Exhibit 2.2
===============================================================================
FIRST AMENDED AND RESTATED
ASSET PURCHASE AND MERGER AGREEMENT
among
CROWN NETWORK SYSTEMS, INC.,
CROWN MOBILE SYSTEMS, INC.,
XXXXXX X. CROWN,
XXXXXXX CROWN
and
CASTLE ACQUISITION CORP. I,
CASTLE ACQUISITION CORP. II,
CASTLE TOWER HOLDING CORP.
July 11, 1997,
as amended and restated on August 14, 1997
===============================================================================
TABLE OF CONTENTS
Page
ARTICLE 1. Purchase and Sale of Assets; Assumption of Liabilities........... 2
1.1. Crown Communications Assets............................................ 2
1.2. Excluded Assets........................................................ 5
1.3. Assumption of Certain Liabilities; Excluded Liabilities................ 6
1.4. Advance Payment; Payment of Purchase Price............................. 7
1.5. Certain Definitions.................................................... 8
1.6. Transfer of Section 1.6 Assets......................................... 8
1.7. Certain FCC Licenses................................................... 10
ARTICLE 2. The Merger Transactions.......................................... 11
2.1. The Mergers Generally.................................................. 11
2.2. Conversion of Shares................................................... 12
2.3. Surrender and Payment.................................................. 13
ARTICLE 3. Due Diligence Investigation...................................... 14
3.1. Due Diligence Investigation Generally.................................. 14
3.2. Interim Financial Statements........................................... 14
ARTICLE 4. Closing; Deliveries of the Parties at Closing.................... 15
4.1. The Closing............................................................ 15
4.2. Deliveries at the Closing by the Crown Parties......................... 15
4.3. Deliveries at the Closing by Buyer..................................... 16
4.4. Time is of the Essence................................................. 18
ARTICLE 5. Representations and Warranties of the Crown Parties.............. 18
5.1. Corporate Status; Authority............................................ 18
5.2. Corporate Action....................................................... 18
5.3. Authority; Execution................................................... 19
5.4. No Conflicts........................................................... 19
5.5. Capitalization of Network.............................................. 20
5.6. Capitalization of Mobile............................................... 20
5.7. Equity Interests....................................................... 20
5.8. Title to the Crown Stock............................................... 21
5.9. Financial Statements................................................... 21
5.10. No Undisclosed Liabilities............................................ 22
5.11. Absence of Certain Changes or Events.................................. 22
5.12. Licenses.............................................................. 23
5.13. Sufficiency of Assets................................................. 24
5.14. Assets Other than Real Property Interests............................. 24
5.15. Title to Real Property................................................ 25
5.16. Intellectual Property................................................. 25
-i-
5.17. Employees............................................................. 26
5.18. Litigation............................................................ 28
5.19. Brokers............................................................... 28
5.20. Contracts............................................................. 28
5.21. Compliance with Laws.................................................. 30
5.22. Environmental Matters................................................. 30
5.23. Taxes................................................................. 32
5.24. Insurance............................................................. 33
5.25. Accounts Receivable................................................... 34
5.26. Securities Act........................................................ 34
5.27. Transactions with Affiliates.......................................... 34
5.28. Disclosure............................................................ 34
ARTICLE 6. Representations and Warranties of Buyer.......................... 35
6.1. Corporate Status; Authority............................................ 35
6.2. Corporate Action....................................................... 35
6.3. No Conflicts........................................................... 35
6.4. Capitalization of Buyer and its Subsidiaries and CTSH and its
Subsidiaries........................................................... 36
6.5. Equity Interests....................................................... 38
6.6. Financial Statements................................................... 38
6.7. No Undisclosed Liabilities............................................. 39
6.8. Absence of Certain Changes or Events................................... 39
6.9. Licenses............................................................... 39
6.10. Assets Other than Real Property Interests............................. 40
6.11. Title to Real Property................................................ 41
6.12. Intellectual Property................................................. 41
6.13. Employees............................................................. 42
6.14. Litigation............................................................ 43
6.15. Brokers............................................................... 44
6.16. Contracts............................................................. 44
6.17. Compliance with Laws.................................................. 46
6.18. Environmental Matters................................................. 46
6.19. Taxes................................................................. 47
6.20. Insurance............................................................. 48
6.21. Disclosure............................................................ 48
ARTICLE 7. Covenants of Sellers............................................. 48
7.1. Operation of the Business.............................................. 49
7.2. Consents............................................................... 51
7.3. Notice of Proceedings.................................................. 52
7.4. No Solicitation........................................................ 52
7.5. Cooperation............................................................ 52
ARTICLE 8. Covenants of Buyer............................................... 53
8.1. Operation of the Business.............................................. 53
8.2. Notice of Proceedings.................................................. 54
-ii-
8.3. Corporate Name and Symbol.............................................. 54
8.4. Liquidity Provision.................................................... 55
ARTICLE 9. Mutual Covenants of the Parties.................................. 55
9.1. Executive Compensation................................................. 55
9.2. Xxxx-Xxxxx-Xxxxxx...................................................... 55
9.3. Access to Facilities, Files and Records................................ 56
9.4. Advice of Changes...................................................... 56
9.5. Consummation of Agreement.............................................. 56
9.6. No Solicitation of Employees........................................... 56
9.7. Standstill............................................................. 56
ARTICLE 10. Conditions to the Obligations of the Crown Parties.............. 58
10.1. No Buyer Material Adverse Effect; Representations and Warranties and
Covenants............................................................. 58
10.2. Proceedings........................................................... 58
10.3. Xxxx-Xxxxx-Xxxxxx..................................................... 58
10.4. Deliveries............................................................ 58
ARTICLE 11. Conditions to the Obligations of Buyer, CAC I and CAC II........ 59
11.1. No Crown Material Adverse Effect; Representations, Warranties and
Covenants............................................................. 59
11.2. Proceedings........................................................... 59
11.3. Xxxx-Xxxxx-Xxxxxx..................................................... 59
11.4. Deliveries............................................................ 59
11.5. Xxxxxx X. Crown....................................................... 60
11.6. Xxxxxxx Employment Agreement.......................................... 60
11.7. FCC Authorization..................................................... 60
ARTICLE 12. Survival of Representations and Warranties...................... 60
12.1. Survival.............................................................. 60
12.2. Indemnification....................................................... 60
ARTICLE 13 Tax-Related Matters.............................................. 64
13.1. Closing of Tax Year................................................... 64
13.2. Filing of Tax Returns................................................. 64
13.3. Tax Audits, Etc....................................................... 65
13.4. Tax Indemnification................................................... 66
13.5. Transfer Taxes, Etc................................................... 67
13.6. Tax Certificate....................................................... 67
13.7. Tax Agreements........................................................ 67
13.8. Access to Books and Records........................................... 67
13.9. Allocation of Crown Value............................................. 68
13.10. Survival............................................................. 68
ARTICLE 14 Miscellaneous.................................................... 68
14.1. Termination of Agreement.............................................. 68
14.2. Liabilities Upon Termination.......................................... 69
-iii-
14.3. Expenses.............................................................. 69
14.4. Bulk Sales Laws....................................................... 69
14.5. Assignments........................................................... 69
14.6. Further Assurances.................................................... 70
14.7. Public Announcement................................................... 70
14.8. Notices............................................................... 70
14.9. Captions.............................................................. 71
14.10. Governing Law........................................................ 71
14.11. Waiver of Provisions................................................. 71
14.12. Counterparts......................................................... 72
14.13. Entire Agreement..................................................... 72
14.14. Confidentiality...................................................... 72
14.15. Submission to Jurisdiction; Waivers.................................. 72
14.16. Brokers or Finders................................................... 73
14.17. Specific Performance................................................. 73
14.18. Definitions; Construction............................................ 73
14.19. No Third Party Beneficiaries......................................... 74
EXHIBITS
--------
Exhibit A Excluded Personal Property
Exhibit B Note
Exhibit C Buyer EBITDA
Exhibit D Acquired Business EBITDA
Exhibit E Shareholder Agreement
Exhibit F FCC Letter Agreement
Exhibit G Crown Name Agreement
Exhibit H Tower Agreement
SCHEDULES
---------
Schedule 1.1(c) Excluded Real Property
Schedule 1.1(d) Excluded Contracts
Schedule 1.6 Schedule 1.6 Towers
Schedule 1.7 Excluded License
Schedule 5.4 No Conflicts - Crown
Schedule 5.7 Equity Interests - Crown
Schedule 5.9 Financial Statements - Crown
Schedule 5.11 Absence of Certain Changes - Crown
Schedule 5.12 Licenses - Crown
Schedule 5.14 Personal Property and Liens - Crown
Schedule 5.15 Real Property - Crown
Schedule 5.16 Intellectual Property - Crown
Schedule 5.17 Employee Matters - Crown
-iv-
Schedule 5.18 Litigation - Crown
Schedule 5.20 Contracts - Crown
Schedule 5.21 Compliance With Laws - Crown
Schedule 5.22 Environmental Matters - Crown
Schedule 5.23(b) Tax Returns - Crown
Schedule 5.23(c) Taxing Jurisdictions - Crown
Schedule 5.24 Insurance - Crown
Schedule 5.27 Transactions with Affiliates - Crown
Schedule 6.3 No Conflicts - Buyer
Schedule 6.4(a) Capitalization of Buyer's Subsidiaries
Schedule 6.4(b) Capitalization of CTSH's Subsidiaries
Schedule 6.5 Equity Interests - Buyer
Schedule 6.6(a) Financial Statements - Buyer
Schedule 6.6(b) Financial Statements - CTSH
Schedule 6.7 No Undisclosed Liabilities - Buyer
Schedule 6.9 Licenses - Buyer
Schedule 6.10 Liens - Buyer
Schedule 6.11 Real Property - Buyer
Schedule 6.12 Intellectual Property - Buyer
Schedule 6.13 Employee Matters - Buyer
Schedule 6.14 Litigation - Buyer
Schedule 6.16 Contracts - Buyer
Schedule 6.17 Compliance With Laws - Buyer
Schedule 6.18 Environmental Matters - Buyer
Schedule 6.20 Insurance - Buyer
Schedule 9.1 Key Employees
Schedule 13.9 Allocation of Crown Value
-v-
Table of Definitions
Term Section
---- -------
Acquired Business 1.5
Acquisition Financing 7.5
Advance Payment recitals
Affiliate 14.18(a)
Amended and Restated Credit Agreement 4.2(j)
Assumed Contracts 1.1(d)
Assumed Liabilities 1.3(a)
BANM 1.6(b)
BANM Notice 1.6(b)
Bank Credit Agreement 6.3
BBC Agreement 6.3
Xxxx Atlantic Agreement 1.6(b)
Xxxx Atlantic Property 1.6(b)
BellSouth 1.6(c)
BellSouth Agreement 1.6(c)
BellSouth Property 1.6(c)
Benefit Plan 5.17(c)
Buyer preamble
Buyer Audited Statements 6.6(a)
Buyer Benefit Plan 6.13(c)
Buyer's Damages 12.2(a)
Buyer Environmental Audits 6.18(a)
Buyer Financial Statements 6.6(a)
Buyer Interim Financial Statements 3.2(b)
Buyer Leased Property 6.11
Buyer Material Adverse Effect 6.1
Buyer Owned Property 6.11
Buyer Permitted Liens 6.19(a)
Buyer Properties 6.10(a)
Buyer Property 6.11
Buyer Scheduled Contract 6.16
Buyer Transaction Documents 4.3(k)
CAC I preamble
CAC II preamble
CAC III 1.4(b)
Cash and Investments 1.1(k)
Castle A Common Stock 6.4
Castle B Common Stock 1.4(b)
-vi-
Term Section
---- -------
Closing 4.1(a)
Closing Date 4.1(a)
Code recitals
Communications Act 5.12
Compensating Incremental Amount 1.6(g)
Contracts 1.1(d)
Crown Audited Statements 5.9(a)
Crown Benefit Plan 5.17(c)
Crown Communications Assets 1.1
Crown Communications Business recitals
Crown Environmental Audits 5.22(a)
Crown Financial Statements 5.9(b)
Crown Interim Financial Statements 3.2(a)
Crown Leased Property 5.15
Crown Material Adverse Effect 5.1
Crown Name Agreement 4.2(i)
Crown Owned Property 5.15
Crown Parties preamble
Crown Permitted Liens 5.14(a)
Crown Permitted Real Estate Liens 5.15
Crown Properties 5.15
Crown Property 5.15
Crown Stock 2.2(a)(ii)
Crown Symbol 1.1(e)
Crown Territory 9.7(a)
Crown Transaction Documents 4.2(g)
Crown Unaudited Statements 5.9(a)
Crowns preamble
CTSH recitals
CTSH Audited Statements 6.6(b)
CTSH Financial Statements 6.6(b)
CTSH Interim Financial Statements 3.2(b)
CTSH Stock 6.4(b)
December 31 Crown Balance Sheets 5.14(a)
December 31 Buyer Balance Sheet 6.10(a)
Due Diligence Completion Date 3.1
Easement Agreement 4.2(k)
EBITDA 3.1
Effective Time 2.1(b)
Environmental Laws 5.22(c)
Environmental Permits 5.22(b)
ERISA 5.17(c)
Excluded Assets 1.2
-vii-
Term Section
---- -------
Excluded Contracts 1.1(d)
Excluded License 1.7
Excluded Liabilities 1.3(b)(ii)
Excluded Real Property 1.1(c)
FAA 5.12
FCC Letter Agreement 4.2(h)
Final S Tax Period(s) 13.1
GAAP 5.9(b)
Governmental Entity 1.1(a)
Xxxx-Xxxxx-Xxxxxx Act 5.4
Hazardous Material 5.22(c)
Incremental Amount 1.6(e)
Indemnified Party 12.2(e)
Intellectual Property 1.1(e)
IRS 5.17(g)
Licenses 1.1(a)
Liens 1.1
Loss 12.2(c)
Merger Consideration 2.2(c)
Mergers recitals
Mobile preamble
Mobile Common Stock 2.2(a)(ii)
Mobile Merger recitals
Mobile Merger Consideration 2.2(c)
Mobile Share 5.6
Mobile Surviving Corporation 2.1(a)
Network preamble
Network Common Stock 2.2(a)(i)
Network Merger recitals
Network Merger Consideration 2.2(c)
Network Shares 5.5
Network Surviving Corporation 2.1(a)
New Business 9.7
Note 1.4(b)
PBCL 2.1(a)
PCBs 5.22(b)
Person 14.18(a)
Pledge Agreement 9.7(c)
Pre-Closing Tax Return 13.2(a)
Preferred Stock 6.4
Property Taxes 13.4(i)
Purchase Price 1.4(a)
Real Property 1.1(c)
-viii-
Term Section
---- -------
Receivables 1.1(g)
Related Person 5.20(i)
Release 5.22(c)
Representative 14.18(a)
Restricted Activities 9.7(a)
Returns 5.23(a)
Schedule 1.6 Towers 1.6(a)
Section 1.6 Asset 1.6(d)
Section 1.6 Assets 1.6(d)
Securities Act 5.26
Sellers preamble
Sellers' Damages 12.2(b)
Seller Scheduled Contract 5.20
Shareholder Agreement 4.2(f)
Straddle Period 13.4
Subsidiary 14.18(a)
Tax Amount 1.4(a)
Tax Controversy 13.3
Tax Indemnification Period 13.4
Taxes 5.23(a)
Third Party Claim 12.2(e)
-ix-
FIRST AMENDED AND RESTATED ASSET PURCHASE AND MERGER
AGREEMENT dated as of July 11, 1997, as amended and restated on
August 14, 1997, among Crown Network Systems, Inc., a
Pennsylvania corporation ("Network"), Crown Mobile Systems, Inc.,
-------
a Pennsylvania corporation ("Mobile"), Xxxxxx X. Crown,
------
individually and as a shareholder of Network and Mobile, Xxxxxxx
Crown, individually and as a shareholder of Network and Mobile
(Xxxxxx X. Crown and Xxxxxxx Crown, referred to together as
"Sellers" or the "Crowns" and, the Crowns, individually and d/b/a
-------- ------
Crown Communications, together with Network and Mobile, referred
to as the "Crown Parties"), Castle Acquisition Corp. I, a
-------------
Pennsylvania corporation ("CAC I"), Castle Acquisition Corp. II,
-----
a Pennsylvania corporation ("CAC II"), and Castle Tower Holding
------
Corp., a Delaware corporation ("Buyer").
-----
RECITALS:
--------
1. Sellers own and operate a communications site acquisition, ownership,
design, development, construction, management and servicing business that
operates under the name of Crown Communications (the "Crown Communications
--------------------
Business"), including certain real estate, leases, licenses, management
--------
agreements, towers, contracts and other assets described in more detail below.
Sellers also own and operate Network and Mobile.
2. Sellers desire to sell, assign and transfer to Buyer, and Buyer
desires to purchase from Sellers, all the assets and properties used or held for
use in connection with the Crown Communications Business, all as described in
more detail below, all on the terms and subject to the conditions described
herein. In connection therewith, Buyer will assume certain liabilities and
obligations of the Crown Communications Business as further described herein.
3. Simultaneously with the sale of assets described above, the parties
intend to effect a merger of CAC I with and into Network, with Network being the
surviving corporation (the "Network Merger"), and a merger of CAC II with and
--------------
into Mobile, with Mobile being the surviving corporation (the "Mobile Merger")
-------------
and, together with the Network Merger, the "Mergers").
-------
4. It is the intention of the parties that for United States Federal
income tax purposes each of the Mergers shall qualify as a "reorganization"
within the meaning of Section 368(a) of the Internal Revenue Code of 1986 (the
"Code") and that the purchase of the Crown Communications Business will be a
----
taxable transaction.
5. It is the further intention of the parties, promptly following the
execution and delivery of this Agreement and the receipt by Sellers of an
advance payment by Buyer in the amount of $10,000,000 (the "Advance Payment"),
---------------
by wire transfer of immediately available Pittsburgh funds to an account
specified by Sellers, that Sellers, on the one part, and Buyer, on the other
part, each shall commence a confirmatory due diligence investigation, including
a review of the businesses, assets, operations, properties, condition (financial
and otherwise), contingent liabilities, prospects (including projected EBITDA
(as defined herein)) and material agreements of
the Buyer and its Subsidiaries and Castle Transmission Services (Holdings) Ltd.
("CTSH") and its Subsidiaries by Sellers and of the Crown Communications
----
Business, Network and Mobile by Buyer. The closing of the transactions
contemplated hereby shall be subject to the satisfactory completion of such
investigation as more fully set forth in Article 3, and the disposition of the
Advance Payment shall be as more fully set forth in Sections 1.4 and 14.2.
6. Buyer has advised Sellers that it intends to complete a reorganization
of equity interests in CTSH such that, upon completion thereof, Buyer or its
successor will hold at least a majority of the outstanding equity interests of
CTSH; provided, however, that in no event shall the completion by Buyer of such
-------- -------
a reorganization be deemed to constitute a condition to Sellers' obligation to
close the transaction contemplated hereby.
NOW, THEREFORE, in consideration of the foregoing and of other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound, the parties agree as follows:
ARTICLE 1.
Purchase and Sale of Assets; Assumption of Liabilities
------------------------------------------------------
1.1. Crown Communications Assets. Subject to and in reliance upon the
---------------------------
representations, warranties and agreements herein set forth, and subject to the
terms and conditions herein contained, on the Closing Date (as defined herein)
(or (x) in the case of the purchase by Buyer of any Section 1.6 Assets, on the
date specified in Section 1.6 or (y) in the case of the FCC Licenses listed on
Schedule 1.7, on the date specified in Section 1.7), Sellers shall grant,
convey, sell, assign, transfer and deliver to Buyer, and Buyer shall purchase,
free and clear of all liabilities and obligations, as well as all covenants,
restrictions, mortgages, liens, security interests, claims, pledges, easements,
assignments, subleases, covenants, rights-of-way, options, rights of refusal,
charges, leases, licenses, defects in title, encumbrances and any other
restriction of any kind or nature (collectively, "Liens") except only those
-----
liabilities, obligations and Liens which are to be assumed by Buyer pursuant to
Section 1.3 hereof and except Crown Permitted Liens (as defined herein) and
Crown Permitted Real Estate Liens (as defined herein), all properties, assets,
privileges, rights, interests and claims, real and personal, tangible and
intangible, of every type and description, wherever located, including the Crown
Communications Business as a going concern and goodwill, that are owned by
Sellers and used or held for use in connection with the Crown Communications
Business (the "Crown Communications Assets"), except for those assets which are
---------------------------
expressly excluded pursuant to Section 1.2 hereof, and except for any Section
1.6 Assets with respect to which BANM or BellSouth (each as defined herein)
shall have exercised its right of first refusal. Without limiting the foregoing,
the Crown Communications Assets shall include the following:
(a) Licenses and Authorizations. All licenses, permits, franchises,
---------------------------
certificates of compliance, consents, approvals and authorizations by any
Federal, state or local government or any subdivision thereof or any court,
administrative agency or commission or other governmental agency or authority (a
"Governmental Entity") (and including the FCC Licenses
-------------------
-2-
listed on Schedule 1.7, if such FCC Licenses are transferred to Buyer in
accordance with Section 1.7) (all the foregoing, including any renewals,
extensions or modifications thereof and additions thereto and any pending
applications therefor, being referred to herein as "Licenses") that are held by
--------
Sellers and used or held for use in connection with the Crown Communications
Business, including those Licenses listed on Schedule 5.12, together with any
Licenses acquired as permitted by the terms of this Agreement between July 11,
1997 and the Closing Date.
(b) Tangible Personal Property. All physical assets, equipment, vehicles,
--------------------------
furniture, fixtures, office materials and supplies, spare parts, and other
tangible personal property of every kind and description owned, leased or
licensed by Sellers as of July 11, 1997 and used or held for use in connection
with the Crown Communications Business, including those items described
generally on Schedule 5.14 (and including any Section 1.6 Assets, if and to the
extent transferred to Buyer in accordance with Section 1.6), and any additions,
improvements, replacements and alterations thereto made as permitted by the
terms of this Agreement between July 11, 1997 and the Closing Date, in each case
other than any tangible personal property consumed in the ordinary course of
business and operations of the Crown Communications Business from July 11, 1997
to the Closing Date.
(c) Real Property. All land and leaseholds, and other estates in real
-------------
property and appurtenances thereto, and all easements, privileges, rights-of-
way, riparian and other water rights, lands underlying any adjacent streets or
roads, appurtenances, licenses, permits and other rights pertaining to or
accruing to the benefit of such real property and leasehold interests and
estates in real property, buildings, towers, transmitters, antennae and
warehouses, and fixtures and improvements thereon (and including any Section 1.6
Assets, if and to the extent transferred to Buyer in accordance with Section
1.6) ("Real Property") owned, leased or licensed by Sellers as of July 11, 1997
-------------
and used or held for use in connection with the Crown Communications Business,
including those described generally on Schedule 5.15, and any additions,
improvements, replacements and alterations thereto made as permitted by the
terms of this Agreement between July 11, 1997 and the Closing Date, but
excluding the Real Property listed on Schedule 1.1(c) (the "Excluded Real
-------------
Property").
--------
(d) Contracts. All contracts, leases, licenses (other than Licenses),
---------
indentures, agreements, commitments and all other legally binding arrangements,
whether oral or written, express or implied (and including any Section 1.6
Assets, if and to the extent transferred to Buyer in accordance with Section
1.6) ("Contracts") entered into in connection with the Crown Communications
---------
Business, including those listed on Schedule 5.20, together with all Contracts
entered into as permitted by the terms of this Agreement between July 11, 1997
and the Closing Date (collectively, the "Assumed Contracts"), but excluding the
-----------------
Contracts listed on Schedule 1.1(d) (the "Excluded Contracts").
------------------
(e) Trademarks, etc. All trademarks (registered or unregistered), service
---------------
marks, franchises, patents, trade names, jingles, slogans, and logotypes,
copyrights and other intangible rights, including any applications therefor and
other material intellectual property and proprietary rights, whether or not
subject to statutory registration or protection (the "Intellectual Property"),
---------------------
in each case owned, leased or licensed by Sellers and used or held for use as of
July 11, 1997 in connection with the Crown Communications Business, including
the current
-3-
Crown corporate symbol (the "Crown Symbol") and other Intellectual Property
------------
described generally on Schedule 5.16, and any Intellectual Property acquired by
Sellers in connection with the Crown Communications Business as permitted by the
terms of this Agreement between July 11, 1997 and the Closing Date.
(f) Files and Records. All files, records, books of account, general,
-----------------
financial, accounting and personnel records, invoices, computer programs, tapes,
electronic data processing software, customer and supplier lists, correspondence
and other records of Sellers used or held for use by or otherwise relating to
the Crown Communications Business.
(g) Prepaid Expenses and Receivables; Other Current Assets. All prepaid
------------------------------------------------------
expenses (other than prepaid Taxes (as defined in Section 5.23)) and notes and
accounts receivable ("Receivables") and any other current assets arising in
-----------
connection with the Crown Communications Business and existing on the Closing
Date.
(h) Security Deposits. All security deposits held by third parties for
-----------------
the benefit of the Crown Communications Business on the Closing Date.
(i) Claims. All rights, claims, credits or causes of action against third
------
parties relating to or arising out of the Crown Communications Business, except
any and all claims of Sellers for refunds of Taxes paid or attributable to a
taxable period (or portion thereof) ending on or prior to the Closing, and
except for any claims relating to or arising out of the matters described in
clause (i) of Section 1.3(b).
(j) Goodwill. All Sellers' goodwill in, and the going concern value of,
--------
the Crown Communications Business.
(k) Cash and Investments. All cash on hand or in bank accounts and other
--------------------
cash items, cash equivalents and short-term investments (collectively, "Cash and
--------
Investments") held in connection with the Crown Communications Business on the
-----------
Closing Date.
(l) Insurance. All insurance policies and insurance contracts listed on
---------
Schedule 5.24 with respect to coverage provided from and after the Closing Date,
together with any claim, chose in action or other right Sellers may have to
insurance coverage under past and present insurance policies and insurance
contracts (including the insurance policies and insurance contracts listed on
Schedule 5.24) insuring the Crown Communications Business with respect to any
and all Crown Communications Assets and Assumed Liabilities, in each case
together with any proceeds received by Sellers from any such policy or contract
after Closing with respect to any Crown Communications Assets or any Assumed
Liabilities to the full extent that such assignment and conveyance is
permissible under the law and under such insurance policies and insurance
contracts.
Notwithstanding the foregoing: (i) Sellers shall retain the rights to
make claims under, and to receive insurance proceeds from, the insurance
policies and insurance contracts and any proceeds thereof insuring the Crown
Communications Business, including those listed on Schedule 5.24, to the extent
that such insurance policies and contracts provide coverage for any
-4-
Excluded Asset (as herein defined) and Excluded Liability (as herein defined),
including but not limited to the matters described in clause (i) of Section
1.3(b), together with any proceeds received by Buyer from any such policy or
contract after Closing to the extent such proceeds are with respect to any
Excluded Assets or Excluded Liabilities; (ii) in the event that Sellers seek to
recover for loss to an Excluded Asset or for an Excluded Liability under
insurance policies or insurance contracts covering the Crown Communications
Business, Sellers shall be responsible for satisfying any and all deductibles or
self-insurance obligations applicable to such claim for coverage of a loss to an
Excluded Asset or for coverage of an Excluded Liability; (iii) in the event that
Buyer seeks to recover a loss to a Crown Communications Asset or for an Assumed
Liability under any insurance policies or contracts covering the Crown
Communications Business, Buyer shall be responsible for satisfying any and all
deductibles or any self-insurance obligations applicable to such claim for
coverage of a loss to a Crown Communication Asset or for an Assumed Liability;
and (iv) in the event that Sellers and Buyer both make claims for coverage under
the same insurance policy and insufficient policy limits are available to
satisfy both claims, the earlier-presented claim shall take priority and shall
be satisfied before the later-presented claim, which shall be satisfied only to
the extent available policy limits remain for such later-presented claim.
