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MEMBERSHIP PURCHASE AGREEMENT
MEMBERSHIP PURCHASE AGREEMENT, dated as of October 6, 2000 (the
"Agreement") by and among Central Telcom Services, LC, f/k/a Central Marketing
Group, LLC, a Utah limited liability company ("Central Telcom"), each of the
persons listed on Schedule A hereto (individually a "Seller" and collectively
"Sellers"), Brighton Communications Corporation, a Delaware corporation (the
"Company") and Xxxxx Telephone Corporation X, a Delaware corporation and a
wholly owned subsidiary of the Company (the "Purchaser").
WHEREAS, each of the Sellers desires to sell such Seller's membership
interests in Central Telcom to Purchaser; and
WHEREAS, Purchaser desires to purchase all of the membership interests of
Central Telcom from Sellers upon the terms and conditions set forth herein.
ARTICLE I--THE MEMBERSHIP SALES
1.1 Sale and Purchase Each Seller hereby agrees, on the terms and
conditions herein, to sell to Purchaser the percentage membership interest of
Central Telcom ("Membership Interests") set forth opposite such Seller's name on
Schedule A hereto. The Purchaser hereby agrees, on the terms and conditions
herein, to purchase from each Seller the membership interest of Central Telcom
set forth opposite such Seller's name on Schedule A hereto. The sales and
purchases contemplated herein are hereinafter referred to as the "Membership
Sales."
1.2 Purchase Price The total purchase price shall be of the membership
interests shall be $4,800,000 (the "Purchase Price") to be allocated among the
Sellers in accordance with Schedule A, payable at the Closing referred to in
Section 1.5 hereof.
1.3 Form of Purchase Price The purchase price shall be payable 50% in cash
and 50% in promissory notes issued by the Purchaser (the "Notes") in the form of
Schedule 1.3(a) hereto). Notes shall be valued at the principal amount thereof.
The Notes shall be secured pursuant to a Pledge and Escrow Agreement in the form
of Schedule 1.3(b) hereto.
1.4 Payment of the Purchase Price The Purchase Price shall be paid by
Purchaser to each Seller at the Closing Time by cashier or certified check or
wire transfer as requested by each Seller as to the cash portion and delivery of
the Notes of Purchaser payable to each Seller as to the portion of the Purchase
Price paid by the Notes. To the extent any payment of the Purchase Price is to
be made by wire transfer, such bank wire transfer(s) shall be made to an account
or accounts that each Seller receiving the cash portion of the Purchase Price
shall designate in writing to Purchaser at least two business days prior to the
Closing Time.
1.5 Closing The closing of the Membership Sales (the "Closing") shall take
place at 10:00 a.m. at the offices of Central Telcom in Fairview, Utah, within
ten days after all of the conditions precedent set forth in Article VI have been
satisfied or waived, or at such other time, date and place (not later than March
31, 2001) as Purchaser and Sellers shall by written instrument designate. Such
time and date are herein referred to as the "Closing Time."
1.6 Transactions at the Closing Time
(a) At the Closing, each of the Sellers shall deliver to Purchaser the
following:
(i) Membership certificates, in form suitable for transfer,
registered in the name of such Seller, evidencing the Membership
Interests to be purchased hereunder, with executed blank transfer
powers attached;
(ii) subordination agreement(s) in such form(s) as may be requested by
the financial institution(s) lending funds for the acquisition by
Purchaser of the Membership Interests of Central Telcom, executed
by each Seller subordinating the Sellers' interests under the
Notes to the interests of lenders to Purchase and to subsidiaries
of Purchaser guaranteed by Purchaser in an amount not to exceed
the cash portion of the Purchase Price plus the amount of any
additional loans used by Purchaser or subsidiaries of Purchaser
for capital expenditures, acquisitions or other investments in
Central Telcom plus any amounts permitted under Section 1.6 of
the Stock Purchase Agreement, dated as of October 6, 2000,
relating to Central Utah Telephone, Inc. ("Central Utah
Telephone") (the "Stock Purchase Agreement"); and
(iii)each of the certificates and documents contemplated by Section
6.2.
(b) At the Closing, Purchaser shall deliver to each Seller the following:
(i) the Purchase Price to be paid to the Members as set forth in
Schedule A attached hereto and in the manner indicated in this
Article I.
(ii) each of the certificates and documents contemplated by Section
6.3.
(c) At the Closing, the Company and Sellers shall enter into an Escrow
Agreement in the form of Schedule 1.3(b).
1.7 Liquidating Distribution The parties hereto agree that for tax purposes
only, the purchase and sale which is the subject of this Agreement shall be
deemed to be a liquidating distribution by Central Telcom to the Sellers under
Sections 708(b)(1)(A) and 741 of the Internal Revenue Code. The Sellers agree to
execute and file all documents, including making an election under Section 754
of the Internal Revenue Code, if necessary, required to effectuate such
election.
ARTICLE II--REPRESENTATIONS AND WARRANTIES OF CENTRAL TELCOM, AND SELLERS
Except as set forth in the Disclosure Schedule delivered by Sellers and
Central Telcom to the Purchaser prior to the execution of this Agreement (the
"Sellers Disclosure Schedule"), which Sellers Disclosure Schedule shall
reference disclosure items by section, each of the Sellers and Central Telcom,
jointly and severally, represent and warrant to the Purchaser that:
2.1 Organization and Qualification
(a) Central Telcom is a limited liability company validly existing and in
good standing under the laws of the State of Utah. Central Telcom has
no subsidiaries. Central Telcom has the requisite corporate power and
authority, and, except as otherwise provided herein, is in possession
of all franchises, grants, authorizations, licenses, permits,
easements, consents, certificates, approvals and orders ("Central
Telcom Approvals"), necessary to own, lease and operate its properties
and to carry on its business as it is now being conducted. Central
Telcom has received no notice of proceedings relating to the
revocation or modification of any Central Telcom Approvals.
(b) Central Telcom is duly qualified or licensed as a foreign limited
liability company to do business, and is in good standing, in each
jurisdiction where the character of its properties owned, leased or
operated by it or the nature of its activities makes such
qualification or licensing necessary, except where such failures to be
so duly qualified or licensed and in good standing would not, either
individually or in the aggregate, have a Material Adverse Effect with
respect to Central Telcom.
(c) There have been no meetings of the Members or the Managers of Central
Telcom and no minutes or resolutions with respect to any actions taken
by the Members or the Manager.
2.2 Articles of Organization and Operating Agreement. Central Telcom has
previously furnished to Purchaser a copy of the current Articles of Organization
and Operating Agreement, as amended or restated, of Central Telcom ("Central
Telcom Articles" or "Central Telcom Operating Agreement"). The Central Articles
and Central Operating Agreement are in full force and effect. Central Telcom is
not in violation of any of the provisions of its Articles or Operating
Agreement.
2.3 Capitalization.
(a) The Membership Interest of Central Telcom are as set forth on Schedule
A attached hereto. There are no options, warrants or other rights,
agreements, arrangements or commitments of any character, including
without limitation voting agreements or arrangements, relating to the
issued or unissued Membership Interests of Central Telcom or
obligating Central Telcom to issue or sell any Membership Interests in
Central Telcom. There are no obligations of Central Telcom to
repurchase, redeem or otherwise acquire any Membership Interests.
(b) Each Seller owns outright the Membership Interest set forth opposite
such Seller's name on Schedule A hereto, free and clear of all
encumbrances, security interests and charges of any kind. There are no
options, warrants or other rights, agreements, arrangements or
commitments of any character, including without limitation voting
agreements or arrangements relating to any shares set forth on
Schedule A hereto.
(c) Any Membership Interests purchased or otherwise acquired by Central
Telcom were purchased or acquired in accordance with all laws
including fiduciary duties.
2.4 Authority.
(a) Each of the Sellers and Central Telcom has the requisite power and
authority to execute and deliver this Agreement, to perform their
respective obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by
each of the Sellers and Central Telcom and the consummation by them of
the transactions contemplated hereby have been duly and validly
authorized by all necessary action and no other proceedings on the
part of each of the Sellers and Central Telcom are necessary to
authorize this Agreement or to consummate the transactions so
contemplated hereby. This Agreement has been duly executed and
delivered by, and constitutes a valid and binding obligation of each
of the Sellers and Central Telcom and, assuming due authorization,
execution and delivery by the Company and the Purchaser, is
enforceable against each of the Sellers and Central Telcom and in
accordance with its terms, except as enforcement may be limited by
general principles of equity whether applied in a court of law or a
court of equity and by bankruptcy, insolvency and similar laws
affecting creditors' rights and remedies generally.
2.5 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by each of the Sellers
and Central Telcom does not, and the performance of this Agreement and
the transactions contemplated hereby by each of the Sellers and
Central Telcom shall not, (i) conflict with or violate Central Telcom
Articles of Organization or Central Telcom Operating Agreement, (ii)
conflict with or violate any federal or state law, statute, ordinance,
rule, regulation, order, judgment or decree (collectively, "Laws")
applicable to any Seller or Central Telcom or by which any Seller or
Central Telcom or any of their respective properties is bound or
affected, or (iii), except as set forth in Item 2.5(a) of the Seller
Disclosure Schedule, result in any breach of or constitute a default
(or an event that with notice or lapse of time or both would become a
default) under, or give to others any rights of termination,
amendment, acceleration, cancellation of, or result in rights of
payment, compensation or other rights or the creation of a lien or
encumbrance on any of the properties or assets of any Seller or
Central Telcom pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which any Seller or Central Telcom is a
party or by which any Seller or Central Telcom or any of their
respective properties are bound or affected.
(b) The execution and delivery of this Agreement by each of the Sellers
and Central Telcom does not, and the performance of this Agreement by
the Sellers and Central Telcom and shall not, require any consent,
approval, authorization or permit of, or filing with or notification
to any governmental or regulatory authority except (i) for applicable
requirements, if any, of the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), and (ii) the consents or
approvals of the Federal Communications Commission ("FCC") listed on
Sellers Disclosure Schedule.
2.6 Compliance; Permits. To the best of Sellers' knowledge, Central Telcom
is not in conflict with, or in default or violation of, (i) any Law applicable
to Central Telcom or by which its or any of their respective properties is bound
or affected, or (ii) any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation to which
Central Telcom is a party or by which Central Telcom or its properties is bound
or affected.
2.7 Reports; Financial Statements.
(a) Central Telcom has filed all forms, reports and documents required to
be filed with the FCC. Central Telcom is not required to file, and has
not filed, any forms, reports and documents with the Public Service
Commission of Utah ("PSCU").
