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FAIRPOINT COMMUNICATIONS, INC. | MJD VENTURES, INC. | FAIRPOINT BENTLEYVILLE CORPORATION | BENTLEYVILLE COMMUNICATIONS CORPORATION. RealDealDocs™ contains millions of easily searchable legal documents and clauses from top law firms. Search for free - click here. |
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Exhibit 2.2
AGREEMENT AND PLAN OF MERGER
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This AGREEMENT AND PLAN OF MERGER (“Agreement”) is made this 22 nd day of April by and among BENTLEYVILLE COMMUNICATIONS CORPORATION, a Pennsylvania corporation (the “Company”), FAIRPOINT COMMUNICATIONS, INC., a Delaware corporation (“FairPoint”), MJD VENTURES, INC., a Delaware corporation (“Parent”), and FAIRPOINT BENTLEYVILLE CORPORATION, a Pennsylvania corporation (“Acquisition Sub”).
A. The respective Boards of Directors of FairPoint, Parent, and Acquisition Sub on April , 2005 and the Company, on April , 2005, have approved the merger of Acquisition Sub with and into the Company (the “Merger”), upon the terms and subject to the conditions set forth herein, as a result of which Acquisition Sub will be merged into the Company and the shareholders of the Company (other than shareholders who perfect dissenter rights) will be entitled to receive the consideration provided in this Agreement.
B. The Board of Directors of the Company has directed that this Agreement and the Plan of Merger be submitted to the holders of Company Common Stock (the “Shareholders”) for their approval.
C. Upon approval of this Agreement and the Merger by the Shareholders, certain Shareholders who collectively hold at least two-thirds of the outstanding shares of Company Common Stock will enter into a Shareholder Agreement with Company and Parent in the form attached hereto as Exhibit A (the “Shareholder Agreement”).
NOW, THEREFORE, in consideration of the mutual benefits to be derived from this Agreement and of the representations, warranties, covenants and agreements contained herein, FairPoint, Parent, Acquisition Sub and the Company intending to be legally bound hereby agree as follows:
SECTION I. THE MERGER
1.1 Surviving Corporation . In accordance with the provisions of this Agreement, the Merger and the Business Corporation Law of the Commonwealth of Pennsylvania (“PA BCL”), at the Effective Date (as defined in Section 1.6), Acquisition Sub shall be merged with and into the Company, and the Company shall be the surviving corporation in the Merger (hereinafter sometimes called the “Surviving Corporation”). At the Effective Date, the separate existence of Acquisition Sub shall cease.1.2 Certificate of Incorporation . As of the Effective Date, the Certificate of Incorporation of the Company immediately prior to the Effective Date shall be the Certificate of Incorporation of the Surviving Corporation, until thereafter amended as otherwise provided by law or in such Certificate of Incorporation.
1.3 Bylaws . The Bylaws of the Acquisition Sub as in effect at the Effective Date shall be the Bylaws of the Surviving Corporation, until thereafter amended or repealed as provided by law.1.4 Directors . The directors of Acquisition Sub at the Effective Date shall, from and after the Effective Date, be the directors of the Surviving Corporation and shall hold office from the Effective Date until their respective successors are duly elected or appointed and qualified in the manner provided in the Certificate of Incorporation and Bylaws of the Surviving Corporation, or as otherwise provided by law.1.5 Officers . The officers of Acquisition Sub at the Effective Date shall, from and after the Effective Date, be the officers of Surviving Corporation and they shall hold office from the Effective Date until their respective successors are duly elected or appointed and qualified in the manner provided in the Certificate of Incorporation and Bylaws of the Surviving Corporation, or as otherwise provided by law.1.6 Effective Date . The Merger shall become effective at the time of filing of the Articles of Merger with the Department of State of the Commonwealth of Pennsylvania in accordance with Section 1927 of the PA BCL or, if later, the time specified in the Articles of Merger. The Articles of Merger shall be filed with the Secretary of State of the Commonwealth of Pennsylvania on the Closing Date (as defined in Section 8.1 hereof). The date when the Merger becomes effective is herein referred to as the “Effective Date”.1.7 Additional Action . If, at any time after the Effective Date, the Surviving Corporation determines that any deeds, bills of sale, assignments, assurances or any other acts or things are necessary or desirable to vest, perfect or confirm, of record or otherwise, in the Surviving Corporation, its right, title or interest in, to or under any of the rights, properties or assets of the Company or its Subsidiary acquired or to be acquired by reason of, or as a result of, the Merger, or otherwise to carry out the purposes of this Agreement, the Surviving Corporation and its proper officers and directors shall be authorized to execute and deliver, in the name and on behalf of the Company and its Subsidiary, all such deeds, bills of sale, assignments and assurances and to do, in the name and on behalf of the Company and its Subsidiary, all such other acts and things necessary or desirable to vest, perfect or confirm any and all right, title or interest in, to or under such rights, properties or assets in the Surviving Corporation or otherwise to carry out the purposes of this Agreement.1.8 Conversion of Company Common Stock .(a) Each share of the Company’s common stock (the “Company Common Stock”), actual issued and outstanding the Effective Date (except for Dissenting Shares, as defined in Section 1.11) shall, by virtue of the Merger and without any action on the part of the holder thereof, be converted into the right to receive from the Parent cash in an amount equal to the quotient obtained by dividing $10,992,800 (the “Merger Consideration”) as adjusted in accordance with Section 1.9 (the “Adjusted Merger Consideration”) by the number of shares of Company Common Stock actually issued and outstanding at the Effective Date. As of the Effective Date, and except as otherwise provided in Section 1.11, no shares of Company Common Stock shall be outstanding and all such shares shall automatically be canceled and retired and shall cease to exist, and each holder with a certificate representing any shares of