Sellers hereby represent and warrant to Buyer that, except for the matters
referred to in Section 1.3(b)(i) and except for workers compensation, automobile
insurance and inland marine claims in the ordinary course of business, there are
no outstanding claims under any past or present insurance policy or insurance
contract insuring the Crown Communications Business and, to the knowledge of
Sellers, there are not any existing facts or circumstances that could reasonably
be expected to form the basis of or give rise to any claim under any such
insurance policy or insurance contract.
1.2. Excluded Assets. The following shall be excluded from the Crown
---------------
Communications Assets and retained by Sellers (the "Excluded Assets"):
---------------
(a) Certain Claims. Any and all claims of Sellers for refunds of
--------------
Taxes paid or attributable to a taxable period (or portion thereof) ending on or
prior to the Closing, and any and all claims relating to or arising out of the
matters described in clause (i) of Section 1.3(b);
(b) Certain Personal Property. All items of personal property listed
-------------------------
on Exhibit A;
(c) Section 1.6 Assets. Any Section 1.6 Assets with respect to which
------------------
BANM or BellSouth, as the case may be, shall have exercised its right of first
refusal;
(d) Excluded Real Property. All Excluded Real Property; and
----------------------
(e) Excluded Contracts. All Excluded Contracts.
------------------
1.3. Assumption of Certain Liabilities; Excluded Liabilities.
-------------------------------------------------------
(a) Upon the terms and subject to the conditions of this Agreement,
effective as of the Closing Date (and, with respect to any Assumed Contracts or
other liabilities and obligations relating to or arising out of the Section 1.6
Assets, on the date the relevant Section 1.6
-5-
Assets are transferred to Buyer pursuant to Section 1.6), Buyer shall assume and
agree to pay, perform and discharge when due, and indemnify Sellers and hold
each of them harmless from the following liabilities and obligations of the
Crown Communications Business (the "Assumed Liabilities"):
-------------------
(i) outstanding indebtedness of the Crown Communications
Business, including approximately $20.5 million in the aggregate
outstanding as of May 31, 1997 and additional indebtedness incurred
thereafter in the ordinary course of business; provided, however, that the
-------- -------
aggregate amount of outstanding indebtedness assumed will not exceed (A)
$25 million, plus (B) the aggregate amount of any additional indebtedness
incurred with the written consent of Buyer pursuant to Section 7.1.
(ii) trade payables and other accounts payable reflected on the
balance sheet as of June 30, 1997 of Crown Communications included as part
of the Crown Interim Financial Statements (as defined herein) and those
arising thereafter in the ordinary course of business consistent with past
practice (including trade payables and other accounts payable relating to
or arising out of the Section 1.6 Assets, if and to the extent the relevant
Section 1.6 Assets are transferred to Buyer in accordance with Section
1.6);
(iii) all liabilities and obligations of Sellers arising under or
relating to the Assumed Contracts (including Assumed Contracts relating to
the Section 1.6 Assets, if and to the extent the relevant Section 1.6
Assets are transferred to Buyer in accordance with Section 1.6); and
(iv) all other liabilities and obligations of Sellers arising in
the ordinary course of business consistent with past practice, up to $2
million in the aggregate (including other liabilities and obligations
relating to or arising out of the Section 1.6 Assets, if and to the extent
the relevant Section 1.6 Assets are transferred to Buyer in accordance with
Section 1.6).
(b) Buyer shall in no event assume, nor shall it be liable for:
(i) all liabilities and obligations of the Sellers arising
under, relating to or based on (x) three lawsuits filed in the United
States District Court for the Western District of Pennsylvania which have
been consolidated at Civil Action No. 95-639 and which are captioned: (A)
Xxxxxxxx Xxxxx, Guardian and next-of-kin of Xxxxx X. Xxxx, an incapacitated
---------------------------------------------------------------------------
person, plaintiff x. Xxxx Atlantic Mobile Systems, Inc., UNR-XXXX, a
--------------------------------------------------------------------
division of UNR Industries, Inc. v. Crown Corporation, Crown Communications
---------------------------------------------------------------------------
and Crown Network Systems, Inc., at No. C.A. 95-639; (B) Xxxxxxx X. Xxxxxx,
---------------------------------------------------------------------------
Plaintiff, x. Xxxx Atlantic Mobile Systems, Inc., UNR-XXXX, a division of
-------------------------------------------------------------------------
UNR Industries, Inc., Defendants v. Crown Corporation, Crown Communications
---------------------------------------------------------------------------
and Crown Network Systems, Inc., Third-Party Defendants, at No. C.A. 95-942
---------------------------------------------------------------------------
and (C) Xxxx X. Xxxxxxx X. Xxxx Atlantic Mobile Systems, Inc., UNR-XXXX, a
--------------------------------------------------------------------------
division of UNR Indust., Inc., Defendants v. Crown, Crown Communications,
--------------------------------------------------------------------------
Third Party Defendant, at No. C.A. 97-260, or (y) the facts and
-----------------------------------------
circumstances or events relating to such lawsuits; and
-6-
(ii) any other obligations or liabilities of Sellers of any nature
whatsoever (whether express or implied, fixed or contingent, known or
unknown) other than the Assumed Liabilities (all obligations and
liabilities of Sellers under clauses (i) and (ii) of this paragraph are
referred to herein collectively as the "Excluded Liabilities"). Without
--------------------
limiting the foregoing, Buyer shall not be deemed to assume any liabilities
relating to or arising out of any Excluded Assets or any liabilities for
any Taxes, other than liability for transfer taxes to the extent assumed by
Buyer pursuant to Section 14.3.
1.4. Advance Payment; Payment of Purchase Price.
------------------------------------------
(a) The total consideration for the Crown Communications Assets
(including the Section 1.6 Assets) shall consist of (i) the sum of (A)
$100,000,000 plus (B) $1,229,828 (the "Tax Amount") in cash, (ii) 25,000 fully
paid and nonassessable shares of Class B Common Stock, par value $0.01 per
share, of Buyer (the "Castle B Common Stock"), and (iii) the assumption by Buyer
---------------------
of the Assumed Liabilities (clauses (i), (ii) and (iii), collectively, the
"Purchase Price"). The Advance Payment shall be applied at Closing against the
--------------
cash portion of the Purchase Price, subject to the provisions of Article 3 and
Sections 14.1 and 14.2.
(b) On the Closing Date, Buyer shall pay, or cause to be paid, to
Sellers for the Crown Communications Assets other than the Section 1.6 Assets
(i) by wire transfer of $15,000,000 ($25,000,000 less the Advance Payment) in
immediately available Pittsburgh funds to an account specified by Sellers in
writing at least two business days prior to the Closing, (ii) by delivery to
Sellers of a negotiable promissory note of Buyer in substantially the form of
Exhibit B (the "Note") and (iii) by delivery to Sellers of 12,667 shares of
----
Castle B Common Stock. The initial principal amount payable under the Note shall
be equal to $2,582,970, which amount shall be subject to increase in accordance
with Section 1.6. The Note shall be due on October 31, 1997 (subject to earlier
maturity 30 days following demand, which demand may be made any time after
September 15, 1997, as specified in the Note) and shall bear interest at the
rate of 11 percent per annum, payable monthly commencing on the date that is one
month following the Closing Date. Buyer's obligations under the Note will be
secured by a first priority pledge of all of the outstanding capital stock of
the Network Surviving Corporation and the Mobile Surviving Corporation (each as
defined herein) and of a newly formed, wholly owned subsidiary of Buyer to be
named "Crown Communication, Inc." ("CAC III"), which will, as of the Closing
-------
Date, hold all of the Crown Communications Assets (other than the Section 1.6
Assets), and will assume all of the Assumed Liabilities (other than any Assumed
Contracts or other liabilities and obligations relating to or arising out of the
Section 1.6 Assets). Buyer and Sellers agree to allocate the Purchase Price,
together with the value of the Assumed Liabilities, as provided in Section 13.9.
Sellers shall deliver to Buyer as soon as practicable after the execution of
this Agreement, an estimate of the Tax Amount, and shall certify the Tax Amount
to Buyer on the Closing Date, which certificate shall include a reasonably
detailed calculation of the Tax Amount.
1.5. Certain Definitions. For the avoidance of doubt, the Crown
-------------------
Communications Business shall not include the capital stock, business, assets or
liabilities of Network or Mobile. For all purposes of this Agreement, the Crown
Communications Assets, the Assumed Liabilities and the capital stock, business,
assets and liabilities of Network and Mobile are referred to herein as the
"Acquired Business."
-----------------
-7-
1.6. Transfer of Section 1.6 Assets.
------------------------------
(a) Sellers have advised Buyer that certain assets and properties
relating to the towers listed on Schedule 1.6 (individually, a "Schedule 1.6
------------
Tower" and, collectively, the "Schedule 1.6 Towers") are currently subject to
----- -------------------
rights of first refusal in favor of BANM and BellSouth (each as defined herein).
Such assets and properties shall initially be retained by Sellers, subject to
the provisions of this Section 1.6.
(b) On or as promptly as practicable (and in any event within two
business days) after the earlier to occur of (i) the date that is 45 days after
the date on which Sellers shall have given notice (the "BANM Notice") under
-----------
Section 17 of the Xxxx Atlantic Agreement (as defined below) of the receipt by
Sellers of a definitive offer to acquire the Xxxx Atlantic Property (as defined
below) and (ii) the date on which Cellco Partnership, d/b/a Xxxx Atlantic/NYNEX
Mobile, Pittsburgh SMSA, L.P. and Pennsylvania RSA 6(II), L.P. (individually and
collectively, "BANM") notifies Sellers that it has elected not to exercise its
----
right of first refusal in accordance with Section 17 of the Master Tower Lease
Agreement dated as of December 29, 1995, among Xxxxxx X. Crown, d/b/a Crown
Communications and BANM (the "Xxxx Atlantic Agreement") with respect to any
-----------------------
"Property" (such term, as defined in the Xxxx Atlantic Agreement, being referred
to herein collectively as the "Xxxx Atlantic Property"), Sellers shall grant,
----------------------
convey, sell, assign, transfer and deliver to Buyer, and Buyer shall purchase,
free and clear of all Liens except Crown Permitted Liens and Crown Permitted
Real Estate Liens, (A) in the case of clause (i), all of the Xxxx Atlantic
Property that has not been transferred to Buyer prior to such date, other than
any of the Xxxx Atlantic Property with respect to which BANM shall have
exercised such right of first refusal and, in the case of clause (ii), all Xxxx
Atlantic Property with respect to which Sellers shall have been so notified, and
(B) the Xxxx Atlantic Agreement and all other Contracts listed on Schedule 1.6
relating to the Xxxx Atlantic Property. Sellers shall promptly notify Buyer of
any notice received by Sellers that BANM has elected to exercise its right of
first refusal (or that BANM has elected not to exercise such right of first
refusal) with respect to any of the Xxxx Atlantic Property. Sellers shall
furnish the BANM Notice to BANM as promptly as practicable and, in any event
within ten days, after the Closing Date, and shall also keep Buyer informed on a
timely basis of all discussions with BANM regarding such right of first refusal.
(c) On or as promptly as practicable (and in any event within two
business days) after the earlier to occur of (i) August 29, 1997 and (ii) the
date on which BellSouth Mobility, Inc. ("BellSouth") notifies Sellers that it
---------
has elected not to exercise its right of first refusal in accordance with
Section 19 of the Option to Purchase Real Property and Perpetual Easements and
Right of First Refusal dated as of September 22, 1992 between BellSouth and
Xxxxxx X. Crown, d/b/a Crown Communications, and Xxxxxxx Crown (collectively,
the "BellSouth Agreement") with respect to the tower or any other portion of the
-------------------
real property described in the BellSouth Agreement (collectively, the "BellSouth
---------
Property"), Sellers shall grant, convey, sell, assign, transfer and deliver to
--------
Buyer, and Buyer shall purchase, free and clear of all Liens except Crown
Permitted Liens and Crown Permitted Real Estate Liens, (A) in the case of clause
(i) all of the BellSouth Property that has not been transferred to Buyer prior
to such date, other than any of the BellSouth Property with respect to which
BellSouth has exercised such right of first refusal and, in the case of clause
(ii), all of the BellSouth Property with respect to which Sellers have been so
notified, and (B) the BellSouth Agreement and all other Contracts listed on
-8-
Schedule 1.6 relating to the BellSouth Property. Sellers shall promptly notify
Buyer of any notice received by Sellers that BellSouth has elected to exercise
such right of first refusal (or that BellSouth has elected not to exercise such
right of first refusal) with respect to any of the BellSouth Property. Sellers
shall keep Buyer informed on a timely basis of all discussions with BellSouth
regarding such right of first refusal.
(d) The Xxxx Atlantic Property, the BellSouth Property, the Xxxx
Atlantic Agreement, the BellSouth Agreement, and the other Contracts listed on
Schedule 1.6 are referred to herein individually as a "Section 1.6 Asset" and
-----------------
collectively as the "Section 1.6 Assets". Until the earlier to occur of (i) such
------------------
time as any Section 1.6 Assets are transferred to Buyer in accordance with this
Section 1.6 and (ii) if BANM or BellSouth, as the case may be, elects to
exercise its right of first refusal with respect to any such Section 1.6 Assets,
the date on which such Section 1.6 Assets are transferred to BANM or BellSouth,
as applicable, Sellers shall operate, or cause to be operated, the Section 1.6
Assets in the ordinary course of business consistent with the past practice and,
without limiting the foregoing, Sellers shall use reasonable commercial efforts
to (i) preserve their relationships with BANM, BellSouth and the other
contracting parties to the Contracts listed on Schedule 1.6 and their current
material relationships with others whom the Sellers have a material business or
financial relationship relating to the Section 1.6 Assets and (ii) maintain the
books and records relating to the Section 1.6 Assets in substantially the same
manner as presently maintained, provided further, and not in limitation of the
-------- -------
foregoing, Sellers agree not to (A) create or assume any Lien on any of the
Section 1.6 Assets other than Crown Permitted Liens, Crown Permitted Real Estate
Liens and Liens incurred in the ordinary course of business consistent with past
practice, (B) agree to any modification, amendment, waiver, assignment,
termination or relinquishment of any Contract, License or other right relating
to the Section 1.6 Assets, (C) fail to make any material capital expenditures
necessary to maintain the Section 1.6 Assets, (D) make or change any Tax
election, change any annual Tax accounting period, adopt or change any method of
Tax accounting, file any amended return, enter into any closing agreement,
settle any Tax claim or assessment, surrender any right to claim a Tax refund,
fail to make any Tax payments or consent to extend or waive the limitations
period applicable to any Tax claim or assessment, in each case with respect to
any Section 1.6 Asset or (E) agree in writing or otherwise to take any of the
actions prohibited by this Section 1.6(d).
(e) Upon transfer of any Section 1.6 Asset to Buyer in accordance
with this Section 1.6, (i) Sellers shall pay to Buyer an amount in cash equal to
the net cash flow (as defined below) of Sellers attributable to ownership and
operation of such Section 1.6 Assets from the Closing Date to the date of such
transfer; (ii) the principal amount of the Note shall be increased in accordance
with its terms by an amount equal to the sum of the principal amounts designated
on Schedule 1.6 as the cash purchase price attributable to such Section 1.6
Assets (the amount of any such increase with respect to such transfer, an
"Incremental Amount"); and (iii) Buyer shall issue and deliver to Sellers that
------------------
number of shares of Castle B Common Stock designated on Schedule 1.6 with
respect to the applicable Section 1.6 Assets. For purposes of this Section
1.6(e), "net cash flow" of Sellers attributable to ownership and operation of
any Section 1.6 Asset during the period from the Closing Date to the date of
transfer of such Section 1.6 Asset to Buyer shall mean all cash and other
proceeds received by Sellers in respect of such Section 1.6 Asset during such
period less any out-of-pocket expenses paid by Sellers in compliance with any of
their
-9-
obligations under any Contract or other binding obligation applicable to such
Section 1.6 Asset during such period; provided that net cash flow shall not
--------
include any Taxes attributable to the Section 1.6 Assets during such period
which the parties agree shall be the responsibility of Sellers.
(f) At such time as any Section 1.6 Asset is transferred to Buyer in
accordance with this Section 1.6, such Section 1.6 Asset shall, for all purposes
hereunder, be included among the Crown Communications Assets.
(g) If (i) BANM exercises its right of first refusal with respect to
any Xxxx Atlantic Property or (ii) BellSouth exercises its right of first
refusal with respect to any BellSouth Property, Sellers shall be entitled to
complete the sale of the relevant Section 1.6 Asset to BANM or BellSouth, as the
case may be, and retain all proceeds of such sale, and Buyer shall not receive
any of such proceeds. Not less than two business days prior to the date of
transfer of any Section 1.6 Asset to BANM or BellSouth upon the exercise by BANM
or BellSouth, as applicable, of its right of first refusal, Sellers shall notify
Buyer in writing of all amounts received or to be received from BANM or
BellSouth, as applicable, upon exercise of its right of first refusal with
respect to such Section 1.6 Asset. If the aggregate of such amounts is less than
the aggregate value designated on Schedule 1.6 with respect to such Section 1.6
Asset and if Buyer shall have consented to the sale of such Section 1.6 Assets
to BANM or BellSouth, as applicable, for such lesser amounts, then effective on
and as of the date of transfer of Section 1.6 Asset to BANM or BellSouth, as
applicable, the principal amount of the Note shall be increased by the amount of
such deficiency (the amount of any such increase with respect to such
deficiency, a "Compensating Incremental Amount"). Unless Sellers transfer the
-------------------------------
Section 1.6 Assets to Buyer in accordance with this Section 1.6, Sellers shall
be entitled to retain all net cash flow attributable to the ownership and
operation of the Section 1.6 Assets, and Buyer shall not receive any of such
profits.
(h) So long as the Note is outstanding, any Section 1.6 Assets
purchased by Buyer pursuant to this Section 1.6 shall be held by CAC III, unless
otherwise agreed in writing by Sellers.
1.7. Certain FCC Licenses. The parties acknowledge that Crown
--------------------
Communications will not have received a "special temporary authorization" from
the FCC to assign and transfer the FCC Licenses listed on Schedule 1.7 to CAC
III on the Closing Date as contemplated by this Agreement. Accordingly, the
parties agree that such FCC Licenses shall be retained by Sellers until such
time as such FCC approval (which approval need not be final FCC approval) to
assign and transfer such FCC Licenses to CAC III shall have been obtained.
Promptly upon receipt (and in any event within two business days) of such FCC
approval to assign and transfer either of such FCC Licenses to CAC III, Sellers
shall assign such FCC License to CAC III, free and clear of all Liens except
Crown Permitted Liens. Until receipt of such FCC approval and assignment and
transfer of such FCC Licenses to CAC III: (i) Sellers shall make the facilities
of the stations authorized by such FCC Licenses available to CAC III on a fully
paid, exclusive basis; (ii) Sellers agree not to (a) knowingly take any action
that conflicts with or violates the terms and conditions of such FCC Licenses,
(b) create or assume any Lien on such FCC Licenses other than Crown Permitted
Liens, (c) agree to any modification, amendment, waiver, assignment, termination
or relinquishment of such FCC Licenses or any right relating thereto, or (d)
agree in writing or
-10-
otherwise to take any of the actions prohibited by this clause (ii); and (iii)
Sellers shall cooperate with Buyer, and use commercially reasonable efforts, to
cause such FCC approval to be obtained and shall not knowingly take any action
that could result in any such FCC approval being denied.
ARTICLE 2.
The Merger Transactions
-----------------------
2.1. The Mergers Generally.
---------------------
(a) Upon the terms and subject to the conditions set forth herein, at
the Effective Time (as defined below) (i) CAC I shall be merged with and into
Network in accordance with the Pennsylvania Business Corporation Law (the
"PBCL") and the separate corporate existence of CAC I shall thereupon cease and
----
(ii) CAC II shall be merged with and into Mobile in accordance with the PBCL and
the separate corporate existence of CAC II shall thereupon cease. Network and
Mobile shall be the surviving corporations in the Mergers (the "Network
-------
Surviving Corporation" and the "Mobile Surviving Corporation," respectively)
--------------------- ----------------------------
and shall continue to be governed by the laws of the Commonwealth of
Pennsylvania. The Mergers shall have the effects set forth in Section 1929 of
the PBCL.
(b) Simultaneously with the Closing, Network and Mobile will file
articles of merger with the Department of State of the Commonwealth of
Pennsylvania and make all other filings or recordings required by the PBCL in
connection with the Mergers. Each of the Mergers shall become effective at such
time as the relevant articles of merger are duly filed with the Department of
State of the Commonwealth of Pennsylvania or at such later time as is agreed by
the parties and specified in the articles of merger (the "Effective Time").
--------------
(c) The articles of incorporation and by-laws of the Network
Surviving Corporation and the Mobile Surviving Corporation shall contain
provisions substantially identical to those of the articles of incorporation and
by-laws of CAC I and CAC II, respectively.
2.2. Conversion of Shares.
--------------------
(a) At the Effective Time:
(i) each share of common stock, no par value, of Network (the
"Network Common Stock") held by Network as treasury stock immediately prior
---------------------
to the Effective Time shall, by virtue of the Network Merger and without
any action on the part of the holder thereof, be canceled, and no Castle
Common Stock (as defined herein) or other consideration shall be delivered
in exchange therefor;
(ii) each share of common stock, par value $1.00 per share, of
Mobile (the "Mobile Common Stock" and, together with the Network Common
-------------------
Stock, the "Crown Stock") held by Mobile as treasury stock immediately
-----------
prior to the Effective Time shall, by virtue of the Mobile Merger and
without any action on the part of the holder
-11-
thereof, be canceled, and no Castle Common Stock or other consideration
shall be delivered in exchange therefor;
(iii) each share of common stock, par value $0.01 per share, of
CAC I outstanding immediately prior to the Effective Time shall, by virtue
of the Network Merger and without any action on the part of CAC I or the
holder thereof, be converted into and become one share of common stock of
the Network Surviving Corporation and shall constitute the only outstanding
shares of capital stock of the Network Surviving Corporation;
(iv) each share of common stock, par value $0.01 per share, of
CAC II outstanding immediately prior to the Effective Time shall, by virtue
of the Mobile Merger and without any action on the part of CAC II or the
holder thereof, be converted into and become one share of common stock of
the Mobile Surviving Corporation and shall constitute the only outstanding
shares of capital stock of the Mobile Surviving Corporation;
(v) each share of Network Common Stock outstanding immediately
prior to the Effective Time shall, by virtue of the Network Merger and
without any action on the part of the holder thereof, except as otherwise
provided in Section 2.2(a)(i), be converted into the right to receive the
number of fully paid and nonassessable shares of Castle B Common Stock
equal to the Network Merger Consideration (as defined herein); and
(vi) each share of Mobile Common Stock outstanding immediately
prior to the Effective Time shall, by virtue of the Mobile Merger and
without any action on the part of the holder thereof, except as otherwise
provided in Section 2.2(a)(ii), be converted into the right to receive the
number of fully paid and nonassessable shares of Castle B Common Stock
equal to the Mobile Merger Consideration (as defined herein).
(b) From and after the Effective Time, all shares of Crown Stock
converted in accordance with Section 2.2(a)(v) or (vi) shall no longer be
outstanding and shall, by virtue of the Mergers and without any action on the
part of the holder thereof, automatically be canceled and retired and shall
cease to exist, and each holder of a certificate representing any such shares
shall cease to have any rights with respect thereto, except the right to receive
the applicable Merger Consideration (as defined herein) and any dividends
payable pursuant to Section 2.3(d). From and after the Effective Time, all
certificates representing the common stock of CAC I or CAC II shall be deemed
for all purposes to represent the number of shares of common stock of the
Network Surviving Corporation or the Mobile Surviving Corporation, as the case
may be, into which they were converted in accordance with Section 2.1(a)(iii) or
(iv).
(c) The "Network Merger Consideration" shall be 701,000 shares of
----------------------------
Castle B Common Stock per outstanding share of Network Common Stock, and the
"Mobile Merger Consideration" shall be 38,000 shares of Castle B Common Stock
---------------------------
per outstanding share of Mobile Common Stock (the Mobile Merger Consideration,
together with the Network Merger
-12-
Consideration, the "Merger Consideration") which the parties agree represents an
--------------------
aggregate value of $54,000,000.
2.3. Surrender and Payment.
---------------------
(a) At the Closing, Buyer shall cause the issuance of the Merger
Consideration to the Sellers upon proper delivery of the outstanding Crown
Stock. Buyer and Sellers contemplate that the exchange of Merger Consideration
for certificates of Crown Stock will occur at the Closing.
(b) Upon surrender to the Buyer of a certificate or certificates
representing shares of the Network Common Stock or the Mobile Common Stock, the
Crowns will be entitled to receive the Merger Consideration payable in respect
of such shares and any dividends payable pursuant to Section 2.3(d). Until so
surrendered, each such certificate shall, after the Effective Time, represent
for all purposes only the right to receive the Network Merger Consideration or
the Mobile Merger Consideration, as applicable, and any dividends payable
pursuant to Section 2.3(d).
(c) After the Effective Time, there shall be no further registration
of transfers of shares of Crown Stock. If, after the Effective Time,
certificates representing such shares are presented to Network Surviving
Corporation or Mobile Surviving Corporation, they shall be canceled and
exchanged for the consideration provided for, and in accordance with the
procedures set forth, in this Article 2.
(d) No dividends or other distributions with respect to Castle B
Common Stock issued in the Mergers shall be paid to the holders of any
unsurrendered certificates representing shares of Crown Stock until such
certificates are surrendered as provided in this Section 2.3. Subject to the
effect of applicable laws, following the surrender of such certificates, there
shall be paid, without interest, to the record holder of the Castle B Common
Stock issued in exchange therefor at the time of such surrender, the amount of
dividends or distributions with a record date after the Effective Date payable
with respect to such whole shares of Castle B Common Stock prior to or on the
date of such surrender and not previously paid, less the amount of any
withholding taxes which may be required thereon.
ARTICLE 3.
