way and other similar
restrictions on the Real Property none of which, individually or in the
aggregate, materially impairs the continued use and operation of such Real
Property.
“Person”
means
an individual, a corporation, a limited liability company, a partnership, a
trust, an unincorporated association, a government or any agency,
instrumentality or political subdivision of a government, or any other entity
or
organization.
“Pre-Closing
Period”
is
defined in Section 7.1.1.
“Proposed
Closing Statement”
is
defined in Section 2.7.1.
“Real
Property”
is
defined in Section 3.12(a).
“Release”
shall
have the meaning assigned it at 42 U.S.C. Section 9601(22) without giving effect
to exception (A) therein.
“Repaid
Closing Indebtedness”
is
defined in Section 2.6.2.
“Seller
Indemnitees”
is
defined in Section 8.3.
“Shares”
is
defined in Section 2.8.
“Special
Claim Escrow Agreement”
is
defined in Section 2.6.4.
“Special
Claim Escrow Funds”
is
defined in Section 2.6.4.
“Stockholders’
Agreement”
is
defined in Section 3.2.1.
38
“Stockholders
Percentage Interest”
shall
mean the relative ownership interest all of stockholders in Communications
as
shown in Schedule 2.6.3.
“Stockholders’
Representative”
is
defined in the preamble of this Agreement.
“Subsidiary”
means
any corporation, partnership, limited liability company or other business entity
with respect to which a specified Person (or a Subsidiary thereof) owns a
majority of the ownership interest therein or has the power to vote or direct
the voting of sufficient securities thereof to elect a majority of its directors
or other persons performing similar functions.
“Surviving
Corporation”
is
defined in Section 2.1.
“Tax”
or
“Taxes”
means
any federal, state, local, or foreign income, gross receipts, license, payroll,
employment, FICA withholding, excise, severance, stamp, occupation, premium,
windfall profits, customs duties, capital stock, franchise, profits, social
security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not and including any
obligations to indemnify or otherwise assume or succeed to the Tax liability
of
any other Person.
“Tax
Return”
means
any return, declaration, report, claim for refund, or information return or
statement relating to Taxes, including any schedule or attachment thereto,
and
including any amendment thereof.
“Telecom”
is
defined in the Recitals to this Agreement.
“Telecom
Shares”
is
defined in Section 3.2.2.
“Telplus”
is
defined in the Recitals to this Agreement.
“Telplus
Shares”
is
defined in Section 3.2.3.
“Third-Party
Claim”
is
defined in Section 8.5.1.
“To
the
Knowledge of Communications”
means
within the actual knowledge of Xxxx Xxxxxxxx, Xxxx Xxxxxxxxxx, Xxxxx Xxx or
Xxxxxx Xxxxxx.
“WC
Escrow Agreement”
is
defined in Section 2.6.4
“WC
Escrow Funds”
means
$400,000.
“Working
Capital”
is
defined in Section 2.5.2.
39
ARTICLE
10
Construction;
Miscellaneous Provisions
10.1 Notices. Any
notice to be given or delivered pursuant to this Agreement shall be ineffective
unless given or delivered in writing, and shall be given or delivered in writing
as follows:
| (a) |
If
to Acquisition, to:
|
000
Xxxxx
Xxxxxx Xxxx
Xxxxxxx,
Xxxxxxx 00000
Attention: Xxxxxxx
Xxxxxx
Telecopy
Number: (000) 000-0000
With
a
copy to:
Xxxxxx
& Whitney LLP
000
Xxxx
Xxxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Attention: Xxxxxx
Xxxxxxx, Esq.
Telecopy
Number: (000) 000-0000
|
(b)
|
If
to Communications, in the case of notices prior to Closing, or to
Stockholders’ Representative, in the case of notices after the
Closing:
|
Richfield
Associates, Inc.
000
Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx,
XX 00000
Attention:
Xxxx Xxxxxxxx
Telecopy
Number: (000) 000-0000
With
a
copy to:
Xxxxx
Xxxxxxxx Xxxxxxxx & Pachios LLP
Xxx
Xxxx
Xxxxxx
Xxxxxxxx,
Xxxxx 00000
Attention: Xxxxxxx
X. Xxxxxxx, Esq.
Telecopy
Number: (000) 000-0000
And
with
a copy to:
Alta
Communications
000
Xxxxxxxxx Xxxxxx
00xx
Xxxxx
Xxxxxx,
XX 00000
Attention: Xxxxx
Xxxx, Esq.
Telecopy
Number: (000) 000-0000
40
And
with
a copy to:
Xxxxxxx
Taintor & Xxxxxx
00
Xxxx
Xxxxxx
X.X.
Xxx
0000
Xxxxxx,
Xxxxx 00000-0000
Attention: Xxxxxxxx
Xxxxx, Esq.
Telecopy
Number: (000) 000-0000
or
in any
case, to such other address for a party as to which notice shall have been
given
to Acquisition and Stockholders’ Representative in accordance with this Section.