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Company Common Stock shall cease to have any rights with respect thereto, except the right to receive such holder’s pro-rata portion of the Adjusted Merger Consideration payable therefor upon the surrender of such Company Common Stock certificate in accordance with Section 1.12 hereof, without interest.(b) Any share of Company Common Stock held by Parent or in the Company’s treasury at the Effective Date shall, by virtue of the Merger, be canceled without payment of any consideration therefor and without any conversion thereof.1.9 Adjustments to Merger Consideration .(a) The Merger Consideration shall be increased or decreased, as the case may be, by the dollar amount that the Net Cash exceeds or is less than, as the case may be, $1,548,856 as of the Closing Date. Net Cash shall be defined as the total of the consolidated cash and cash equivalents of the Company, minus the consolidated current and long term indebtedness of the Company. The Net Cash shall be determined in accordance with GAAP and this Section 1.9. The Company, in conjunction with its accountant and subject to the review and approval of Parent, shall prepare and deliver to Parent, not less than ten (10) days prior to Closing, a statement setting forth its good faith estimates of the Net Cash as of the Closing Date (the “Estimated Closing Statement”). The Estimated Closing Statement (i) will be prepared based upon the good faith estimate of the Net Cash of the Company on a consolidated basis on the Closing Date, (ii) will be prepared in accordance with the books of account and records of the Company and its Subsidiary, (iii) will be prepared in accordance with GAAP and the Company’s past practices consistent with its historical financial statements, but adjusted to reflect the specific definitions set forth in Section X DEFINITIONS hereof, and (iv) will present fairly and accurately a good faith estimate of the Company’s consolidated financial position as of the Closing Date. The Merger Consideration shall be preliminarily adjusted based on the Estimated Closing Statement (as preliminarily adjusted, the “Initial Merger Consideration”). Within 90 days after the Closing Date, Parent (at its expense) will prepare and deliver to the Shareholder Representative a statement setting forth its good faith determination of the Net Cash as of the Closing Date (the “Proposed Closing Statement”). The Proposed Closing Statement (i) will be prepared based upon a consolidated basis on the Closing Date, (ii) will be in accordance with the books of account and records of the Company and its Subsidiary, (iii) will be prepared in accordance with GAAP and the Company’s past practices consistent with its historical financial statements, but adjusted to reflect the specific definitions set forth in Section X DEFINITIONS hereof, and (iv) will present fairly and accurately the Company’s consolidated financial position as of the Closing Date. To illustrate the application of the concepts set forth in this Section 1.9(a), a pro forma calculation of the Adjusted Merger Consideration based upon a hypothetical closing as of December 31, 2004 is attached hereto as Exhibit B and made a part hereof. At the Shareholder’s expense, representatives of the Shareholders may examine the work papers of the Parent developed in connection with preparing the Proposed Closing Statement.(b) The Final Closing Statement will be finally determined as provided by this Section 1.9(b) (whereupon all references herein to the “Final Closing Statement” will mean the same as so finally determined). Within thirty (30) days after receipt of the Proposed Closing Statement, the Shareholder Representative will deliver, on behalf of the Company’s shareholders, written objections to the Proposed Closing Statement (if any) to Parent. To the extent that the Shareholder Representative fails to deliver any such objections within such 30-day period, the Proposed Closing Statement (or such undisputed item(s) thereof) will be deemed3
the Final Closing Statement and binding upon all parties for all purposes. If the Shareholder Representative delivers any such objection, Shareholder Representative and Parent will use their respective best efforts to resolve such dispute(s) promptly by mutual agreement, in writing, and any such mutually agreed resolution will be final and binding upon all parties for all purposes. Failing mutually agreed resolution of any such dispute(s) within ten (10) days of delivery of any such objection, the Shareholder Representative, on behalf of the Company’s shareholders, and Parent will then each have the right to require that such dispute(s) be submitted to an independent third-party national accounting firm chosen by the Shareholder Representative and Parent for computation or verification in accordance with the provisions of this Agreement. Such firm’s resolution of such dispute(s), which will be delivered to Parent and the Shareholder Representative within thirty (30) days after submission to such firm, will be final and binding upon all parties for all purposes, and such firm’s fees and expenses therefor will be borne equally by the parties hereto.(c) If the Adjusted Merger Consideration as calculated in accordance with the Final Closing Statement is less than the Initial Merger Consideration, then the amount of such difference, but only to the extent available from the Escrow Amount, shall be refunded to Parent from the Escrow Amount with same day funds within ten (10) days of the final determination of the Final Closing Statement by the Escrow Agent. If the Adjusted Merger Consideration as calculated in accordance with the Final Closing Statement exceeds the Initial Merger Consideration, then the difference will be paid by Parent to the Shareholders, both in the same manner and in the same percentages as the Initial Merger Consideration was paid with same day funds within ten (10) days of the final determination of the Final Closing Statement. Under no circumstances will the Shareholders be requested to reimburse Parent if the Adjusted Merger Consideration as calculated in accordance with the Final Closing Statement is less than the Initial Merger Consideration by an amount more than the Escrow Amount.1.10 Conversion of Acquisition Sub Common Stock . Each share of common stock of Acquisition Sub (the “Acquisition Sub Common Stock”) issued and outstanding at the Effective Date shall, by virtue of the Merger and without any action on the part of the holder thereof, be converted into and exchangeable for one fully paid and nonassessable share of common stock of the Surviving Corporation (the “Surviving Corporation Common Stock”). From and after the Effective Date, each outstanding certificate theretofore representing shares of Acquisition Sub Common Stock shall be deemed for all purposes to evidence ownership of, and to represent the number of shares of, Surviving Corporation Common Stock into which such shares of Acquisition Sub Common Stock shall have been converted.1.11 Dissenting Shares . Notwithstanding anything in this Agreement to the contrary, shares of Company Common Stock issued and outstanding on the Effective Date which are held of record by shareholders who shall not have voted such shares in favor of the Merger and who shall have properly exercised rights to demand payment of the fair value of such shares in accordance with Section 1930 of the PA BCL (the “Dissenting Shares”) shall not be converted into the right to receive any portion of the Adjusted Merger Consideration, but the holders thereof instead shall be entitled to payment of the fair value of such shares in accordance with the provisions of Section 1930 of the PA BCL (the “Dissenting Consideration”); provided , however , that if such a holder subsequently delivers an effective written withdrawal of such notice or such holder shall otherwise lose his or her rights to dissent, then in either of such cases, each share of Company Common Stock held of record by such holder or holders shall automatically be converted into and represent only the right to receive the Adjusted Merger Consideration, upon4