(b) Central Telcom has heretofore furnished Purchaser with the unaudited
financial statements attached as Item 2.7 (b) of Sellers Disclosure
Statement (the "Financial Statements"). The Financial Statements (and
the financial statements ("Section 4.1(i) Financial Statements") to be
furnished Purchaser pursuant to Section 4.1(i) hereof), including the
footnotes thereto, and except as indicated therein, have been prepared
in accordance with generally accepted accounting principles
consistently applied ("GAAP") and fairly present in all material
respects the financial condition and results of the operations of
entities included therein and the changes in their financial position
at such dates and for such periods; provided however, that the Section
4.1(i) Financial Statements shall be subject to normal year end
adjustments. The term "Balance Sheet" shall mean, as the context
requires, either or both of (i) the balance sheets of Central Telcom
as of July 31, 2000, and (ii) the balance sheets of Central Telcom to
be included in the Section 4.1(i) Financial Statements.
(c) There are no material liabilities or obligations of any nature,
whether absolute, accrued, fixed, contingent, matured or unmatured,
against, relating to or affecting Central Telcom except (i) as and to
the extent reflected or reserved against on the Balance Sheet of
Central Telcom, and (ii) those incurred since the date of the latest
Balance Sheet of Central Telcom in the ordinary course of business
consistent with prior practice and consistent with Sections 4.1 and
4.2 hereof and which individually or in the aggregate do not have and
are not expected to have a Material Adverse Effect on Central Telcom.
2.8 Absence of Certain Changes or Events. Except as set forth in Item 2.8
to Sellers' Disclosure Schedule, since December 31, 1999, to the date of this
Agreement, Central Telcom has conducted its business only in the ordinary course
and in a manner consistent with past practice and, since December 31, 1999,
there has not been (i) any change in the financial condition, results of
operations or business of Central Telcom having a Material Adverse Effect with
respect to Central Telcom, (ii) any damage, destruction or loss (whether or not
covered by insurance) with respect to any assets of Central Telcom having a
Material Adverse Effect with respect to Central Telcom, (iii) any declaration,
setting aside or payment of any dividends or distributions in respect of the
Membership Interests or any redemption, purchase or other acquisition of any of
its Membership Interests, (iv) any strike, work stoppage, slow-down or other
labor disturbance suffered by Central Telcom, (v) any collective bargaining
agreement, contract or other agreement or understanding with a labor union or
organization to which Central Telcom has been a party, (vi) any union organizing
activities relating to employees of Central Telcom, (vii) any incurrence of debt
for money borrowed or any lease of any property or assets, (viii) any action,
which if taken subsequent to the execution of this Agreement and prior to the
Closing Time, would constitute a breach of Central Telcom's covenants set forth
in Article IV or (ix) any transaction not in the ordinary course of business
consistent with past practice.
2.9 Absence of Litigation.
(a) Neither any Seller nor Central Telcom is a party to any, and there are
no pending or, to the best of Sellers' and Central Telcom's knowledge,
threatened, legal, administrative, arbitral or other proceedings,
claims, actions or governmental or regulatory investigations of any
nature against or relating in any way to Central Telcom, or
challenging the validity or propriety of the transactions contemplated
by this Agreement.
(b) There is no injunction, order, judgment, decree or regulatory
restriction imposed upon, or, to the best of Sellers' and Central
Telcom's knowledge, threatened against any Seller or Central Telcom
relating in any way to Central Telcom, or the assets of Central Telcom
which has had or may have a Material Adverse Effect with respect to
Central Telcom.
2.10 Employee Benefit Plans. Central Telcom has no, and in the past has not
had any, employee benefit plans (as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")), nor any bonus,
membership purchase option, restricted membership, incentive, deferred
compensation, retiree medical or life insurance, supplemental retirement,
severance or other benefit plans, programs or arrangements, nor any employment,
termination, severance or other employment contracts or employment agreements,
with respect to which Central Telcom has any obligation (collectively, the
"Plans").
(b) Absence of Certain Types of Plans. No member of Central Telcom's
"controlled group," within the meaning of Section 4001(a)(14) of
ERISA, maintains or contributes to, or within the five years preceding
the date of this Agreement has maintained or contributed to, an
employee pension benefit plan subject to Title IV of ERISA ("Title IV
Plan"). No Title IV Plan of any member of Central Telcom's "controlled
group" is a "multiemployer pension plan" as defined in Section (3)37
of ERISA. None of the Plans obligates Central Telcom to pay material
separation, severance, termination or similar-type benefits solely as
a result of any transaction contemplated by this Agreement or as a
result of a "change in ownership or control," within the meaning of
such term under regulations adopted pursuant to Section 280G of the
Internal Revenue Code of 1986, as amended (the "Code").
2.11 Title to Property; Business Operations. Central Telcom neither
owns nor leases any real or tangible personal property, except as set forth on
Item 2.11 of Sellers' Disclosure Statement and Item 2.18 of the Sellers'
Disclosure Schedule. All other real and personal property utilized by Central
Telcom in its business operations are provided by Central Utah Telephone
pursuant to that certain Administrative Services and Facilities Agreement, dated
as of May 1, 2000, a copy of which is attached to Item 2.11 of the Sellers'
Disclosure Schedule. Central Telcom conducts the following businesses:
(a) PCS/Wireless. On May 1, 2000, Central Telcom obtained from Central
Utah Telephone by assignment thereof, the PCS License for the Logan
BTA and Central Utah Telephone's interest in a joint venture with
Manti Telephone Company, Inc., and Gunnison Telephone Company for the
PCS Licenses in Xxxxxxx, Sanpete, Xxxxxx, and Juab counties and the
Goshen and Spanish Fork Canyon exchanges in Utah county. To date,
neither Central Telcom nor the joint venture have developed the PCS
Licenses. Copies of the Spectrum Agreements and Assignments with
respect to the above-described PCS Licenses are attached to Item
2.11(a) of the Sellers' Disclosure Schedule.
(b) MMDS. On December 1, 1998, Central Telcom obtained from Central Utah
Telephone the 15% membership interest held by Central Utah Telephone
in Universal Rapid Access, L.C., a Utah limited liability company
("URA"). URA holds MMDS licenses utilized in connection with
high-speed data services provided in Logan, Utah. To date, URA has
developed the MMDS application for services in Logan, Utah on a
limited commercial basis. Copies of the organizational documents of
URA and those reflecting the transfer of the interest of Central Utah
Telephone in URA to Central Telcom are attached to Item 2.11(b) of the
Sellers' Disclosure Schedule.
(c) Internet , Long Distance and Non-regulated Telephone Services. On
April 1, 2000, Central Utah Communications, L.C. ("CUC"), transferred
to the Ed and Xxxx Xxx Family Trust and the Branch and Xxxxx Xxx
Family Trust (collectively, the "Trusts") the internet , "in area"
toll services and non-regulated telephone services such as inside
wiring, telephone sales, phones jacks and other telephone-related
equipment (the "Transferred Businesses") which CUC previously owned
and operated. The "in area" toll services are those which are provided
to customer residing in the Central Utah Telephone, Inc., Skyline
Telecom and Bear Lake Communications, Inc. certificated service
territories. On April 1, 2000, the Trusts transferred the Transferred
Businesses to Central Telcom. Copies of the Membership Redemption
Agreement pursuant to which the Transferred Businesses were
transferred from CUC to the Trusts and the assignment of those
interests by the Trusts to Central Telcom are attached to Item 2.11(c)
of the Seller's Disclosure Schedule.
(d) No Encumbrances. Each of the businesses described in Sections 2.11(a),
(b) and (c) was legally and validly transferred to Central Telcom and
is the sole and exclusive property of Central Telcom free and clear of
all mortgage liens, and free and clear of all other liens, charges and
encumbrances except for such liens, charges and encumbrances (i)
listed as Item 2.11(d) of the Sellers Disclosure Schedule, and,
further, except for taxes not yet due and payable, pledges to secure
deposits and such minor imperfections of title, if any, as do not
materially detract from the value of or interfere with the present use
or marketability of the property affected thereby.
(e) No Other Business Operations. Except as described in Sections 2.11(a),
(b) and (c) above, Central Telcom does not engage, and has not
engaged, in any other business operations or activities.
2.12 Environmental Matters. (a) (i) Each of Central Telcom and properties
owned, leased or operated by Central Telcom, is in compliance with all
applicable Environmental Laws (as to any non-compliance prior to the ownership
of any property by Central Telcom, the representation and warranty in this
clause (i) is made to the best of Sellers and Central Telcom's knowledge after
due inquiry); (ii) except as described in the Environmental Reports provided
under Section 6.2(g) hereof, and to the best of Sellers' and Central Telcom's
knowledge after due inquiry, there is no asbestos or ureaformaldehyde materials
in or on any property owned, leased or operated by Central Telcom and no
electric transformers or capacitors, other than those owned by public utility
companies, on any such properties which contain any PCBs; (iii) except as
described in the Environmental Reports provided under Section 6.2(g) hereof, and
to the best of Sellers' and Central Telcom's knowledge after due inquiry, there
are no underground or aboveground storage tanks located on, in or under any
properties currently or formerly owned or operated by Central Telcom or any of
the Central Telcom Subsidiaries; (iv) Central Telcom has not received any
notice, formal or informal from any governmental agency or third party notifying
Central Telcom of any Environmental Claim (as defined herein); (v) Central
Telcom has not been notified by any governmental agency or any third party that
Central Telcom may be a potentially responsible party for environmental
contamination or any Release (as defined below) of Hazardous Materials (as
defined below); (vi) Central Telcom has obtained and holds all Environmental
Permits, (as defined below) relating to the ownership or operations of Central
Telcom; (vii) Central Telcom is in material compliance with all terms,
conditions and provisions of all applicable Environmental Permits; (viii) no
Releases of Hazardous Materials have occurred at, from, in, on, to or under any
property owned, operated or leased by Central Telcom that violate any
Environmental Law, and no Hazardous Materials are present in, on or about or
migrating to or from any such property that would give rise to an Environmental
Claim by a third party against Central Telcom (as to Releases prior to the
ownership of the property by Central Telcom, the representation and warranty
made in this clause (viii) is made to the best of Sellers and Central Telcom's
knowledge after due inquiry); (ix) neither Central Telcom has, nor, to the best
of Sellers and Central Telcom's knowledge after due inquiry, any predecessors
thereof have, transported or arranged for the treatment, storage, handling,
disposal or transportation of any Hazardous Material to any location which could
result in an Environmental Claim against or liability to Central Telcom; and (x)
except as set forth in Section 6.2(g), Central Telcom has no environmental
report or statement prepared by or on its behalf or in its possession or control
relating to any of its present or former properties.
(b) For purposes of this Section:
"Environmental Claims: shall mean any and all administrative,
regulatory, judicial or private actions, suits, demands, notices,
claims, liens, investigations, injunctions or similar proceedings that
may result in Central Telcom being liable for: (i) a violation of any
Environmental Law; (ii) the release and ordered remediation of any
Hazardous Material, including without limitation, any investigation,
monitoring abatements, removal, remedial, corrective or other response
action in connection with the release of any Hazardous Material or
order or notice of liability or violation of a governmental authority
or Environmental Law; or (iii) any actual or alleged damage, injury,
threat or harm to the environment.