Due Diligence Investigation
---------------------------
3.1. Due Diligence Investigation Generally. From July 11, 1997 through and
-------------------------------------
including August 4, 1997 (the "Due Diligence Completion Date"), Sellers, on the
-----------------------------
one part, and the Buyer, on the other part, each shall have the opportunity to
conduct a due diligence investigation of the business, assets, operations,
properties, condition (financial and otherwise), contingent liabilities,
prospects and material agreements of Buyer and its Subsidiaries and CTSH and its
Subsidiaries (in the case of Sellers) and of the Crown Communications Business,
Network and Mobile (in the case of Buyer) for the limited purposes of: (a) in
the case of Sellers, (i) confirming the accuracy, in all material respects, of
the Buyer's representations and warranties provided in Article 6, and (ii)
confirming the 1998 projections of earnings before interest, taxes, depreciation
and amortization
-13-
("EBITDA") of Buyer and its Subsidiaries and CTSH and its Subsidiaries set forth
------
in Exhibit C, within the parameters described below; and (b) in the case of
Buyer, (i) confirming the accuracy, in all material respects, of the Crown
Parties' representations and warranties provided in Article 5, (ii) confirming
the 1998 projections of EBITDA for the Acquired Business set forth on Exhibit D,
within the parameters described below, and confirming that the amount of
indebtedness for borrowed money that is needed to generate such projected EBITDA
does not exceed $25 million, (iii) determining, in good faith, that Buyer is
reasonably satisfied in all material respects with the terms of all Contracts,
Licenses and title to assets and properties of the Acquired Business, taken as a
whole, including without limitation the assignability or risks associated with
being unable to obtain consents to assignment of any of the Contracts, Licenses
or other properties or assets of the Crown Communications Business, Mobile or
Network (including any of the Contracts, Licenses or other properties or assets
identified in the Sellers' disclosure schedules as containing restrictions on,
or resulting in other adverse consequences upon, the transfer or assignment of
such Contracts, Licenses or other properties or assets), and (iv) determining,
in good faith, that Buyer is reasonably satisfied in all material respects with
all environmental conditions affecting or relating to the Acquired Business and
the business and operations thereof and the status of compliance by the Acquired
Business with all Environmental Laws (as defined herein). For purposes of
clauses (a)(ii) and (b)(ii) of this Section 3.1, such projected 1998 EBITDA will
be deemed to have been confirmed if the Sellers or Buyer, as the case may be,
determine(s), based upon such due diligence, that the projected 1998 EBITDA
numbers of the other party are at least equal to ninety percent (90%) of the
amount of EBITDA projected for such other party set forth on Exhibit C or D,
respectively. In furtherance of the foregoing, each party shall comply at all
times during the period from July 11, 1997 through and including the Closing
Date with its respective obligations under Section 9.3.
3.2. Interim Financial Statements.
----------------------------
(a) Sellers shall deliver to Buyer on or prior to July 18, 1997 the
unaudited balance sheets of each of Crown Communications, Network and Mobile as
of June 30, 1997, and the unaudited statements of income and cash flow of each
of Crown Communications, Network and Mobile for the six months then ended,
together with the notes to such interim financial statements (collectively, the
"Crown Interim Financial Statements").
----------------------------------
(b) Buyer shall deliver to Sellers on or prior to July 18, 1997 (i)
the unaudited balance sheet of Buyer and its consolidated Subsidiaries as of
June 30, 1997, and the statements of income and cash flow of Buyer and its
subsidiaries for the six months then ended together with the notes to such
interim financial statements (collectively, the "Buyer Interim Financial
-----------------------
Statements"), and (ii) the unaudited balance sheet of CTSH and its consolidated
----------
Subsidiaries as of June 30, 1997, and the unaudited profit and loss account and
cash flow statement of CTSH and its Subsidiaries for the three months then ended
together with the notes to such interim financial statements (collectively, the
"CTSH Interim Financial Statements").
---------------------------------
-14-
ARTICLE 4.
Closing; Deliveries of the Parties at Closing
---------------------------------------------
4.1. The Closing.
-----------
(a) The consummation of the transactions provided for in this
Agreement, which shall be deemed to occur at the Effective Time (the "Closing"),
-------
and shall take place at the offices of Xxxxxxxxxxx & Xxxxxxxx LLP, 0000 Xxxxxx
Xxxxxxxx, Xxxxxxxxxx, XX 00000 at 10:00 A.M. on August 15, 1997 or, if the
conditions to Closing set forth in Articles 10 and 11 shall not have been
satisfied by such date, as soon as practicable after such conditions have been
satisfied. The date on which the Closing shall occur is referred to herein as
the "Closing Date."
------------
4.2. Deliveries at the Closing by the Crown Parties. At the Closing,
----------------------------------------------
Sellers shall deliver to Buyer, CAC I, CAC II and CAC III:
(a) bills of sale, endorsements, assignments, certificates of title
and other good and sufficient instruments of sale, transfer and assignment in
form and substance reasonably satisfactory to Buyer and its counsel sufficient
to sell, transfer and assign to Buyer (or, if so instructed by Buyer, to CAC
III) all right, title and interest of Seller in and good and valid title to the
Crown Communications Assets (other than Real Property owned by Sellers covered
by (b) below), subject to Crown Permitted Liens;
(b) one or more special warranty deeds with covenant against
grantor's acts (or an equivalent form of deed suitable for recordation in the
relevant jurisdictions), in form and substance reasonably satisfactory to Buyer
and its counsel, but subject to all Crown Permitted Real Estate Liens,
sufficient to sell, transfer and assign to Buyer (or if so instructed by Buyer,
to CAC III) all Real Property owned by Sellers and included within the Crown
Communications Assets;
(c) certified copies of resolutions, duly adopted by the Boards of
Directors and shareholders of Network and Mobile, which shall be in full force
and effect at the time of the Closing, authorizing the execution, delivery and
performance by Sellers of this Agreement and the consummation of the
transactions contemplated hereby and any other authorization required for the
sole proprietorship to transfer the Crown Communications Assets;
(d) a certificate from each of the Crown Parties signed by such
party or an executive officer of such party, as applicable, to the effect set
forth in clauses (a) and (b) of Section 11.1;
(e) an opinion dated as of the Closing Date of Xxxxxxxxxxx &
Xxxxxxxx LLP, counsel to Seller, with respect to such matters as Buyer may
reasonably request in form and substance reasonably satisfactory to Buyer;
-15-
(f) executed counterparts to the Amended and Restated Stockholders
Agreement executed by each of the Sellers, substantially in the form set forth
as Exhibit E (the "Shareholder Agreement");
---------------------
(g) such other documents or instruments as Buyer or its counsel may
reasonably request (i) to demonstrate satisfaction of the conditions to Closing
set forth in Article 11 and compliance by the Crown Parties with the agreements
set forth in this Agreement and (ii) for purposes of the issuance of Buyer's
owner's title insurance policy with respect to all Real Property to be acquired
without deletion of the standard exceptions to title (such instruments referred
to in clause (a) above, deeds referred to in clause (b) above, the Shareholder
Agreement referred to in clause (f) above and this Agreement, collectively, the
"Crown Transaction Documents");
---------------------------
(h) executed counterparts to the FCC Letter Agreement executed by
each of the Sellers, substantially in the form set forth as Exhibit F (the "FCC
Letter Agreement");
(i) executed counterparts to the Crown Name Agreement executed by
each of the Crowns, substantially in the form set forth as Exhibit G (the "Crown
Name Agreement");
(j) an Amended and Restated Credit Agreement between CAC III, as
the Borrower, and PNC Bank, National Association, as the Bank (the "Amended and
Restated Credit Agreement"), and the additional loan documentation referred to
therein, in form and substance reasonably satisfactory to Buyer and its counsel;
and
(k) executed counterparts to the Tower Agreement, executed by each
of the Crowns, substantially in the form of Exhibit H (the "Tower Agreement").
4.3. Deliveries at the Closing by Buyer. At the Closing, Buyer, CAC I,
----------------------------------
CAC II or CAC III shall deliver to the Crown Parties:
(a) the Purchase Price for the Crown Communications Assets,
consisting of the Cash Consideration (less the amount of the Advance Payment)
and the Note, in accordance with Section 1.4 hereof;
(b) executed counterparts of a pledge agreement securing Buyer's
obligations under the Note, together with the certificates representing all the
capital stock in CAC III, the Network Surviving Corporation and the Mobile
Surviving Corporation and stock powers for each executed in blank necessary to
perfect Sellers' security interests referred to in Section 1.4(b), in each case
in form and substance reasonably satisfactory to Sellers and their counsel;
(c) an instrument or instruments of assumption of the Assumed
Liabilities of the Sellers' responsibilities therefor, in each case in form and
substance reasonably satisfactory to Sellers and their counsel;
(d) certified copies of resolutions, duly adopted by the Boards of
Directors of Buyer, CAC I and CAC II which shall be in full force and effect at
the time of the Closing,
-16-
authorizing the execution, delivery and performance by Buyer, CAC I and CAC II
of this Agreement and the consummation of the transactions contemplated hereby;
(e) upon proper delivery of the Crown Stock, the Merger
Consideration in connection with the Mergers;
(f) a certificate from each of Buyer, CAC I and CAC II signed by an
executive officer of such party to the effect set forth in clauses (a) and (b)
of Section 10.1;
(g) (i) an opinion of Cravath, Swaine & Xxxxx, counsel to Buyer,
(ii) an opinion of Xxxxx, Xxxxxx & Xxxxx, counsel to Buyer, and (iii) an opinion
of Xxxxxxxx Ingersoll Professional Corporation, counsel to Buyer, in each case
dated as of the Closing Date with respect to such matters as Sellers may
reasonably request in form and substance reasonably satisfactory to Sellers;
(h) executed counterparts to the Shareholder Agreement, executed by
all parties thereto other than the Sellers;
(i) articles of merger to effect the Mergers as contemplated by
Section 2.1;
(j) a letter agreement from Xxxxxx Brothers and Buyer in favor of
Sellers confirming the continuing status of Buyer's committed financing and
stating that Buyer and Xxxxxx Brothers each will provide written notice to
Sellers not less than ten (10) days prior to the scheduled termination of such
financing commitment, or prior to any termination effected by such party, such
letter to be in form and substance reasonably satisfactory to Sellers and their
counsel;
(k) such other documents or instruments as the Crown Parties or
their counsel may reasonably request to demonstrate satisfaction of the
conditions to Closing as set forth in Article 10 and compliance by Buyer with
the agreements set forth in this Agreement (the Note referred to in clause (a)
above, the instruments referred to in clauses (b) and (c) above, the Shareholder
Agreement referred to in clause (h) above, and this Agreement, collectively, the
"Buyer Transaction Documents");
---------------------------
(l) executed counterparts to the FCC Letter Agreement executed by
all parties thereto other than the Sellers;
(m) executed counterparts to the Crown Name Agreement executed by
Buyer;
(n) executed counterparts of the Amended and Restated Credit
Agreement and additional loan documentation referred to therein, executed by
CAC III; and
(o) executed counterparts of the Tower Agreement, executed by
CAC III.
-17-
4.4. Time is of the Essence. With regard to all dates and time periods
----------------------
set forth or referred to in this Agreement, time is of the essence.
ARTICLE 5
Representations and Warranties of the Crown Parties
---------------------------------------------------
Each of the Crown Parties represents and warrants to Buyer, jointly and
severally, as follows:
5.1. Corporate Status; Authority. Each of Network and Mobile is a
---------------------------
corporation duly organized, validly existing and in good standing under the laws
of the Commonwealth of Pennsylvania. Each of Network and Mobile is duly
qualified and in good standing to do business as a foreign corporation and the
Crown Communications Business is duly qualified and in good standing to do
business in each jurisdiction in which the conduct or nature of its business or
the ownership, leasing or holding of its properties makes such qualification
necessary, except such jurisdictions where the failure to be so qualified or in
good standing, individually or in the aggregate, would not reasonably be
expected to have a material adverse effect (i) on the condition (financial or
otherwise), business, liabilities, properties, assets, prospects or results of
operations of the Acquired Business, taken as a whole, or (ii) on the ability of
the Crown Parties to perform their obligations under or to consummate the
transactions contemplated by this Agreement (a "Crown Material Adverse Effect").
-----------------------------
Each of Network and Mobile has all requisite corporate power, and the Crown
Communications Business has all requisite power, to carry on its business and
operations as it is now being conducted and to own and operate such business, to
enter into this Agreement, to perform its obligations hereunder and to complete
the transactions contemplated hereby.
5.2. Corporate Action. All corporate and shareholder actions and
----------------
proceedings necessary to be taken by or on the part of each of Network and
Mobile in connection with the transactions contemplated by the Crown Transaction
Documents have been duly and validly taken, and this Agreement has been duly and
validly authorized, executed and delivered by each of Network and Mobile and
constitutes, and each of the other Crown Transaction Documents, as applicable,
will be duly and validly authorized, executed and delivered by each of Network
and Mobile and will constitute, the legal, valid and binding obligation of each
of Network and Mobile, enforceable against each of Network and Mobile in
accordance with and subject to its terms, except as may be limited by bankruptcy
or other laws affecting creditors' rights and by equitable principles.
5.3 Authority; Execution. Each of the Sellers has all requisite power
--------------------
and authority to execute and deliver the Crown Transaction Documents and to
consummate the transactions contemplated thereby. All acts and other proceedings
required to be taken by the Sellers to authorize the execution, delivery and
performance of the Crown Transaction Documents and the consummation of the
transactions contemplated thereby have been duly and properly taken. This
Agreement has been duly executed and delivered by each seller and constitutes,
and each of the other Crown Transaction Documents, as applicable, will be duly
executed and delivered by each
-18-
Seller and will constitute, a legal, valid and binding obligation of such
Seller, enforceable against such Seller in accordance with and subject to its
terms, except as may be limited by bankruptcy or other laws affecting creditors'
rights and by equitable principles.
5.4 No Conflicts. Except as set forth on Schedule 5.4, neither the
------------
execution, delivery and performance by the Crown Parties, as applicable, of the
Crown Transaction Documents nor the consummation by the Crown Parties of the
transactions contemplated thereby is an event that, by itself or with the giving
of notice or the passage of time or both, will (i) conflict with the articles of
incorporation or by-laws, as amended, of either Network or Mobile, (ii)
constitute a violation of, or conflict with or result in any breach of or any
default under, or constitute grounds for termination or acceleration of, any
License, mortgage, indenture, lease, contract, agreement or instrument to which
any of the Crown parties or the Acquired Business is a party or by which any of
them is bound, except for such violations, conflicts, breaches, terminations and
accelerations as individually or in the aggregate would not have or be
reasonably expected to have a Crown Material Adverse Effect or result in the
creation of any Lien (other than a Permitted Lien (as defined herein)) upon any
of the assets of the Acquired Business or (iii) violate (A) any judgment, decree
or order or (B) any statute, rule or regulation, in each such case, applicable
to any of the Crown Parties or the Acquired Business. The execution, delivery
and performance by the Crown Parties of this Agreement, and the consummation by
the Crown Parties of the transactions contemplated hereby, require no action by
or in respect of, or filing with, any Governmental Entity other than (a) the
filing of articles of merger with the Department of State of the Commonwealth of
Pennsylvania and of appropriate documentation with the relevant authorities of
other states in which Network or Mobile or the Crown Communications Business is
qualified to do business; (b) compliance with any applicable requirements of the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the "Xxxx-
----
Xxxxx-Xxxxxx Act"); (c) the approvals of the FCC contemplated by this Agreement;
----------------
(d) actions or filings which, if not taken or made, would not, individually or
in the aggregate, reasonably be expected to have a Crown Material Adverse
Effect; and (e) filings and notices not required to be made or given until after
the Effective Time.
5.5 Capitalization of Network. The authorized capital stock of Network
-------------------------
consists of 100,000 shares of Common Stock, no par, of which two shares are duly
authorized and validly issued and outstanding, fully paid and nonassessable (the
"Network Shares"). Xxxxxx X. Crown is the record and beneficial owner of one
--------------
Network Share and Xxxxxxx Crown is the record and beneficial owner of one
Network Share. Except for the Network Shares, there are no shares of capital
stock or other equity securities of Network outstanding. The Network Shares have
not been issued in violation of, and the Network Shares are not subject to, any
purchase option, call, right of first refusal, preemptive, subscription or
similar rights under any provision of applicable law, the Network articles of
incorporation or by-laws, as amended, any Contract to which Network or Sellers
are subject, bound or a party or otherwise. There are no outstanding warrants,
options, rights, "phantom" stock rights, agreements, convertible or exchangeable
securities or other commitments (other than this Agreement) (a) pursuant to
which any of the Sellers or Network is or may become obligated to issue, sell,
purchase, return or redeem any shares of capital stock or other securities of
Network or (b) that give any Person the right to receive any benefits or rights
similar to any rights enjoyed by or accruing to the Crowns as holders of the
Network Shares. There are no equity securities of Network reserved for issuance
for any
-19-
purpose. There are no outstanding bonds, debentures, notes or other securities
having the right to vote on any matters on which stockholders of Network may
vote.
5.6. Capitalization of Mobile. The authorized capital stock of Mobile
------------------------
consists of 1,000 shares of Common Stock, par value $1.00 per share, of which
one share is duly authorized and validly issued and outstanding, fully paid and
nonassessable (the "Mobile Share"). Xxxxxx X. Crown is the record and
------------
beneficial owner of 1 Mobile Share. Except for the Mobile Share, there are no
shares of capital stock or other equity securities of Mobile outstanding. The
Mobile Share has not been issued in violation of, and the Mobile Share is not
subject to, any purchase option, call, right of first refusal, preemptive,
subscription or similar rights under any provision of applicable law, the Mobile
articles of incorporation or by-laws, as amended, any Contract to which Mobile
or Sellers are subject, bound or a party or otherwise. There are no outstanding
warrants, options, rights, "phantom" stock rights, agreements, convertible or
exchangeable securities or other commitments (other than this Agreement) (a)
pursuant to which any of the Sellers or Mobile is or may become obligated to
issue, sell, purchase, return or redeem any shares of capital stock or other
securities of Mobile or (b) that give any Person the right to receive any
benefits or rights similar to any rights enjoyed by or accruing to Xxxxxx X.
Crown as holder of the Mobile Share. There are no equity securities of Mobile
reserved for issuance for any purpose. There are no outstanding bonds,
debentures, notes or other securities having the right to vote on any matters on
which stockholders of Mobile may vote.
5.7. Equity Interests. Except as set forth on Schedule 5.7, neither
----------------
Network nor Mobile owns, nor do the Crown Communications Assets include,
directly or indirectly, any capital stock of or other equity interests in any
corporation, partnership, limited liability company, limited liability
partnership or other Person and neither Network, Mobile nor Crown Communications
is a member of or participant in any partnership, joint venture, limited
liability company, limited liability partnership or similar Person. Other than
the Crown Stock, Sellers do not own capital stock of or other equity interests
in any corporation, partnership, limited liability company, limited liability
partnership or other Person that is related to or involved in the conduct or
operation of the Crown Communications Business or the business of Network or
Mobile or any similar or related business or operations.
5.8. Title to the Crown Stock. The Crowns have good and valid title to
------------------------
the Network Shares and the Mobile Share, free and clear of any Liens. Assuming
Buyer has the requisite power and authority to be the lawful owner of the Crown
Stock, upon delivery to Buyer at the Closing of certificates representing the
Crown Stock, duly endorsed by Sellers for transfer to Buyer, and upon Sellers'
receipt of the Merger Consideration with respect to such shares, good and valid
title to the Crown Stock will pass to Buyer, free and clear of any Liens, other
than those arising from acts of Buyer or its Affiliates (including, without
limitation, the pledge of capital stock in favor of Sellers referred to in
Section 1.4(b)). Other than this Agreement, the Crown Stock is not subject to
any voting trust agreement or other contract, agreement, arrangement, commitment
or understanding restricting or otherwise relating to the voting, dividend
rights or disposition of the Crown Stock.
5.9 Financial Statements. Schedule 5.9 sets forth true, correct and
--------------------
complete copies of (a) the balance sheets of each of Crown Communications,
Network and Mobile as at December
-20-
31, 1995 and 1996, and the statements of income and cash flows of each of Crown
Communications, Network and Mobile for each of the years then ended together
with the notes to such financial statements and, in the case of Crown
Communications, the reports thereon of Xxxxx X. Xxxxx & Associates, independent
certified public accountants (with respect to Crown Communications, the "Crown
-----
Audited Statements" and, with respect to Network and Mobile, the "Crown
------------------ -----
Unaudited Statements"); and (b) the balance sheets of each of Crown
--------------------
Communications, Network and Mobile as at May 31, 1997 and the statements of
income and cash flows of each of Crown Communications, Network and Mobile for
the five months then ended (together with the Crown Audited Statements, the
Crown Unaudited Statements and the Crown Interim Financial Statements, the
"Crown Financial Statements"). The Crown Financial Statements have been, or in
---------------------------
the case of the Crown Interim Financial Statements, will be, prepared from the
books and records of the Crown Parties and present fairly (subject, in the case
of the Crown Interim Financial Statements, to normal recurring year-end
adjustments) the financial position of the Crown Communications Business,
Network or Mobile, as applicable, as at December 31, 1995 and 1996, May 31, 1997
and June 30, 1997 and the statements of income and cash flows of the Crown
Communications Business, Network or Mobile, as applicable, for the periods then
ended in conformity with generally accepted accounting principles ("GAAP")
----
applied on a basis consistent with past practice, except in each case as
described in the notes thereto or as otherwise disclosed in Schedule 5.9.
5.10 No Undisclosed Liabilities.
--------------------------
(a) There have been no material liabilities or obligations (whether
pursuant to Contracts or otherwise) of any kind whatsoever (whether accrued,
contingent, absolute, determined, determinable or otherwise) incurred by the
Crown Communications Business, Network or Mobile since December 31, 1996, other
than:
(i) liabilities or obligations disclosed or provided for in
the Crown Interim Balance Sheets or in the notes thereto;
(ii) liabilities or obligations incurred or that have arisen
in the ordinary course of business consistent with past practice which,
individually and in the aggregate, have not had and would not reasonably be
expected to have a Crown Material Adverse Effect; or
(iii) liabilities or obligations under this Agreement or
incurred in connection with the transactions contemplated hereby.
(b) On the Closing Date, neither Network nor Mobile will have any
material liabilities or obligations (whether pursuant to Contracts or otherwise)
of any kind whatsoever (whether accrued, contingent, absolute, determined,
determinable or otherwise) other than:
(i) trade payables and other accounts payable reflected on
the balance sheets as of June 30, 1997 of Network and Mobile respectively,
and those arising thereafter in the ordinary course of business consistent
with past practice; and
-21-
(ii) liabilities or obligations under the Sellers Scheduled
Contracts (as defined herein).
5.11 Absence of Certain Changes or Events. Since December 31, 1996, the
------------------------------------
Crown Parties have made reasonable efforts consistent with past practice to
preserve the Crown Communications Business, Network and Mobile's relationships
with customers, suppliers, lenders, creditors, employees, licensors, licensees,
distributors and others with whom the Crown Communications Business, Network or
Mobile or any of the Crown Parties has a business or financial relationship, and
no such Person or group of persons having a material business or financial
relationship with the Crown Communications Business, Network or Mobile or any of
the Crown Parties has informed any of the Crown Parties that such Person intends
to change or discontinue such relationship, except for such changes or
discontinuances as individually or in the aggregate would not have or be
reasonably expected to have a Crown Material Adverse Effect. Except as set forth
on Schedule 5.11, the Crown Communications Business and the businesses of
Network and Mobile have been conducted in the ordinary course consistent with
past practice (including with respect to the collection of receivables, payment
of payables and other liabilities, advertising activities, sales practices
(including promotions, discounts and concessions), capital expenditures and
inventory levels, and contributions to or accruals to or in respect of Benefit
Plans (as defined herein)) and there has not occurred with respect to the Crown
Communications Business, Network or Mobile:
(a) any event, occurrence or development which, individually or in
the aggregate, has had or would reasonably be expected to have a Crown Material
Adverse Effect;
(b) any damage, destruction or loss not covered by insurance that
would reasonably be expected to have a Crown Material Adverse Effect; provided
--------
that any such damage, destruction or loss between July 11, 1997 and the Closing
Date shall be subject to Section 7.1 and upon the Crown Parties' giving notice
to Buyer of the Crown Parties' election to repair such damage, destruction or
loss pursuant to Section 7.1, and such damage, destruction or loss being
repaired to Buyer's satisfaction, such damage, destruction or loss shall be
deemed not to be a failure of the condition set forth in Section 10.1; provided
--------
further that the Crown Parties shall be under no obligation to elect to repair
-------
such damage, destruction or loss; or
(c) any action taken by any of the Crown Parties which, if taken
after July 11, 1997, would constitute a breach of the covenant set forth in
Section 7.1.
5.12. Licenses. None of the Crown Parties owns, holds or uses any Licenses
--------
which are material to the ownership or operation of the Acquired Business as
currently operated other than the Licenses listed on Schedule 5.12, true and
complete copies of which have been or will be made available to Buyer. Schedule
5.12 identifies the legal holders of all Licenses material to the ownership or
operation of the Acquired Business and whether they are part of the Crown
Communications Business or held by Network or Mobile. Such Licenses are valid
and are in full force and effect and, except as limited by the provisions of the
Communications Act of 1934, as amended (the "Communications Act"), and the FCC's
------------------
rules, regulations and policies and as otherwise specified on the face of such
Licenses, none of such Licenses is subject to any restriction or condition which
would limit in any material respect the operation of the Acquired
-22-
Business as it is presently being conducted. The Crown Parties are familiar with
and have operated the Acquired Business (and any auxiliary assets operated in
connection with the operation of the Acquired Business) at all times in material
compliance with generally accepted industry practices and in compliance in all
material respects with the Licenses, the Communications Act and the existing
rules, regulations and policies of the FCC and the rules and regulations and
policies of the Federal Aviation Administration ("FAA"). Except as shown on
---
Schedule 5.12, no application, action or proceeding is pending for the renewal
or modification of any of the Licenses and there is not now before any
Governmental entity any investigation or complaint against any of the Crown
Parties relating to the Acquired Business the unfavorable resolution of which
would impair the qualifications of any of the Crown Parties to hold any of the
Licenses. Except as shown on Schedule 5.12, no event or events have occurred
which, individually or in the aggregate, and with or without the giving of
notice or the lapse of time or both, would constitute grounds for, or which
could result in, the revocation or termination of any License or the imposition
of any restriction or limitation by any Governmental Entity on the operation of
the Acquired Business or the Crown Communications Business. No Licenses other
than those shown on Schedule 5.12 are necessary or required to operate the
Acquired Business as it is presently being conducted.
5.13. Sufficiency of Assets. Except for the Excluded Assets, the Acquired
---------------------
Business constitutes, and on the Closing Date will constitute, all of the assets
or property used or held for use primarily in the Crown Communications Business
to conduct the Crown Communications Business as the same is now being conducted.
On the Closing Date, the Network Surviving Corporation will have all of the
assets or property used or held for use primarily in the business and operations
of Network to conduct such business and operations as the same is now being
conducted, and the Mobile Surviving Corporation will have all of the assets or
property used or held for use primarily in the business and operations of Mobile
to conduct such business and operations as the same is now being conducted. On
the Closing Date, the Acquired Business will have access to liquidity and will
have working capital reasonably sufficient to enable it to conduct its business
and operations, including those of Network and Mobile, as the same is now being
conducted and as proposed to be conducted after the Closing as contemplated by
the parties.