the surrender of the certificate or certificates representing such Dissenting Shares. The Company shall give Parent prompt notice of any demands received by the Company for payment of the fair value of such shares, and Parent shall have the right to participate in all the negotiations and proceedings with respect to such demands. The Company shall not, except with the prior written consent of Parent, make any payment (except to the extent that any such payment is made pursuant to a court order) with respect to, or settle or offer to settle, any such demands.1.12 Surrender of Shares; Payment of Merger Consideration .(a) At the Closing, from the Initial Merger Consideration, Parent shall (i) deposit Four Hundred Fifty Thousand Dollars ($450,000.00) (the “Escrow Amount”) with a mutually agreeable escrow agent (the “Escrow Agent”), to be held and released by the Escrow Agent pursuant to the terms and conditions set forth in an escrow agreement which shall be substantially in the form of Exhibit C hereto (“Escrow Agreement”) and (ii) if applicable, deposit the Remediation Escrow with the Remediation Escrow Agent pursuant to Section 7.22. The remainder of the Initial Merger Consideration shall be delivered to the Shareholders pro rata in accordance with subparagraph (b) hereafter. The foregoing payments shall be made in accordance with a schedule to be provided by the Company and certified by the President and Controller at least ten (10) days prior to the Closing Date (the “Payment Schedule”).(b) Upon surrender to Parent of a properly endorsed Company Common Stock certificate representing each of the shares of Company Common Stock (each, a “Certificate”) or an affidavit of loss stating that the holder of the Certificate has lost such Certificate, together with an indemnity agreement providing for indemnification of the Company, Parent and Surviving Corporation for any loss, damage or other expense resulting from a third party having a claim to such Certificate or the shares of stock underlying such Certificate (“Affidavit”), the holder of such Certificate or Affidavit shall be entitled to receive in exchange for each share of Company Common Stock represented by such Certificate or subject to the Affidavit, as the case may be, the portion of the Adjusted Merger Consideration indicated on the Payment Schedule, and such Certificate shall forthwith be canceled (if a Certificate is presented) and the records of the Company shall be modified accordingly upon receipt by the holder of such Certificate or Affidavit, as the case may be, of the indicated portion of the Initial Merger Consideration. Such surrender of Certificates and Affidavits to Parent shall be made at Closing in exchange for the appropriate portion of the Initial Merger Consideration. No interest will be paid or accrued on any portion of the Adjusted Merger Consideration payable upon the surrender of such Certificates or Affidavits.(c) If payment is to be made to a person other than the person in whose name the Certificate surrendered in exchange therefor is registered, it shall be a condition of payment of the relevant portion of the Adjusted Merger Consideration that the Certificate so surrendered be properly endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name of the record holder appears on such Certificate, with signature guaranteed, and is otherwise in proper form for transfer, and that the Person requesting such payment shall pay any transfer or other taxes required by law as a result of such payment to a Person other than the record holder of the Certificate surrendered, or shall establish to Parent’s satisfaction that such tax has been paid or is not applicable.(d) After the Effective Date, there shall be no further transfers on the stock transfer books of the Surviving Corporation of the shares of Company Common Stock, which are5
outstanding at the Effective Date. If, after the Effective Date, Certificates are presented to the Surviving Corporation for transfer, they shall be canceled and there shall be issued to the transferee in exchange for each share of Company Common Stock the portion of the Adjusted Merger Consideration indicated on the Payment Schedule.(e) The consideration payable upon the surrender for exchange of Certificates in accordance with the terms of this Section I shall be deemed to have been paid in full satisfaction of all rights pertaining to the shares of Company Common Stock theretofore represented by such Certificates, and there shall be no further registration of transfers on the stock transfer books of the Surviving Corporation of the shares of Company Common Stock which were outstanding immediately prior to the Effective Date. If, after the Effective Date, Certificates are presented to the Surviving Corporation for any reason, they shall be canceled and exchanged as provided in this Section I.SECTION II. REPRESENTATIONS AND WARRANTIES OF COMPANY
The Company hereby represents and warrants to Parent and Acquisition Sub that:
2.1 Organization and Corporate Power . Each of the Company and its Subsidiary (a) is a corporation duly organized, validly existing and in good standing with perpetual duration under the laws of its state of incorporation as specified in Schedule 2.1 attached hereto, (b) is qualified to do business as a foreign corporation in each jurisdiction in which such qualification is required and (c) has all required corporate power and authority to own its property and to carry on its business as presently conducted or contemplated. Subject to (i) the receipt of required PPUC and FCC approvals (if any are required), and (ii) the approval of any governmental authorities with respect to any cable system owned, operated, or controlled by the Company or its Subsidiary, each of the Company and its Subsidiary has all required corporate power and authority to enter into and perform this Agreement and the Related Documents, and generally to carry out the transactions contemplated hereby and by the Related Documents. The copies of the charter and Bylaws of each of the Company and its Subsidiary, as amended to date, which have been delivered by Company to Parent, are correct and complete at the date hereof. Except as provided in Schedule 2.1, neither the Company nor its Subsidiary is in violation of any term of its charter or Bylaws, or any agreement, franchise, instrument, judgment, decree, order, law, statute, ordinance, rule or government regulation applicable to it.2.2 Authorization and No Contravention . The execution and delivery of, and performance by the Company of its obligations under, this Agreement and the Related Documents have been duly authorized by the Company’s Board of Directors and except as may otherwise be specifically provided in this Agreement, each of this Agreement and the Related Documents constitutes the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws affecting the enforcement of creditors’ rights generally, and general principles of equity and the general availability of equitable remedies. The Company’s execution and delivery of this Agreement and the Related Documents, and its respective performance of the transactions contemplated hereby and thereby, will not: (i) except as set forth on Schedule 2.2, violate, conflict with or result in a default under any contract, instrument, agreement, license, indenture,6