"Environmental Law: shall mean any and all federal, state and local
civil and criminal laws, statutes, ordinances, orders,
----------------- permits, codes, rules or regulations of any
governmental or regulatory authority relating to the protection of
health, the environment, natural resources, worker health and safety
and/or governing the handling, use, generation, treatment, storage,
transportation, disposal, manufacture, distribution, formulation,
packaging, labeling, or Release of Hazardous Materials, including but
not limited to: the Clean Air Act, 42 U.S.C.ss.7401 et seq.; the
Comprehensive Environmental Response, Compensation and Liability --
--- Act of 1980, 42 U.S.C.ss.9601 et seq.; the Federal Water Pollution
Control Act, 33 U.S.C.ss.1251 et seq.; the Hazardous Material -- ---
-- --- Transportation Act 49 U.S.C.ss.1801 et seq.; the Federal
Insecticide, Fungicide and Rodenticide Act 7 U.S.C.ss.136 et seq.; the
-- --- -- --- Resource Conservation and Recovery Act of 1976 ("RCRA"),
42 U.S.C.ss.6901 et seq.; the Toxic Substances Control Act, 15
U.S.C.ss.2601 ---- -- --- et seq.; the Occupational Safety & Health
Act of 1970, 29 U.S.C.ss.651 et seq.; the Oil Pollution Act of 1990,
33 U.S.C.ss.2701 et seq.; --- -- --- -- --- and the state analogies
thereto, all as amended or superceded from time to time, on or before,
but not after, the date of Closing.
"Environmental Permits: shall mean any action, approval, consent,
waiver, exemption, variance, franchise, order, permit, authorization,
right or license issued from any federal, state or local governmental
body, agency or authority relating to the protection of health, the
environment or natural resources.
"Hazardous Materials" shall mean any and all chemicals, pollutants,
contaminants, wastes, toxic substances, compounds, products, solid,
liquid, gas, petroleum, asbestos, asbestos-containing materials,
polychlorinated biphenyls or other regulated substances or materials
which are hazardous, toxic or otherwise harmful to the environment.
"Release: shall mean any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, -------
leaching, dumping or disposing of a Hazardous Material into the
environment.
2.13 Absence of Agreements. Central Telcom is not a party to any agreement,
order, directive, memorandum of understanding or similar arrangement with any
governmental authority that restricts materially the conduct of its business
(other than restrictions imposed by the PSCU or the FCC on telephone companies
generally, which do not, individually or collectively, adversely affect the
businesses of Central Telcom as currently conducted or proposed to be
conducted), nor has Central Telcom been advised that any governmental authority
is contemplating issuing or requesting (or is considering the appropriateness of
issuing or requesting) any such agreement, order, directive, memorandum of
understanding or similar arrangement.
2.14 Taxes.
(a) Central Telcom is a limited liability company and has timely filed all
material Tax Returns (as defined below) as a partnership required to
be filed by it or will duly and timely file (including any extension
periods) such Tax Returns. Central Telcom has not granted any waiver
of any statute of limitations with respect to, or any extension of a
period for the assessment of, any Tax. Except for statutory liens for
current taxes not yet due, there are no material tax liens on any
assets of Central Telcom . Central Telcom has not received a ruling or
entered into an agreement with the IRS or any other taxing authority
that would have a Material Adverse Effect with respect to Central
Telcom, after the Closing Time.
(c) True and complete copies of any and all Tax Returns for the last five
years and all tax audit reports, if any, with respect to Central
Telcom have been furnished to the Purchaser. Any deficiencies proposed
in tax audits have been duly and fully paid, settled, or reserved
against in the Financial Statements. Tax Returns for Central Telcom
have never been audited by either the state or federal taxing
authorities.
(d) Central Telcom has not been nor is it in violation (with or without
notice or lapse of time or both) of any applicable law relating to the payment
or withholding of Taxes. Central Telcom has duly and timely withheld from
employee salaries, wages, and other compensation and paid over to the
appropriate taxing authorities all amounts required to be so withheld and paid
over for all periods due and payable under all applicable Laws.
(e) No audit is pending or, to the knowledge of Central Telcom, threatened
with respect to any Taxes due from, or Tax Return filed by or relating
to, Central Telcom.
(f) Central Telcom is not a party to any agreement, contract, or
arrangement that would require Central Telcom to make any gross-up
payments with respect to any Taxes or otherwise indemnify or hold
harmless any employee with respect to Taxes.
(g) Prior to the Closing Time, Central Telcom shall notify Purchaser in
writing of any power of attorney granted by Central Telcom concerning
any Tax matter that will be in force as of the Closing Time.
2.15 Insurance. Item 2.15 of the Sellers Disclosure Schedule lists all
material policies of insurance of Central Telcom currently in effect. Central
Telcom has no liability for unpaid premiums or premium adjustments not properly
reflected on Central Telcom's Financial Statements.
2.16 Broker/Expenses. No broker, finder, consultant or investment banker is
entitled to any brokerage, finder's, consultant's, or other fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Sellers or Central Telcom. Neither Central
Telcom nor Central Utah Telephone have paid, or agreed to pay, in the aggregate
in excess of $10,000 in connection with the possible sale of Central Telcom,
Central Utah Telephone or the transactions contemplated herein or in the Stock
Purchase Agreement since January 1, 1999.
2.17 Material Adverse Effect. Since July 31, 2000, there has been no
Material Adverse Effect with respect to Central Telcom.
2.18 Material Contracts/Licenses.
(a) Except as set forth in Item 2.18(a) of Sellers Disclosure Schedule,
Central Telcom is not a party to or obligated under any material
contract, agreement or other instrument or understanding that is not
terminable by Central Telcom without additional payment or penalty
within 90 days. Each contract disclosed on Sellers Disclosure Schedule
is in full force and effect and constitutes a legal, valid, and
binding obligation of Central Telcom, and (to the knowledge of Sellers
and Central Telcom) each other party in accordance with its terms,
except as such enforcement may be limited by applicable bankruptcy,
insolvency, moratorium, or similar laws affecting the enforcement of
creditors' rights generally, or by general principles of equity
(regardless of whether such enforceability is considered in a
proceeding in law or in equity). Central Telcom is not in violation or
breach of or default under any such contract (with or without notice
or lapse of time or both). Since December 31, 1998, no such contract
has been amended or supplemented in any material respect. For purposes
of this Section 2.18, the term "material contract" shall include any
agreement, contract, instrument or understanding involving the payment
or receipt by Central Telcom of $10,000 ($25,000 in the case of
billing and collecting agreements) or more per year or $25,000
($100,000 in the case of billing and collecting agreements) or more in
the aggregate through the life of the contract.
(b) Material Licenses. Item 2.18(b) of the Sellers Disclosure Schedule
contains a true and complete list and brief description of all
franchises, permits, licenses, approvals, and other authorizations
that are necessary for the business, operations, and affairs of
Central Telcom as currently being or contemplated to be conducted.
Central Telcom owns or validly holds each such franchise, permit,
license, approval, and other authorization. Each such franchise,
permit, license, approval, and other authorization is valid, in good
standing, and in full force and effect. To the knowledge of Sellers
and Central Telcom, no basis exists for the termination, suspension,
restriction, or limitation of any such franchise, permit, license,
approval, or other authorization.
2.19 Intangible Property. Central Telcom owns no intangible personal
property or other invention, process, design, formula, license, royalty
arrangement, trade secret, know how and proprietary technique necessary for the
conduct of its businesses.
2.20 State Takeover Statutes; Absence of Supermajority Provision. No
provision of the Utah Limited Liability Company Act or Central Telcom's Articles
or Operating Agreement or the terms of any rights plan or other takeover defense
mechanism of Central Telcom would, directly or indirectly, restrict or impair
the ability of any Seller or Purchaser to consummate the transactions
contemplated by this Agreement nor will any such provisions restrict or impair
the ability of the Purchaser to exercise the same rights to vote or otherwise
exercise the same rights as the other or former Membership Interest holders of
Central Telcom in the event that Purchaser were to acquire the Membership
Interests of Central Telcom.
2.21 Easements Rights of Way. Central Telcom has no easements, rights of
way, and leases with respect to real property.
2.22 Transactions with Affiliates. Except as provided in Item 2.22 to the
Sellers' Disclosure Schedule, Central Telcom has made since December 31, 1997,
no payments or distributions to any present or former director, officer or
person holding in excess of 1% of outstanding Membership Interests of Central
Telcom, or any affiliate of any such person, other than normal directors fees,
normal retirement benefits under the Plans, normal salary and other employee
compensation, and normal dividends, and there have been and are no outstanding
liabilities or contracts between or among Central Telcom and any such person or
affiliate of such person.
2.23 Year 2000 Representation. No technology owned, developed or licensed
by Central Telcom or used in connection with their business (including, but not
limited to, information systems and technology, commercial and noncommercial
hardware and software, firmware, mechanical or electrical products, embedded
systems, or any other electro-mechanical or processor-based system, whether as
part of a desktop system, office system, building system or otherwise)
(collectively, the "Technology") has experienced or will experience any
malfunctions, premature cancellation or expiration of contractual rights or
deletion of data, or any other problems in connection with (i) the year 2000
(and all subsequent years) as distinguished from 1900 years, (ii) the date
February 29, 2000, and all subsequent leap years, or (iii) the date September 9,
1999. Insofar as this representation and warranty relates to services to be
provided by a third party, it is based upon written assurances received by
Central Telcom from such party.
ARTICLE IIASECURITIES REPRESENTATIONS
Each Seller makes the following representations and warranties, severally
and not jointly, to the Purchaser and to Xxxxx Interactive Corporation:
2A.1 Investment Purpose. Each Seller is acquiring the Notes for his own
account as principal for investment only and not with a present view towards the
public sale or distribution thereof, except pursuant to sales exempted from
registration under the Securities Act of 1933, as amended (the "1933 Act").
2A.2 Sophisticated Investor Status. Such Seller has such business and
financial experience as is required to give him the capacity to protect his own
interests in connection with the decision to receive the Note.
2A.3 Reliance on Exemptions. Such Seller understands that the Notes are
being offered and sold to it in reliance upon specific exemptions from the
registration requirements of United States federal and state securities laws and
that Purchaser and Xxxxx Interactive Corporation are relying upon the truth and
accuracy of, and such Seller's compliance with, the representations, warranties,
agreements, covenants, acknowledgments and understandings of such Seller set
forth in Article IIA in order to determine the availability of such exemptions
and the eligibility of such Seller to acquire the Notes.