5.14. Assets Other than Real Property Interests.
-----------------------------------------
(a) The Crown Parties have good and valid title to all assets
reflected on the December 31, 1996 balance sheets of the Crown Communications
Business, Network and Mobile included in the Crown Financial Statements (the
"December 31 Crown Balance Sheets") or thereafter acquired, except those sold or
--------------------------------
otherwise disposed of in the ordinary course of business consistent with past
practice and not in violation of this Agreement, in each case free and clear of
all Liens of any kind except (i) such as are set forth on Schedule 5.14, (ii)
mechanics', carriers', workmen's, repairmen's or other like Liens arising or
incurred in the ordinary course of business consistent with past practice, (iii)
Liens which secure debt that is reflected as a liability on the balance sheets
as of June 30, 1997 included in the Crown Interim Financial Statements and other
debt incurred under existing credit facilities and vehicle financings of the
Acquired Business and (iv) other imperfections of title or encumbrances, if any,
which do not, individually or in the aggregate, materially impair the continued
use and operation of the assets to which they relate in the Acquired Business,
as presently conducted (Liens, encumbrances and imperfections of title
-23-
described in clauses (i), (ii), (iii) and (iv) above are hereinafter referred to
collectively as "Crown Permitted Liens"). Schedule 5.14 sets forth a list of all
---------------------
material personal property owned by Sellers and used or held for use in
connection with the Crown Communications Business.
(b) All the material tangible assets used, held for use or
necessary in the Acquired Business (i) have been and are being maintained in
accordance with the customary industry practice, (ii) are free from material
defects and (iii) are in all material respects in good working condition,
reasonable wear and tear and depreciation excepted. All leased personal property
used or held for use in the Acquired Business is in all material respects in the
condition required of such property by the terms of the lease applicable thereto
during the term of the lease and upon the expiration thereof.
This Section 5.14 does not relate to Real Property or interests in Real
Property, such items being the subject of Section 5.15.
5.15. Title to Real Property. Schedule 5.15 sets forth a complete list of
----------------------
all Real Property and interests in Real Property used or held for use in the
Acquired Business owned in fee by the Crown Parties (individually, a "Crown
-----
Owned Property") and identifies any material reciprocal easement or operating
--------------
agreements (other than such operating agreements not relating to Real Property
identified on other disclosure schedules of the Crown Parties attached hereto)
relating thereto. Schedule 5.15 sets forth a complete list of all Real Property
and interests in Real Property used or held for use in the Acquired Business
leased by the Crown Parties (individually, a "Crown Leased Property") and
---------------------
identifies any material leases and reciprocal easement or operating agreements
(other than such operating agreements not relating to Real Property identified
on other disclosure schedules of the Crown Parties attached hereto) relating
thereto. The Crown Parties have (i) good and insurable fee title to all Crown
Owned Property and (ii) assuming good and adequate title in each lessor of a
leasehold estate, good and valid title to the leasehold estates in all Crown
Leased Property (a Crown Owned Property or Crown Leased Property being sometimes
referred to herein, individually, as a "Crown Property" and, collectively, as
--------------
"Crown Properties"), in each case free and clear of all Liens and other similar
----------------
restrictions of any nature whatsoever, except (A) such as are set forth on
Schedule 5.15, (B) leases, subleases and similar agreements set forth on
Schedule 5.20, (C) Crown Permitted Liens, (D) easements, covenants, rights-of-
way and other similar restrictions of record, (E) any conditions that may be
shown by a current, accurate survey or readily determined by a physical
inspection of any Crown Property made prior to Closing and (F) (I) zoning,
building and other similar restrictions, (II) Liens and other similar
restrictions that have been placed by any developer, landlord or other third
party on property over which the Crown Parties have easement rights or on any
Leased Property and subordination or similar agreements relating thereto, and
(III) unrecorded easements, covenants, rights-of-way and other similar
restrictions, none of which items set forth in clauses (I), (II) and (III),
individually or in the aggregate, materially impair the continued use and
operation of the property to which they relate in the Crown Communications
Business, as presently conducted. Except as disclosed on Schedule 5.18, to the
knowledge of the Crown Parties, the current use by the Crown Parties of the
plants, offices and other facilities located on Crown Property does not violate
any local zoning or similar land use or government regulations in any material
respect (Liens, encumbrances and imperfections of title described in clause (A),
(B), (C), (D), (E) and (F) are hereinafter referred to as "Crown Permitted Real
--------------------
Estate
------
-24-
Liens"). No condemnation of any material portion of the Crown Properties
-----
has occurred; and the Crown Parties have not received any notice related to any
future or proposed condemnation of any material portion of the Crown Properties.
5.16 Intellectual Property.
---------------------
(a) Schedule 5.16 sets forth a true and complete list of all
material Intellectual Property owned, used, filed by or licensed to the Crown
Parties in connection with the Acquired Business. With respect to registered
trademarks, Schedule 5.16 sets forth a list of all jurisdictions in which such
trademarks are registered or applied for and all registrations and application
numbers. Except as set forth on Schedule 5.16, the Crown Parties own, and the
Crown Parties have the right to use, execute, reproduce, display, perform,
modify, enhance, distribute, prepare derivative works of and sublicenses,
without payment to any other person, all Intellectual Property listed in
Schedule 5.16 and, to the knowledge of the Crown Parties, the consummation of
the transactions contemplated hereby will not conflict with, alter or impair any
such rights. The Crown Parties have all rights to Intellectual Property which
are necessary in connection with the Acquired Business as it is presently being
conducted.
(b) The Crown Parties have not granted any licenses or contractual
rights of any kind relating to Intellectual Property listed on Schedule 5.16 or
the marketing or distribution thereof. None of the Crown Parties is bound by or
a party to any Contracts of any kind relating to the Intellectual Property of
any other Person, except as set forth on Schedule 5.16 and except for agreements
relating to computer software licensed to the Crown Parties in the ordinary
course of business consistent with past practice. Subject to the rights of third
parties set forth on Schedule 5.16, all Intellectual Property listed in Schedule
5.16 is free and clear of the claims of others and of all Liens whatsoever. The
conduct of the Acquired Business as it is presently being conducted and as it is
proposed to be conducted after the Closing as contemplated by the parties does
not and will not violate, conflict with or infringe the Intellectual Property of
any other Person. Except as set forth on Schedule 5.16, (i) no claims are
pending or, to the knowledge of the Crown Parties, threatened against the Crown
Parties by any Person with respect to the ownership, validity, enforceability,
effectiveness or use of any Intellectual Property and (ii) the Crown Parties
have not received any communications alleging that the Crown Parties have
violated any rights relating to Intellectual Property of any Person.
5.17. Employees.
---------
(a) Except as described in Schedule 5.17, the Crown Parties have no
contracts of employment with any employee and none of the Crown Parties is a
party to or subject to any collective bargaining agreements with respect to the
Crown Communications Business, Network or Mobile. Schedule 5.17 contains a true
and complete list of all officers and key employees and a reasonably complete
list of all other employees, with their job titles and compensation, of the
Crown Communications Business, Network and Mobile as of July 1, 1997.
(b) No employee of the Crown parties shall (i) be entitled to
receive any termination, severance or deferred compensation payment as a result
of the transactions contemplated by this Agreement or (ii) be entitled to any
such payment in the event that any such
-25-
employee ceases to be employed in the Crown Communications Business, by Network
or Mobile, upon the Closing.
(c) Schedule 5.17 lists each "employee benefit plan" (within the
meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), and each other employment, pension, welfare, savings,
-----
deferred compensation, severance, termination, holiday, vacation, sick leave,
performance, incentive, bonus, insurance, stock option, stock purchase or other
equity-based plan, program, arrangement or understanding (a "Benefit Plan") with
respect to which the Crown Parties contribute or have any liability in respect
of any present or former employee of the Crown Communications Business, Network
or Mobile (each a "Crown Benefit Plan"). The Crown Parties have made available
------------------
to Buyer true and complete copies of any Crown Benefit Plan and related trust
agreements as in effect on July 11, 1997 and the most recent Form 5500 required
to be filed with respect to such Crown Benefit Plan. No event has occurred
since the filing of the most recent Form 5500 that will materially increase the
cost of any Crown Benefit Plan. No Crown Benefit Plan is a "multiemployer plan"
(within the meaning of Section 3(37) of ERISA) and with respect to the
operations of the Acquired Business, the Crown Parties are not required to
contribute to, nor have the Crown Parties maintained or contributed to or had an
obligation to maintain or contribute to, any such plan within the five full plan
years of any such plan immediately prior to July 11, 1997.
(d) Each of the Crown Benefit Plans is in compliance in all
material respects with all applicable requirements of ERISA, the Code and other
applicable law. Each of the Crown Benefit Plans has been administered in all
material respects in accordance with its terms. No Crown Benefit Plan which is a
"defined benefit plan" (within the meaning of Section 3(35) of ERISA) has a
material amount of unfunded benefit liabilities (within the meaning of Section
4001(a)(18) of ERISA). No "reportable event" (as defined in Section 4043 of
ERISA), "prohibited transaction" (within the meaning of Section 406 of ERISA or
Section 4975 of the Code) or breach of fiduciary responsibility has occurred
with respect to any Crown Benefit Plan which could subject Crown Communications,
Network or Mobile to a material penalty, tax or other liability under ERISA, the
Code or applicable law; there is no pending or, to the knowledge of the Crown
Parties, threatened claim or litigation by any party with respect to the Crown
Benefit Plans, other than routine claims for benefits. None of the Crown Parties
nor any entity required to be treated as a single employer under Section 414 of
the Code or Section 4001 of ERISA has a material actual or contingent liability
under Title IV of ERISA and no condition exists that could reasonably be
expected to give rise to any such liability.
(e) No Crown Benefit Plan (i) has an "accumulated funding
deficiency" within the meaning of Section 412(a) of the Code as of its most
recent plan year or (ii) has applied for or received a waiver of the minimum
funding standards imposed by Section 412 of the Code; and the Crown Parties have
not incurred any material liability to a Crown Benefit Plan (other than for
contributions not yet due) or to the Pension Benefit Guaranty Corporation (other
than for premiums not yet due).
(f) No employee of the Crown Parties will be entitled to any
additional benefits or any acceleration of the time of payment or vesting of any
benefits under any Crown Benefit Plan (other than under written employment
contracts listed on Schedule 5.17) as a result
-26-
of the transactions contemplated hereby. The deduction of any amount payable
under any Crown Benefit Plan shall not be subject to disallowance under Section
280G of the Code.
(g) Each Crown Benefit Plan may be amended or terminated after the
Closing without material liability to Buyer, the Network Surviving Corporation
or the Mobile Surviving Corporation. The consummation of the transactions
contemplated by this Agreement shall not give rise to any material liability
with respect to any Crown Benefit Plan. Each Crown Benefit Plan intended to be a
qualified plan under Section 401(a) of the Code has been the subject of a
determination letter from the Internal Revenue Service (the "IRS") to the effect
---
that such Crown Benefit Plan is qualified and exempt from Federal income taxes
under Sections 401(a) and 501(a), respectively, of the Code, and no event has
occurred that could adversely affect such qualified or exempt status.
5.18 Litigation. Schedule 5.18 sets forth a list of all pending lawsuits
----------
or claims with respect to which any of the Crown Parties has been contacted in
writing by counsel for the plaintiff or claimant against or affecting the
Acquired Business or arising out of the Acquired Business, including litigation
and claims relating to electromagnetic fields, and which (i) relate to or
involve more than $50,000, (ii) seek any material injunctive relief or (iii) may
give rise to any legal restraint on or prohibition against the transactions
contemplated by this Agreement. Except as set forth on Schedule 5.18, to the
knowledge of the Crown Parties, none of the lawsuits or claims listed in
Schedule 5.18 as to which there is at least a reasonable possibility of adverse
determination would have, if so determined, individually or in the aggregate, a
Crown Material Adverse Effect. Except as set forth on Schedule 5.18, to the
knowledge of the Crown Parties, there are no unasserted or threatened claims of
the type that would be required to be disclosed in Schedule 5.18. To the
knowledge of the Crown Parties, except as set forth on Schedule 5.18, none of
the Crown Parties is a party or subject to or in default under any material
judgment, order, injunction or decree of any Governmental Entity or arbitration
tribunal applicable to it or the Acquired Business. Except as set forth on
Schedule 5.18, there is no lawsuit or claim by any of the Crown Parties pending,
or which any of the Crown Parties intend to initiate, against any other Person.
Except as set forth on Schedule 5.18, to the knowledge of the Crown Parties,
there is no pending or threatened investigation of or affecting the Acquired
Business or the Crown Communications Business by any Governmental Entity.
5.19. Brokers. Other than Xxxxxx Xxxxx, whose fees will be paid by
-------
Sellers, there is no investment banker, broker or finder or other Person who
will have any valid claim against any of the Crown Parties for a commission or
brokerage fee in connection with this Agreement or the transactions contemplated
hereby as a result of any agreement of, or action taken by, any of the Crown
Parties.
5.20. Contracts. Except for Contracts listed on Schedule 5.20, none of the
---------
Crown Parties is a party to or bound by any Contract relating to or affecting
the Crown Communications Business, Network or Mobile which is a:
(a) Contract with its agents, suppliers, customers, advertisers,
consultants, advisors, sales representatives, distributors, sales agents or
dealers other than Contracts which by their terms are cancelable by any of the
Crown Parties with notice of not more than 30 days and
-27-
without cancellation penalties or severance payments, in the case of any such
Contract, in excess of $50,000;
(b) covenant not to compete (other than pursuant to any radius
restriction contained in any lease, reciprocal easement agreement or
development, construction, operating or similar agreement) or confidentiality
agreement;
(c) Contract with any Governmental Entity;
(d) agreement, Contract or other instrument under which any of the
Crown Parties has borrowed any money from, or issued any note, bond, debenture
or other evidence of indebtedness to, any Person or any other note, bond,
debenture or other evidence of indebtedness issued to any Person;
(e) Contract (including any so-called take-or-pay, cash deficiency
or keepwell agreement) under which (A) any Person (including any of the Crown
Parties) has directly or indirectly guaranteed indebtedness, liabilities or
obligations of any of the Crown Parties or (B) or any of the Crown Parties has
directly or indirectly guaranteed indebtedness, liabilities or obligations of
any Person, and other than endorsements for the purpose of collection in the
ordinary course of business consistent with past practice and including
agreements having the effect of a guarantee, whether or not required to be
reflected on the Crown Communications Business' Financial Statements in
accordance with GAAP;
(f) pledge, security agreement, deed of trust, financial statement
or other document granting a Lien on any of the assets of the Acquired Business
(other than Crown Permitted Liens or Crown Permitted Real Property Liens);
(g) Contract under which any of the Crown Parties has, directly or
indirectly, made any advance, loan, extension of credit or capital contribution
to, or other investment in, any Person (other than Network or Mobile) in excess
of $50,000;
(h) Contract under which any of the Crown Parties is lessee of, or
holds or operates, any machinery, equipment, vehicle or other tangible personal
property owned by a third party and used in the Acquired Business or the Crown
Communications Business and which entails payments in any 12-month period, in
the case of any such Contract, in excess of $50,000;
(i) Contract or other arrangement with (A) any other Crown Party or
any Affiliate of the Crown Parties or (B) any current or former officer,
director or employee, shareholder or with any relative, beneficiary, spouse or
Affiliate of any such Person (a "Related Person") of the Crown Communications
--------------
Business, Network or Mobile or any of their respective affiliates;
(j) Contract for the sale of any assets of the Acquired Business
(including any capital stock or rights to acquire capital stock of Network or
Mobile) or the grant of any preferential rights to purchase any portion of the
Acquired Business or requiring the consent of any party to the transfer thereof
or otherwise limiting the Crown Parties' ability to sell any assets
-28-
of the Acquired Business (including any capital stock or rights to acquire
capital stock of Network or Mobile);
(k) Contract not made in the ordinary course of business consistent
with past practice, including any joint venture or partnership arrangement or
any agreement relating to any merger or acquisition involving any of the Crown
Parties; or
(l) Contract whether or not made in the ordinary course of
business, which is material to the Acquired Business or the termination of which
would reasonably be expected to have a Crown Material Adverse Effect.
The Crown Parties are not, and to the knowledge of the Crown Parties, no other
party is (with or without the lapse of time or the giving of notice or both) in
default in any material respect under any Contract, License or instrument
required to be set forth in the Crown Parties disclosure schedules (each, a
"Seller Scheduled Contract"). The Crown Parties have made available to Buyer or
-------------------------
its Representatives true and complete copies of all Seller Scheduled Contracts.
Each Seller Scheduled Contract is in full force and effect and constitutes a
legal, valid and binding obligation of Sellers, Network or Mobile, as the case
may be, and, to the knowledge of the Crown Parties, the other parties thereto,
enforceable in accordance with its terms. The Crown Parties have not received
any written notice of the intention of any party to terminate any Seller
Scheduled Contract.
5.21. Compliance with Laws. Except as set forth on Schedule 5.21, the
--------------------
operations of the Crown Communications Business, Network and Mobile are not now
being conducted and, to the knowledge of the Crown Parties, have not been
conducted in violation of any applicable law, ordinance, statute, rule or
regulation of any Governmental Entity except for violations which do not and
will not, individually or in the aggregate, have or reasonably be expected to
have a Crown Material Adverse Effect. None of the Crown Parties has received any
notice from any Governmental Entity that the operations of the Crown
Communications Business, Network and Mobile are being conducted in violation of
any applicable law, ordinance, statute, rule or regulation of any Governmental
Entity, or of any investigation or review pending or threatened by any
Governmental Entity investigating or reviewing any alleged violation, which
violation individually or in the aggregate with all other violations would have
or would reasonably be expected to have a Crown Material Adverse Effect. Except
as set forth on Schedule 5.21, all the Real Property included in the assets of
the Acquired Business is in compliance with applicable laws, including zoning,
land use and building code laws, ordinances and regulations necessary to conduct
the operations of the Acquired Business and the Crown Communications Business as
presently conducted, and the transactions contemplated by this Agreement could
not reasonably be expected to result in the revocation of any permit or
variance, except to the extent that any such non-compliance or violation or
revocation, individually or in the aggregate, would not have or would not
reasonably be expected to have a Crown Material Adverse Effect.
5.22. Environmental Matters.
---------------------
(a) Except as set forth on Schedule 5.22, the Crown Parties are in
compliance with all Environmental Laws (as defined herein), except for instances
of non-compliance that,
-29-
individually or in the aggregate, do not or will not have or would not
reasonably be expected to result in a Crown Material Adverse Effect. No Lien has
attached to any Crown Property or facility of the Crown Communications Business,
Network or Mobile pursuant to any Environmental Laws. Except as set forth on
Schedule 5.22, there have been no Releases of Hazardous Material, as both terms
are defined herein, by any of the Crown Parties or, to the knowledge of the
Crown Parties, by any other Person, in, on, under or affecting any Crown
Property or facility of the Crown Communications Business, Network or Mobile,
and the Crown Parties have not disposed of any Hazardous Material in a manner
that in either case, individually or in the aggregate, could reasonably be
expected to result in a Crown Material Adverse Effect. Except as set forth on
Schedule 5.22, prior to the period of ownership or operation by any of the Crown
Parties of any Crown Property or facility of the Crown Communications Business,
Network or Mobile, to the knowledge of the Crown Parties, no Hazardous Material
was generated, treated, stored, disposed of, used, handled or manufactured at,
or transported, shipped or disposed of from, such currently or previously owned
properties and, except as set forth on Schedule 5.22, to the knowledge of the
Crown Parties, there were no Releases of Hazardous Material in, on, under or
affecting any such property. Except as set forth on Schedule 5.22, there are no
sites, locations or operations for which any of the Crown Parties have received
notice that it is or may be responsible for any remedial or response action, as
defined in any Environmental Law, relating to any Release of Hazardous Material.
Schedule 5.22 sets forth a list of any and all environmental audits of any Crown
Property or facility of the Crown Communications Business, Network or Mobile
conducted by the Crown Parties during their ownership of the Crown
Communications Business, Network or Mobile, or obtained by, or performed on
behalf of, any of the Crown Parties in connection with its acquisition of the
Crown Communications Business, Network or Mobile, and any environmental audits
in the Crown Parties' possession of any Crown Property or facility adjacent to
the Crown Communications Business, Network or Mobile which relate to any facts,
conditions or circumstances that have resulted, or may result, in a Release of
Hazardous Material at or under any Crown Property or facility of the Crown
Communications Business, Network or Mobile (collectively, the "Crown
-----
Environmental Audits"). Sellers have made copies of all Crown Environmental
--------------------
Audits available to Buyer.
(b) The Crown Parties have obtained, and are in compliance in all
material respects with, all permits, licenses, authorizations, registrations and
other governmental consents required by applicable Environmental Laws
("Environmental Permits"). Except as disclosed on Schedule 5.22, the Crown
---------------------
Parties have not received notice of any civil, criminal or administrative claims
or proceedings, pending or threatened, that are based on or related to any
Environmental Laws or the failure to comply with any terms and conditions of any
Environmental Permits which claims or proceedings of which failure to comply,
individually or in the aggregate, would have or reasonably be expected to result
in a Crown Material Adverse Effect. To the knowledge of the Crown Parties,
except as described in Schedule 5.22, (i) there are no polychlorinated biphenyls
("PCBs") in any container or equipment on, about, under or within any Crown
----
Property or facility of the Crown Communications Business, Network or Mobile,
(ii) there is no asbestos at, on, about, under or within any Crown Property or
facility of the Crown Communications Business, Network or Mobile, and (iii)
there are no underground storage tanks, whether in service or closed in place,
under any Crown Property or facility of the Crown Communications Business,
Network or Mobile.
-30-
(c) The term "Environmental Laws" means laws relating to the
------------------
contamination, pollution or preservation of the environment or to human health.
The term "Release" has the meaning set forth in the Comprehensive Environmental
-------
Response, Compensation, and Liability Act, as amended by the Superfund
Amendments and Reauthorization Act, 42 U.S.C. (S) 9601(22). The term "Hazardous
---------
Material" means (1) hazardous materials, pollutants, contaminants, constituents,
--------
medical or infectious wastes, hazardous wastes and hazardous substances as those
terms are defined in any Environmental Law, (2) petroleum, including crude oil
and any by-products or fractions thereof, (3) natural gas, synthetic gas and any
mixtures thereof, (4) asbestos and/or asbestos-containing material, (5) radon
and (6) PCBs or materials or fluids containing PCBs.
5.23. Taxes.
-----
(a) For purposes of this Agreement "Taxes" shall mean all Federal,
-----
state, local and foreign taxes or similar charges, including all income,
franchise, real property, withholding, employment, sales, excise and transfer
taxes and any interest and penalties thereon. The Crown Parties have timely
filed or caused to be timely filed, or will timely file or cause to be timely
filed on or prior to the Closing Date, all Tax returns and Tax reports which are
required to be filed (including proper filing extensions) on or prior to the
Closing date by Network or Mobile or the Crown Communications Business (the
"Returns"). All the Returns were or will be, as the case may be, complete and
-------
correct in all material respects at the time of filing. All Taxes due and
payable with respect to taxable periods covered by the Returns, or with respect
to which Network, Mobile or the Crown Communications Business is or might be
otherwise be liable (including Taxes which Network, Mobile or the Crown
Communications Business may have been required to withhold from amounts owing to
any stockholder, employee, creditor or third party), have been, or prior to the
Closing Date will be, timely paid. None of the Crown Communications Business,
Network or Mobile is delinquent in the payment of any Tax, or has any Tax
deficiencies proposed, assessed, or to the knowledge of the Crown Parties,
threatened against it. No Liens for Taxes exist with respect to any assets of
the Crown Communications Business, Network or Mobile.
(b) Schedule 5.23(b) sets forth the tax years through which the
Returns have been examined and closed or are returns with respect to which the
applicable period for assessment under applicable law, after giving effect to
extensions or waivers, has expired. Any deficiencies resulting from any Federal,
state, local or foreign audits or examinations of Network, Mobile or the Crown
Communications Business have been paid in full. There are no present audits,
disputes or proceedings as to any Taxes of Network, Mobile or the Crown
Communications Business. No material issued were raised in writing during any
audit, dispute or proceeding of Network, Mobile or the Crown Communications
Business that might apply to any taxable period subsequent to the taxable period
covered by such audit, dispute or proceeding. No power of attorney with respect
to Taxes of Network, Mobile or the Crown Communications Business has been filed
with any taxing jurisdiction or authority. None of the Crown Communications
Business, Network or Mobile has executed any waiver of the statute of
limitations on the assessment or collection of any Tax.
-31-
(c) Each of Network and Mobile, and all of its current or former
shareholders, have consented to a valid election for its first taxable year or
period, which election has not been revoked or terminated or otherwise become
ineffective for any subsequent taxable year or period, under Section 1362(a) of
the Code, to be taxed as an "S Corporation" under Sections 1361 through 1379 of
the Code. Each of Network and Mobile, and all of its current or former
shareholders, have consented to a valid election, which election has not been
revoked or terminated or otherwise become ineffective, to be taxed in a
comparable fashion under comparable state, local or foreign Tax law, for each of
the taxable periods by each of the taxing jurisdictions set forth on Schedule
5.23(c). Network, Mobile and the Crown Communications Business do not file, and
are not required to file, state or local Tax returns in any states or localities
other than those listed on Schedule 5.23(c). None of the assets of Network or
Mobile are of a type described in Section 1374(d)(8) of the Code.
(d) None of the Crown Communications Business, Network or Mobile is
a party to or bound by any agreement (including any tax sharing agreement),
election or extension of the statute of limitations with respect to taxes. None
of the Crown Communications Business, Network or Mobile is or has ever been a
member of an affiliated, consolidated, combined or unitary group of which any
corporation other than Network or Mobile also is or was a member.
(e) Neither Network nor Mobile is a party to, and none of the
assets of Network, Mobile or the Crown Communications Business is subject to,
any lease made pursuant to Section 168(f)(8) of the Internal Revenue Code of
1954. No assets of Network, Mobile or the Crown Communications Business is "tax
exempt use property" within the meaning of Section 168(h) of the Code.
(f) Neither Network nor Mobile has taken any action that would
require it to include in income any adjustment under Section 481(a) of the Code
by reason of a change in accounting method initiated by Network or Mobile, and
the Internal Revenue Service has not proposed for any open Tax year any such
adjustment or change in accounting method. Neither Network nor Mobile will be
required to include in a taxable period (or portion thereof) beginning on or
after the Closing Date taxable income attributable to income that economically
accrued in a prior taxable period (or portion thereof), including as a result of
the installment method of accounting, the completed contract method of
accounting or the cash method of accounting.
5.24. Insurance. The Crown Parties maintain policies of fire and casualty,
---------
liability and other forms of insurance with respect to the Crown Communications
Business, Network and Mobile in such amounts, with such deductibles and against
such risks and losses as are customary in the business in which they are
engaged. The insurance policies currently in effect and owned and maintained by
the Crown Parties are listed in Schedule 5.24.
All such policies are in full force and effect, all premiums due and
payable thereon have been paid (other than retroactive or retrospective premium
adjustments that are not yet, but may be, required to be paid with respect to
any period ending prior to the Closing Date), and no notice of cancellation or
termination has been received with respect to any such policy which has not been
replaced on substantially similar terms prior to the date of such cancellation.