obligation or commitment to which the Company or its Subsidiary is a party or by which its assets, or any of their assets, are bound, or any charter provision or Bylaw of the Company or its Subsidiary, or the creation of any lien, charge or encumbrance of any nature upon any of the properties or assets of the Company or its Subsidiary except pursuant to this Agreement and the agreements contemplated hereby; (ii) violate or result in a violation of, or constitute a default under, any provision of any law, statute, ordinance, regulation, franchise or rule, or any decree, judgment or order of, or any restriction imposed by, any court or other federal, state or local governmental agency; or (iii) except as set forth on Schedule 2.2, require any notice to, filing with, or consent or approval of any governmental authority or other third party.2.3 Capitalization; Stockholders; Subsidiary . The authorized and issued capital stock of the Company and its Subsidiary as of the date hereof is as set forth in Schedule 2.3. All of the presently issued shares of capital stock of the Company and its Subsidiary have been duly and validly authorized and issued in accordance with all applicable federal and state laws and are fully paid and non-assessable. No dividends or other distributions are owed by the Company and/or its subsidiaries in connection with any of the Capital Stock. Neither the Company nor its Subsidiary has issued any other shares of its capital stock and there are no outstanding warrants, options or other rights to purchase or acquire any of such shares, nor any outstanding securities convertible into such shares or outstanding warrants, options or other rights to acquire any such convertible securities. Except as set forth on Schedule 2.3, there are no preemptive rights with respect to the issuance or sale by the Company, or its Subsidiary of the Company’s or its Subsidiary’s capital stock. Except as disclosed in Schedule 2.3, the Company knows of no restrictions on the transfer of the Company’s or its Subsidiary’s capital stock other than those arising from federal and state securities laws or under this Agreement. Except as set forth in Schedule 2.3, there are no rights of first refusal, rights of first offer or such other similar rights with respect to any of the securities of the Company or the Company’s Subsidiary. The outstanding shares of capital stock of the persons identified in Schedule 2.3 are held in the amounts indicated therein. Except as set forth in Schedule 2.3, the Company has no Subsidiaries and neither the Company nor its Subsidiary has any investments in, or loans or advances to, any other corporation, trust, partnership or business entity and is not a party to any joint venture. Neither the Company nor its Subsidiary has any current liability or any potential liability to any Person with respect to any investment held by either the Company or its Subsidiary. There are no equity equivalents, interests in the ownership or earnings, or other similar rights of or with respect to the Subsidiary of the Company. All of the outstanding securities of the Subsidiary of the Company are owned of record and beneficially by the Company, free and clear of any Liens with respect thereto, except for restrictions on transfer imposed by federal and state laws. There are no voting trusts or other agreements or understandings with respect to the voting of any shares of the stock of the Company or its Subsidiary.
2.4 Financial Statements . Attached hereto as Schedule 2.4 are the Company’s consolidated and consolidating reviewed statements of operations, cash flow and stockholders’ equity and the related balance sheets as of and for the fiscal years ended December 31, 2003 and December 31, 2004 together with all notes and schedules thereto (the balance sheet, dated as of December 31, 2004, is herein referred to as the “Base Balance Sheet”) and the unaudited balance sheet and related statement of income for the Company for the period ending February 28, 2005 (the foregoing unaudited statements with all monthly unaudited statements delivered hereafter are herein referred to as the “Unaudited Financial Statements”). Except as set forth in the Base Balance Sheet the Unaudited Financial Statements or on Schedule 2.11, neither the Company nor its Subsidiary has any contingent obligations, liabilities or forward or long-term commitments.
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The foregoing financial statements have been prepared (i) to the extent required, in accordance with the rules and regulations of the PPUC and the FCC, (ii) in accordance with the books and records of the Company, and (iii) in accordance with generally accepted accounting principles applied on a consistent basis. All such financial statements fairly represent the financial condition of the Company and its Subsidiary as of the date thereof, and are true and correct as of the date thereof. Nothing has come to the attention of the Company since such dates which would indicate that such financial statements were not true and correct.
2.5 Business; Franchises and Regulations . Except as set forth in Schedule 2.5, the Company and its Subsidiary has ownership of and/or the right to use (i) all franchises, permits, registrations, licenses (other than FCC Licenses) and other authorizations required by applicable law or regulation, and (ii) all patent, copyright, trademark, and other rights and privileges, in the case of both (i) and (ii) used or useful in their respective businesses as presently conducted, or contemplated to be conducted, or required or necessary to permit it to own its properties and to conduct its business as presently conducted or contemplated to be conducted and neither their present nor contemplated activities infringe any such patent, copyright, trademark or other proprietary rights of others. Schedule 2.5 correctly sets forth all of the franchises, authorizations, permits, registrations and licenses (other than FCC Licenses) which are held by the Company and its Subsidiary (the “Company Authorizations”) and correctly sets forth the issuer and termination or expiration date of each Company Authorization. Each Company Authorization was duly and validly issued by the issuer thereof to the Company or its Subsidiary pursuant to procedures that complied with all requirements of applicable law. Each Company Authorization or other right held by the Company or its Subsidiary is in full force and effect, free of any Lien, charge or encumbrance of any nature, and are not subject to any restrictions or conditions which, individually or in the aggregate, would impair the ability of the Company and its Subsidiary to own their respective properties and to carry on their respective businesses as presently conducted or contemplated to be conducted, and the Company and its Subsidiary are in compliance with the terms thereof with no conflict with the valid rights of others which could affect or impair in any manner the business, assets or condition, financial or otherwise, of the Company and its Subsidiary taken as a whole except as set forth in Schedule 2.5. No event has occurred which permits, or after notice or lapse of time or both would permit, the revocation or termination of any Company Authorization, except as set forth in Schedule 2.5. No proceedings to terminate, revoke, refuse, renew, modify or restrict such Company Authorizations are pending or, to the knowledge of the Company, threatened. No Company Authorization authorizing the installation, construction, development, ownership or operation of a cable television system by the Company or its Subsidiary has been surrendered or has expired or otherwise terminated without the issuance of a replacement Company Authorization to the Company or its Subsidiary.