2A.4 Information. Such Seller has been furnished with all materials
relating to the business, finances and operations of Purchaser and Xxxxx
Interactive Corporation and materials relating to the Notes which have been
requested by such Seller. Such Seller has been afforded the opportunity to ask
questions of Purchaser and Xxxxx Interactive Corporation and has received what
such Seller believes to be satisfactory answers to any such inquiries. Neither
such inquiries nor any other due diligence investigation conducted by such
Seller or any of its advisors or representatives shall modify, amend or affect
such Seller's right to rely on Purchaser's representations and warranties
contained in Article III below.
2A.5 No Governmental Review. Such Seller understands that no United States
federal or state agency or any other government or governmental agency has
passed upon or made any recommendation or endorsement of the Notes.
2A.6 Transfer or Resale. Such Seller understands that (i) no public market
now exists for the Notes and it is very unlikely that a public market will ever
exist for the Notes, (ii) the Notes have not been and are not being registered
under the 1933 Act or any applicable state securities laws, and may not be
transferred unless (a) subsequently included in an effective registration
statement thereunder, or (b) such Seller shall have delivered to the Purchaser
an opinion of counsel (which opinion shall be reasonably satisfactory to the
Purchaser) to the effect that the Notes to be sold or transferred may be sold or
transferred pursuant to an exemption from such registration; and (iii) neither
the Purchaser nor any other person is under any obligation to register such
Notes under the 1933 Act or any state securities laws or to comply with the
terms and conditions of any exemption thereunder.
2A.7 Legends. Such Seller understands that the Notes may bear a restrictive
legend in substantially the form on Schedule 1.3(a) hereto (and a stop-transfer
order may be placed against transfer of the Notes).
ARTICLE III--REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE PURCHASER
Except as set forth in the Disclosure Schedule delivered by the Company to
Seller prior to the execution of this Agreement (the "Purchaser Disclosure
Schedule"), which Purchaser Disclosure Schedule shall reference disclosure items
by section, the Purchaser, jointly and severally, represent and warrant to the
Sellers and Central Telcom that:
3.1 Organization and Qualification.
(a) Each of the Company and the Purchaser is a corporation validly
existing and in good standing under the laws of the states of
Delaware.
(b) Each of the Company and the Purchaser is duly qualified or licensed as
a foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of its properties owned, leased or
operated by it or the nature of its activities makes such
qualification or licensing necessary, except for such failures to be
so duly qualified or licensed and in good standing that would not,
either individually or in the aggregate, have a Material Adverse
Effect with respect to the Company.
3.2 Authority. The Company and the Purchaser have the requisite corporate
power and authority to execute and deliver this Agreement and to perform their
respective obligations hereunder and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement by the Company and the
Purchaser and the consummation by the Company and the Purchaser of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action on the part of the Company and the Purchaser and no
other corporate proceedings on the part of the Company and the Purchaser are
necessary to authorize this Agreement or to consummate the transactions so
contemplated hereby. This Agreement has been duly and validly executed and
delivered by the Company and the Purchaser and constitutes the valid and binding
obligation of the Company and the Purchaser and assuming the authorization,
execution and delivery by Purchaser, is enforceable against the Company and the
Purchaser in accordance with its terms, except as enforcement may be limited by
general principles of equity, whether applied in a court of law or a court of
equity, and by bankruptcy, insolvency and similar laws affecting creditors'
rights and remedies generally.
3.3 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by the Company and the
Purchaser does not, and the performance of this Agreement by the
Company and the Purchaser shall not, (i) conflict with or violate the
Articles of Incorporation or Bylaws of the Company or the Purchaser,
(ii) conflict with or violate any Laws applicable to the Company or
the Company Subsidiary or by which any of their respective properties
is bound or affected, or (iii) result in any breach of or constitute a
default (or an event which with notice or lapse of time or both would
become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or result in the creation
of a lien or encumbrance on any of the properties or assets of the
Company or the Purchaser pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which the Company or the Purchaser
is a party or by which the Company or the Purchaser or its or any of
their respective properties is bound or affected.
(b) The execution and delivery of this Agreement by the Company and the
Purchaser does not, and the performance of this Agreement by the
Company shall not, require any consent, approval, authorization or
permit of, or filing with or notification to, any governmental or
regulatory authority, domestic or foreign, except the HSR Act and the
consents or approvals of the PSCU or FCC listed on the Sellers
Disclosure Schedule.
ARTICLE IIIASECURITIES REPRESENTATIONS
Each of the Company and the Purchaser makes the following representations
and warranties, jointly and severally, to the Sellers:
3A.1 Investment Purpose. The Purchaser is acquiring the CU Common
Membership for its own account as principal for investment only and not with a
present view towards the public sale or distribution thereof, except pursuant to
sales exempted from registration under the 1933 Act.
3A.2 Accredited Investor Status. The Purchaser is an "accredited investor"
as that term is defined in Rule 501(a) of Regulation D and has such business and
financial experience as is required to give it the capacity to protect its own
interests in connection with the decision to receive the CU Common Membership.
3A.3 Reliance on Exemptions. The Purchaser understands that the CU Common
Membership is being offered and sold to it in reliance upon specific exemptions
from the registration requirements of United States federal and state securities
laws and that theSellers are relying upon the truth and accuracy of, and the
Purchaser's compliance with, the representations, warranties, agreements,
covenants, acknowledgments and understandings of the Purchaser set forth in
Article IIIA in order to determine the availability of such exemptions and the
eligibility of the Purchaser to acquire the CU Common Membership.
3A.4 Information. The Purchaser and the Company have been furnished with
all materials relating to the business, finances and operations of the Central
Telcom and materials relating to the CU Common Membership which have been
requested by the Purchaser and the Company. The Purchaser and the Company have
been afforded the opportunity to ask questions of the Sellers, Central Telcom
and have received what the Purchaser and the Company believe to be satisfactory
answers to any such inquiries. Neither such inquiries nor any other due
diligence investigation conducted by the Purchaser or the Company or any of
their advisors or representatives shall modify, amend or affect the Purchaser's
or the Company's right to rely on Sellers', Central Telcom's representations and
warranties contained in Article II below.
3A.5 No Governmental Review. The Purchaser and the Company understand
that no United States federal or state agency or any other government or
governmental agency has passed upon or made any recommendation or endorsement of
the CU Common Membership.
3A.6 Transfer or Resale. The Purchaser and the Company understand that (i)
no public market now exists for the CU Common Membership and it is very unlikely
that a public market will ever exist for the CU Common Membership, (ii) the CU
Common Membership has not been and is not being registered under the 1933 Act or
any applicable state securities laws, and may not be transferred unless (a)
subsequently included in an effective registration statement thereunder, or (b)
the Purchaser or the Company shall have delivered to the Sellers an opinion of
counsel (which opinion shall be reasonably satisfactory to the Sellers) to the
effect that the CU Common Membership to be sold or transferred may be sold or
transferred pursuant to an exemption from such registration; and (iii) neither
the Sellers, Central Telcom, nor any other person is under any obligation to
register such Notes under the 1933 Act or any state securities laws or to comply
with the terms and conditions of any exemption thereunder.
3A.7 Legends. The Purchaser and the Company understand that the CU Common
Membership may bear a restrictive legend (and a stop-transfer order may be
placed against transfer of the CU Common Membership).
ARTICLE IV--COVENANTS OF THE SELLERS AND CENTRAL TELECOM
4.1 Affirmative Covenants. Each of the Sellers and Central Telcom covenants
and agrees with the Purchaser that from and after the date of this Agreement and
prior to the Closing Time, unless the prior written consent of the Purchaser
shall have been obtained and except as otherwise contemplated herein, each
Seller and Central Telcom will cause Central Telcom to:
(a) operate its business only in the ordinary course consistent with past
practices or as described as Section 4.1(a) of Sellers Disclosure
Schedule;
(b) use reasonable efforts to preserve intact its business organization
and assets, maintain its rights and franchises, retain the services of
its officers and key employees and maintain its relationships with and
the good will of regulators and customers;
(c) maintain and keep its properties in as good repair and condition as at
present, ordinary wear and tear excepted;
(d) keep in full force and effect insurance and bonds comparable in amount
and scope of coverage to that now maintained by it;
(e) perform in all material respects all obligations required to be
performed by it under all material contracts, leases, and documents
relating to or affecting its assets, properties, and business;
(f) maintain in good standing all franchises, permits, licenses, approvals
and other authorizations owned or held by Central Telcom;
(g) comply in all material respects with all laws and regulations
applicable to the business operations and affairs of Central Telcom;
(h) take such reasonable actions as are requested by the Purchaser to
satisfy the conditions to and complete the Sale; and
(i) provide to Purchaser Central Telcom's monthly financial statements
promptly upon their completion.