The activities and operations of the Crown Communications Business, Network and
Mobile have been
-32-
conducted in a manner so as to conform in all material respects to all
applicable provisions of such insurance policies.
5.25. Accounts Receivable. All the accounts receivable included in the
-------------------
Acquired Business (i) do and on the Closing Date will represent actual
indebtedness incurred by the applicable account debtors, (ii) have and on the
Closing Date will have arisen in the ordinary course of business consistent with
past practice and (iii) are and on the Closing Date will be subject to no prior
assignment, claim, Lien, dispute or unapplied credit of any nature whatsoever
other than Crown Permitted Liens.
5.26. Securities Act. The shares of Castle B Common Stock acquired by the
--------------
Crowns in the Mergers and the Note are being acquired by the Crowns for
investment only and not with a view to any public distribution thereof, and the
Crowns shall not offer to sell or otherwise dispose of the shares so acquired by
them in violation of the registration requirements of the Securities Act of 1933
(the "Securities Act"). Each Seller is an "accredited investor" within the
--------------
meaning of Rule 501 under the Securities Act and has sufficient knowledge and
experience in business and investment matters so as to be able to evaluate the
risks and merits of an investment in Buyer and, after the Closing, he or she is
each financially able to bear the risks of such investment, including the risk
of a complete loss of its investment in Buyer.
5.27. Transactions with Affiliates. Except as set forth in Schedule 5.27,
----------------------------
none of the Seller Scheduled Contracts between the Crown Communications
Business, Network or Mobile, on the one hand, and Sellers or any Affiliates or
Related Persons of the Crown Parties, on the other hand, will continue in effect
subsequent to the Closing. Except as set forth in Schedule 5.27, after the
Closing neither Sellers nor any Affiliate or Related Person of the Crown Parties
will have any interest in any property (real or personal, tangible or
intangible) or Contract used in or pertaining to the acquired Business. Neither
Sellers nor any Affiliate or Related Person of the Crown Parties has any direct
or indirect ownership interest in any Person in which the Crown Communications
Business, Network or Mobile has any direct or indirect ownership interest or
with which the Crown Communications Business, Network or Mobile competes or has
a business relationship. Except as set forth in Schedule 5.27, none of Sellers
or any Affiliates or Related Persons of the Crown Parties provide any material
services to the Crown Communications Business, Network or Mobile.
5.28. Disclosure. No statement of Sellers contained in this Article 5, in
----------
Exhibit D, in any of the disclosure schedules referred to in Article 5 or in any
certificates delivered by any of the Crown Parties pursuant to Section 1.1(k),
Section 4.2(d) and Section 7.1(c) intentionally contains any untrue statement of
a material fact or intentionally omits to state a material fact necessary to
make the statements contained herein or therein, in light of the circumstances
in which they are made, not misleading.
-33-
ARTICLE 6.
Representations and Warranties of Buyer
---------------------------------------
6.1. Corporate Status; Authority. Each of Buyer and its Subsidiaries and
---------------------------
CTSH and its Subsidiaries is a corporation, partnership or other entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization. Each of Buyer and its
Subsidiaries and CTSH and its Subsidiaries is duly qualified and in good
standing to do business as a foreign corporation in each jurisdiction in which
the conduct or nature of its business or the ownership, leasing or holding of
its properties makes such qualification necessary, except such jurisdictions
where the failure to be so qualified or in good standing, individually or in the
aggregate, would not reasonably be expected to have a material adverse effect
(i) on the condition (financial or otherwise), business, liabilities,
properties, assets, prospects or results of operations of Buyer and its
Subsidiaries and CTSH and its Subsidiaries, taken as a whole, or (ii) on the
ability the buyer or its Subsidiaries to perform their obligations under or to
consummate the transactions contemplated by this Agreement (a "Buyer Material
--------------
Adverse Effect"). Each of Buyer and its Subsidiaries and CTSH and its
--------------
Subsidiaries has all requisite corporate power to carry on its business as it is
now being conducted, to own and operate such business and each of Buyer, CAC I
and CAC II has all requisite corporate power to enter into this Agreement, to
perform its obligations hereunder and to complete the transactions contemplated
hereby.
6.2. Corporate Action. All corporate and shareholder actions and
----------------
proceedings necessary to be taken by or on the part of Buyer, CAC I and CAC II,
as applicable, in connection with the transactions contemplated by the Buyer
Transaction Documents have been duly and validly taken, and this Agreement has
been duly and validly authorized, executed and delivered by Buyer, CAC I and CAC
II and constitutes, and each of the other Buyer Transaction Documents will be
duly and validly authorized, executed and delivered by Buyer and will
constitute, the legal, valid and binding obligations of Buyer, CAC I and CAC II,
as applicable, enforceable against Buyer, CAC I and CAC II, as applicable, in
accordance with and subject to its terms, except as may be limited by bankruptcy
or other laws affecting creditors' rights and by equitable principles.
6.3. No Conflicts. Except as set forth on Schedule 6.3, neither the
------------
execution, delivery and performance by Buyer, CAC I or CAC II, as applicable, of
the Buyer Transaction Documents, nor the consummation by Buyer, CAC I and CAC II
of the transactions contemplated thereby is an event that, by itself or with the
giving of notice or the passage of time or both, will (i) conflict with the
certificate of incorporation or by-laws, as amended, of Buyer or the articles of
incorporation or by-laws of CAC I or CAC II, (ii) constitute a violation of, or
conflict with or result in any breach of or any default under, or constitute
grounds for termination or acceleration of, any mortgage, indenture, lease,
contract, agreement (including, without limitation, the agreement between the
British Broadcasting Corporation, CTSH and/or its Affiliates (the "BBC
---
Agreement") and the credit agreement between the Buyer and KeyBank National
---------
Association dated as of April 26, 1995 (as amended, the "Bank Credit
-----------
Agreement")) or instrument to which Buyer, any of its Subsidiaries, CAC I, CAC
---------
II, CTSH or any of its Subsidiaries is a party or by which it is bound, except
for such violations, conflicts, breaches, terminations and accelerations as
individually or in the aggregate would not have or be reasonably expected to
have a Buyer
-34-
Material Adverse Effect or result in the creation of any material Lien upon any
of Buyer's assets such that it is reasonably likely that Buyer, CAC I and CAC II
will be unable to proceed with the transactions contemplated in this Agreement
or (iii) violate (A) any judgment, decree or order or (B) any statute, rule or
regulation, in each such case, applicable to Buyer, CAC I or CAC II. The
execution, delivery and performance by Buyer, CAC I and CAC II of this
Agreement, and by Buyer of the Shareholder Agreement, and the consummation by
Buyer, any of its Subsidiaries, CAC I, CAC II, CTSH or any of its Subsidiaries
of the transactions contemplated hereby or thereby, require no action by or in
respect of, or filing with, any Governmental Entity other than (a) the filing of
articles of merger with the Department of State of the Commonwealth of
Pennsylvania and of appropriate documentation with the relevant authorities of
other states in which CAC I or CAC II is qualified to do business; (b)
compliance with any applicable requirements of the Xxxx-Xxxxx-Xxxxxx Act; (c)
the approvals of the FCC contemplated by this Agreement; (d) actions or filings
which, if not taken or made, would not, individually or in the aggregate,
reasonably be expected to have a Buyer Material Adverse Effect; and (e) filings
and notices not required to be made or given until after the Effective Time.
6.4. Capitalization of Buyer and its Subsidiaries and CTSH and its
-------------------------------------------------------------
Subsidiaries.
------------
(a) The authorized capital stock of Buyer consists of 208,313
shares of Class A Common Stock, par value $0.01 per share ("Castle A Common
---------------
Stock"), of which 208,313 are duly authorized and validly issued and
-----
outstanding, fully paid and nonassessable; 10,048,051 shares of Castle B Common
Stock, par value $0.01 per share, of which 408,433 are duly authorized and
validly issued and outstanding, fully paid and nonassessable; and 6,071,228
shares of Preferred Stock, par value $0.01 per share ("Preferred Stock"), of
---------------
which 5,777,733 are duly authorized and validly issued and outstanding, fully
paid and nonassessable. A total of 1,080,375 shares of Castle B Common Stock are
reserved for issuance under Buyer's 1995 Stock Option Plan, as amended, and a
total of 6,095,025 shares of Castle B Common Stock are reserved for the
conversion of Castle A Common Stock and Preferred Stock of Buyer. Except as set
forth in this Section 6.4(a) and except for transactions contemplated by this
Agreement there are outstanding no shares of capital stock or other equity
securities of Buyer. Schedule 6.4(a) sets forth for each Subsidiary of Buyer the
amount of its authorized capital stock, the amount of its outstanding capital
stock and the record and beneficial owners of its outstanding capital stock. All
the outstanding shares of capital stock of each Subsidiary have been duly
authorized and validly issued and are fully paid and nonassessable. Except as
set forth on Schedule 6.4(a), there are no shares of capital stock or other
equity securities of any Subsidiary of Buyer outstanding. Neither the shares of
capital stock of Buyer nor those of any of its Subsidiaries have been issued in
violation of, and except as set forth on Schedule 6.4, none of such shares are
subject to, any purchase option, call, right of first refusal, preemptive,
subscription or similar rights under any provision of applicable law, the
certificate of incorporation, as amended, or by-laws of Buyer or the comparable
governing instruments of any of its Subsidiaries, any Contract to which Buyer or
any of its Subsidiaries is subject, bound or a party or otherwise. Except as
indicated above or as set forth on Schedule 6.4(a), there are no outstanding
warrants, options, rights, "phantom" stock rights, agreements, convertible or
exchangeable securities or other commitments (other than this Agreement and
Buyer's financing commitments dated as of June 27, 1997 from Xxxxxx Brothers
Inc., copies of which have been made available to Sellers) (i) pursuant to which
Buyer or any of its Subsidiaries is or may become obligated to issue, sell,
purchase, return or redeem any shares of
-35-
capital stock or other securities of Buyer or any of its Subsidiaries or (ii)
that give any Person the right to receive any benefits or rights similar to any
rights enjoyed by or accruing to holders of shares of capital stock of Buyer or
any of its Subsidiaries. Except as set forth above or on Schedule 6.4(a), there
are no equity securities of Buyer or any of its Subsidiaries reserved for
issuance for any purpose. Except as set forth on Schedule 6.4(a), Buyer has good
and valid title, directly or through one or more wholly owned Subsidiaries, to
all the outstanding shares of capital stock of each such Subsidiary, free and
clear of any Liens and restrictions of any kind. There are no outstanding bonds,
debentures, notes or other securities having the right to vote on any matters on
which stockholders of Buyer or any of its Subsidiaries may vote.
(b) The authorized share capital of CTSH consists of 11,477,290
ordinary shares, par value 1p per share ("CTSH Stock"), all of which are duly
----------
authorized and validly issued and outstanding, fully paid and nonassessable and
held of record by the Persons named in Schedule 6.4(b) in the respective amount
shown therein. Except as set forth in this Section 6.4(b) and except for
transactions contemplated by this Agreement there are outstanding no shares of
capital stock or other equity securities of CTSH. Schedule 6.4(b) sets forth for
each Subsidiary of CTSH the amount of its authorized share capital, the amount
of its outstanding capital stock and the record and beneficial owners of its
outstanding shares. All the outstanding shares of capital stock of each
Subsidiary of CTSH have been duly authorized and validly issued and are fully
paid and nonassessable. Except as set forth on Schedule 6.4(b), there are no
shares of capital stock or other equity securities of any Subsidiary of CTSH
outstanding. Neither the shares of capital stock of CTSH nor those of any of
its Subsidiaries have been issued in violation of, and except as set forth on
Schedule 6.4(b), none of such shares are subject to, any purchase option, call,
right of first refusal, preemptive, subscription or similar rights under any
provision of applicable law or any charter documents of CTSH or the comparable
governing instruments of any of its Subsidiaries, any Contract to which CTSH or
any of its Subsidiaries is subject, bound or a party or otherwise. Except as
indicated above or as set forth in Schedule 6.4(b), there are no warrants,
options, rights, "phantom" stock rights, agreements, convertible or exchangeable
securities or other commitments (other than this Agreement) outstanding as of
July 11, 1997 or as to which CTSH will be or is likely to become bound or
obligated in connection with the financing by Buyer of the transactions
contemplated hereby (i) pursuant to which CTSH or any of its Subsidiaries is or
may become obligated to issue, sell, purchase, return or redeem any shares of
capital stock or other securities of CTSH or any of its Subsidiaries or (ii)
that give any Person the right to receive any benefits or rights similar to any
rights enjoyed by or accruing to holders of share capital of CTSH or any of its
Subsidiaries. Except as set forth above or on Schedule 6.4(b), there are no
equity securities of CTSH or any of its Subsidiaries reserved for issuance for
any purpose. Except as set forth on Schedule 6.4(b), CTSH has good and valid
title, directly or through one or more wholly owned Subsidiaries, to all the
outstanding shares of capital stock of each of its Subsidiaries, free and clear
of any Liens and restrictions of any kind. There are no outstanding bonds,
debentures, notes or other securities having the right to vote on any matters on
which stockholders of CTSH or any of its Subsidiaries may vote.
6.5. Equity Interests. Except as set forth on Schedule 6.5 hereto, Buyer
----------------
does not directly or indirectly own any capital stock of or other equity
interests in any corporation, partnership or other Person and neither Buyer nor
any of its Subsidiaries is a member of or
-36-
participant in any partnership, joint venture, limited liability company,
limited liability partnership or similar Person.
6.6. Financial Statements.
--------------------
(a) Schedule 6.6(a) sets forth true, correct and complete copies of
(i) the balance sheet of Buyer and its consolidated Subsidiaries as at December
31, 1995, and December 31, 1996, and the statements of income and cash flows of
Buyer and its consolidated Subsidiaries for each of the years then ended,
together with the notes thereto and report thereon of KPMG Peat Marwick LLP,
independent public accountants (the "Buyer Audited Statements"); and (ii) the
------------------------
balance sheet of Buyer and its consolidated Subsidiaries as at May 31, 1997 and
the statements of income and cash flows of Buyer and its consolidated
Subsidiaries for the five months then ended (together with the Buyer Audited
Statements and the Buyer Interim Financial Statements, the "Buyer Financial
---------------
Statements"). The Buyer Financial Statements have been, or in the case of the
----------
Buyer Interim Financial Statements, will be, prepared from the books and records
of Buyer and present fairly (subject, in the case of the Buyer Interim Financial
Statements, to normal recurring year-end adjustments) the financial position of
Buyer and its consolidated Subsidiaries as at December 31, 1995 and 1996, May
31, 1997 and June 30, 1997 and the statements of income and cash flows of Buyer
and its consolidated Subsidiaries for the periods then ended in conformity with
GAAP applied on a basis consistent with past practices (except in each case as
described in the notes thereto or as otherwise disclosed in Schedule 6.6(a)).
(b) Schedule 6.6(b) sets forth true, correct and complete copies of
(i) the balance sheet of CTSH and its consolidated Subsidiaries as at March 31,
1997, and the consolidated profit and loss account and consolidated cash flow
statement for the seven-month period ended March 31, 1997, together with the
notes and report thereon of KPMG, Chartered Accountants (the "CTSH Audited
------------
Statements"); and (ii) the CTSH Interim Financial Statements (collectively,
----------
together with the CTSH Audited Statements, the "CTSH Financial Statements").
-------------------------
The CTSH Financial Statements have been prepared from the books and records of
CTSH and give a true and fair view of the state of affairs of CTSH and its
consolidated Subsidiaries as at March 31, 1997 and of their consolidated profit
for the period then ended and have been properly prepared in accordance with the
U.K. Companies Act 1985 (as if those requirements were to apply) applied on a
basis consistent with past practices (except in each case as described in the
notes thereto or as otherwise disclosed in Schedule 6.6(b).
6.7. No Undisclosed Liabilities. Except as set forth on Schedule 6.7,
--------------------------
there have been no material liabilities or obligations (whether pursuant to
Contracts or otherwise) of any kind whatsoever (whether accrued, contingent,
absolute, determined, determinable or otherwise) incurred by Buyer or any of its
Subsidiaries since December 31, 1996, or incurred by CTSH or any of its
Subsidiaries since March 31, 1997, other than:
(a) liabilities or obligations disclosed or provided for in the
balance sheet of Buyer and its Subsidiaries as of June 30, 1997 included in the
Buyer Interim Financial Statements or the balance sheet of CTSH and its
consolidated Subsidiaries as of June 30, 1997 included in the CTSH Interim
Financial Statements or in the notes to the Buyer Interim Financial Statements
or the CTSH Interim Financial Statements.
-37-
(b) liabilities or obligations incurred or that have arisen in the
ordinary course of business consistent with past practice which, individually
and in the aggregate have not had and would not reasonably be expected to have a
Buyer Material Adverse Effect; or
(c) liabilities or obligations under this Agreement or incurred in
connection with the transactions contemplated hereby.
6.8. Absence of Certain Changes or Events. Since December 31, 1996, the
------------------------------------
business of Buyer and its Subsidiaries has been conducted in the ordinary course
consistent with past practice (including with respect to the collection of
receivables, payment of payables and other liabilities, advertising activities,
sales practices (including promotions, discounts and concessions), capital
expenditures and inventory levels, and contributions to or accruals to or in
respect of Benefit Plans). There has not occurred with respect to the business
of Buyer and its Subsidiaries since December 31, 1996 or with respect to the
business of CTSH and its Subsidiaries since March 31, 1997:
(a) any event, occurrence or development which, individually or in
the aggregate, has had or would reasonably be expected to have a Buyer Material
Adverse Effect.
(b) any action taken by the Buyer or any of its Subsidiaries which,
if taken after July 11, 1997, would constitute a breach of the covenant set
forth in Section 8.1.
6.9. Licenses. None of Buyer or any of its Subsidiaries owns, holds or
--------
uses any Licenses which are material to the ownership or operation of their
respective businesses other than the Licenses listed on Schedule 6.9, true and
complete copies of which have been made available to Sellers. Schedule 6.9
identifies the legal holders of all Licenses relating to the business of Buyer
or any of its Subsidiaries. Such Licenses are valid and are in full force and
effect and, except as limited by the provisions of the Communications Act, and
the FCC's rules, regulations and policies and as otherwise specified on the face
of such Licenses, none of such Licenses is subject to any restriction or
condition which would limit in any material respect the operation of any
business of Buyer or any of its Subsidiaries as it is presently being conducted.
Buyer and its Subsidiaries are familiar with and have operated their respective
businesses (and any auxiliary assets operated in connection with the operation
of such businesses) at all times in material compliance with generally accepted
industry practices and in compliance in all material respects with the Licenses,
the Communications Act and the existing rules, regulations and policies of the
FCC and the rules and regulations and policies of the FAA. Except as shown on
Schedule 6.9, no application, action or proceeding is pending for the renewal or
modification of any of the Licenses and there is not now before any Governmental
Entity any investigation or complaint against Buyer or any of its Subsidiaries
the unfavorable resolution of which would impair the qualifications of any of
Buyer or any of its Subsidiaries to hold any of the Licenses. Except as shown on
Schedule 6.9, no event or events have occurred which, individually or in the
aggregate, and with or without the giving of notice or the lapse of time or
both, would constitute grounds for, or which could result in, the revocation or
termination of any License or the imposition of any restriction or limitation by
any Governmental Entity on the operation of the businesses of Buyer or any of
its Subsidiaries. No Licenses other than those shown on Schedule
-38-
6.9 are necessary or required to operate any business of Buyer or its
Subsidiaries as it is presently being conducted.
6.10. Assets Other than Real Property Interests.
-----------------------------------------
(a) Buyer and its Subsidiaries have good and valid title to all
assets reflected on the December 31, 1996 balance sheet of Buyer and its
consolidated Subsidiaries included in the Buyer Financial Statements (the
"December 31 Buyer Balance Sheet") or thereafter acquired, except those sold or
-------------------------------
otherwise disposed of in the ordinary course of business consistent with past
practice and not in violation of this Agreement, in each case free and clear of
all Liens of any kind except (i) such as are set forth on Schedule 6.10, (ii)
mechanics', carriers', workmen's, repairmen's or other like Liens arising or
incurred in the ordinary course of business consistent with past practice, (iii)
Liens which secure debt that is reflected as a liability on the balance sheets
as of June 30, 1997 included in the Buyer Interim Financial Statements and other
debt incurred under existing credit facilities of Buyer or its Subsidiaries and
(iv) other imperfections of title or encumbrances, if any, which do not,
individually or in the aggregate, materially impair the continued use and
operation of the assets to which they relate, as presently conducted (Liens,
encumbrances and imperfections of title described in clauses (i), (ii), (iii)
and (iv) above are hereinafter referred to collectively as "Buyer Permitted
---------------
Liens"). Schedule 6.10 sets forth a list of all material personal property owned
-----
by Buyer and its Subsidiaries and used or held for use in connection with their
respective businesses.
(b) All the material tangible assets used, held for use or
necessary in the operation of the businesses of Buyer and its Subsidiaries (i)
have been and are being maintained in accordance with the customary industry
practice, (ii) are free from material defects and (iii) are in all material
respects in good working condition, reasonable wear and tear and depreciation
excepted. All leased personal property used, or held for use or necessary in the
operation of the businesses of Buyer and its Subsidiaries is in all material
respects in the condition required of such property by the terms of the lease
applicable thereto during the term of the lease and upon the expiration thereof.
This Section 6.10 does not relate to Real Property or interests in Real
Property, such items being the subject of Section 6.11.
6.11. Title to Real Property. Schedule 6.11 sets forth a complete list of
----------------------
all Real Property and interests in Real Property used or held for use in the
operation of the businesses of Buyer and its Subsidiaries and owned in fee by
Buyer or any of its Subsidiaries (individually, a "Buyer Owned Property") and
--------------------
identifies any material reciprocal easement or operating agreements (other than
such operating agreements not relating to Real Property identified on other
disclosure schedules of Buyer attached hereto) relating thereto. Schedule 6.11
sets forth a complete list of all Real Property and interests in Real Property
used, or held for use in the operation of the businesses of Buyer and its
Subsidiaries leased by Buyer or any of its Subsidiaries (individually, a "Buyer
-----
Leased Property") and identifies any material leases and reciprocal easement or
---------------
operating agreements (other than such operating agreements not relating to Real
Property identified on other disclosure schedules of Buyer attached hereto)
relating thereto. Buyer and its Subsidiaries have (i) good and insurable fee
title to all Buyer Owned Property and (ii) assuming good and
-39-
adequate title in each lessor of a leasehold estate, good and valid title to the
leasehold estates in all Buyer Leased Property (a Buyer Owned Property or Buyer
Leased Property being sometimes referred to herein, individually, as a "Buyer
-----
Property" and, collectively, as "Buyer Properties"), in each case free and clear
-------- ----------------
of all Liens and other similar restrictions of any nature whatsoever, except (A)
such as are set forth on Schedule 6.11, (B) leases, subleases and similar
agreements set forth on Schedule 6.16, (C) Buyer Permitted Liens, (D) easements,
covenants, rights-of-way and other similar restrictions of record, (E) any
conditions that may be shown by a current, accurate survey or readily determined
by a physical inspection of any Buyer Property made prior to Closing and (F) (I)
zoning, building and other similar restrictions, (II) Liens and other similar
restrictions that have been placed by any developer, landlord or other third
party on property over which the Buyer Parties have easement rights or on any
Buyer Leased Property and subordination or similar agreements relating thereto,
and (III) unrecorded easements, covenants, rights-of-way and other similar
restrictions, none of which items set forth in clauses (I), (II) and (III),
individually or in the aggregate, materially impair the continued use and
operation of the property to which they relate, as presently conducted. Except
as set forth on Schedule 6.17, to the knowledge of Buyer, the current use by
Buyer and its Subsidiaries of the plants, offices and other facilities located
on Buyer Property does not violate any local zoning or similar land use or
government regulations in any material respect. No condemnation of any material
portion of the Buyer Properties has occurred; and Buyer and its Subsidiaries
have not received any notice related to any future or proposed condemnation of
any material portion of the Buyer Properties.
6.12. Intellectual Property.
---------------------
(a) Schedule 6.12 sets forth a true and complete list of all
material Intellectual Property owned, used, filed by or licensed to Buyer or any
of its Subsidiaries. With respect to registered trademarks, Schedule 6.12 sets
forth a list of all jurisdictions in which such trademarks are registered or
applied for and all registrations and application numbers. Except as set forth
on Schedule 6.12, the Buyer and its Subsidiaries own, and Buyer and its
Subsidiaries have the right to use, execute, reproduce, display, perform,
modify, enhance, distribute, prepare derivative works of and sublicenses,
without payment to any other Person, all Intellectual Property listed in
Schedule 6.12 and, to the knowledge of Buyer or its Subsidiaries, the
consummation of the transactions contemplated hereby will not conflict with,
alter or impair any such rights. Buyer and its Subsidiaries have all rights to
Intellectual Property as are necessary in connection with their respective
businesses as they are presently being conducted.
(b) Buyer and its Subsidiaries have not granted any licenses or
contractual rights of any kind relating to Intellectual Property listed on
Schedule 6.12 or the marketing or distribution thereof. Buyer and its
Subsidiaries are not bound by or a party to any Contracts of any kind relating
to the Intellectual Property of any other Person, except as set forth on
Schedule 6.12 and except for agreements relating to computer software licensed
to Buyer and its Subsidiaries in the ordinary course of business consistent with
past practice. Subject to the rights of third parties set forth on Schedule
6.12, all Intellectual Property listed in Schedule 6.12 is free and clear of the
claims of others and of all Liens whatsoever. The conduct of the businesses of
Buyer and its Subsidiaries as they are presently being conducted and as they are
proposed to be conducted after the Closing as contemplated by the parties does
not and will not violate, conflict with or infringe the Intellectual Property of
any other Person. Except as set forth on
-40-
Schedule 6.12, (i) no claims are pending or, to the knowledge of Buyer or any of
its Subsidiaries, threatened against Buyer or any of its Subsidiaries by any
Person with respect to the ownership, validity, enforceability, effectiveness or
use of any Intellectual Property and (ii) Buyer and its Subsidiaries have not
received any communications alleging that Buyer or any of its Subsidiaries has
violated any rights relating to Intellectual Property of any Person.
6.13. Employees.
---------
(a) Except as described on Schedule 6.13, Buyer and its
Subsidiaries have no contracts of employment with any employee and are not a
party to or subject to any collective bargaining agreements. Schedule 6.13
contains a true and complete list of all officers and key employees of Buyer and
each of its Subsidiaries as of July 1, 1997.
(b) No employee of Buyer or any of its Subsidiaries shall be
entitled to receive any termination, severance or deferred compensation payment
as a result of the transactions contemplated by this Agreement.
(c) Schedule 6.13 lists each Benefit Plan with respect to which
Buyer and its Subsidiaries contribute or have any liability (each a "Buyer
-----
Benefit Plan"). Buyer has made available to the Crown Parties true and complete
------------
copies of any Buyer Benefit Plan and related trust agreements as in effect on
July 11, 1997 and the most recent Form 5500 required to be filed with respect to
such Buyer Benefit Plan. No event has occurred since the filing of the most
recent Form 5500 that will materially increase the cost of any Buyer Benefit
Plan. No Buyer Benefit Plan is a "multiemployer plan" (within the meaning of
Section 3(37) of ERISA), and with respect to the operations of their businesses,
Buyer and its Subsidiaries are not required to contribute to, nor have Buyer and
its Subsidiaries maintained or contributed to or had an obligation to maintain
or contribute to, any such plan within the five full plan years of any such plan
immediately prior to July 11, 1997.