Except as described on Schedule 2.10, the Company has timely and properly made all filings and reports required by the PPUC, the FCC and all other regulatory entities having jurisdiction over the Company or its Subsidiary.
2.6 Tariffs: FCC Licenses .
(a) The regulatory tariffs applicable to the Company and its Subsidiary stand in full force and effect in accordance with their terms, and there is no outstanding notice of suspension, cancellation or termination or, to the Company’s knowledge, any threatened suspension, cancellation or termination in connection therewith. Except as otherwise disclosed on Schedule 2.6, neither the Company nor its Subsidiary is subject to any restrictions or8
conditions applicable to its regulatory tariffs that limit or would limit the operations of the Company or its Subsidiary (other than restrictions or conditions generally applicable to tariffs of that type). Each such tariff has been duly and validly approved by the appropriate regulatory agency. Except as otherwise disclosed on Schedule 2.6, neither the Company nor its Subsidiary is in violation under the terms and conditions of any such tariff, and there is no basis for any claim of violation by the Company or its Subsidiary under any such tariff. There are no applications by the Company or its Subsidiary, nor any complaints or petitions, or other filings by others, or proceedings pending or, to the knowledge of the Company, threatened, before the PPUC or the FCC relating to the Company or its Subsidiary, or their respective operations or regulatory tariffs. To the knowledge of the Company, there are no violations by subscribers or others under any such tariff. Each tariff applicable to the Company or its Subsidiary has been listed on Schedule 2.6 and a true and correct copy has been made available to Parent.(b) Schedule 2.6 correctly sets forth all of the FCC Licenses held by the Company or its Subsidiary and correctly sets forth the expiration or termination date of each FCC License. The Company and its Subsidiary hold all FCC Licenses required by applicable law or regulation, or which are used or useful in their respective businesses as presently conducted or as contemplated to be conducted. Except as disclosed on Schedule 2.6, each such FCC License was duly and validly issued to the Company or its Subsidiary pursuant to procedures which complied with all requirements of applicable law. Each FCC License is in full force and effect in accordance with its terms, and there is no outstanding notice of cancellation or termination or, to the knowledge of the Company, any threatened cancellation or termination in connection therewith nor are any of such FCC Licenses subject to any restrictions or conditions that limit the operations of the Company or its Subsidiary (other than restrictions or conditions generally applicable to licenses of that type). No proceedings to revoke, refuse to renew, modify or restrict such FCC Licenses are pending or, to the knowledge of the Company, threatened. The Company has no reason to believe that any of the FCC Licenses (i) could be revoked, canceled or suspended, and (ii) would not be renewed or extended in the ordinary course of business. The transactions contemplated by this Agreement shall not cause Company’s study area to change. Company is currently an average schedule company and Company does not know of any reason such study area or average schedule company status shall not continue to be available to the Surviving Corporation after the Closing Date.2.7 Rate Base . Except for amounts that are disallowed or excluded due to regulation applied generically to all local exchange carriers, neither the Company nor its Subsidiary has any material amount of inventory, plant or equipment that has been disallowed from rate base or excluded from the revenue calculations for any pool and neither the Company nor its Subsidiary has received notification that the FCC or any state regulatory authority or pool administrator proposes to exclude any assets from rate base or revenue calculations for the pools.
2.8 Overbillings; Refunds . Except as set forth on Schedule 2.8, neither the Company nor its Subsidiary has any liabilities for any customer or inter-exchange or toll carrier overbillings or prospective refunds of overearnings in excess of one thousand dollars ($1,000).
2.9 Capital Improvements . Except as set forth on Schedule 2.9, neither the Company nor its Subsidiary is required by any federal, state or local regulatory body to make any changes, upgrades or enhancements with respect to its physical plant and neither the Company nor its Subsidiary has reason to believe that any such changes, upgrades or enhancements will be so required in the foreseeable future. Except as set forth on Schedule 2.9, neither the Company nor
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its Subsidiary has any outstanding contracts or commitments for capital expenditures. Schedule 2.9 includes a list, as of February 28, 2005, of all disbursements on account of capital investments by Company and its Subsidiary since December 31, 2004. Schedule 2.9 contains the Company’s and its Subsidiary’s 2004 detailed actual capital expenditures.
2.10 Compliance with Law . Except as set forth in Schedule 2.10, each of the Company and its Subsidiary has been and is in compliance with all applicable statutes, laws, ordinances, regulations, franchises, rules, governmental policies, policy statements or orders of any foreign, federal, state or local government or any governmental department or agency (including without limitation, the PPUC and the FCC), and any judgment, ruling, decree or order of any court, administrative agency or tribunal or any arbitrator or arbitral panel or tribunal applicable to its business or operations; and the conduct of the Company’s and its Subsidiary respective businesses has been and is in compliance with all federal, state and local energy, public utility, health, wage and hour (including but not limited to the Fair Labor Standards Act), employment, workplace or worker safety and health, including but not limited to OSHA, and environmental requirements and all other federal, state and local governmental regulatory requirements and policies (including without limitation, requirements and policies of the PPUC and the FCC). The Company and its Subsidiary have all permits, licenses, registrations, franchises and other authorizations from, and have made all necessary filings with, all governmental agencies, including the PPUC and the FCC, required to conduct their businesses as now being conducted or as contemplated to be conducted.