4.2 Negative Covenants. Except as specifically contemplated by this
Agreement, from the date of this Agreement until the Closing Time, each of the
Sellers and Central Telcom shall not permit Central Telcom to do, without the
prior written consent of the Purchaser, any of the following:
(a) except as required by applicable Laws or to maintain qualification
pursuant to the Code or set forth as Section 4.2(a) on Sellers
Disclosure Schedule, adopt, amend, renew or terminate any Plan or any
agreement, arrangement, plan or policy between Central Telcom and one
or more of its current or former members, or employees, or except as
required by applicable law, increase in any manner the base salary,
bonus, incentive compensation or fringe benefits of any member or
employee or pay any benefit not required by any plan or agreement as
in effect as of the date hereof;
(b) declare or pay any dividend on, or make any other distribution in
respect of, its outstanding membership interests;
(c)(i) redeem, purchase or otherwise acquire any shares of its membership
interests or any securities or obligations convertible into or
exchangeable for its membership interests, or any options, warrants,
conversion or other rights to acquire any of its membership interests
or any such securities or obligations; (ii) merge with or into any
other business organization, permit any other business organization to
merge into it or consolidate with any other business organization, or
effect any reorganization or recapitalization; (iii) purchase or
otherwise acquire any substantial portion of the assets, or more than
5% of any class of stock of any corporation or other business other
than in the ordinary course of business and consistent with past
practice; (iv) liquidate, sell, dispose of, or encumber any assets or
acquire any assets, other than in the ordinary course of its business
consistent with past practice; or (v) split, combine or reclassify any
of its membership interests or issue or authorize or propose the
issuance of any other securities in respect of, in lieu of or in
substitution for its membership interest;
(d) issue, deliver, award, grant or sell, or authorize or propose the
issuance, delivery, award, grant or sale of, any shares of any class
of membership interest of Central Telcom (including shares held in
treasury) or any rights, warrants or options to acquire, any such
membership interests;
(e) directly or indirectly through any director, officer, shareholder,
employee, agent, adviser or otherwise, orally or in writing, initiate,
solicit, encourage, respond to, discuss, negotiate or accept any
inquiries, indications of interest, proposals or offers from, or make
any inquiries, indications of interest, proposals, offers, counter
proposals or counteroffers to, or furnish any information to, any
other person with respect to (i) an acquisition of the membership
interests of Central Telcom, (ii) additional equity or convertible
debt financing for Central Telcom, (iii) an acquisition of all or part
of the assets of Central Telcom, or (iv) a merger, consolidation or
any other transaction which would result in a change in control in
Central Telcom or a substantial change in the business of Central
Telcom, or (v) provide third parties with any nonpublic information
relating to any such inquiry or proposal;
(f) propose or adopt any amendments to the Articles of Organization or
Operating Agreement of Central Telcom in any way adverse to the
Purchaser;
(g) change any of its methods of accounting in effect at December 31,
1999, or change in any material respect its methods of reporting income or
deductions for federal income tax purposes from those employed in the
preparation of its federal income tax returns for the taxable year ended
December 31, 1999, except as may be required by Law or GAAP;
(h) change in any material respect any material policies concerning the
business or operations of Central Telcom (except as required by Law)
including, without limitation taking any action to: (i) sell, assign,
transfer, pledge, mortgage or otherwise encumber any of its assets,
except for those sales, assignments and transfers (but excluding
pledges, mortgages or encumbrances) incurred in individual amounts of
less than $7,500 incurred in the ordinary course of business
consistent with past practice subject to an aggregate maximum of
$50,000; (ii) make any investment except in Permitted Investments with
a maturity of six months or less; (iii) except with respect to those
described on Section 4.2 (h) of the Sellers' Disclosure Schedules,
enter into any agreement with respect to any acquisition of or acquire
assets except in individual amounts of less than $7,500 incurred in
the ordinary course of business consistent with past practice subject
to an aggregate maximum of $50,000, or any discharge, waiver,
satisfaction, release or relinquishment of any material contract
rights, liens, encumbrances, debt or claims, except in individual
amounts of less than $500 in the ordinary course of business
consistent with past practice subject to an aggregate maximum of
$5,000; (iv) settle any claim, action, suit, litigation, proceeding,
arbitration, investigation or controversy of any kind, for any amount
in excess of $5,000, net of any insurance proceeds, or in any manner
which would restrict the operations or business of Central Telcom; (v)
except with respect to those described on Section 4.2 (h) of the
Sellers' Disclosure Schedules, make any capital expenditure, except in
individual amounts of less than $5,000 incurred in the ordinary course
of business consistent with past practice subject to an aggregate
maximum of $25,000; (vi) enter into any transaction with a present or
former director, officer, employee or Member of Central Telcom or any
affiliate of any such person; (vii) incur any indebtedness for money
borrowed or lease any property or assets; (viii) lower any current
prices or rates with respect to telephone or other services provided
by Central Telcom except for changes in the ordinary course of
business or as otherwise required by regulatory authorities; or (ix)
take any action or fail to take any action which individually or in
the aggregate is likely to have a Material Adverse Effect with respect
to Central Telcom;
(i) agree in writing or otherwise to do any of the foregoing.
4.3 Access and Information.
(a) From the date of this Agreement until the Closing Time and upon
reasonable notice, Sellers and Central Telcom shall afford to the
Purchaser's officers, employees, accountants, legal counsel and other
representatives of the Purchaser, access, during normal business
hours, to all its properties, books, contracts, commitments and
records, excluding any books, contracts, commitments and records
related to the Membership Sales. From the date of this Agreement and
until the Closing Time, Sellers and Central Telcom shall furnish
promptly (as soon as available or received by Central Telcom) to the
Purchaser (i) a copy of each Central Telcom Report filed by it or
received by it after the date of this Agreement and prior to the
Closing Time pursuant to the requirements of the HSR Act or any other
applicable Laws promptly after such documents are available, (ii) a
copy of any action, including all minutes, taken by the Members or
Managers, or any committee thereof, and any documents or other
materials of any kind provided to such Members or Managers or
committees promptly after such action, minutes, materials or other
documents become available without further request by the Purchaser,
(iii) a copy of each Tax Return filed by Central Telcom for the three
most recent years available, a copy of any correspondence received
from the IRS or any other governmental entity or taxing authority or
agency and any other correspondence relating to Taxes, and any other
documents relating to Taxes as the Purchaser may reasonably request,
and (iv) all other information concerning its business, properties and
personnel as the Purchaser may reasonably request.
(b) Unless otherwise required by Law, the parties will hold any such
information which is nonpublic in confidence until such time as such
information becomes publicly available through no wrongful act of
either party, and in the event of termination of this Agreement for
any reason each party shall promptly return all nonpublic documents
obtained from any other party, and any copies made of such documents,
to such other party or destroy such documents (including any resulting
work product) and copies; provided that Purchaser's ultimate parent
company, Xxxxx Interactive Corporation, may make such disclosure
concerning the transactions contemplated herein as it deems necessary
or appropriate because of its status as a public company.
4.4 Update Disclosure; Breaches.
(a) From and after the date of this Agreement until the Closing Time,
Sellers and Central Telcom shall update the Purchaser on a regular
basis by written notice to the Purchaser to reflect any matters which
have occurred from and after the date of this Agreement which, if
existing on the date of this Agreement, would have been required to be
described on Sellers Disclosure Statement.
(b) Sellers and Central Telcom shall, in the event any of them becomes
aware of the impending or threatened occurrence of any event or
condition which would cause or constitute a material breach (or would
have caused or constituted a material breach had such event occurred
or been known prior to the date of this Agreement) of any of their
representations or agreements contained or referred to herein, give
prompt written notice thereof to the Purchaser and use its best
efforts to prevent or promptly remedy the same; provided, however,
that the delivery of any notice pursuant to this Section shall not
limit or otherwise affect the remedies available hereunder to the
Purchaser. If, however, the Purchaser consummates the Membership
Sales, it shall be deemed to have waived any breach of a
representation, warranty or covenant which has been corrected by
amendment by the information disclosed by Sellers or Central Telcom
pursuant to this Section prior to the satisfaction of the conditions
to the purchase set out in Article VI.
4.5 Expenses. All Expenses (as defined below) incurred by the parties
hereto shall be borne solely and entirely by the party which has incurred the
same. "Expenses" as used in this Agreement shall include all reasonable
out-of-pocket expenses (including, without limitation, all fees and expenses of
counsel, accountants, investment bankers, experts and consultants to the party
and its affiliates incurred by a party or on its behalf in connection with or
related to the authorization, preparation and execution of this Agreement, the
solicitation of Membership holder approvals and all other matters related to the
closing of the transactions contemplated hereby. Neither Central Telcom nor
Central Utah Telephone or its subsidiaries shall pay or agree to pay in the
aggregate in excess of $100,000 in connection with the consummation of the
transactions contemplated in this Agreement and the Stock Purchase Agreement
except with the prior written consent of the Purchaser excluding any
Xxxx-Xxxxx-Xxxxxx filing fees.
4.6 Delivery of Membership holder List. Sellers and Central Telcom shall
deliver to the Purchaser or its designee, from time to time prior to the Closing
Time, a true and complete list setting forth the names and addresses of Central
Telcom's Membership holders, their holdings of Membership as of the latest
practicable date, and such other Membership holder information as the Purchaser
may reasonably request.
4.7 Member Indebtedness. Each Seller agrees to pay or cause to be paid any
and all advances and indebtedness (including interest thereon) owed by such
Seller and any Affiliate of such Seller to Central Telcom or Central Utah
Telephone or its subsidiaries on or prior to the Closing Time.
ARTICLE V--ADDITIONAL AGREEMENTS
5.1 Appropriate Action; Consents; Filings. The Sellers, Central Telcom and
the Purchaser shall use all reasonable efforts to (i) take, or cause to be
taken, all appropriate action, and do, or cause to be done, all things
necessary, proper or advisable under applicable Law to consummate and make
effective the transactions contemplated by this Agreement, (ii) obtain all
consents, licenses, permits, waivers, approvals, authorizations or orders
required under Law required in connection with the authorization, execution and
delivery of this Agreement and the consummation by them of the transactions
contemplated hereby, and (iii) make all necessary filings, and thereafter make
any other required submissions, with respect to this Agreement and the
transactions contemplated herein required under any applicable Law; provided
that the Purchaser and Sellers and Central Telcom shall cooperate with each
other in connection with the making of all such filings, including providing
copies of all such documents to the non-filing party and its advisors prior to
filing and, if requested, accepting all reasonable additions, deletions or
changes suggested in connection therewith. The Sellers, Central Telcom and the
Purchaser shall furnish all information required for any application or other
filing to be made pursuant to the rules and regulations of any applicable Law in
connection with the transactions contemplated by this Agreement. In case at any
time after the Closing Time any further action is necessary or desirable to
carry out the purposes of this Agreement, each party to this Agreement shall use
all reasonable efforts to take all such necessary action.
5.2 Notification of Certain Matters. The Sellers and Central Telcom shall
give prompt notice to the Purchaser, and the Purchaser shall give prompt notice
to the Sellers and Central Telcom of (i) the occurrence or non-occurrence of any
event, the occurrence or non-occurrence of which would be likely to cause any
representation or warranty contained in this Agreement to be untrue or
inaccurate and (ii) any failure of the Sellers or Central Telcom or the
Purchaser, as the case may be, to comply with or satisfy any covenant, condition
or agreement to be complied with or satisfied by it hereunder; provided,
however, that the delivery of any notice pursuant to this Section shall not
limit or otherwise affect the remedies available hereunder to the party
receiving such notice. If, however, the parties consummate the Membership Sales
contemplated herein, they (including the shareholders of Central Telcom) shall
be deemed to have waived any breach of a representation, warranty or covenant
which has been corrected by amendment by the information disclosed pursuant to
this Section prior to the satisfaction of the conditions of the purchase
contemplated herein set out in Article VI.
5.3 Escrow Agreement. At the Closing the Company and Sellers will execute
and deliver an Escrow Agreement in the form of Schedule 1.3(b).
ARTICLE VI--CONDITIONS OF PURCHASE AND SALE/CLOSING
6.1 Conditions to Obligation of Each Party to Effect the Membership Sales.
The respective obligations of each party to effect the Membership Sales shall be
subject to the satisfaction at or prior to the Closing Time of the following
conditions:
(a) Governmental Approvals. The approvals of the PSCU and the FCC
(collectively, "Governmental Approvals") shall have been obtained and
shall be in full force and effect. The terms and conditions of the
Governmental Approvals shall be acceptable in all material respects to
Sellers and the Purchaser in the exercise of their reasonable
discretion, including, but not limited to, regulatory treatment of any
gain on sale which shall allow for all of the gain to be retained by
Sellers and preclude the PSCU from including the gain, or any part of
it, in any further regulatory proceeding for rate-making or any other
purpose. If either party deems it advisable such approvals shall have
become final and non-appealable.