Notices so addressed shall be deemed to have been duly given (i) on the third
business day after the day of registration, if sent by registered or certified
mail, postage prepaid, (ii) on the next business day following the
documented acceptance thereof for next-day delivery by a national overnight
air
courier service, if so sent, or (iii) on the date sent by facsimile
transmission, if electronically confirmed. Otherwise, notices shall be deemed
to
have been given when actually received at such address.
10.2 Entire
Agreement. This
Agreement and the Schedules and Exhibits hereto constitute the exclusive
statement of the agreement among Acquisition and each Seller concerning the
subject matter hereof, and supersedes all other prior agreements, oral or
written, among or between any of the parties hereto concerning such subject
matter. All negotiations among or between any of the parties hereto are
superseded by this Agreement, and there are no representations, warranties,
promises, understandings or agreements, oral or written, in relation to the
subject matter hereof among or between any of the parties hereto other than
those expressly set forth or expressly incorporated herein.
10.3 Modification. No
amendment, modification, or waiver of this Agreement or any provision hereof,
including the provisions of this sentence, shall be effective or enforceable
as
against a party hereto unless made in a written instrument that specifically
references this Agreement and that is signed by the party waiving
compliance.
10.4 Jurisdiction
and Venue. The
parties agree that any claim relating to this Agreement shall be brought solely
in a state or federal court of competent jurisdiction located in the State
of
Maine and all objections to personal jurisdiction and venue in any action,
suit
or proceeding so commenced are hereby expressly waived by all parties hereto.
10.5 Binding
Effect. This
Agreement shall be binding upon and shall inure to the benefit of Acquisition,
Surviving Corporation, Stockholders’ Representative and their permitted
assigns.
10.6 Headings. The
article and section headings used in this Agreement are intended solely for
convenience of reference, do not themselves form a part of this Agreement,
and
may not be given effect in the interpretation or construction of this
Agreement.
10.7 Number
and Gender; Inclusion. Whenever
the context requires in this Agreement, the masculine gender includes the
feminine or neuter, the neuter gender includes the masculine or feminine, the
singular number includes the plural, and the plural number includes the
singular. In every place where it is used in this Agreement, the word
“including” is intended and shall be construed to mean “including, without
limitation.”
41
10.8 Counterparts. This
Agreement may be executed and delivered in multiple counterparts, each of which
shall be deemed an original, and all of which together shall constitute one
and
the same instrument. A facsimile or other copy of a signature shall be deemed
an
original for purposes of this Agreement.
10.9 Third
Parties. Except
as
may otherwise be expressly stated herein, no provision of this Agreement is
intended or shall be construed to confer on any Person, other than the parties
hereto, any rights hereunder. Acquisition Indemnitees and Seller Indemnitees
who
are not otherwise parties to this Agreement shall be third party beneficiaries
of this Agreement.
10.10 Schedules
and Exhibits. The
Schedules and Exhibits, if any, referenced in this Agreement constitute an
integral part of this Agreement as if fully rewritten herein. Notwithstanding
anything to the contrary contained in this Agreement or in any of the Schedules,
any information disclosed in one Schedule shall be deemed to be disclosed in
such other Schedules and applicable to such other representations and warranties
to the extent that the disclosure is reasonably apparent from its face to be
applicable to such other Schedule and such other representations and warranties.
Disclosure of any fact or item in any Schedule shall not be deemed to constitute
an admission that such item or fact is material for the purposes of this
Agreement. All references in this document to “this Agreement” and the terms
“herein,” “hereof,” “hereunder” and the like shall be deemed to include all of
such Schedules and Exhibits.
10.11 Time
Periods. Any
action required hereunder to be taken within a certain number of days shall,
except as may otherwise be expressly provided herein, be taken within that
number of calendar days; provided,
however,
that if
the last day for taking such action falls on a Saturday, a Sunday, or a legal
holiday, the period during which such action may be taken shall automatically
be
extended to the next business day.
10.12 Governing
Law. This
Agreement shall be governed by and construed in accordance with the laws of
the
State of New York, without regard to the choice-of-laws or conflicts-of-laws
provisions thereof.
[Remainder
of this page intentionally left blank.]
42
IN
WITNESS WHEREOF, Acquisition, Communications and Stockholders’ Representative
have executed and delivered this Securities Purchase Agreement, or have cause
this Securities Purchase Agreement to be executed and delivered by their duly
authorized representatives, as of the date first written above.
|
ACQUISITION:
MMC
ACQUISITION CORP.
By:
/s/
Xxxxxxx X.
Xxxxxx
Its:
President
COMMUNICATIONS:
MID-MAINE
COMMUNICATIONS, INC.
By:
Xxxx
X.
Xxxxxxxx
Its:
President
STOCKHOLDERS’
REPRESENTATIVE:
RICHFIELD
ASSOCIATES, INC.
By:
Xxxx
X.
Xxxxxxxx
Its:
President
|
43