2.11 Absence of Undisclosed Liabilities . Except as otherwise specifically disclosed in the Base Balance Sheet, the Unaudited Financial Statements or as set forth in Section 2.4 or on Schedule 2.11, neither the Company nor its subsidiaries have any accrued or contingent liability or liabilities arising out of any transaction or state of facts existing prior to the date hereof.
2.12 Absence of Certain Developments . Except as specifically disclosed in Schedule 2.12, since December 31, 2004 there has been (i) no material adverse change in the assets, liabilities, properties, business, results of operations or financial condition of the Company or its Subsidiary, (ii) no declaration, setting aside or payment of any dividend or other distribution with respect to, or any direct or indirect redemption or acquisition of, any of the capital stock of the Company or its Subsidiary, (iii) no waiver of any valuable right of the Company or its Subsidiary or the cancellation of any debt or claim held by the Company or its Subsidiary (including any settlement of any claims or litigation), (iv) no loan by the Company or its Subsidiary to any officer, director, employee or stockholder of the Company or its Subsidiary, or any agreement or commitment therefor, (v) no increase, direct or indirect, in the compensation paid or payable to any officer, director, employee, person or entity performing services as an independent contractor, consultant or agent of the Company or its Subsidiary outside of the ordinary course of business, (vi) no loss, destruction or damage to any property of the Company or its Subsidiary, whether or not insured in excess of $10,000 in the aggregate, (vii) no strikes, work stoppages, slow downs, lockouts, union organizing or recognition efforts, grievance procedures, claims of unfair labor practices or similar incidents of significant labor difficulty of any nature whatsoever involving the Company or its Subsidiary and no material change in the personnel of the Company or its Subsidiary or the terms and conditions of any collective bargaining agreements, employment contracts or independent contractor or consulting agreements to which any of them are parties, (viii) no acquisition or disposition of any assets (or any contract or arrangement therefor) nor any other transaction by the Company or its Subsidiary otherwise than in the
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ordinary course of business, (ix) no creation, incurrence, guarantee or assumption of any indebtedness by the Company or its Subsidiary for borrowed money (other than pursuant to existing credit facilities), (x) no amendment, cancellation or termination of any contract, license or other instrument material to the Company or its Subsidiary, (xi) no change in accounting methods or practices by the Company or its Subsidiary affecting their respective assets, liabilities or business, (xii) no revaluation by the Company or its Subsidiary of any of their respective assets, including without limitation, writing off notes or accounts receivable, (xiii) no mortgage, pledge or other encumbrance of any material assets of the Company and its Subsidiary, (xiv) no increase or change in any assumptions underlying or methods of calculating any bad debt, contingency or other reserves, other than in the ordinary course of business, and (xv) no payment, discharge or satisfaction of any liabilities other than the payment, discharge or satisfaction (1) in the ordinary course of business and consistent with the past practice of liabilities reflected or reserved against in the Base Balance Sheet or incurred in the ordinary course of business and consistent with the past practice since December 31, 2003, and (2) of other liabilities involving $15,000 or less singly and $25,000 or less in the aggregate.
2.13 Title to Properties .
(a) Except as specifically disclosed on Schedule 2.13, the Company and its Subsidiary has good and marketable title to, or in the case of leased property have valid leasehold interests in, all of its properties and assets, free and clear of all mortgages, Liens, restrictions or encumbrances. All owned or leased real property of the Company and its Subsidiary is described on Schedule 2.13. A true copy of each deed for each parcel of real property owned by the Company or its Subsidiary and each lease to which the Company or its Subsidiary is a party, is listed on Schedule 2.13 and has been delivered by the Company to Parent. Each lease is in full force and effect and affords the Company or the Subsidiary, as the case may be, peaceful and undisturbed possession of the subject matter of such lease. No default or event of default on the part of the Company or its Subsidiary or, to the knowledge of the Company, on the part of the lessor, exists under any lease, and neither the Company nor its Subsidiary has received any notice of default under any such lease or any indication that the owner of the leased property intends to terminate such lease, and, no event has occurred which with notice or the lapse of time, or both, would constitute a default under any such lease. Except as specifically disclosed on Schedule 2.13, each of the Company and its Subsidiary holds all easements, rights-of-way and other rights necessary to own, operate and maintain its physical plant and, is not in breach of, or default under, any such easement, right-of-way or other right and there are not any burdensome limitations or obligations on the Company or its Subsidiary under any such easement, right-of-way or other right. A listing of all easements and rights-of-way is provided on Schedule 2.13.(b) Except as set forth on Schedule 2.13, neither the Company nor its Subsidiary is in violation of any zoning, land-use, building or safety law, ordinance, regulation or requirement or other law or regulation applicable to the operation of its owned or leased properties, nor has it received any notice of violation with which it has not complied, in any case in which the consequences of such violation if asserted by the applicable regulatory authority would be adverse with respect to the Company or its Subsidiary. All real property owned or leased and all tangible personal property owned or leased by the Company and its Subsidiary taken as a whole and required for the purpose of carrying on its business and operations, is in good operating condition and repair, reasonable wear and tear excepted, and no portion of any such real or personal property has suffered any damage by fire or other casualty which has not
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heretofore been completely repaired and restored to its original condition to the extent necessary or useful in the continued operation of its business.
