assets of Sellers relating to and necessary for the operation of the Business as of the Closing Date (collectively, the “Purchased Assets”), including, but not limited to, the following (to the extent relating to the Business), free and clear of all Liens except Permitted Liens:

 

(a)            all cash, bank accounts and accounts receivable of CassTel and CassTel LD;

 

(b)            all inventory, materials, customer premise equipment and supplies including but not limited to the items listed on Schedule 1.1(b);

 

(c)            to the extent assignable, any and all permits, consents and licenses relating to the Business, including licenses issued by the Federal Communications Commission (“FCC”) or the Missouri Public Service Commission (“MPSC”) or the Kansas Corporation Commission (“KCC”) which are necessary to engage in the Business;

 

(d)            all furniture, fixtures, machinery, vehicles, plant, systems, optical fiber, computers, switches, twisted copper, pay phones, test equipment, structures, construction, telephone line facilities, tools, implements, conduits, stations, substations and equipment of any kind, character or nature including but not limited to the items listed on Schedule 1.1(d) ;

 

(e)            the Assumed Contracts as listed on Schedule 1.1(e) ;

 

(f)             all real estate interests, including without limitation all leases, licenses, easements, rights of ways and the like, and all real property with all privileges appurtenant thereto owned by Sellers, as listed on Schedule 2.13 ;

 

(g)            all of the Sellers’ interests in all real property improvements;

 

(h)            all prepaid expenses, including amounts paid in advance on account of rent, property taxes, utility charges, fees and deposits;

 

(i)             originals (if available) or copies (at the option of Buyer) of (i) all books, records, manuals, files, customer lists and records, accounts and billing records, plans, blueprints, specifications, drawings, surveys, engineering reports, personnel and employee benefit plan records and operating data whether in electronic format or otherwise, and (ii) the Assumed Contracts related to the Business;

 

(j)             all rights of the Sellers in and to all databases, software, software programs, object codes, source codes, systems documentation and user manuals used in connection with the Business as listed on Schedule 1.1(j) ;

 

(k)            all Intellectual Property Rights, including all rights to all of the corporate, domain, trade names and trademarks of CassTel and CassTel LD and the brand names, trademarks and trade names of the Business as listed on Schedule 1.1(k) ;

 

(l)             all claims, causes of action and rights of recovery relating to the Business, whether asserted or commenced on or before the Closing Date other than accounts receivable owed by T-Mobile that arose prior to the Closing Date;

 

2

 

(m)           the right to receive and retain mail, accounts receivable payments and other communications relating to the Business, except as provided in Section 1.1(l) above;

 

(n)            the right to bill and receive payments for products shipped or delivered and services performed but unbilled or unpaid as of the Closing related to the Business;

 

(o)            to the extent transferable, all telephone numbers (e.g., toll free numbers), facsimile numbers, Internet addresses, websites and similar numbers or addresses assigned to or used by CassTel or CassTel LD or their respective customers; and

 

(p)            all rights of the Sellers with respect to each of its customers related to the Business;

 

(q)            all other business, property, assets and rights or benefits of Sellers on the Closing Date not described above, relating to the Business including, but not limited to, the Sellers’ interest in Missouri Network Alliance, L.L.C.;

 

1.2            Excluded Assets . Notwithstanding anything to the contrary contained herein or otherwise, the Purchased Assets do not include the following assets of Sellers (collectively, the “Excluded Assets”):

 

(a)            all federal, state and local income tax, franchise tax or other tax credits and tax refund claims arising out of the operations of the Business prior to Closing;

 

(b)            the minute books, equity record books and tax returns of Sellers;

 

(c)            except as provided in Section 1.5, any insurance policies (other than insurance policies constituting Assumed Contracts), insurance proceeds, insurance refunds and prepaid expenses relating to the period prior to the Closing (other than proceeds, refunds or prepaid expenses relating to Assumed Contracts);

 

(d)            all contracts other than the Assumed Contracts;

 

(e)            any and all equity interests in the Sellers, and any and all investments of LEC other than in Missouri Network Alliance, L.L.C.;

 

(f)             all rights to the names, trade names and trademarks of LEC not listed on Schedule 1.1(k);

 

(g)            any recovery by the Sellers from T-Mobile for accounts receivable arising prior to the Closing Date;

 

(h)            any interest or investment in the stock of CoBank, ACB; and

 

(i)             any and all intercompany accounts receivable owed by any Seller to any one or more of the Sellers.

 

3

 

1.3            Limited Assumption of Liabilities . Buyer hereby agrees to assume, as of the Closing Date, and agrees to pay, perform and discharge when due, only the following liabilities, responsibilities and obligations of Sellers relating to the Business and the Purchased Assets, thereafter arising (collectively, the “Assumed Liabilities”):

 

(a)            All liabilities, responsibilities and obligations of the Sellers arising out of or relating to the Assumed Contracts, but only to the extent same arise, accrue or become performable after the Closing Date; and

 

(b)            All liabilities, responsibilities and obligations relating to security or other deposits made by customers of CassTel or CassTel LD to the extent these liabilities are considered Current Liabilities in Section 1.10

 

(c)            All accounts payable and accrued expenses related to the Purchased Assets (but excluding any intercompany payables) to the extent these payables and expenses are considered Current Liabilities in Section 1.10.