(b) No Order. No federal or state governmental or regulatory authority or
other agency or commission, or federal or state court of competent
jurisdiction, shall have enacted, issued, promulgated, enforced or
entered any statute, rule, regulation, executive order, decree,
injunction or other order (whether temporary, preliminary or
permanent) which has the effect of restricting, preventing or
prohibiting consummation of the transactions contemplated by this
Agreement. (c) Xxxx-Xxxxx-Xxxxxx Act. If a filing under the HSR Act is
required to be made prior to consummation of the purchase and sale,
early termination shall have been granted or applicable waiting
periods shall have expired under the HSR Act.
(d) Stock Purchase Agreement. The Stock Purchase Agreement shall have
closed or shall close concurrently with the Closing of this Agreement
in accordance with the terms and conditions thereof.
6.2 Additional Conditions to Obligations of the Purchaser. Any certificates
or opinions given pursuant to this Section 6.2 shall, at the Purchaser's
request, be made to and given to any person providing financing to the Purchaser
or Central Telcom. The obligations of the Purchaser to effect the purchase and
sale are also subject to the following conditions:
(a) Representations and Warranties. Each of the representations and
warranties of Sellers and Central Telcom contained in this Agreement,
without giving effect to any update to Sellers Disclosure Schedule or
notice to the Purchaser under Section 4.4, shall be true and correct
as of the date of this Agreement and (except to the extent such
representations and warranties speak as of an earlier date) as of the
Closing Time as though made on and as of the Closing Time.
(b) Agreements and Covenants. The Sellers and Central Telcom shall have
performed or complied in all material respects with all agreements and
covenants required by this Agreement to be performed or complied with
by each of them on or prior to Closing Time.
(c) Consents Obtained. All Central Telcom Approvals (which shall be deemed
to include the PSCU, if any, all items referred to in Section 2.5 or
2.6 of this Agreement or which should have set forth in such Sections
to Sellers Disclosure Statement) and all filings required to be made
by Sellers and Central Telcom for the authorization, execution and
delivery of this Agreement and the consummation by it of the
transactions contemplated hereby shall have been made by Sellers and
Central Telcom and obtained in form and substance satisfactory to the
Purchaser in its sole discretion (including without limitation without
any terms or conditions which the Purchaser deems adverse) and, if
Purchaser deems it advisable, shall have become final and
non-appealable.
(d) No Challenge. There shall not be pending or threatened any action,
proceeding or investigation before any court or administrative agency
or by a government agency (i) challenging or seeking material damages
in connection with, the Membership Sales or (ii) seeking to restrain,
prohibit or limit the exercise of full rights of ownership or
operation by the Purchaser of all or any portion of the business or
assets of Central Telcom, which in either case is reasonably likely to
have a Material Adverse Effect with respect to Central Telcom or the
Purchaser.
(e) No Material Adverse Changes. Since the date of the Agreement, there
shall not have been any change in the financial condition, results of
operations or business of Central Telcom, taken as a whole, or any of
the matters referred to in Section 4.9 hereof, that either
individually or in the aggregate would have a Material Adverse Effect
with respect to Central Telcom.
(f) [Reserved.]
(g) Opinion of Counsel.
(a) The Purchaser shall have received from Xxxxxxxxx & Xxxxx, counsel
to Sellers ("Sellers' Counsel") an opinion dated the Closing
Time, in substantially the form attached hereto as Schedule
6.2(i)(a) and containing such additional opinions as the
financial institution(s) lending funds for the acquisition by
Purchaser of the Membership Interests shall request. Sellers'
Counsel may rely as to FCC matters on an opinion of FCC counsel
acceptable to Purchaser in form and substance reasonably
satisfactory to the Purchaser.
(b) The Purchaser shall have received from Utah counsel to the
Purchaser ("Utah Counsel") an opinion dated the Closing Time in
substantially the form attached hereto as Schedule 6.2(i)(b) and
containing such additional opinions as the financial
institution(s) lending funds for the acquisition by Purchaser of
the Membership Interests shall request.
(h) Managers Certificate. The Purchaser shall have received a certificate
of I. Branch Xxx and Xxxxx X. Xxx as Managers of Central Telcom with
respect to the conditions set forth in Sections 6.2(a), (b), (e) and
(f).
(i) All Sellers. Each Seller shall have complied with all of such Seller's
representations, warranties, agreements and obligations herein and
shall have tendered such Seller's Membership Interests to Purchaser
for purchase as contemplated herein.
(j) Payment of Indebtedness. All receivables and other indebtedness
(including all interest thereon) owed by all of the Sellers of Central
Telcom and their respective Affiliates to Central Telcom or Central
Utah Telephone or its subsidiaries shall have been paid off in full on
or prior to the Closing Time.
(k) Term of Notes. If any financial institution(s) proposing to lend funds
for the acquisition by Purchaser of the Membership Interests of
Central Telcom shall require that the Notes have a maturity date later
than the maturity date contemplated in Schedule 1.3(a) hereto, the
Sellers shall have the option, in their sole discretion, to either (i)
agree to accept Notes with such later maturity date instead of the
maturity date contemplated in Schedule 1.3(a) or (ii) terminate this
Agreement without liability to Purchaser.
6.3 Additional Conditions to Obligations of Sellers. The obligation of
Sellers to effect the Membership Sales is also subject to the following
conditions:
(a) Representations and Warranties. Each of the representations and
warranties of the Purchaser set forth in this Agreement, without
giving effect to any notice to Central Telcom under Section 5.2, shall
be true and correct as of the date of this Agreement and (except to
the extent such representation and warranties speak as of an earlier
date) as of the Closing Time, as though made on and as of the Closing
Time. Central Telcom shall have received a certificate signed on
behalf of the Purchaser and the Company by the Chief Executive Officer
or President and the Chief Financial Officer of the Purchaser to the
foregoing effect and to the effect set forth in 6.3(b).
(b) Agreements and Covenants. The Purchaser shall have performed or
complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by it on
or prior to the Closing Time.
(c) Consents Under Agreements. All consents, waivers, approvals,
authorizations or orders required to be obtained, and all filings
required to be made by the Purchaser for the authorizations, execution
and delivery of this Agreement and the consummation by it of the
transactions contemplated hereby shall have been obtained and made by
the Purchaser.
(d) Opinion of Counsel. Central Telcom shall have received from Xxxxxx X.
Xxxxxxx, counsel to the Purchaser ("Purchaser Counsel") an opinion
dated the Closing Time, in substantially the form set forth in
Schedule 6.3(b) to this Agreement. Purchaser Counsel may rely as to
certain matters of Utah law on the opinion of Utah Counsel referred to
in Section 6.2(i)(b).
ARTICLE VII--TERMINATION, AMENDMENT AND WAIVER
7.1 Termination. This Agreement may be terminated at any time prior to the
Closing Time:
(a) by mutual written consent of the Purchaser and the Sellers;
(b) by Sellers or the Purchaser (i) if there has been a breach in any
material respect (except that where any statement in a representation
or warranty expressly includes a standard of materiality, such
statement shall have been breached in any respect) of any
representation, warranty, covenant or agreement on the part of the
Purchaser, on the one hand, or the Sellers, Central Telcom, on the
other hand, set forth in this Agreement, or (ii) if any representation
or warranty of Sellers and Central Telcom, on the one hand, or the
Purchaser, on the other hand, shall be discovered to have become
untrue in any material respect (except that where any statement in a
representation or warranty expressly includes a standard of
materiality, such statement shall have become untrue in any respect),
in either case (i) or (ii) which breach or other condition has not
been cured within 10 business days following receipt by the
nonterminating party of notice of such breach or other condition, or
which breach or other condition by its nature, cannot be cured prior
to the Closing Time; provided, however, that this Agreement may not be
terminated pursuant to this clause (c) by the breaching party or party
making any representation or warranty which shall have become untrue
in any material respect;
(c) by either the Purchaser or Sellers if any permanent injunction
preventing the consummation of the purchase and sale shall have become
final and nonappealable;
(d) by the Purchaser at any time prior to the Closing if additional due
diligence by the Purchaser reveals information relating to or
affecting Central Telcom which in the opinion of the Purchaser has a
Material Adverse Effect with respect to Central Telcom.
(e) by either the Purchaser or the Sellers if the Membership Sales shall
not have been consummated by March 31, 2001, for a reason other than
the failure of the party seeking termination to comply with its
obligations under this Agreement; or
(g) by either the Purchaser or Sellers if any regulatory authority has
denied approval of the transactions contemplated herein, and neither
the Purchaser nor Central Telcom has, within 30 days after the entry
of such order denying approval, filed a petition seeking review of
such order as provided by applicable law.
7.2 Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 7.1, this Agreement shall forthwith become void
and all rights and obligations of any party shall cease except that nothing
herein shall relieve any party from liability for any breach of this Agreement
or any representation, warranty, covenant or agreement contained in this
Agreement or shall restrict either party's rights in the case thereof.
7.3 Waiver. At any time prior to the Closing Time, the parties may (a)
extend the time for the performance of any of the obligations or other acts of
the other party, (b) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto and (c)
waive compliance with any of the agreements or conditions contained herein. Any
such extension or waiver shall be valid only if set forth in a written
instrument signed on behalf of such party, but such extension or waiver or
failure to insist on strict compliance with an obligation, covenant, agreement
or condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure.
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification by Sellers. Subject to the provisions of this Article
VIII and of Article IX hereof, Sellers, jointly and severally, shall indemnify
the Company, Purchaser, Central Telcom, and any Affiliate of the Company,
Purchaser, Central Telcom, and any officer, director, or employee of the
Company, Purchaser, Central Telcom, or any Affiliate of the Company, Purchaser,
Central Telcom ("Purchaser Party") in respect of, and hold each Purchaser Party
harmless against, any and all damages, obligations, losses, lost profits,
expenses (including reasonable attorneys' fees), liabilities, costs (including
environmental response, remediation, and cleanup costs resulting from a material
breach of Sellers' or Central Telcom's representations, warranties, covenants
and agreements), fines, and fees ("Damages") resulting from or relating to any
one or more of the following:
(a) any misrepresentation, breach of warranty, or nonfulfillment of or
failure to perform any material covenant or agreement made by any
Sellers or Central Telcom included in the Agreement or the
certificates delivered by Sellers or Central Telcom pursuant to
Article VI hereof; and
(b) any action, suit, investigation, arbitration, or proceeding against
any Purchaser Party (whether as a defendant, counterclaim or third
party defendant, intervenor, or otherwise) resulting from or relating
to any act or failure to act before the Closing Time by any Sellers or
Central Telcom, which if determined adversely to any Purchaser Party
would entitle the Purchaser Party to indemnification pursuant to this
Agreement.
8.2 Indemnification by Purchaser. Subject to the provisions of this Article
VIII and of Article IX hereof, the Company and Purchaser, will, jointly and
severally, indemnify each Seller and any Affiliate of each Seller ("Seller
Party") in respect of, and hold each Sellers Party harmless against, any and all
Damages (as defined in Section 8.1 hereof) resulting from or relating to any
misrepresentation, breach of warranty, or nonfulfillment of or failure to
perform any covenant or agreement made by Purchaser included in this Agreement
or the certificates delivered by Purchaser pursuant to Article VI hereof.