2.14 Tax Matters .
(a) Except as set forth on Schedule 2.14, the Company and its subsidiaries have timely filed all Tax Returns that they were required to file, and have paid all Taxes owed (whether or not shown on any Tax Return). All such Tax Returns are complete, true and correct in all respects. All Taxes owed by any affiliated group of which Company and its subsidiaries have at any time been a member (whether or not shown on any Tax Return) have been paid for each taxable period which Company or its subsidiaries were a member of the affiliated group. Except as set forth on Schedule 2.14, neither the Company nor its subsidiaries currently are the beneficiary of any extension of time within which to file any Tax Return.(b) Except as set forth on Schedule 2.14, there is no dispute or claim concerning any Tax liability of the Company and its subsidiaries either (A) claimed or raised by any authority in writing or (B) as to which the directors and officers of the Company and its subsidiaries have knowledge based upon personal contact with any agent of such authority.
(c) Schedule 2.14 lists all income tax returns filed with respect to the Company and its subsidiaries for taxable periods ended on or after December 31, 2000, indicates those income tax returns that have been audited, and indicates those income tax returns that currently are the subject of audit. The Company has delivered to the Parent correct and complete copies of all federal income tax returns, examination reports, and statements of deficiencies assessed against or agreed to by any of the Company and its subsidiaries since December 31, 2000 and upon completion will deliver all returns for the year ending December 31, 2004.
(d) Except as set forth on Schedule 2.14, neither the Company nor its subsidiaries have waived any statute of limitations in respect of income taxes or agreed to any extension of time with respect to an income tax assessment or deficiency.
(e) Neither the Company nor its subsidiaries are a party to any income tax allocation or sharing agreement.
(f) No claim has been made by a taxing authority in writing in a jurisdiction where neither the Company nor its subsidiaries file Tax Returns that it is or may be subject to taxation by that jurisdiction. Any liability of the Company or its subsidiaries for Taxes not yet due and payable or which are being contested in good faith, has been provided for on their financial statements in accordance with GAAP or are described on Schedule 2.14.
(g) Neither the Company nor its subsidiaries are a “foreign person” within the meaning of Section 1445 of the Code. Neither the Company nor its subsidiaries are a party to any agreement, whether written or unwritten, providing for the payment of taxes, payment for tax losses, entitlements to refunds or similar tax matters. Neither the Company nor its subsidiaries have been a United States real property holding corporation within the meaning of Section 897(c)(2) of the Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
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(h) No property of the Company or its subsidiaries is “tax exempt use property” within the meaning of Section 168(h) of the Code or property that the Company or its subsidiaries will be required to treat as being owned by another person pursuant to Section 168 (f) (8) of the Internal Revenue Code of 1954, as amended, in effect immediately before the enactment of the Tax Reform Act of 1980.
(i) There are no Tax Liens upon any property or assets of the Company or its subsidiaries except for liens for current taxes not yet due and payable.
(j) Each of the Company and its subsidiaries has withheld and timely paid all taxes (including, without limitation, federal, state, local or foreign income, franchise, payroll, employee withholding and social security and unemployment taxes) required to have been withheld and paid in connection with amounts paid or owing to any employee, creditor, independent contractor, stockholder or other third party. All Forms W-2 and 1099-series forms required to be filed with respect thereto have been timely and properly filed.
(k) Neither the Company nor its subsidiaries (i) have made since January 1, 1999, and will not make, any elections under Section 341(f) of the Code and (ii) have not made since January 1, 1999 any payment (and is not obligated to make any payment) that will be nondeductible under Section 280G of the Code.
2.15 Insurance . The Company has in force all policies of insurance described in Schedule 2.15, in the amounts and covering the risks described therein which are usual and customary as to . Neither the Company nor its Subsidiary has ever been refused any insurance coverage for which it has applied. All of such policies are in full force and effect, all premiums with respect thereto have been paid or accrued therefor, and no notice of cancellation or termination has been received with respect to any such policy. Such policies are sufficient for compliance with all applicable statutes, laws, ordinances, regulations, franchises, rules, governmental policies or orders and any contract to which the Company or its Subsidiary are a party. Neither the Company nor its Subsidiary has breached or otherwise failed to perform the obligations under any of such policies. Except as set forth on Schedule 2.15, there are no pending or to the knowledge of the Company threatened claims under any insurance policy relating to the Company or its Subsidiary.
2.16 Contracts and Commitments . Except as set forth in Schedule 2.5 and 2.16, neither the Company nor its Subsidiary (a) is a party to any contract, obligation, understanding or commitment (whether written or oral) which involves a potential or actual commitment or aggregate payments to or from the Company or its Subsidiary to or from any third party in excess of $5,000, or which is otherwise material and not entered into in the ordinary course of business, (b) has any employment contracts; stock redemption or purchase agreements; financing agreements; collective bargaining agreements; consulting or management services agreements; independent contractor agreements; or agreements with any current or former officers, directors, employees or shareholders of the Company or its Subsidiary or persons or organizations related to or affiliated with any such persons, (c) has any contract or arrangement concerning directory publishing matters or billing and collection matters, (d) has any note, mortgage, agreement, contract or arrangement that limits the ability of the Company or its Subsidiary to compete in any line of business or to compete with any other person, (e) has any contract relating to any obligation for borrowed money or any guarantee or indemnification of or the granting of security
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for an obligation for borrowed money or any other obligation or liability, (f) has any contract relating to 911 or E911 services, interconnection or collocation arrangements, or other arrangements with any local exchange carrier, competitive access provider or other telecommunications carrier, (g) any contract relating to licenses to or from the Company or its Subsidiary of the Company with respect to software or hardware used in the businesses of the Company or its Subsidiary; (h) any contract relating to cable television; or (i) any contract relating to any indemnity obligations of the Company or its Subsidiary. Except as disclosed in Schedule 2.16, neither the Company nor its Subsidiary is in default under any contract, obligation, understanding or commitment and there is no state of facts which upon notice or lapse of time or both would constitute such a default. Except as set forth in Schedule 2.16, neither the Company nor its Subsidiary is a party to any contract or arrangement which is likely to have a material adverse effect on the assets, liabilities, properties, or financial condition of the Company and its Subsidiary, taken as a whole.