(d) Each of the Buyer Benefit Plans is in compliance in all
material respects with all applicable requirements of ERISA, the Code and other
applicable law. Each of the Buyer Benefit Plans has been administered in all
material respects in accordance with its terms. No Buyer Benefit Plan which is a
"defined benefit plan" (within the meaning of Section 3(35) of ERISA) has a
material amount of unfunded benefit liabilities (within the meaning of Section
4001(a)(18) of ERISA). No "reportable event" (as defined in Section 4043 of
ERISA), "prohibited transaction" (within the meaning of Section 406 of ERISA or
Section 4975 of the Code) or breach of fiduciary responsibility has occurred
with respect to any Buyer Benefit Plan which could subject the Crown Parties or
Buyer to a material penalty, tax or other liability under ERISA, the Code or
applicable law; there is no pending or, to the knowledge of Buyer, threatened
claim or litigation by any party with respect to the Buyer Benefit Plans, other
than routine claims for benefits. None of Buyer or its Subsidiaries nor any
entity required to be treated as a single employer under Section 414 of the Code
or Section 4001 of ERISA has a material, actual or contingent liability under
Title IV of ERISA and no condition exists that could reasonably be expected to
give rise to any such liability.
-41-
(e) No Buyer Benefit Plan (i) has an "accumulated funding
deficiency" within the meaning of Section 412(a) of the Code as of its most
recent plan year of (ii) has applied for or received a waiver of the minimum
funding standards imposed by Section 412 of the Code; and Buyer and its
Subsidiaries have not incurred any material liability to a Buyer Benefit Plan
(other than for contributions not yet due) or to the Pension Benefit Guaranty
Corporation (other than for premiums not yet due).
(f) No employee of Buyer or any of its Subsidiaries will be
entitled to any additional benefits or any acceleration of the time of payment
or vesting of any benefits under any Buyer Benefit Plan (other than under
written employment contracts listed on Schedule 6.13) as a result of the
transactions contemplated hereby. The deduction of any amount payable under any
Buyer Benefit Plan shall not be subject to disallowance under Section 280G of
the Code.
(g) Each Buyer Benefit Plan may be amended or terminated after the
Effective Time without material liability to Buyer, Network or Mobile.
(h) The consummation of the transactions contemplated by this
Agreement shall not give rise to any material liability with respect to any
Buyer Benefit Plan.
(i) Each Buyer Benefit Plan intended to be a qualified plan under
Section 401(a) of the Code has been the subject of a determination letter from
the IRS to the effect that such Buyer Benefit Plan is qualified and exempt from
Federal income taxes under Sections 401(a) and 501(a), respectively, of the
Code, and no event has occurred that could adversely affect such qualified or
exempt status.
6.14. Litigation. Schedule 6.14 sets forth a list of all pending lawsuits
----------
or claims with respect to which Buyer or any of its Subsidiaries has been
contacted in writing by counsel for the plaintiff or claimant against or
affecting Buyer or any Subsidiary or any of their respective properties, assets,
operations or businesses, and which (i) relate to or involve more than $50,000,
(ii) seek any material injunctive relief or (iii) may give rise to any legal
restraint on or prohibition against the transactions contemplated by this
Agreement. Except as set forth on Schedule 6.14, to the knowledge of Buyer or
its Subsidiaries, none of the lawsuits or claims listed in Schedule 6.14 as to
which there is at least a reasonable possibility of adverse determination would
have, if so determined, individually or in the aggregate, a Buyer Material
Adverse Effect. Except as set forth on Schedule 6.14, to the knowledge of Buyer
and its Subsidiaries, there are no unasserted or threatened claims of the type
that would be required to be disclosed in Schedule 6.14. To the knowledge of
Buyer and its Subsidiaries, except as set forth on Schedule 6.14, none of Buyer
and its Subsidiaries is a party or subject to or in default under any material
judgment, order, injunction or decree of any Governmental Entity or arbitration
tribunal applicable to it or its respective properties, assets, operations or
businesses. Except as set forth on Schedule 6.14, there is no lawsuit or claim
by Buyer or any of its Subsidiaries pending, or which Buyer or any of its
Subsidiaries intend to initiate, against any other Person. Except as set forth
on Schedule 6.14, to the knowledge of Buyer and its Subsidiaries, there is no
pending or threatened investigation of or affecting Buyer or any of its
Subsidiaries by any Governmental Entity.
-42-
6.15. Brokers. There is no investment banker, broker or finder or other
-------
Person who will have any valid claim against Buyer, CAC I or CAC II for a
commission or brokerage in connection with this Agreement or the transactions
contemplated hereby as a result of any agreement of, or action taken by, Buyer,
other than Xxxxxx Brothers whose fees will be paid by Buyer.
6.16. Contracts. Except for Contracts listed on Schedule 6.16, neither the
---------
Buyer nor any of its Subsidiaries is a party to or bound by any Contract
relating to or affecting the assets of Buyer and its Subsidiaries which is a:
(a) Contract with its agents, suppliers, customers, advertisers,
consultants, advisors, sales representatives, distributors, sales agents or
dealers other than Contracts which by their terms are cancelable by Buyer or any
of its Subsidiaries with notice of not more than 30 days and without
cancellation penalties or severance payments, in the case of any such Contract,
in excess of $50,000;
(b) covenant not to compete (other than pursuant to any radius
restrictions contained in any lease, reciprocal easement agreement or
development, construction, operating or similar agreement) or confidentiality
agreement;
(c) Contract with any Governmental Entity;
(d) agreement, Contract or other instrument under which Buyer or
any of its Subsidiaries has borrowed any money from, or issued any note, bond,
debenture or other evidence of indebtedness to, any Person or any other note,
bond, debenture or other evidence of indebtedness issued to any Person;
(e) Contract (including any so-called take-or-pay, cash deficiency
or keepwell agreement) under which (A) any Person (including Buyer or any of its
Subsidiaries) has directly or indirectly guaranteed indebtedness, liabilities or
obligations of Buyer or any of its Subsidiaries or (B) or Buyer or any of its
Subsidiaries has directly or indirectly guaranteed indebtedness, liabilities or
obligations of any Person, and other than endorsements for the purpose of
collection in the ordinary course of business consistent with past practice and
including agreements having the effect of a guarantee, whether or not required
to be reflected on the Buyer Financial Statements in accordance with GAAP;
(f) pledge, security agreement, deed of Trust, financial statement
or other document granting a Lien on any of the assets of Buyer or any of its
Subsidiaries (other than Buyer Permitted Liens);
(g) Contract under which Buyer or any of its Subsidiaries has,
directly or indirectly, made any advance, loan, extension of credit or capital
contribution to, or other investment in, any Person in excess of $50,000;
(h) Contract under which Buyer or any of its Subsidiaries is lessee
of, or holds or operates, any machinery, equipment, vehicle or other tangible
personal property owned by a
-43-
third party and used in the business of Buyer or any of its Subsidiaries and
which entails payments in any 12-month period, in the case of any such Contract,
in excess of $50,000;
(i) Contract or other arrangement with (A) any affiliate of Buyer
or any of its Subsidiaries or (B) any current or former officer, director or
employee, shareholder or with any Related Person of Buyer or any of its
Subsidiaries or any of their respective affiliates;
(j) Contract for the sale of any of the assets of Buyer and its
Subsidiaries (including any capital stock or rights to acquire capital stock of
Buyer and its Subsidiaries) or the grant of any preferential rights to purchase
any of the assets of Buyer and its Subsidiaries or requiring the consent of any
party to the transfer thereof or otherwise limiting the ability of Buyer and its
Subsidiaries to sell the assets of Buyer and its Subsidiaries (including any
capital stock or rights to acquire capital stock of Buyer and its Subsidiaries);
(k) Contract not made in the ordinary course of business consistent
with past practice, including any joint venture or partnership arrangement or
any agreement relating to any merger or acquisition involving the Buyer or any
of its Subsidiaries; or
(l) Contract whether or not made in the ordinary course of
business, which is material to Buyer and its Subsidiaries, taken as a whole, or
the termination of which could reasonably be expected to have a Buyer Material
Adverse Effect.
Buyer and its Subsidiaries are not, and to the best of the knowledge of Buyer
and its Subsidiaries, no other party is (with or without the lapse of time or
the giving of notice or both) in default in any material respect under any
Contract, License or instrument required to be set forth in Buyer's disclosure
schedules (each, a "Buyer Scheduled Contract"). Buyer and its Subsidiaries have
------------------------
made available to the Crown Parties or their Representatives true and complete
copies of all Buyer Scheduled Contracts. Each Buyer Scheduled Contract is in
full force and effect as of July 11, 1997 and constitutes a legal, valid and
binding obligation of Buyer and its Subsidiaries and, to the best of the
knowledge of Buyer and its Subsidiaries, the other parties thereto, enforceable
in accordance with its terms. Neither Buyer nor any of its Subsidiaries has
received any written notice of the intention of any party to terminate any Buyer
Scheduled Contract.
6.17. Compliance with Laws. Except as set forth on Schedule 6.17, the
--------------------
operations of Buyer and its Subsidiaries are not now being conducted and, to the
knowledge of Buyer or any of its Subsidiaries, have not been conducted in
violation of any applicable law, ordinance, statute, rule or regulation of any
Governmental Entity except for violations, which do not and will not,
individually or in the aggregate, have or be reasonably expected to have a Buyer
Material Adverse Effect. Buyer and its Subsidiaries have not received any notice
from any Governmental Entity that the operations of Buyer and its Subsidiaries
are being conducted in violation of any applicable law, ordinance, statute, rule
or regulation of any Governmental Entity, or of any investigation or review
pending or threatened by any Governmental Entity investigating or reviewing any
alleged violation, which violation individually or in the aggregate with all
other violations would have or would reasonably be expected to have a Buyer
Material Adverse Effect. Except as set forth on Schedule 6.17 to this Agreement,
all the Real Property of Buyer and its Subsidiaries is in compliance with
applicable laws, including zoning, land use and building code laws, ordinances
-44-
and regulations necessary to conduct the operations of Buyer and its
Subsidiaries as presently conducted, and the transactions contemplated by this
Agreement could not reasonably be expected to result in the revocation of any
permit or variance, except to the extent that any such non-compliance, violation
or revocation, individually or in the aggregate, would not have or would not
reasonably be expected to have a Buyer Material Adverse Effect.
6.18. Environmental Matters.
---------------------
(a) Except as set forth on Schedule 6.18, Buyer and its
Subsidiaries are in compliance with all Environmental Laws, except for instances
of non-compliance, that, individually or in the aggregate, do not or will not
have or would not reasonably be expected to have a Buyer Material Adverse Effect
on the financial condition, business, operations or assets of Buyer and its
Subsidiaries. No Lien has attached to any Buyer Property or facility of Buyer
and its Subsidiaries pursuant to any Environmental Laws. Except as set forth on
Schedule 6.18, there have been no Releases of Hazardous Material by Buyer or any
of its Subsidiaries or, to the knowledge of Buyer or any of its Subsidiaries, by
any other Person in, on, under or affecting any Buyer Property or facility of
Buyer and its Subsidiaries, and Buyer and its Subsidiaries have not disposed of
any Hazardous Material in a manner that, in either case, individually or in the
aggregate, could reasonably be anticipated to result in a Buyer Material Adverse
Effect. Except as set forth on Schedule 6.18, prior to the period of ownership
or operation by Buyer and its Subsidiaries of any Buyer Property or facility, to
the knowledge of Buyer, no Hazardous Material was generated, treated, stored,
disposed of, used, handled or manufactured at, or transported, shipped or
disposed of from, such current or previously owned properties and, except as set
forth on Schedule 6.18, to the knowledge of Buyer, there were no Releases of
Hazardous Material in, on, under or affecting any such property. Except as set
forth on Schedule 6.18, there are no sites, locations or operations for which
Buyer and its Subsidiaries have received notice that they are or may be
responsible for any remedial or response action, as defined in any Environmental
Law, relating to any Release of Hazardous Material. Schedule 6.18 sets forth a
list of any and all environmental audits of any Buyer Property or facility of
Buyer and its subsidiaries conducted by Buyer or by any of its Subsidiaries
during Buyer's or a Subsidiary's ownership of such Buyer Property or facility,
or obtained by, or performed on behalf of, Buyer and its Subsidiaries in
connection with its acquisition of any Buyer Property or facility, and any
audits in the possession of Buyer and its Subsidiaries of any Buyer Property or
facility adjacent to their facilities which relate to any facts, conditions or
circumstances that have resulted, or may result, in a Release of Hazardous
Material at or under such Buyer Property or facility (collectively, the "Buyer
-----
Environmental Audits"). Buyer has made copies of all Buyer Environmental Audits
--------------------
available to Sellers.
(b) Buyer and its Subsidiaries have obtained, and are in material
compliance in all material respects with all Environmental Permits. Except as
disclosed on Schedule 6.18, Buyer and its Subsidiaries have not received notice
of any civil, criminal or administrative claims or proceedings, pending or
threatened, that are based on or related to any Environmental Laws or the
failure to comply with any terms and conditions of any Environmental Permits
which claims or proceedings of which failure to comply, individually or in the
aggregate, would have or reasonably be expected to result in a Buyer Material
Adverse Effect. To the knowledge of Buyer, except as described in Schedule 6.18,
(i) there are no PCBs in any container or equipment on, about, under
-45-
or within any Buyer Real Property or facility of Buyer and its Subsidiaries,
(ii) there is no asbestos at, on, about, under or within any Real Property or
facility of Buyer and its Subsidiaries and (iii) there are no underground
storage tanks, whether in service or closed in place, under any Buyer Property
or facility of Buyer or its Subsidiaries.
6.19. Taxes.
-----
(a) Buyer and its Subsidiaries have timely filed or caused to be
timely filed, or will timely file or cause to be timely filed on or prior to the
Closing Date, all Tax returns and Tax reports which are required to be filed
(including proper filing extensions) on or prior to the Closing Date by them.
All such returns were or will be, as the case may be, complete and correct in
all material respects at the time of filing. All Taxes due and payable with
respect to taxable periods covered by such returns, or with respect to which any
of Buyer or its Subsidiaries is or might be otherwise liable (including Taxes
which Buyer and its Subsidiaries may have been required to withhold from amounts
owing to any stockholder, employee, creditor or third party), have been, or
prior to the Closing Date will be, timely paid. Except as disclosed in schedule
6.7, none of Buyer or any of its Subsidiaries is delinquent in the payment of
any Tax, or has any Tax deficiencies proposed, assessed, or to the knowledge of
Buyer, threatened against it. No Liens for Taxes exist with respect to any
assets of Buyer or its Subsidiaries.
(b) Any deficiencies resulting from any tax audits or examinations
of Buyer or any of its Subsidiaries have been paid in full. There are no present
audits, disputes or proceedings as to any Taxes of Buyer or any of its
Subsidiaries. No material issues were raised in writing during any audit,
dispute or proceeding of Buyer or any of its Subsidiaries that might apply to
any taxable period subsequent to the taxable period covered by such audit,
dispute or proceeding.
(c) None of Buyer or its Subsidiaries is a party to or bound by any
agreement (including any tax sharing agreement), election or extension of the
statute of limitations with respect to taxes. None of the Buyer or its
Subsidiaries is or has ever been a member of an affiliated, consolidated,
combined or unitary group of which any corporation other than Buyer or any of
its Subsidiaries also is or was a member.
(d) Neither Buyer nor any of its Subsidiaries has taken any action
that would require it to include in income any adjustment under Section 481(a)
of the Code by reason of a change in accounting method initiated by Buyer or any
of its Subsidiaries, and the Internal Revenue Service has not proposed for any
open Tax year any such adjustment or change in accounting method. Neither Buyer
nor any of its Subsidiaries will be required to include in a taxable period (or
portion thereof) beginning on or after the Closing Date taxable income
attributable to income that economically accrued in a prior taxable period (or
portion thereof), including as a result of the installment method of accounting,
the completed contract method of accounting or the cash method of accounting.
6.20. Insurance. Buyer and its Subsidiaries maintain policies of fire and
---------
casualty, liability and other forms of insurance in such amounts, with such
deductibles and against such risks and losses as are customary in the businesses
in which they are engaged. The insurance policies currently in effect and owned
and maintained by Buyer and its Subsidiaries are listed in Schedule
-46-
6.20. All such policies are in full force and effect, all premiums due and
payable thereon have been paid (other than retroactive or retrospective premium
adjustments that are not yet, but may be, required to be paid with respect to
any period ending prior to the Closing Date), and no notice of cancellation or
termination has been received with respect to any such policy which has not been
replaced on substantially similar terms prior to the date of such cancellation.
The activities and operations of Buyer and its Subsidiaries have been conducted
in a manner so as to conform in all material respects to all applicable
provisions of such insurance policies.
6.21. Disclosure. No statement of Buyer contained in this Article 6, in
----------
Exhibit C, in any of the disclosure schedules referred to in Article 6 or in any
Certificates delivered pursuant to Section 4.3(f) intentionally contains any
untrue statement of a material fact or intentionally omits to state a material
fact necessary to make the statements contained herein or therein, in light of
the circumstances in which they are made not misleading.
ARTICLE 7.
Covenants of Sellers
--------------------
Each of the Crown Parties, on a joint and several basis, from July 11, 1997
until the completion of the Closing, covenants and agrees as follows:
7.1. Operation of the Business. From July 11, 1997 until the Closing,
-------------------------
except as expressly provided otherwise in this Agreement, the Crown Parties
shall conduct, or cause to be conducted, the Crown Communications Business and
the businesses of Network and Mobile in the ordinary course consistent with past
practice (including with respect to the collection of receivables, payment of
payables and other liabilities, advertising activities, sales practices
(including promotions, discounts and concessions), capital expenditures and
inventory levels, and contributions to or accruals to or in respect of Benefit
Plans). Furthermore, without limiting the generality of the foregoing, until the
Closing, the Crown Parties will (i) use reasonable commercial efforts to (A)
preserve intact their business organizations and the business organization of
the Crown Communications Business, (B) keep available to Buyer and the Surviving
Corporations the services of the present officers and key employees of the Crown
Communications Business, Network and Mobile, (C) continue in full force and
effect without modification all existing policies or binders of insurance
currently maintained in respect of the Crown Communications Business, Network
and Mobile, (D) preserve their current material relationships with customers,
suppliers, creditors, employees, licensors, licensees, distributors and others
with whom any of the Crown Parties has a material business or financial
relationship, (E) safeguard the inventory of the Crown Communications Business,
Network and Mobile from theft or misappropriation, (F) maintain the books and
records of the Crown Communications Business, Network and Mobile in
substantially the same manner as presently maintained and (G) continue the
construction and development of all in progress construction and development
sites, and (ii) not engage in any practice, take any action, fail to take any
action or enter into any transaction that would or would reasonably be expected
to result in any of the conditions set forth in Article 11 not being satisfied
on the Closing Date. In the event of damage, destruction or loss affecting any
assets of the Crown Communications Business, Network or Mobile between July
-47-
11, 1997 and the Closing Date, the Crown Parties may (but shall not be obligated
to) prior to the Closing Date elect to repair (or undertake to repair) such
damage, destruction or loss at the expense of Sellers.
In furtherance and not in limitation of the foregoing, each of the Crown
Parties covenants and agrees that, prior to the Closing, without the prior
written consent of Buyer, none of the Crown Parties will:
(a) make any material change in the business policies or practice
of the Crown Communications Business (including any advertising, marketing,
pricing, purchasing, personnel or sales policy or practice) except in the
ordinary course of business consistent with past practice;
(b) engage in any forward selling or acceleration of customer
orders or contracts, any deferral in paying payables, any deferral in making
capital expenditures or any delay in any construction or other capital projects,
any grant of any discount to customers other than in the ordinary course of
business consistent with past practice or any other changes intended to increase
the current income and cash collection of the Crown Communications Business
prior to the Closing Date by accelerating revenue that would otherwise be
collected after the Closing Date or deferring payment that would otherwise be
expected to be made prior to the Closing Date;
(c) in the case of Network or Mobile, declare, set aside or pay any
dividend or other distribution with respect to any shares of capital stock of
Network or Mobile, or repurchase, redeem or otherwise acquire any amount of
outstanding shares of capital stock or other equity securities of, or other
ownership interests in, Network or Mobile, other than declaration of a dividend
with respect to the outstanding shares of Network Common Stock in the amount of
$525,687.50 per share (or an aggregate amount of $1,051,375), which dividend
will be payable on October 31, 1997, to holders of record of Network Common
Stock as of August 14, 1997;
(d) issue, sell, transfer, pledge, or otherwise dispose of or
encumber any shares of, or securities convertible into or exchangeable for, or
options, warrants, calls, commitments or acquisition rights of any kind with
respect to any shares of, capital stock of any class or series of Network or
Mobile;
(e) in the case of Network or Mobile, amend any term of any
outstanding security of Network or Mobile;
(f) (x) incur or assume any indebtedness for borrowed money other
than under existing credit facilities in the ordinary course of business
consistent with past practice (but in any event not more than an aggregate
amount of additional indebtedness, to be agreed upon by Buyer and Sellers, in
excess of the aggregate amounts reflected on the Crown Interim Financial
Statements), or (y) guarantee, endorse or otherwise incur or assume (whether
directly, contingently or otherwise) liability for the obligations of any other
Person, other than in the ordinary course of business consistent with past
practice;
(g) create or assume any Lien on any material asset of the Crown
Communications Business, Network or Mobile other than Crown Permitted Liens,
Crown
-48-
Permitted Real Estate Liens, and Liens incurred under existing credit facilities
or in the ordinary course of business consistent with past practice;
(h) make any loan, advance (other than to employees for business
expenses, consistent with past practice) or capital contribution to or
investment in any Person;
(i) (x) enter into any Contract relating to any acquisition or
disposition of, or the lease, mortgage or pledge of, any assets or business of
any Person, except in the ordinary course of business consistent with past
practice or as required to comply with Section 7.1(o) hereof, or (y) agree to
any modification, amendment, assignment, termination or relinquishment of any
Contract, License or other right (including any insurance policy naming it as a
beneficiary or a loss payable payee) that would have or reasonably be expected
to have a Crown Material Adverse Effect, other than in the ordinary course of
business consistent with past practice and those contemplated by this Agreement;
(j) change any method of accounting or accounting principles or
practice relating to the Crown Communications Business, Network or Mobile,
except for any such change required by reason of a change in GAAP;
(k) make or change any Tax election, change any annual Tax
accounting period, adopt or change any method of Tax accounting, file any
amended return, enter into any closing agreement, settle any Tax claim or
assessment, surrender any right to claim a Tax refund, fail to make any Tax
payments or consent to extend or waive the limitations period applicable to any
Tax claim or assessment;
(l) (w) grant any severance or termination pay to any director,
officer or employee of the Crown Communications Business, Network or Mobile, (x)
enter into any employment, deferred compensation or other similar agreement (or
any amendment to any such existing agreement) with any director, officer or
other employee of the Crown Communications Business, Network or Mobile, (y)
increase benefits payable under any existing severance or termination pay
policies or employment agreements, or (z) increase compensation, bonuses or
other benefits payable to directors, officers or employees of the Crown
Communications Business, Network or Mobile except, with respect to clauses (w)
or (z) pursuant to Crown Benefit Plans in existence on July 11, 1997;
(m) adopt any changes to the articles of incorporation or by-laws
of Network or Mobile;
(n) adopt any plan or agreement of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or other
material reorganization of the Crown Communications Business, Network or Mobile;
(o) fail to make any material capital expenditures necessary to
maintain the existing business of the Crown Communications Business, Network and
Mobile;
(p) enter into any Contract or transaction with any Affiliate or
Related Person of any of the Crown Parties;
-49-
(q) enter into or amend any Benefit Plan other than as required by
law; or
(r) agree in writing or otherwise to take any of the actions
specified in this Section 7.1.
7.2. Consents. Without limiting the provisions of Section 9.3 hereof, the
--------
Crown Parties shall use commercially reasonable efforts to obtain or cause to be
obtained prior to the Closing Date any necessary consents from any Person to the
assignment (directly or indirectly) to Buyer of any Contract, License or other
instrument and right of the Crown Parties included in the Acquired Business that
requires the consent of any third party by reason of the transactions provided
for in this Agreement, and Buyer will reasonably cooperate with the Crown
Parties in this regard, but neither the Crown Parties nor Buyer will be
obligated to make any special payment or grant any special concession to any
party. For the avoidance of doubt, the procurement of any such necessary
consents shall not be deemed to be a condition to Buyer's obligation to close
the transaction contemplated hereby.
7.3. Notice of Proceedings. The Crown Parties will promptly notify Buyer
---------------------
telephonically and in writing upon the Crown Parties' (i) becoming aware of any
order or decree or any complaint praying for an order or decree restraining or
enjoining the consummation of this Agreement or the transactions contemplated
hereunder or (ii) receiving any notice from any Governmental Entity of its
intention (x) to institute an investigation into, or institute a suit or
proceeding to restrain or enjoin, the consummation of this Agreement or such
transactions or (y) to nullify or render ineffective this Agreement or such
transactions if consummated.
7.4. No Solicitation. From July 11, 1997 through the Closing Date or the
---------------
earlier termination of this Agreement in accordance with its terms, none of the
Crown Parties shall, nor shall any of the Crown Parties authorize or permit any
Representative of any of the Crown Parties to, directly or indirectly solicit,
initiate, encourage or participate in any discussions or negotiations with, or
furnish any information or assistance to, or afford access to the properties,
books and records or employees of the Crown Communications Business, Network or
Mobile to, any Person or group (other than Buyer or its Representatives)
concerning any merger, sale of securities, sale of substantial assets or similar
transaction involving any of the Crown Parties. Without limiting the foregoing,
it is understood that any violation of the restrictions set forth in the
preceding sentence by Sellers, the Crown Communications Business, Network or
Mobile, or any Representative of Sellers, Network or Mobile, whether or not such
Person is purporting to act on behalf of any of Seller, the Crown Communications
Business, Network or Mobile, shall be deemed to be a breach of this Section 7.4
by Sellers.