8.3 Representations and Warranties. All representations, warranties,
covenants, and agreements made herein or pursuant hereto will be deemed to be
material and to have been relied upon by the parties hereto.
8.4 Indemnification Procedure. Any person or entity entitled to
indemnification under Section 8.1 or 8.2 hereof that asserts a claim under
Sections 8.1 or 8.2 hereof is hereinafter referred to as the "Indemnitee," and
the party against whom such claim is asserted under Section 8.1 or 8.2 hereof is
hereinafter referred to as the "Indemnifying Party."
(a) If an Indemnitee becomes aware of any matter that it believes is
indemnificable pursuant to this Article VIII and such matter involves
(i) any claim made against the Indemnitee by any person or entity
other than a Purchaser Party or a Sellers Party or (ii) the
commencement of any action, suit, investigation, arbitration, or
similar proceeding against Indemnitee by any person or entity other
than a Purchaser Party or a Sellers Party, Indemnitee will give the
Indemnifying Party prompt written notice of such claim or the
commencement of such action, suit, investigation, arbitration, or
similar proceeding. Such notice will (A) provide (with reasonable
specificity) the bases on which indemnification is being asserted, (B)
set forth the actual or estimated amount of Damages for which
indemnification is being asserted, and (C) be accompanied by copies of
all relevant pleadings, demands, and other papers served on
Indemnitee. If Indemnifying Party's ability to defend against any such
claim, action, suit, investigation, arbitration, or similar proceeding
is irrevocably prejudiced by the failure of Indemnitee to provide
prompt written notice, as provided above, then Indemnifying Party will
not be obligated to indemnify Indemnitee with respect to such
prejudiced claim, action, suit, investigation, arbitration, or similar
proceeding.
(b) Indemnifying Party will have a period of the earlier of (i) thirty
calendar days or (ii) three days prior to the date of the earliest
statutory response (after the delivery of each notice required by
Section 8.4(a) hereof) within which to respond to such notice. If
Indemnifying Party accepts full responsibility for the claim described
in such notice or does not respond within such response period,
Indemnifying Party will be obligated to compromise or defend (and will
control the defense of) such claim, at its own expense and by counsel
chosen by Indemnitee and reasonably satisfactory to Indemnifying
Party, and Indemnifying Party will provide the Indemnitee with such
assurances as may be reasonably required by the Indemnitee to assure
that Indemnifying Party will assume, and be responsible for, the
entire liability for such claim, subject to the limitations set forth
in this Article VIII. Indemnitee will cooperate reasonably with
Indemnifying Party and counsel for Indemnifying Party in the defense
against any such claim, and the Indemnitee will have the right to
participate at its own expense in the defense of any such claim. If
Indemnifying Party responds within such response period denying or
rejecting responsibility for such claim in whole or in part or fails
to promptly provide Indemnitee with such assurances as may be
reasonably required by Indemnitee as provided above, Indemnitee will
be free, without prejudice to any of Indemnitee's rights hereunder, to
compromise or settle or defend (and control the defense of) such claim
and to pursue such remedies as may be available to Indemnitee under
applicable Law.
(c) Any compromise or settlement of any claim (whether defended by
Indemnitee or by the Indemnifying Party) will require the prior
written consent of Indemnitee and, except as provided in the last
sentence of Section 8.4(b), Indemnifying Party. If, however,
Indemnitee refuses to consent to a bona fide offer of compromise or
settlement that (i) Indemnifying Party desires to accept and (ii)
imposes no obligation or liability on Indemnitee and does not
adversely restrict Indemnitee in its business or condition, Indemnitee
may continue to pursue such claim, free of any participation by
Indemnifying Party, at the sole expense of Indemnitee. In such event,
the obligation of Indemnifying Party to Indemnitee will equal the
lesser of (i) the amount of the offer of compromise or settlement that
Indemnifying Party desired to accept, plus the reasonable
out-of-pocket expenses (except for expenses resulting from
Indemnitee's participation in any defense controlled by Indemnifying
Party) incurred by Indemnitee before the date the Indemnifying Party
notified Indemnitee of the offer of compromise or settlement, or (ii)
the actual out-of-pocket amount that Indemnitee is obligated to pay as
a result of Indemnitee's continuing to pursue such claim, plus the
reasonable out-of-pocket expenses (except for expenses resulting from
Indemnitee's participation in any defense controlled by Indemnifying
Party) incurred by Indemnitee before the date Indemnifying Party
notified Indemnitee of the offer of compromise or settlement, minus
the reasonable out-of-pocket expenses incurred by Indemnifying Party
after such notice date.
(d) If an Indemnitee becomes aware of any matter that it believes is
indemnifiable pursuant to VIII hereof and such matter involves a claim
made by any Purchaser Party or Seller Party, Indemnitee will give
Indemnifying Party prompt written notice of such claim. Such notice
will (i) provide (with reasonable specificity) the bases for which
indemnification is being asserted and (ii) set forth the actual or
estimated amount of Damages for which indemnification is being
asserted. Indemnifying Party will have a period of thirty calendar
days (after the delivery of each notice required by this Section
8.4(d)) within which to respond to such notice. If Indemnifying Party
accepts full responsibility for the claim described in such notice or
does not respond within such thirty-day period, the actual or
estimated amount of Damages reflected in such notice will be
conclusively deemed a liability that Indemnifying Party owes, and will
pay (in cash) upon demand, to Indemnitee. If Indemnifying Party has
timely disputed such claim, as provided above, Indemnifying Party and
Indemnitee agree to proceed in good faith to negotiate a resolution of
such dispute. If all such disputes are not resolved through
negotiations, either Indemnifying Party or Indemnitee may initiate
litigation to resolve such disputes.
8.5 Limitations on Sellers' Indemnification Obligations.
(a) Threshold/Maximum Amount. Sellers shall not be liable for, or
otherwise be required to indemnify against, any Damages sustained,
suffered or incurred by any Purchaser Party unless Damages in the
aggregate for all Purchaser Parties (as defined in this Agreement and
in the Stock Purchase Agreement") relating to this Agreement and the
Stock Purchase Agreement equal or exceed $100,000, in which event, any
and all Purchaser Parties who sustained, suffered or incurred the
Damages shall be entitled to be indemnified with respect to the full
amount of its Damages, up to a maximum of $7.5 million dollars in the
aggregate relating to this Agreement and the Stock Purchase Agreement.
(b) Reduction of Damages. In computing the amount of Damages which are
sustained, suffered or incurred by an Indemnitee, the Indemnifying
Party or Parties are to be given the benefit of (i) insurance
proceeds, if any (up to the maximum amount of Damages), that the
Indemnitee shall have the right to receive.
(c) Limitation on Recovery From Each Seller. No Seller shall be required
to pay Damages in excess of the purchase price (both cash and Notes)
for his, her or its shares of Central Telcom as set forth on Schedule
A. In addition, any Seller receiving Promissory Notes may pay for his,
hers or its indemnification obligation by surrendering Promissory
Notes issued to him, her or it, which will be valued for payment
purposes at the principal amount thereof, plus accrued but unpaid
interest. If the Damages are less than the Promissory Note, the
outstanding principal balance of Promissory Note shall remain
outstanding as to that portion thereof exceeding the Damages.
Purchaser will give such Seller notice of the adjusted outstanding
principal amount of such Promissory Note.
(d) Exceptions. The threshold and maximum amounts in subparagraph (a) and
(c) hereof shall not apply to any misrepresentation, breach of
warranty, or nonfulfillment of or failure to perform any covenant or
agreement made by any Seller included in this Agreement or the
certificates delivered by Sellers pursuant to Article VI hereof that
relates to the capitalization of Central Telcom (Section 2.3) (Section
2.1(c)), the ownership of Central Telcom's Membership Interests by
Sellers (Section 2.3) or transactions (or omissions or failures to
act) between or among Central Telcom and any Seller. Notwithstanding
anything to the contrary in this Agreement, if the Closing occurs, no
claim for indemnification may be asserted by any Purchaser Party with
respect to any matter discovered by or known to Purchaser Party on or
before the Closing Time.
(e) Security for Indemnification. $1.8 million principal amount of Notes
and the Notes issued pursuant to the Stock Purchase Agreement shall be
held by Purchaser as security for Sellers' Parties (as defined herein
and in the Stock Purchase Agreement) indemnification obligations
relating to this Agreement and the Stock Purchase Agreement, but the
holders of such Notes shall be entitled to receive all interest on
such Notes so long as such holder of the Notes shall not be in default
of his or her indemnification obligations. Such Notes (or the excess
over claimed indemnification) shall be delivered to the holders of
such Notes if no claim for indemnification has been made (or if made
has been resolved) on the eighteen month anniversary of the Closing
Time.
8.6 Limitations on Purchaser's Indemnification Obligations.
Purchaser shall not be liable for, or otherwise be required to indemnify
against, any Damages sustained, suffered or incurred by any Sellers Party unless
damages in the aggregate for all Sellers Parties (as defined in this Agreement
and the Stock Purchase Agreement) relating to this Agreement and the Stock
Purchase Agreement, equal or exceed $100,000, in which event, the Sellers Party
who sustained, suffered or incurred the Damages shall be entitled to be
indemnified with respect to the full amount of its Damages up to a maximum of
$7.5 million in the aggregate relating to this Agreement and the Stock Purchase
Agreement.
ARTICLE IX
SURVIVAL OF REPRESENTATION
9.1 Survival of Representations. All representations and warranties of
Sellers, Central Telcom, and Purchaser contained in this Agreement shall survive
the Closing Time and shall continue for a period of two years after the Closing
Time, at which time such representations and warranties (except for Sections
2.3, 2.4, 2.6, 2.14, and 2.22) shall expire and become null and void, unless
prior to the expiration of the two-year period beginning at the Closing Time,
written notice of a claim for the inaccuracy or breach of such representations
and warranties shall be made to Sellers or Purchaser, as the case may be.
Sections 2.3, 2.4, 2.6, 2.14, and 2.22 shall survive until the expiration of all
applicable statutes of limitations (including all periods of extension, whether
automatic or permissive), at which time they shall expire and become null and
void, unless prior to the expiration thereof, written notice of a claim for the
inaccuracy or breach of Sections 2.3, 2.4, 2.6, 2.14, and 2.22 shall be made to
Sellers.