2.17 Litigation . Except as set forth in Schedule 2.17, there is no investigation, complaint, charge, claim, grievance, action, suit or proceeding at law or in equity or by or before any governmental or administrative instrumentality or other agency (including, without limitation, the PPUC or the FCC) or before any court, arbitrator, or similar tribunal now pending or, to the knowledge of the Company, threatened against the Company or its Subsidiary to which the Company or its Subsidiary or their properties is party or is subject. There is no investigation, complaint, action, suit or proceeding at law or in equity or by or before any governmental instrumentality or other agency now pending against the Company, its Subsidiary, any director, officer or key employee of the Company or its Subsidiary which has a reasonable possibility of calling into question the validity, or hindering the enforceability or performance, of this Agreement or any action taken or to be taken pursuant hereto or any of the other agreements and transactions contemplated hereby, nor has there occurred any event or does there exist any condition on the basis of which any such litigation, proceeding or investigation might properly be instituted. There is no outstanding judgment, injunction, decree or order issued by any governmental instrumentality or other agency (including, without limitation, the PPUC or the FCC) against the Company or its Subsidiary.
2.18 Environmental Matters . Except as set forth in Schedule 2.18:
(a) Neither the Company nor its Subsidiary is or has been required to obtain from Governmental Authorities any permits, licenses, authorizations or other consents required under applicable Environmental Law (“Environmental Permits”) for the operation of its business as currently conducted or contemplated to be conducted.(b) No Hazardous Substances have been or are now being generated, used, stored, treated or otherwise managed on real property owned or leased by the Company or its Subsidiary (the “Properties”), or by any other Persons, in violation of Environmental Laws or relevant Environmental Permits. For any Property at which any Hazardous Substance has ever been or is now being generated, used, stored, treated or otherwise, managed, each such activity has been and is in compliance with applicable Environmental Laws and/or Environmental Permits, and then only in the ordinary course of business as then conducted and in such amounts as are typical of the business of the Company or its Subsidiary. No Hazardous Substances have been, or are being spilled, released, discharged, disposed, placed, or otherwise caused to come to be located on or in the soil, surface water or groundwater in, on or under any of the Properties, by the Company, its Subsidiary or any other Person. No Hazardous Substances have been
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shipped or transported from any of the Properties for treatment, storage or disposal at any other facility, by the Company or its Subsidiary, or any other Person, except pursuant to and in full compliance with applicable Environmental Laws and/or relevant Environmental Permits. Neither the Company nor its Subsidiary has disposed, stored, treated, or sent for disposal, storage or treatment, any solid waste, pollutant, contaminant or waste (whether hazardous waste or other waste), or Hazardous Substances, except in compliance with applicable Environmental Laws and/or Environmental Permits, and then only to a facility which possessed a valid permit. There have never been and are no underground or above ground storage tanks on any Property. No environmental remediation or other environmental response is occurring or has occurred on any real property of the Company or its Subsidiary nor has the Company or its Subsidiary issued a request for proposal or otherwise asked an environmental remediation contractor to begin plans for such environmental remediation or other environmental response.
(c) Neither the Company nor its Subsidiary has received, and no circumstances exist that would form the basis for, (i) any notice of violation of any applicable Environmental Law; or (ii) any suit, action, claim, liability (contingent or otherwise), or proceeding (whether at law, in equity, or administrative) concerning or related to environmental matters or any environmental condition except as noted on Schedule 2.18. Neither the Company nor its Subsidiary has received any notice, nor is the Company aware of any circumstances related to, liability as a potentially responsible party, under the Comprehensive Environmental Response Compensation and Liability Act, or any state analogue thereto as of the date of this Agreement.(d) For purposes of this Agreement, the term “Environmental Laws” shall mean all federal, state, or local laws, statutes, ordinances, regulations, permits or permit conditions relating to the emission or discharge of pollutants, hazardous and/or toxic materials including requirements under the Clean Air Act, Federal Water Pollution Control Act, Resource Conservation and Recovery Act, Comprehensive Environmental Response Compensation and Liability Act, the Oil Spill Act, each as amended and in effect from time to time, and any state analogues thereto. The term “Hazardous Substances” shall mean crude oil and any refined fraction or product thereof, any substance defined as a Hazardous Substance under Section 101(14) of the Comprehensive Environmental Response Compensation and Liability Act, asbestos, polychlorinated biphenyls, or any substance regulated as hazardous or toxic under applicable Environmental Laws.
(e) The Company and its Subsidiary are now and have at all times been in compliance with all applicable Environmental Laws.
2.19 Investment Company . Neither the Company nor its Subsidiary is an Investment Company as such term is defined in the Investment Company Act of 1940, as amended.2.20 Margin Securities . Neither the Company nor its Subsidiary owns or has any present intention of acquiring, any “margin security” within the meaning of Regulation G (12 C.F.R. Part 207), or any “margin stock” within the meeting of Regulation U (12 C.F.R. Part 221), of the Board of Governors of the Federal Reserve System (herein called “margin security” and “margin stock”).
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2.21 Employee Benefit Programs .(a) Schedule 2.21 sets forth a list of (1) every Employee Program maintained by the Company or its Subsidiary and (2) every Employee Program maintained at anytime within the past five years which was subject to Title IV of ERISA. Except for the Employee Programs set forth on Schedule 2.21, the Company has no liability or potential liability for any Employee Program maintained or contributed to by it, or by a current or former Affiliate.(b) Except as set forth on Schedule 2.21, each Employee Program which has ever been maintained by the Company or its Subsidiary and which has been intended to qualify under Section 401(a) of the Code has received a favorable determination letter from the Internal Revenue Service (“IRS”) regarding its qualification under such section and any such Employee Program maintained at any time since 1999 has a favorable determination letter covering GUST. No such Employee Program has been disqualified under the applicable section of the Code from the effective date of the favorable determination letter for such Employee Program through and including the date hereof (or, if earlier, the date that all of such Employee Program’s assets were distri | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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