7.5. Cooperation. The Crown Parties acknowledge that Buyer intends to
-----------
finance or refinance the acquisition of the Acquired Business by arranging for a
loan or loans from certain banks and by issuing securities in the high yield
debt market (collectively, the "Acquisition Financing"). In connection with the
---------------------
Acquisition Financing, the Crown Parties shall cooperate with Buyer and aid
Buyer in consummating the Acquisition Financing, including by (a) using
commercially reasonable efforts to assist Buyer and its accountants in
obtaining, no later than July 28, 1997, audited and unaudited combined
historical financial statements for the Acquired Business meeting the
requirements of Regulation S-X for a Form S-1 registration statement with
-50-
the audited financial statements being audited by KPMG Peat Marwick LLP; (b)
executing and delivering to KPMG Peat Marwick LLP a customary letter of
representations to enable KPMG Peat Marwick LLP to deliver its audit opinion
with respect to the audited combined financial statements referred to in clause
(a) above; (c) assisting Buyer in the preparation of a customary offering
memorandum in connection with the issuance by Buyer of securities in the high
yield debt market; (d) providing access to Buyer's Representatives at reasonable
times to information and officers and other key employees of the Crown
Communications Business, Network or Mobile for due diligence purposes in
connection with the Acquisition Financing; and (e) providing access to Buyer's
Representatives at reasonable times to prior audits, working papers and other
information related to the financial statements of the Crown Communications
Business, Network and Mobile. For the avoidance of doubt, in no event shall
Buyer's obtaining or completing the audited financial statements or financing
referred to above be deemed to constitute a condition to Buyer's obligation to
close the transactions contemplated hereby. Any information obtained by Buyer
and its Representatives pursuant to this Section 7.5 relating to the operation
of the Acquired Business or the Crown Communications Business shall be held
confidential pursuant to the Confidentiality Agreement referred to in Section
14.14 hereof; provided, however, that Buyer and its Representatives may disclose
-------- -------
such information as is reasonably necessary to complete the Acquisition
Financing (including as is reasonably necessary to meet their disclosure
obligations in connection with the Acquisition Financing).
ARTICLE 8.
Covenants of Buyer
------------------
Buyer covenants and agrees that from July 11, 1997 until the completion of
the Closing:
8.1. Operation of the Business. From July 11, 1997 until the Closing,
-------------------------
except as expressly provided otherwise in this Agreement, Buyer and its
Subsidiaries shall conduct, or cause to be conducted, their business in the
ordinary course consistent with past practice (including with respect to the
collection of receivables, payment of payables and other liabilities,
advertising activities, sales practices (including promotions, discounts and
concessions), capital expenditures and inventory levels, and contributions to or
accruals to or in respect of Benefit Plans). Furthermore, without limiting the
generality of the foregoing, Buyer and its Subsidiaries will (i) use reasonable
commercial efforts to (A) preserve intact their business organizations, (B) keep
available the services of their present officers and key employees, (C) continue
in full force and effect without modification all existing policies or binders
of insurance currently maintained in respect of their business, (D) preserve
their current material relationships with customers, suppliers, lenders,
creditors, employees, licensors, licensees, distributors and others with whom
Buyer or any of its Subsidiaries or CTSH or any of its Subsidiaries has a
material business or financial relationship, including without limitation the
BBC Agreement, (E) safeguard the inventory of Buyer and its Subsidiaries from
theft or misappropriation and (F) maintain the books and records of Buyer and
its Subsidiaries in substantially the same manner as presently maintained and
(ii) not engage in any practice, take any action, fail to take any action or
enter into any transaction that would or would reasonably be expected to result
in any of the conditions set forth in Article 10 not being satisfied on the
Closing Date.
-51-
In furtherance and not in limitation of the foregoing, Buyer covenants and
agrees that, prior to the Closing, without the prior written consent of the
Crown Parties, none of Buyer or its Subsidiaries will:
(a) issue, sell, transfer, pledge or otherwise dispose of or
encumber any shares of, or securities convertible into or exchangeable for, or
options, warrants, calls, commitments or acquisition rights of any kind with
respect to any shares of, capital stock of any class or series of Buyer or its
Subsidiaries, other than issuances pursuant to the exercise of stock-based
awards or options, including under the plans described in Section 6.13,
outstanding on July 11, 1997 and the issuance of convertible preferred stock to
investors in Buyer as contemplated in connection with transactions contemplated
hereby;
(b) declare, set aside or pay any dividend or other distribution with
respect to any shares of capital stock of Buyer or any of its Subsidiaries or
repurchase, redeem or otherwise acquire any amount of outstanding shares of
capital stock or other equity securities of, or other ownership interests in,
Buyer or any of its Subsidiaries, other than intercompany distributions and
advances between wholly owned Subsidiaries;
(c) enter into any Contract relating to any acquisition or
disposition, or the lease, mortgage or pledge of, of any assets or business of
any Person that would be reasonably likely to have a Buyer Material Adverse
Effect, other than in the ordinary course of business consistent with past
practice and those contemplated by this Agreement, or amend, modify, terminate
or violate any term of the BBC Agreement;
(d) change any method of accounting or accounting principles or
practice, except for any such change required by reason of a change in GAAP;
(e) adopt any changes to the certificate of incorporation or by-laws
of Buyer and similar governing instruments of its Subsidiaries;
(f) adopt any plan or agreement of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or other
material reorganization of Buyer or any of its Subsidiaries; or
(g) agree in writing or otherwise to take any of the actions
specified in this Section 8.1.
8.2 Notice of Proceedings. Buyer will promptly notify the Crown Parties
---------------------
telephonically and in writing upon Buyer (i) becoming aware of any order or
decree or any complaint praying for an order or decree restraining or enjoining
the consummation of this Agreement or the transactions contemplated hereunder or
(ii) receiving any notice from any Governmental Entity of its intention (x) to
institute an investigation into, or institute a suit or proceeding to restrain
or enjoin, the consummation of this Agreement or such transactions or (y) to
nullify or render ineffective this Agreement or such transactions if
consummated.
8.3 Corporate Name and Symbol. On the Closing Date, Buyer will take all
-------------------------
necessary action such that CAC III shall adopt the name "Crown Communication
Inc.", "Crown
-52-
Communications Inc." or another name including "Crown" that is satisfactory to
Sellers and, after the Closing, CAC III shall not change its name without the
prior written consent of Sellers. Commencing as of the Closing, CAC III, the
Network Surviving Corporation, the Mobile Surviving Corporation and any other
domestic Subsidiaries of any such entity and any successor to any such entity or
such Subsidiary shall adopt and use the current Crown Symbol, to the extent
reasonably possible and permitted under applicable law.
8.4 Liquidity Provision. Upon receipt of a completed application, and
-------------------
compliance by Mr. Crown with any requirements under such application (including
a customary physical examination), Buyer shall take appropriate steps to obtain
and maintain for one year following the Closing Date, not less than $30 million
in life insurance on the life of Xxxxxx X. Crown naming Xxxxxxx Crown as
beneficiary in order to provide liquid funds to pay taxes related to the capital
stock of Buyer owned by the Crowns resulting from the death of Xxxxxx X. Crown
or both the Sellers; provided, however, that the annual premium for any such
-------- -------
life insurance shall not exceed $45,000.
ARTICLE 9.
Mutual Covenants of the Parties
-------------------------------
Buyer and the Crown Parties covenant and agree from July 11, 1997 until the
completion of the Closing:
9.1 Executive Compensation. As soon as practicable after the Closing,
----------------------
Buyer shall adopt, for the benefit of Xxxxxx X. Crown and other key employees
named on Schedule 9.1, a mutually acceptable modern and meaningful compensation
package containing appropriate base salary, short-term incentives, long-term
incentives, pensions, group term life and medical insurance and other forms of
compensation comparable to those offered by other companies of comparable size
in the same or similar businesses. Prior to the Closing, Buyer shall provide to
Xxxxxx X. Crown a detailed summary of such proposed compensation package. In his
capacity as Chief Executive Officer, Xxxxxx X. Crown shall make the
recommendations to the compensation committee or Board of Directors of Buyer, as
applicable, regarding compensation packages for the benefit of employees of
Crown Communications Inc.
9.2 Xxxx-Xxxxx-Xxxxxx. As soon as possible (but in no event later than
-----------------
five business days) after July 11, 1997, the parties shall prepare and file all
documents with the Federal Trade Commission and the United States Department of
Justice as are required to comply with the Xxxx-Xxxxx-Xxxxxx Act, and shall
request early termination of the waiting period under the Xxxx-Xxxxx-Xxxxxx Act.
The parties will furnish promptly all materials thereafter requested by any
Governmental Entity having jurisdiction over such filings. The parties shall
keep each other fully informed of the status of the Xxxx-Xxxxx-Xxxxxx Act filing
and any other filings made to a Governmental Entity in connection with the
transactions contemplated in this Agreement.
9.3 Access to Facilities, Files and Records. At the reasonable request
---------------------------------------
of any party hereto and upon reasonable advance notice, the other parties will
give or cause to be given to the
-53-
authorized Representatives of such requesting party (i) full access to all
facilities, management personnel, property, accounts, books, deeds, title
papers, insurance policies, licenses, agreements, contracts, commitments, logs,
records and files of every character, equipment, machinery, fixtures,
furniture, vehicles and notes and accounts payable and receivable and (ii) all
such other information as such party may reasonably request; provided, however,
-------- -------
that parties shall not be required to permit such access or provide such
information to the extent it unreasonably interferes with the operation of the
party's business or such information is subject to a binding confidentiality
agreement with a third party.
9.4 Advice of Changes. Each party will give written notice to the other
-----------------
parties promptly upon its learning of (i) the occurrence of any event that would
or would be reasonably expected to cause or constitute a material breach had
such event occurred or been known to such party prior to July 11, 1997, of any
of such party's representations or warranties contained in this Agreement or in
any disclosure schedule to this Agreement, or of a Crown Material Adverse Effect
or a Buyer Material Adverse Effect, as the case may be, or (ii) any attempted
unionization of employees of such party.
9.5 Consummation of Agreement. Subject to the provisions of Section 14.1
-------------------------
of this Agreement, each of the parties hereto will use all reasonable efforts to
fulfill and perform all conditions and obligations required on its part to be
fulfilled and performed under this Agreement, and to cause the transactions
contemplated by this Agreement to be carried out.
9.6 No Solicitation of Employees.
----------------------------
(a) For a period of two years after July 11, 1997 or until the
earlier consummation of the Mergers, neither Buyer nor any of its Subsidiaries
will, nor will Buyer cause CTSH or any of its Subsidiaries to, directly or
indirectly, solicit or hire any employee of the Crown Communications Business,
Network or Mobile.
(b) For a period of two years after July 11, 1997 or until the
earlier consummation of the Mergers, none of the Crown Parties will, directly or
indirectly, solicit or hire any employee of the Buyer, CTSH or any of their
respective Subsidiaries.
9.7 Standstill.
----------
(a) Buyer acknowledges that Sellers have provided certain highly
sensitive and proprietary information to Buyer relating to, inter alia,
marketing plans, business strategies and methods of operations of the Crown
Parties, which, if used by Buyer in violation of the Confidentiality Agreement,
would be unfair and cause irreparable damage to the Crown Parties, for which
Crown's legal remedies would be inadequate. Accordingly, for a period of one
year from July 11, 1997, or until the earlier consummation of the Mergers,
neither Buyer nor any of its Subsidiaries will, directly or indirectly, engage
in, or provide any financial assistance to, or make any investment in any
business engaging in any wireless communications site acquisition, ownership,
design, development, construction, management and servicing, including broadcast
and telecommunications tower and rooftop facilities ("Restricted Activities")
---------------------
conducted in any service area (or any portion thereof) in Pennsylvania, West
Virginia, Ohio or Kentucky served by
-54-
the Crown Parties as of July 11, 1997 (the "Crown Territory"); provided,
---------------
however, that the prohibitions against Restricted Activities by Buyer set forth
in this Section 9.7(a) shall not apply to any Restricted Activities directly
related to or arising from existing contractual arrangements and certain
contractual negotiations between Buyer and NEXTEL with respect to Restricted
Activities within the Commonwealth of Kentucky, such contractual arrangements
and negotiations having been entered into prior to July 11, 1997.
(b) Sellers acknowledge that Buyer has provided certain highly
sensitive and proprietary information to Seller relating to, inter alia,
marketing plans, business strategies and methods of operations of the Buyer and
its Subsidiaries, which, if used by Buyer in violation of the Confidentiality
Agreement, would be unfair and cause irreparable damage to the Buyer, for which
Buyer's legal remedies would be inadequate. Accordingly, for a period of one
year from July 11, 1997 or until the earlier consummation of the Mergers, none
of the Crown Parties will, directly or indirectly, engage in, or provide any
financial assistance to, or make any investment in any business engaging in the
any Restricted Activities conducted in any service area (or any portion thereof)
in Arizona, Colorado, Mississippi, Nevada, New Mexico, North Dakota, Oklahoma,
Puerto Rico or Texas served by the Buyer or its Subsidiaries as of July 11,
1997.
Notwithstanding the foregoing, Buyer or any of its Subsidiaries may (i)
acquire stock or assets of a business ("New Business") that is engaged in
------------
Restricted Activities in the Crown Territory, provided that the Restricted
Activities conducted by such New Business in the Crown Territory account for
less than 10% of the annual gross revenues of the New Business and less than 10%
of the total asset value of such New Business, and provided further, that in
each such case the Buyer or its Subsidiaries, or such New Business shall, within
one (1) month of such acquisition, offer to sell to Sellers the portion of such
New Business conducted in the Crown Territory upon the same price and other
terms paid by Buyer for such portion of the New Business. In the event that
Buyer is unable to allocate the consideration paid for the New Business to that
portion thereof conducted in the Crown Territory, then Buyer and Sellers shall
use commercially reasonable efforts to agree upon an acceptable price therefor.
(c) Notwithstanding the consummation of the Mergers, the provisions of
Sections 9.7(a) and (b) shall be reinstated and become effective as to all the
parties if the Sellers exercise their rights under Section 11 of the Pledge
Agreement by and among Xxxxxx X. Crown, Xxxxxxx Crown and Castle Tower Holding
Corp. dated August 14, 1997 (the "Pledge Agreement") to take control of all
----------------
Collateral (as that term is defined in the Pledge Agreement) and the proceeds
thereof.
ARTICLE 10.
Conditions to the Obligations of the Crown Parties
--------------------------------------------------
The obligations of the Crown Parties to consummate the transactions
contemplated by this Agreement are subject to the satisfaction (or waiver by the
Crown Parties) of the following conditions:
-55-
10.1 No Buyer Material Adverse Effect; Representations and Warranties and
--------------------------------------------------------------------
Covenants.
---------
(a) No event or events shall have occurred since July 11, 1997
which, individually or in the aggregate, has had or is reasonably likely to
result in a Buyer Material Adverse Effect.
(b) Each of Buyer, CAC I and CAC II shall have performed in all
material respects all of its obligations and complied in all material respects
with all of its covenants hereunder required to be performed or complied with by
it at or prior to the Closing and the representations and warranties of each of
Buyer, CAC I and CAC II contained in this Agreement qualified as to materiality
shall be true and correct, and those not so qualified shall be true and correct
in all material respects, as of the Closing Date, as if made at and as of such
date, except for those representations and warranties that address matters only
as of a particular date (in which case such representations and warranties
qualified as to materiality shall be true and correct, and those not so
qualified shall be true and correct in all material respects, on and as of such
date).
10.2 Proceedings. Neither the Crown Parties nor Buyer, CAC I or CAC II
-----------
shall (a) be subject to any restraining order or injunction restraining or
prohibiting the consummation of the transactions contemplated hereby and (b)
have received written notice from any Governmental Entity of its intention to
institute any action or proceeding seeking to restrain, enjoin or nullify this
Agreement or the transactions contemplated hereby.
10.3 Xxxx-Xxxxx-Xxxxxx. The applicable waiting period imposed by the
-----------------
Xxxx-Xxxxx-Xxxxxx Act shall have expired or been terminated.
10.4 Deliveries. Buyer shall have complied with each and every one of
----------
its obligations set forth in Section 4.3.
ARTICLE 11.
Conditions to the Obligations of Buyer, CAC I and CAC II
--------------------------------------------------------
The obligations of Buyer, CAC I and CAC II to consummate the transactions
contemplated by this Agreement are subject to the satisfaction (or waiver by
such parties) of the following conditions:
11.1 No Crown Material Adverse Effect; Representations, Warranties and
-----------------------------------------------------------------
Covenants.
---------
(a) No event or events shall have occurred since July 11, 1997 which,
individually or in the aggregate, has had or is reasonably likely to result in a
Crown Material Adverse Effect.
(b) Each of the Crown Parties shall have performed in all material
respects all of its obligations and complied in all material respects with all
of its covenants hereunder required
-56-
to be performed or complied with by it at or prior to the Closing and the
representations and warranties of each of the Crown Parties contained in this
Agreement qualified as to materiality shall be true and correct, and those not
so qualified shall be true and correct in all material respects, as of the
Closing Date, as if made at and as of such date, except for those
representations and warranties that address matters only as of a particular date
(in which case such representations and warranties qualified as to materiality
shall be true and correct, and those not so qualified shall be true and correct
in all material respects, on and as of such date).
11.2 Proceedings. Neither the Crown Parties nor Buyer, CAC I or CAC II
-----------
shall (a) be subject to any restraining order or injunction restraining or
prohibiting the consummation of the transactions contemplated hereby and (b)
have received written notice from any Governmental Entity of its intention to
institute any action or proceeding seeking to restrain, enjoin or nullify this
Agreement or the transactions contemplated hereby.
11.3 Xxxx-Xxxxx-Xxxxxx. The applicable waiting period imposed by the
-----------------
Xxxx-Xxxxx-Xxxxxx Act relating to the transactions contemplated by this
Agreement shall have expired or been terminated. The applicable waiting period
imposed by the Xxxx-Xxxxx-Xxxxxx Act relating to the investment by certain of
the Investors (as defined in the Shareholder Agreement) in Buyer in shares of
convertible preferred stock in connection with the transactions contemplated by
this Agreement shall have been expired or been terminated.
11.4 Deliveries. Each of the Crown Parties shall have complied with each
----------
and every one of its obligations set forth in Section 4.2.
11.5 Xxxxxx X. Crown. Xxxxxx X. Crown shall be alive and shall have the
---------------
mental and physical capacity to operate the Acquired Business as such business
is operated by him as of July 11, 1997.
11.6 Xxxxxxx Employment Agreement. The parties and Xxxx X. Xxxxxxx shall
----------------------------
have agreed to arrangements reasonably satisfactory to Buyer relating to the
employment agreement dated as of November 1, 1996, between Network and Xxxx X.
Xxxxxxx.
11.7 FCC Authorization. The Crown Parties shall have received a "special
temporary authorization" from the FCC to transfer the FCC Licenses set forth on
Schedule 5.12 (other than those listed on Schedule 1.7).
ARTICLE 12.
Survival of Representations and Warranties
------------------------------------------
12.1 Survival. All representations and warranties contained in this
--------
Agreement or in any Schedule, Exhibit, certificate, agreement, document or
statement delivered pursuant hereto shall terminate on and as of the Closing.
-57-
12.2 Indemnification. From and after the Closing, the parties shall
---------------
indemnify each other as set forth below.
(a) Indemnification by Sellers. Sellers jointly and severally shall
--------------------------
indemnify Buyer, the Crown Communications Business, CAC I, CAC II, Network and
Mobile and each of their respective Affiliates and each of their respective
Representatives against and hold them harmless from any loss, liability, claim,
damage or expense (including reasonable legal fees and expenses) (collectively,
the "Buyer's Damages") suffered or incurred by any such indemnified party (other
---------------
than any relating to Taxes, for which indemnification provisions are set forth
in Section 13.4) arising from, relating to or otherwise in respect of (i) any
breach of any pre-closing covenant of Sellers contained in this Agreement, (ii)
all Excluded Liabilities other than liabilities and obligations arising under or
related to Excluded Leases and Excluded Contracts, and (iii) all obligations and
liabilities of Network and Mobile of any kind whatsoever, whether accrued,
contingent, absolute, determined, determinable or otherwise, other than any such
liabilities or obligations disclosed in Section 5.10 (b); provided, however,
-------- -------
that Sellers shall not have any liability under clause (i) above unless the
Buyer's Damages shall have resulted from an intentional breach or fraud on the
part of any of the Crown Parties.
Each of Buyer, CAC I, CAC II, Network and Mobile acknowledges and
agrees that, should the Closing occur, its sole and exclusive remedy with
respect to any and all claims relating to this Agreement and the transactions
contemplated hereby (other than matters related to the Shareholder Agreement and
other than post-Closing covenants) and the Crown Communications Business (other
than claims of, or causes of action arising from, fraud) shall be pursuant to
the indemnification provisions set forth in this Article 12. In furtherance of
the foregoing, each of Buyer, CAC I, CAC II, Network and Mobile hereby waives,
from and after the Closing, any and all rights, claims and causes of action
(other than claims of, or causes of action arising from, fraud) it may have
against Sellers and their respective Affiliates arising under or based upon any
federal, state, local or foreign statute, law, ordinance, rule or regulation or
otherwise (except pursuant to the indemnification provisions set forth in this
Article 12).
(b) Indemnification by Buyer. Buyer shall, and shall cause its
------------------------
Subsidiaries to, indemnify Sellers and their respective Affiliates and each of
their respective Representatives against and hold them harmless from any loss,
liability, claim, damage or expense (including reasonable legal fees and
expenses) (collectively, "Sellers' Damages") incurred by any such indemnified
----------------
party, arising from, relating to or otherwise in respect of (i) any breach of
any pre-closing covenant of Buyer contained in this Agreement and (ii) all
Assumed Liabilities; provided that Buyer shall not have any liability under
clause (i) above unless the Sellers' Damages shall have resulted from an
intentional breach or fraud on the part of Buyer.
Each of the Sellers acknowledges and agrees that, should the
Closing occur, his or her sole and exclusive remedy with respect to any and all
claims relating to this Agreement and the transactions contemplated hereby
(other than the matters related to the Shareholder Agreement and other than
post-closing covenants, or claims of, or causes of action arising from, fraud)
shall be pursuant to the indemnification provisions set forth in this Article
12. In furtherance of the foregoing, each of the Sellers hereby waives from and
after the Closing, any and all rights, claims and causes of action (other than
claims of, or causes of action arising from,
-58-
fraud) he or she may have against Buyer and its Affiliates arising under or
based upon any federal, state, local or foreign statute, law, ordinance, rule or
regulation or otherwise (except pursuant to the indemnification provisions set
forth in this Article 12).
(c) Losses Net of Insurance, etc. The amount of any loss,
-----------------------
liability, claim, damage, expense or Tax for which indemnification is provided
under this Article 12 or Article 13 shall be net of any amounts recovered by the
indemnified party under insurance policies with respect to such loss, liability,
claim, damage, expense or Tax (collectively, a "Loss") and shall be (i)
increased to take account of any net Tax cost incurred by the indemnified party
arising from the receipt or accrual of indemnity payments hereunder (grossed up
for such increase) and (ii) reduced to take account of any net Tax benefit
realized by the indemnified party arising from the deductibility of any such
Loss. In computing the amount of any such Tax cost or Tax benefit, the
indemnified party shall be deemed to recognize all other items of income, gain,
loss, deduction or credit before recognizing any item arising from the receipt
or accrual of any indemnity payment hereunder or the deductibility of any
indemnified Loss. Any indemnification payment hereunder shall initially be made
without regard to this paragraph and shall be increased or reduced to reflect
any such net Tax cost (including gross-up) or net Tax benefit only after the
indemnified party has actually realized such cost or benefit. For purposes of
this Agreement, an indemnified party shall be deemed to have "actually realized"
a net Tax cost or a net Tax benefit to the extent that, and at such time as, the
amount of Taxes payable by such indemnified party is increased above or reduced
below, as the case may be, the amount of Taxes that such indemnified party would
be required to pay but for the receipt or accrual of the indemnity payment or
the deductibility of such Loss, as the case may be. The amount of any increase
or reduction hereunder shall be adjusted to reflect any final determination
(which shall include the execution of Form 870-AD or successor form) with
respect to the indemnified party's liability for Taxes and payments between
Sellers and Buyer to reflect such adjustment shall be made if necessary. Any
indemnity payment under this Agreement shall be treated as an adjustment to the
Purchase Price for Tax purposes, unless a final determination (which shall
include the execution of a Form 870-AD or successor form) with respect to the
indemnified party or any of its affiliates causes any such payment not to be
treated as an adjustment to the Purchase Price for federal income Tax purposes.
(d) Termination of Indemnification. The obligations to indemnify
------------------------------
and hold harmless a party hereto pursuant to Sections 12.2(a) and 12.2(b) shall
not terminate.
(e) Procedures Relating to Indemnification under Article 12. In
-------------------------------------------------------
order for a party (the "indemnified party") to be entitled to any
indemnification provided for under this Agreement (other than under Article 13)
in respect of, arising out of or involving a claim or demand made by any Person
against the indemnified party (a "Third Party Claim"), such indemnified party
-----------------
must notify the indemnifying party in writing, and in reasonable detail, of the
Third Party Claim within 10 business days after receipt by such indemnified
party of written notice of the Third Party Claim; provided, however, that
-------- -------
failure to give such notification shall not affect the indemnification provided
hereunder except to the extent the indemnifying party shall have been actually
prejudiced as a result of such failure (except that the indemnifying party shall
not be liable for any expenses incurred during the period in which the
indemnified party failed to give such notice). Thereafter, the indemnified party
shall deliver to the indemnifying party, within five
-59-
business days after the indemnified party's receipt thereof, copies of all
notices and documents (including court papers) received by the indemnified party
relating to the Third Party Claim.
If a Third Party Claim is made against an indemnified party, the
indemnifying party shall be entitled to participate in the defense thereof and,
if it so chooses and acknowledges its obligation to indemnify the indemnified
party therefor, to assume the defense thereof with counsel selected by the
indemnifying party; provided that such counsel is not reasonably objected to by
--------
the indemnified party. Should the indemnifying party so elect to assume the
defense of a Third Party Claim, the indemnifying party shall not be liable to
the indemnified party for legal expenses subsequently incurred by the
indemnified party in connection with the defense thereof. If the indemnifying
party assumes such defense, the indemnified party shall have the right to
participate in the defense thereof and to employ counsel (not reasonably
objected to by the indemnifying party), at its own expense, separate from the
counsel employed by the indemnifying party, it being understood that the
indemnifying party shall control such defense. The indemnifying party shall be
liable for the fees and expenses of counsel employed by the indemnified party
for any period during which the indemnifying party has failed to assume the
defense thereof (other than during the period prior to the time the indemnified
party shall have given notice of the Third Party Claim as provided above).
If the indemnifying party so elects to assume the defense of any Third Party
Claim, all of the indemnified parties shall cooperate with the indemnifying
party in the defense or prosecution thereof. Such cooperation shall include the
retention and (upon the indemnifying party's request) the provision to the
indemnifying party 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. Whether or not the indemnifying party shall have assumed the defense
of a Third Party Claim, the indemnified party shall not admit any liability with
respect to, or settle, compromise or discharge, such Third Party Claim without
the indemnified party's prior written consent (which consent shall not be
unreasonably withheld). If the indemnifying party shall have assumed the
defense of a Third Party Claim, the indemnified party shall agree to any
settlement, compromise or discharge of Third Party Claim which the indemnifying
party may recommend and which by its terms obligates the indemnifying party to
pay the full amount of the liability in connection with such Third Party Claim,
which releases the indemnifying party completely in connection with such Third
Party Claim and which would not otherwise adversely affect the indemnified
party.
Notwithstanding the foregoing, the indemnifying party shall not be entitled
to assume the defense of any Third Party Claim (and shall be liable for the
reasonable fees and expenses of counsel incurred by the indemnified party in
defending such Third Party Claim) if the Third Party Claim seeks an order,
injunction or other equitable relief or relief for other than money damages
against the indemnified party which the indemnified party reasonably determines,
after conferring with its outside counsel, cannot be separated from any related
claim for money damages. If such equitable relief or other relief portion of
the Third Party Claim can be so separated from that for money damages, the
indemnifying party shall be entitled to assume the defense of the portion
relating to money damages. The indemnification required by
-60-
Section 12.2(a) or 12.2(b) other than Third Party Claims shall be governed by
Section 12.2(e). All Tax Controversies as defined in Section 13.3 shall be
governed by Section 13.3.