ARTICLE XGENERAL PROVISIONS
10.1 Notices. All Notices and other communications given or made pursuant
hereto shall be in writing and shall be deemed given if delivered personally,
telecopied (with confirmation), mailed by register or certified mail (postage
prepaid, return receipt requested) to the parties at the following addresses (or
at such other address for a party as shall be specified by like notice) and
shall be effective upon receipt:
(a) If to the Company or Purchaser:
Brighton Communications Corporation
or Xxxxx Telephone Corporation X
000 Xxxxxxxx Xxxxx Xxxxxx
Xxx, Xxx Xxxx 00000
Telecopier: (000) 000-0000
(b) If to Sellers:
I. Branch Xxx
Xxxxx Xxx
00 Xxxx Xxxxxx
Xxxxxxxx, Xxxx 00000
Telecopier: (000) 000-0000
Copy to:
Xxxxxxx X. Xxxxx, Esq.
Xxxxxxxxx & Xxxxx, XX
00 Xxxx 000 Xxxxx, Xxxxx 000
Xxxx Xxxx Xxxx, Xxxx 00000
Telecopier: (000) 000-0000
(c) If to Central Telcom
Central Telcom Services, L.L.C.
00 Xxxx Xxxxxx
Xxxxxxxx, Xxxx 00000
Telecopier: (000) 000-0000
10.2 Certain Definitions. For purposes of this Agreement, the term:
(a) "affiliate" means a person that directly or indirectly, through one or
more intermediaries, controls, is controlled by, or is under common
control with, the first mentioned person; including, without
limitation, any partnership or joint venture in which any person
(either alone, or though or together with any other subsidiary) has,
directly or indirectly, an interest of 5% or more;
(b) "business day" means any day other than a day on which
federally-chartered banks are required or authorized to be closed;
(c) "control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly or as
trustee or executor, of the power to direct or cause the direction of
the management or policies of a person, whether through the ownership
of Membership or as trustee or executor, by contract or credit
arrangement or otherwise;
(d) "Material Adverse Effect" means, with respect to Central Telcom, as
the case may be, (i) any adverse effect on the business, assets,
properties, liabilities, results of operations or financial condition
of, and which is material with respect to, Central Telcom, or (ii) any
effect that materially impairs the ability of the Purchaser to
consummate the transactions contemplated hereby.
(e) "Permitted Investment" means investments issued or fully guaranteed as
to principal and interest by the United States (or any money market
mutual fund which invests solely in such investments) or certificates
of deposits or accounts fully insured by the Federal Deposit Insurance
Corporation; and
(f) "person" means an individual, corporation, partnership, association,
trust, unincorporated organization, other entity or group (as defined
in Section 13(d) of the Exchange Act).
10.3 Headings. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
10.4 Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner adverse to
any party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that
transactions contemplated hereby are fulfilled to the extent possible.
10.5 Entire Agreement. This Agreement constitutes the entire agreement of
the parties and supersedes all prior agreements and undertakings, both written
and oral, between the parties, or any of them, with respect to the subject
matter hereof and, except as otherwise expressly provided herein, is not
intended to confer upon any other person any rights or remedies hereunder.
10.6 Assignment. This Agreement shall not be assigned by operation of law
or otherwise, except that the Company may assign all or any of its rights
hereunder to any affiliate provided that no such assignment shall relieve the
assigning party of its obligations hereunder. In addition, the Company may
insert one or more additional subsidiaries between the Company and the
Purchaser.
10.7 Parties in Interest. This Agreement shall be binding upon and inure
solely to the benefit of each party and nothing in this Agreement, express or
implied, is intended to or shall confer upon any other person any right, benefit
or remedy of any nature whatsoever under or by reason of this Agreement.
10.8 Governing Law; Venue. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
law. Any action relating to this Agreement brought by Sellers, or prior to
Closing, by Central Telcom in the State of Utah shall be brought in the Federal
District Court in Salt Lake City, Utah, if there is jurisdiction in such court
or, if there is not jurisdiction in such Federal Court, in Utah state courts in
Salt Lake City, Salt Lake County, State of Utah.
10.9 Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties in separate counterparts, each of
which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
10.10 Amendment/Waiver. This Agreement may not be amended except by an
instrument in writing signed by the parties hereto. No provision or obligation
in this Agreement may be waived except by an instrument in writing signed by the
waiving party(s). Any instrument amending this Agreement or waiving any
provision or obligation herein shall be deemed to have been taken on behalf of
and signed by all Sellers if the instrument in writing is signed by Sellers.
IN WITNESS WHEREOF, Central Telcom, the Sellers, the Company and the
Purchaser have caused this Agreement to be executed as of the date first written
above by their respective officers thereunto duly authorized.
CENTRAL TELCOM SERVICES, LC ("Central Utah")
By:
--------------------------------
Name:
Title: Manager
XXXXX TELEPHONE CORPORATION X
("Purchaser")
By:
----------------------------------
Name: Xxxxxx X. Xxxxx
Title: President
BRIGHTON COMMUNICATIONS CORPORATION
("Company")
By:
-----------------------------------
Name: Xxxxxx X. Xxxxx
Title: President
SELLERS
----------------------------------------
I. Branch Xxx
----------------------------------------
Xxxxx X. Xxx
----------------------------------------
Xxxxx Xxx
----------------------------------------
Xxxx Xxx
- PAGE -...()()().. SCHEDULE 1.3(a)
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE ACT. THIS NOTE MUST BE HELD INDEFINITELY AND MAY
NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR
UNLESS MAKER RECEIVES AN OPINION OF COUNSEL, OR OTHER EVIDENCE,
REASONABLY ACCEPTABLE TO IT STATING THAT SUCH SALE OR TRANSFER IS
EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF
SAID ACTS.
SUBORDINATED PROMISSORY NOTE
$_______________ Rye, NY, _____________, 2000*
1. Obligation. For value received, the undersigned, Xxxxx Telephone
Corporation X, a Delaware corporation ("Maker"), hereby promises to
pay to the order of __________, an individual ("Payee") at the address
set forth below for notices to Payee, or at such other place as Payee
may from time to time designate, the principal sum of $_________
together with interest (calculated on a 365-day year) on the unpaid
principal of this Note, computed from the date hereof until the stated
maturity hereof at the rate per annum set forth herein.
2. Interest. The unpaid principal balance of this Note shall bear
interest prior to maturity at the rate of ten -------- percent (10%),
payable quarterly in arrears without notice or demand by Payee.
3. Payment. The principal amount of and all accrued and unpaid interest
on this Note shall be due and payable without ------- notice or demand
by Payee on ___________, 2005**.
-[PG NUMBER]-
4. Usury. Any provision in this Note or in any other document executed in
connection herewith, or in any other agreement or commitment, whether
written or oral, express or implied, to the contrary notwithstanding,
Payee shall not in any event be entitled to receive or collect, nor
shall or may amounts received hereunder be credited, so that Payee
shall be paid, as interest, a sum greater than the highest rate of
interest permitted under applicable law. If any construction of this
Note, or of any and/or all other papers, agreements or commitments,
indicates a different right given to Payee or ask for, demand or
receive any larger sum as interest, such as a mistake in calculation
or wording, which this clause shall override and control, it being the
intention of the parties that this Note and all other instruments
relating to this Note shall in all things comply with applicable law,
and proper adjustment shall automatically be made accordingly. In the
event Payee ever receives, collects or applies as interest, any sum in
excess of the highest rate of interest permitted under applicable law,
such excess amount shall be applied to the reduction of the unpaid
principal balance of this Note, and, if this Note is paid in full, any
remaining excess shall be paid to Maker. In determining whether or not
the interest paid or payable, under any specific contingency, exceeds
the highest rate of interest permitted under applicable law, Payee and
Maker shall, to the maximum extent permitted under applicable law, (i)
characterize any nonprincipal payment as an expense, fee or premium
rather than as interest, (ii) exclude voluntary prepayments and the
effects thereof, and (iii) allocate and "spread" the total amount of
interest throughout the entire term of this Note so that the interest
rate is uniform throughout the entire term hereof.
5. Subordination. [Language acceptable to acquisition financing]
--------------
6. Prepayment. This Note may be prepaid at any time upon ten business
days notice to Payee. ----------
7. Event of Default. If Maker fails to pay any principal or interest on
this Note or any principal or interest on the Note executed by the
Maker in favor of Payee in connection with the acquisition by it of
the shares of common stock of Central Utah Telephone, Inc., under that
certain Stock Purchase Agreement, dated October 6, 2000, when due and
payable or declared due and payable and such default continues for
thirty (30) days, then such event shall constitute an "Event of
Default."
8. Remedy. Upon the occurrence and during the continuance of an Event of
Default, Payee shall have all of the rights and remedies provided in
this Note, as well as those rights and remedies provided by applicable
law, rule or regulation. In conjunction with and in addition to the
foregoing rights and remedies of Payee, Payee may, if the Event of
Default continues for more than one hundred and twenty (120) days,
declare all indebtedness due under this Note, although otherwise
unmatured, to be due and payable immediately without notice or demand
whatsoever. All rights and remedies of Payee hereunder are cumulative
and may be exercised singly or concurrently. The exercise of any right
or remedy will not be a waiver of any other.
9. Waiver. Maker hereby waives demand, presentment for payment, notice of
dishonor, protest, notice of protest, and diligence in collecting or
bringing suit against any party liable hereon, and further agrees to
any and all extensions, renewals, modifications, partial payments, and
substitutions of evidence of indebtedness before or after maturity.
10. Costs and Attorneys' Xxxx.Xx the event that Payee successfully brings
legal action for the payment of any amounts owed hereunder, Maker
hereby agrees to pay to Payee all reasonable expenses and costs of
such legal action, including, but not limited to, reasonable
attorneys' fees incurred in connection with any such legal action, in
addition to the principal and interest then due.
11. New York Law to Apply. This note shall be governed by and construed in
accordance with the internal laws of the
---------------------
State of New York.
-[PG NUMBER]-
12. Notice. Any notice or demand or payment required to be given
hereunder shall be in writing and shall be deemed to have been duly given and
received, if given by hand, when a writing containing such notice is received by
the person to whom addressed or, if given by mail, seventy-two (72) hours after
a certified or registered letter containing such notice or payment, with postage
prepaid, is deposited in the United States mails, addressed to:
Maker : Xxxxx Telephone Corporation X
000 Xxxxxxxx Xxxxx Xxxxxx
Xxx, XX 00000
Attn: Xxxxxx X. Xxxxx
Payee:
13. Terms. For purposes of this Note, the term "Payee" shall include any
subsequent permitted holder or assigns of ----- this Note.
14. Successors and Assigns. All of the covenants, obligations, promises
and agreements contained in this Note made by Maker shall be binding
upon its successors and assigns; notwithstanding, however, that Maker
shall not assign this Note or its performance hereunder without the
prior written consent of Payee, which shall not be unreasonably
withheld.
IN WITNESS WHEREOF, the Maker has executed this Note to be effective as
of he day and year first above written.
MAKER:
XXXXX TELEPHONE CORPORATION X
By: _________________________
Title: President
Print Name: Xxxxxx X. Xxxxx
* Closing Date
** Fifth Anniversary of Closing Date