(f) Other Claims. In the event any indemnified party should have
------------
a claim against any indemnifying party under Section 12.2(a) or 12.2(b) that
does not involve a Third Party Claim being asserted against or sought to be
collected from such indemnified party, the indemnified party shall deliver
notice of such claim with reasonable promptness to the indemnifying party. The
failure by any indemnified party so to notify the indemnifying party shall not
relieve the indemnifying party from any liability which it may have to such
indemnified party under Section 12.2(a) or 12.2(b), except to the extent that
the indemnifying party demonstrates that it has been materially prejudiced by
such failure. If the indemnifying party does not notify the indemnified party
within 10 business days following its receipt of such notice that the
indemnifying party disputes its liability to the indemnified party under Section
12.2(a) or 12.2(b), such claim specified by the indemnified party in such notice
shall be conclusively deemed a liability of the indemnifying party under Section
12.2(a) or 12.2(b) and the indemnifying party shall pay the amount of such
liability to the indemnified party on demand or, in the case of any notice in
which the amount of the claim (or any portion thereof) is estimated, on such
later date when the amount of such claim (or such portion thereof) becomes
finally determined. If the indemnifying party has timely disputed its liability
with respect to such claim, as provided above, the indemnifying party and the
indemnified party shall proceed in good faith to negotiate a resolution of such
dispute, and, if not resolved through negotiations, such dispute shall be
resolved by litigation in an appropriate court of competent jurisdiction.
(g) Mitigation. Buyer and Sellers shall cooperate with each other
----------
with respect to resolving any claim or liability with respect to which one party
is obligated to indemnify the other party hereunder, including by making
commercially reasonable efforts to mitigate or resolve any such claim or
liability; provided that such party shall not be required to make such efforts
--------
if they would be detrimental in any material respect to such party. In the
event that Buyer or Sellers shall fail to make such commercially reasonably
efforts to mitigate or resolve any claim or liability, then (unless the proviso
to the foregoing covenant shall be applicable) notwithstanding anything else to
the contrary contained herein, the other party shall not be required to
indemnify any Person for any loss, liability, claim, damage or expense that
could reasonably be expected to have been avoided if Buyer or Sellers, as the
case may be, had made such efforts.
ARTICLE 13
Tax-Related Matters
-------------------
13.1. Closing of Tax Year. The Crown Parties and Buyer hereby
-------------------
acknowledge that, effective as of the Closing Date, each of Network and Mobile
will cease to be an S corporation under the Code. As a result, each of Network's
and Mobile's taxable years as an S corporation will terminate as of the Closing
Date, and such corporations will be required to file Federal income tax returns
and various state income and franchise tax returns for the period beginning
January 1, 1997 and ending on the earlier to occur of December 31, 1997 and the
date prior to the Closing Date, and, if the Closing does not occur prior to
December 31, 1997, the period
-61-
commencing January 1, 1998 and ending on the date prior to the Closing Date (the
"Final S Tax Period(s)"). Each of the Crown Parties and Buyer hereby agree that
Network and Mobile each shall be treated as an S corporation for Federal income
tax purposes, and by all states and localities listed on Schedule 5.23(c), for
the Final S Tax Period(s).
13.2 Filing of Tax Returns.
---------------------
(a) The Crown Parties shall, at their sole expense, cause Habib &
Associates to prepare all Tax returns required to be filed by Network and/or
Mobile or with respect to the Crown Communications Business for any taxable
period which ends prior to the Closing Date or on the Closing Date and any Tax
return with respect to the Crown Communications Business with respect to a
Section 1.6 Asset for any taxable period which ends prior to the date such
Section 1.6 Asset is transferred to the Buyer, including the Federal income tax
return(s) for the Final S Tax Period(s), and the various state income tax and
franchise returns for the same period(s) (each, a "Pre-Closing Tax Return");
----------------------
provided, however, that (i) such returns shall be prepared on a basis consistent
-------- -------
with the intention of the parties that each of the Mergers will qualify as a
"reorganization" within the meaning of Section 368(a) of the Code (to the extent
such position is consistent with applicable law) and that the purchase of the
Crown Communications Business will be a taxable transaction, (ii) such returns
shall be prepared on a basis consistent with past practice and in a manner that
does not distort taxable income (e.g., by deferring income to a period after the
----
Closing or accelerating deductions to a period prior to the Closing) and (iii)
such returns shall be submitted to Buyer no less than two weeks prior to the due
date for filing and shall not be filed without the prior written consent of
Buyer. The parties shall use reasonable commercial efforts to promptly resolve
any disagreements as to the Pre-Closing Tax return(s). Any remaining
disagreements will be referred to a "Big 6" accounting firm, mutually agreed
upon by Buyer and Sellers, for resolution, provided that the scope of review by
--------
such accounting firm shall be limited to the disputed items.
(b) All returns with respect to Taxes for a Tax Indemnification
Period (as defined in Section 13.4), other than Pre-Closing Tax Returns, shall
be prepared by Buyer in a manner consistent with that set forth in Section
13.2(a).
(c) The Crowns shall pay to Buyer, Network or Mobile, as Buyer may
direct, all amounts due with respect to Pre-Closing Tax Returns or any other
return for the Tax Indemnification Period no later than two days prior to the
due date for payment with respect thereto.
(d) Any tax refunds of Taxes of Network, Mobile or the Crown
Communications Business attributable to the Tax Indemnification Period shall be
for the account of the Crowns. Any other tax refunds shall be for the account
of Buyer.
13.3. Tax Audits, Etc. The Crowns and Buyer shall promptly notify each
---------------
other in writing within 10 days from receipt by any of them (or Network or
Mobile, in the case of Buyer) of notice of any pending or threatened Tax audit,
determination or assessment of Network, Mobile or the Crown Communications
Business for any Tax Indemnification Period (a "Tax Controversy"); provided,
--------------- --------
however, that the failure of one party to so notify the other party of any
-------
Tax Controversy shall not affect such other party's obligations hereunder except
to the extent such other party is actually prejudiced by such failure. Except as
otherwise provided in this Section 13.3, the Crowns shall have the right to
control, at their own expense, all phases of any Tax Controversy relating to a
Pre-Closing Tax Return. In connection with any such Tax Controversy, the Crowns
shall have the right to employ third-party advisors, including accountants and
attorneys, all at their own expense; provided, however, that no such third-party
-------- -------
advisors shall be retained without the prior consent of Buyer. The Crowns shall
regularly consult with Buyer in connection with any such Tax Controversy and
shall provide reports (including copies of any and all correspondence received
by the Crowns from taxing authorities) to Buyer no less frequently than monthly
to apprise it of the status thereof. Buyer shall have the right to participate,
at its own expense, in any and all proceedings with respect to any such Tax
Controversy. Notwithstanding the foregoing, the Crowns shall have no right,
without the prior written consent of Buyer, to (A) enter into any settlement
agreement, closing agreement or other agreement in compromise with any taxing
authority in connection with a Tax Controversy, (B) file a petition in any court
in connection with a Tax Controversy (whether in the form of a claim for refund,
a challenge of an asserted deficiency or otherwise) or appeal or file to appeal
any decision of any court in connection with a Tax Controversy or (C) permit the
expiration of any period of time during which administrative or judicial relief
may be sought with respect to a Tax Controversy. Buyer shall have the right to
control, at its own expense, all phases of any Tax Controversy other than a Tax
Controversy relating to a Pre-Closing Tax Return. The Crowns shall have the same
right to participate in any such Tax Controversy as Buyer would have in a Tax
Controversy relating to a Pre-Closing Tax Return.
13.4. Tax Indemnification. The Crowns jointly and severally shall
-------------------
indemnify and hold harmless Buyer, CAC I, CAC II, Network and Mobile and their
respective affiliates from (i) (A) all liability for Taxes of Network, Mobile or
the Crown Communications Business for all taxable periods ending on or before
the Closing Date and the portion of any taxable period as of the Closing Date
where the taxable period includes (but does not end on) the Closing Date; (B)
all liability for Taxes of the Crown Communications Business incurred with
respect to a Section 1.6 Asset, for all taxable periods ending on or before the
date such Section 1.6 Asset is transferred, and the portion of any taxable
period which includes (but does not end on) such date; and (C) all liability for
Taxes of the Crown Communications Business arising out of the ownership,
operation or transfer of any Section 1.6 Asset that is transferred to BANM or
BellSouth (clauses (A), (B) and (C), collectively, the "Tax Indemnification
-------------------
Period"), (ii) (A) all liability (as a result of Treasury Regulation (S) 1.1502-
------
6(a) or otherwise) for Taxes of any person other than Network or Mobile which is
or has ever been affiliated with Network or Mobile or with whom Network or
Mobile has ever joined (or has ever been required to join) in filing any
consolidated, combined, unitary or aggregate return, or with respect to which
Network, Mobile or the Crown Communications Business is a transferee or a
successor, (iii) any loss, liability, claim, damage or expense attributable to
any breach of any warranty or representation contained in Section 5.23 (relating
to Taxes), or any breach by the Crown Parties of any covenant contained in this
Article 13 (relating to Taxes), (iv) all liability for Taxes arising (directly
or indirectly) as a result of or otherwise attributable to the sale of the Crown
Communications Business, the Mergers or otherwise in connection with this
Agreement or the transactions contemplated hereby, other than any transfer taxes
to the extent assumed by Buyer pursuant to Section 13.5, and (v) all liability
for
-63-
reasonable legal, accounting, appraisal, consulting or similar fees and
expenses attributable to any item in clauses (i) through (iv) above.
In the case of any taxable period that includes (but does not end on) the
Closing Date (or, with respect to a Section 1.6 Asset, the date such Section 1.6
Asset is transferred to the Buyer) (a "Straddle Period"):
---------------
(i) real, personal and intangible property Taxes ("Property Taxes") of
--------------
Network, Mobile or the Crown Communications Business for the Straddle Period
shall be equal to the amount of such property Taxes for the entire Straddle
Period multiplied by a fraction, the numerator of which is the number of days
during the Straddle Period that are in the Pre-Closing Tax Period and the
denominator of which is the number of days in the entire Straddle Period; and
(ii) the Taxes of Network, Mobile or the Crown Communications Business
(other than property Taxes) for the Pre-Closing Tax Period shall be computed as
if such taxable period ended as of the close of business on the Closing Date.
13.5. Transfer Taxes, Etc. All transfer, documentary, sales, use,
-------------------
registration and other such Taxes (including all applicable real estate transfer
or gains Taxes and stock transfer and sales Taxes) and the related fees
(including any penalties, interests and additions to Tax) incurred in connection
with the sale of the Crown Communications Business, the Mergers or otherwise in
connection with this Agreement or the transactions contemplated hereby shall be
paid by Buyer, and the Crowns and Buyer shall cooperate in timely preparing and
filing all Returns as may be required to comply with the provisions of such Tax
laws. The Crowns shall cooperate with Buyer to minimize, to the extent permitted
by law, the amount of any sales taxes, transfer taxes or similar taxes and fees
imposed with respect to the transactions contemplated by this Agreement,
including by utilizing any applicable sales tax exemptions for occasional sales.
13.6. Tax Certificate. The Crowns shall deliver to Buyer at the Closing
---------------
and upon the transfer of each Section 1.6 Asset to the Buyer a duly executed and
acknowledged certificate, in form and substance acceptable to Buyer and in
compliance with the Code and Treasury Regulations, certifying such facts as to
establish that the sale of the Crown Communications Business, the Mergers and
any other transactions contemplated hereby are each exempt from withholding
under Section 1445 of the Code.
13.7. Tax Agreements. The Crown Parties shall cause the provisions of
--------------
any agreement, arrangement or practice with respect to Taxes (including any Tax
sharing agreements) between the Crowns and their affiliates other than Network
and Mobile, on the one hand, and Network, Mobile and the Crown Communications
Business on the other hand, to be terminated on or before the Closing Date.
After the Closing Date, no Person shall have any rights or obligations under any
such agreement, arrangement or practice with respect to Taxes.
13.8. Access to Books and Records. After the Closing Date, each party
---------------------------
shall, upon the request of the other party, in connection with the preparation
by either party of Tax returns or Tax contests and for such other purposes as
either party shall reasonably request: (i) provide to the officers and other
authorized Representatives of the requesting party full access, during
-64-
normal business hours upon reasonable advance notice, to any and all premises,
properties, files, books, records, documents and other information of Network,
Mobile or the Crown Communications Business, (ii) cause its officers to (and in
the case of Crowns, the Crowns will) furnish to the requesting party and its
authorized Representatives any and all relevant financial, technical and
operating data and other information pertaining to Network, Mobile or the Crown
Communications Business, (iii) make available to the requesting party and its
authorized Representatives personnel to consult with such Persons and (iv) make
available for inspection and copying by the requesting party at such party's
expense true and complete copies of any documents relating to the foregoing. Any
information obtained by either party pursuant to this Section 13.8 relating to
the operation of Network, Mobile or the Crown Communications Business after (in
the case of the Crowns) or prior to (in the case of Buyer) the Closing shall be
held confidential by the requesting party to the same extent as the requesting
party is required to keep information confidential pursuant to the
Confidentiality Agreement referred to in Section 14.14 hereof. In exercising
their rights under the foregoing provisions of this Section 13.8, the requesting
party and its Representatives shall not interfere with the other party's normal
operations.
13.9. Allocation of Crown Value. The value of the Crown Communications
-------------------------
Business and the Assumed Liabilities and the Network and Mobile Common Stock
shall be mutually agreed to by Buyer and the Crowns at or prior to the Closing
Date. The parties agree that, except as otherwise provided in Section 13.5, the
sole consideration allocable to the Mergers is 1,440,000 shares of Castle B
Common Stock. Such agreed allocations shall be set forth on Schedule 13.9 to
this Agreement, and all allocations contained in such Schedule shall be used by
the parties in preparing all relevant Tax returns, information reports and other
Tax documents and forms (unless a contrary allocation is required pursuant to a
final determination of a relevant Governmental Entity).
13.10. Survival. Notwithstanding any other provision in this Agreement,
--------
this Article 13 shall survive the Closing Date and remain in force until the
expiration of the relevant statutes of limitation (including all periods of
extension, whether automatic or permissive).
ARTICLE 14
Miscellaneous
-------------
14.1. Termination of Agreement. This Agreement may be terminated at any
------------------------
time on or prior to the Closing Date (a) by the mutual consent of Sellers and
Buyer; (b) by Sellers or Buyer if the Closing has not taken place by October 31,
1997, and the party seeking to terminate this Agreement has not contributed in
any material way to the failure of the transaction to close by such date; or (c)
by Sellers, if the Buyer has not terminated the Agreement pursuant to clause (x)
of this Section 14.1, below, and Buyer fails or refuses to close the transaction
on the scheduled Closing Date notwithstanding the prior satisfaction or waiver
of all of Buyer's conditions to Closing in Article 11. In addition, this
Agreement may be terminated at any time on or prior to the Due Diligence
Completion Date (x) by Buyer, if Buyer provides a written certification to
Sellers to the effect that Buyer, in good faith, has not confirmed or determined
that it is satisfied
-65-
in all material respects with respect to the matters referred to in clause (b)
of Section 3.1 and specifying, in reasonable detail, the reasons supporting such
certification; and (y) by Sellers, if Sellers provide a written certification to
Buyer to the effect that Sellers, in good faith, have not confirmed the matters
referred to in clause (a) of Section 3.1 and specifying, in reasonable detail,
the reasons supporting such certification. Any such certification shall be
delivered to the other party on or prior to the Due Diligence Completion Date.
14.2. Liabilities Upon Termination. Except for the obligations contained
----------------------------
in Sections 14.3, 14.7, 14.14 and 14.16 hereof, which shall survive any
termination of this Agreement, and except as provided in the next sentence of
this Section 14.2, upon the termination of this Agreement pursuant to Section
14.1 hereof, this Agreement shall forthwith become null and void, and no party
hereto or any of its officers, directors, employees, agents, consultants or
stockholders, shall have any rights, liabilities or obligations hereunder or
with respect hereto. If this Agreement is terminated (a) by Buyer pursuant to
clause (x) of Section 14.1 or by Buyer or Sellers pursuant to clause (a) or (b)
of Section 14.1, then Sellers shall forthwith return to Buyer the Advance
Payment (and any interest or earnings thereon); (b) by Sellers pursuant to
clause (c) of Section 14.1, then Sellers shall retain the Advance Payment (and
any interest or earnings thereon) as liquidated damages; or (c) by Sellers
pursuant to clause (y) of Section 14.1, then Sellers shall retain one-half of
the Advance Payment (together with one-half of any interest or earnings thereon)
as liquidated damages, and shall forthwith return to Buyer the remaining one-
half of the Advance Payment (together with one-half of any interest or earnings
thereon).
14.3. Expenses. Each party hereto shall bear all its expenses incurred
--------
in connection with the transactions contemplated in this Agreement, including
accounting, legal and financial advisory fees incurred in connection herewith;
provided, however, that (i) Buyer shall pay in the first instance any
-------- -------
Xxxx-Xxxxx-Xxxxxx filing fees required to be paid in connection with the Xxxx-
Xxxxx-Xxxxxx applications of both Buyer and Sellers referred to in Section 9.2
hereof, and at Closing the Crown Parties shall reimburse Buyer for 50% of all
such Xxxx-Xxxxx-Xxxxxx filing fees promptly upon presentation by Buyer of
appropriate supporting documentation with respect thereto, (ii) the Buyer shall
pay any sales or transfer taxes arising from the transfer of the Acquired
Business to Buyer as provided in Section 13.5, and (iii) Buyer shall pay the
cost of any reasonable and customary title insurance which Buyer elects to
obtain with respect to any interest in Real Property included in the Acquired
Business.
14.4. Bulk Sales Laws. Buyer hereby waives compliance with the provisions
---------------
of any applicable bulk sales law, and Buyer agrees to indemnify and hold Sellers
harmless from all claims made by creditors with respect to non-compliance with
any bulk sales law.
14.5. Assignments. No party hereto may assign any of its rights or
-----------
delegate any of its duties hereunder without the prior written consent of the
other parties, and any such attempted assignment or delegation without such
consent shall be void, except that Buyer may assign any or all of its rights
(but not its obligations) hereunder to CAC III.
14.6. Further Assurances. From time to time prior to, at and after the
------------------
Closing Date, each party hereto will execute all such instruments and take all
such actions as any other party, being advised by counsel, shall reasonably
request in connection with carrying out and
-66-
effectuating the intent and purpose hereof and all transactions and things
contemplated by this Agreement, including the execution and delivery of any and
all confirmatory and other instruments in addition to those to be delivered on
the Closing Date, any and all actions which may reasonably be necessary or
desirable to complete the transactions contemplated hereby.
14.7. Public Announcement. Prior to the Closing Date, no party shall,
-------------------
without the approval of the others, make any press release or other public
announcement concerning the transactions contemplated by this Agreement, except
as and to the extent that such party shall be so obligated by law, in which case
such party shall give advance notice to the other parties and the parties shall
use all reasonable efforts to cause a mutually agreeable release or announcement
to be issued.
14.8. Notices. Notices and other communications provided for herein shall
-------
be in writing (which shall include notice by facsimile transmission) and shall
be delivered or mailed (or if by facsimile communications equipment of the
sending party hereto, delivered by such equipment), addressed as follows:
If to any of the Crown Parties:
Mr. and Xxx. Xxxxxx X. Crown
c/o Crown Communications
Xxxx Xxxxxx Xxxx XXX
Xxxxx 000
Xxxxxxxxxx, XX 00000
Facsimile No.: 000-000-0000
with a copy to:
Xxxxxxxxxxx & Xxxxxxxx LLP
0000 Xxxxxx Xxxxxxxx
Xxxxxxxxxx, Xxxxxxxxxxxx 00000-0000
Facsimile No.: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxx, Xx., Esq.
If to Buyer, CAC I or CAC II:
Castle Tower Holding Corp.
000 Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Facsimile No.: (000) 000-0000
Attention: Xxxxx X. Xxx
-67-
with a copy to:
Cravath, Swaine & Xxxxx
Worldwide Plaza
000 Xxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
Attention: Xxxxx Xxxxxxx, Esq.
or to such other address as a party may from time to time designate in writing
in accordance with this Section 14.8. All notices and other communications
given to any party hereto in accordance with the provisions of this Agreement
shall be deemed to have been given on the date of receipt.
14.9. Captions. The captions of Articles and Sections of this Agreement
--------
are for convenience only and shall not control or affect the meaning or
construction of any of the provisions of this Agreement.
14.10. Governing Law. This Agreement shall be governed by, construed, and
-------------
enforced in accordance with the laws of the Commonwealth of Pennsylvania without
regard to conflict of laws principles.
14.11. Waiver of Provisions. The terms, covenants, representations,
--------------------
warranties and conditions of this Agreement may be amended, modified of waived
only by a written instrument executed by the party sought to be bound thereby.
The failure of any party at any time or times to require performance of any
provision of this Agreement shall in no manner affect the right of such party at
a later date to enforce the same. No waiver by any party of any condition or the
breach of any provision, term, covenant, representation or warranty contained in
this Agreement, whether by conduct or otherwise, in any one or more instances
shall be deemed to be or construed as a further or continuing waiver of any such
condition or of the breach of any other provision, term, covenant,
representation or warranty of this Agreement.
14.12. Counterparts. This Agreement may be executed in several
------------
counterparts, and all counterparts so executed shall constitute one agreement,
binding on the parties hereto, notwithstanding that the parties are not
signatory to the same counterpart.
14.13. Entire Agreement. This Agreement and the Confidentiality Agreement
----------------
referenced in Section 14.14, including the Schedules, Exhibits and Annexes
hereto, constitute the entire Agreement between the parties and supersede and
cancel any and all prior agreements between them relating to the subject matter
hereof.
14.14. Confidentiality. All information provided to Buyer or its
---------------
Representatives by or on behalf of Sellers or their affiliates before or after
July 11, 1997 concerning the business, assets, liabilities and operations of
Sellers, the Acquired Business or the Crown Communications Business shall be
governed by the Confidentiality Agreement dated as of June 27, 1997, heretofore
executed by Buyer and the Crown Parties. All information provided to the Crown
-68-
Parties or their respective Representatives by or on behalf of Buyer or its
affiliates before or after July 11, 1997 concerning the business, assets,
liabilities and operations of Buyer and its Subsidiaries and affiliates shall be
governed by the Confidentiality Agreement dated as of June 27, 1997, heretofore
executed by the Crown Parties and Buyer.
14.15. Submission to Jurisdiction; Waivers. Each of Buyer, CAC I, CAC II
-----------------------------------
and the Crown Parties hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement, or for recognition of the enforcement of
any judgment in respect thereof, to the exclusive general jurisdiction of the
courts of the Commonwealth of Pennsylvania, the courts of the United States of
America located in the Commonwealth of Pennsylvania and appellate courts from
any of the foregoing;
(b) consents that any such action or proceeding may be brought in
such courts, and waives any objection that it may now or hereafter have to the
venue of any such action or proceeding in any such court or that such action or
proceeding was brought in an inconvenient court and agrees not to plead or claim
the same; and
(c) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or certified
mail (or any substantially similar form of mail), postage prepaid, to such party
at its address as provided in Section 14.8 hereof.
14.16. Brokers or Finders. Each party agrees to indemnify and hold the
------------------
other harmless from and against any and all claims, liabilities, or obligations
with respect to any other fees, commissions or expenses asserted by any Person
on the basis of any act or statement alleged to have been made by the other
party or its Affiliates.
14.17. Specific Performance. The parties hereto agree that irreparable
--------------------
damage would occur in the event any provision of this Agreement was not
performed in accordance with the terms hereof and that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the term and provisions of this Agreement in any
courts of the Commonwealth of Pennsylvania or any courts of the United States of
America located in the Commonwealth of Pennsylvania, in addition to any other
remedy to which they are entitled at law or in equity.
14.18. Definitions; Construction.
-------------------------
(a) As used herein, the following terms shall have the following
meanings:
"Affiliate" means, with respect to any specified Person, any
---------
other Person directly or indirectly controlling or controlled by or under the
direct or indirect common control with such specified Person. Without limiting
the generality of the foregoing, for purposes of this Agreement, CTSH and its
Subsidiaries shall each be deemed to be an Affiliate of Buyer.
-69-
"Person" means an individual, a corporation, a limited liability company, a
------
partnership, a joint venture, a business association, a trust or any other
entity or organization, including a Governmental Entity.
"Representative" when used with respect to any Person means any directors,
--------------
officers, employees, stockholders, agents or representatives (including
attorneys, accountants, consultants, banks and financial advisors) of such
Person.
"Subsidiary" when used with respect to any Person means any other Person,
----------
whether incorporated or unincorporated, of which at least a majority of the
securities or other interests having by their terms ordinary voting power to
elect at least a majority of the board of directors or others performing similar
functions with respect to such corporation or other organization is directly or
indirectly owned or controlled by such Person or by any one or more of its
Subsidiaries.
(b) The definitions in this Agreement shall apply equally to both the
singular and plural forms of the terms defined. Whenever the context may
require, any pronoun shall include the corresponding masculine, feminine and
neuter forms. The words "include," "includes" and "including" shall be deemed
to be followed by the phrase "without limitation." All references herein to
Articles, Sections, Exhibits and Schedules shall be deemed references to
Articles and Sections of, and exhibits and Schedules to, this Agreement unless
the context shall otherwise require.
14.19. No Third Party Beneficiaries. This Agreement is not intended to
----------------------------
confer upon any Person other than the parties hereto and their respective
successors and assigns any rights or remedies hereunder.
-70-
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their duly authorized officers, all as of the day and year first
above written.
XXXXXX X. CROWN,
/s/ XXXXXX X. CROWN
------------------------------------
Individually and as a shareholder of
Network and Mobile
/s/ XXXXXX X. CROWN
------------------------------------
Xxxxxx X. Crown, d/b/a Crown
Communications
XXXXXXX CROWN,
/s/ XXXXXXX CROWN
------------------------------------
Individually and as a shareholder of
Network and Mobile
Xxxxxxx Crown, d/b/a Crown
Communications
CROWN NETWORK SYSTEMS, INC.,
By: /s/ XXXXXX X. CROWN
----------------------------------
Name: Xxxxxx X. Crown
Title: Chief Executive Officer and
President
CROWN MOBILE SYSTEMS, INC.,
By: /s/ XXXXXX X. CROWN
---------------------------------
Name: Xxxxxx X. Crown
Title: Chief Executive Officer and
President
-00-
XXXXXX XXXXX XXXXXXX CORP.,
By: /s/ XXXXX X. XXX
---------------------------------
Name: Xxxxx X. Xxx
Title: President
CASTLE ACQUISITION CORP. I
By: /s/ XXXXX X. XXX
---------------------------------
Name: Xxxxx X. Xxx
Title: Vice President
CASTLE ACQUISITION CORP. II
By: /s/ XXXXX X. XXX
---------------------------------
Name: Xxxxx X. Xxx
Title: Vice President
-72-