 

Notwithstanding anything in this Section 1.3 to the contrary, “Assumed Liabilities” shall not include any liabilities, responsibilities or obligations expressly identified as an Excluded Liability pursuant to Section 1.4.

 

1.4            Excluded Liabilities . Except as set forth in Section 1.3, the Buyer shall not assume or be responsible for any of the liabilities or obligations of the Sellers (collectively, the “Excluded Liabilities”), including without limitation:

 

(a)            any and all liabilities or obligations associated with or relating to any Excluded Assets, any long term indebtedness and any intercompany payables or receivables of the Sellers owed to any one or more of Sellers or Sellers’ Affiliates; members, managers or partners;

 

(b)            any liability, complaint, claim or obligation of any kind, character or nature arising out of (i) the conduct of the Sellers whether or not in connection with the operations of the Business (except as expressly provided for in Section 1.3), or (ii) the employment by the Sellers of any employees of the Business or the provision of any employee benefit to such employees pursuant to any plan, program or arrangement maintained by any Seller (whether or not subject to ERISA and whether or not written), whether such claim arises before or after the Closing Date and whether or not such employees become Buyer’s employees;

 

(c)            any liability or obligation of the Sellers owing to any equity holder or Affiliate thereof including, without limitation, any obligations arising out of or related to the transactions contemplated hereby;

 

(d)            any liabilities related to (i) income taxes of the Sellers, (ii) all other taxes attributable to the Sellers or to Sellers’ operation of the Business including, but not limited to, sales and use taxes, and (iii) taxes of any other person or third party (except Buyer) pursuant to an agreement or otherwise;

 

4

 

(e)            any liabilities, responsibilities and obligations relating to the operation of the Business or the actions of the Sellers prior to the Closing Date under any rule, regulation, law, mandate, decision or order of the MPSC, KCC, FCC, National Exchange Carriers Association (“NECA”), Universal Service Administration Company (“USAC”) or any other Governmental Entity (as defined in Section 8.9(d)), whether enacted or promulgated before, on or after the Closing Date;

 

(f)             any liabilities existing or arising under Environmental Laws attributable to or incurred as a result of any acts, omissions or conditions first occurring or in existence as of or prior to the Closing Date, including, but not limited to, liabilities for the release, threatened release, handling, discharge, treatment, storage, disposal, transport, presence, or migration of Regulated Materials (as defined in Section 2.12(d));

 

(g)            any obligation or requirement imposed by any Governmental Entity, including any Environmental Authority (as hereinafter defined) arising and required to be performed prior to the Closing Date; and

 

(h)            Sellers’ contract with GVNW Consulting, Inc.

 

1.5            Insurance Proceeds . If prior to the Closing, any Purchased Assets shall have suffered, sustained or incurred any material loss, damage or destruction and the Sellers shall not have completed the repair or replacement of such Purchased Assets as of the Closing Date to the reasonable satisfaction of Buyer, then at Buyer’s option, the Sellers shall, at the Closing, assign and transfer to Buyer, and Buyer shall be entitled to receive from the Sellers, all insurance proceeds collected by reason of such loss, damage or destruction which have not been expended on such repair or replacement, together with any rights to receive any uncollected insurance proceeds relating to such loss, damage or destruction which is payable to the Sellers. This Section shall not limit Buyer’s other rights hereunder.

 

1.6            Purchase Price; Tax Allocation . The purchase price for the Purchased Assets shall be an aggregate amount of Thirty Three Million Dollars ($33,000,000) (the “Purchase Price”). The Purchase Price shall be subject to adjustment in accordance with Section 1.10. The Purchase Price shall be allocated for tax purposes in accordance with Schedule 1.6 attached hereto. Each of Buyer and Sellers shall file its respective federal income tax returns consistent with such allocation for the tax year in which this Agreement is executed, and each of Sellers and Buyer shall report all tax consequences of the transactions contemplated by this Agreement, in a manner consistent with such allocation, and not take any position inconsistent therewith upon examination of any tax return, in any refund claim, in any litigation or investigation or otherwise.

 

1.7            Closing . The closing of the purchase of the Purchased Assets under this Agreement shall take place at the offices of Buyer located at 521 East Morehead Street, Suite 250, Charlotte, North Carolina 28202 at 9:00 a.m. local time, on the closing date (the “Closing” or the “Closing Date”), which shall be on the first day of the month which is at least ten (10) days after the fulfillment or waiver of each of the conditions set forth in Article V hereof or at such other place, or on such earlier or later date and time as may be mutually agreed in writing by Buyer and Sellers, with the parties executing documents and exchanging signed documents. All proceedings to be taken and all documents to be executed and delivered by all parties at the

 

5

 

Closing shall be deemed to have been taken and executed simultaneously, and no proceedings shall be deemed to have been taken nor any documents executed or delivered until all have been taken, executed and delivered. At Closing, (i) the Sellers shall deliver to Buyer all executed documents contemplated hereby including, without limitation, bills of sale and quitclaim deeds with covenant, necessary to transfer all of Sellers’ right, title and interest in and to the Purchased Assets, subject only to Permitted Liens, to Buyer as provided herein, (ii) the Buyer shall deliver to the Sellers all executed documents contemplated hereby, including without limitation instruments of assumption with respect to the Assumed Liabilities, and (iii) Buyer shall hand deliver or wire transfer the Purchase Price to or at the written direction of the Sellers on the terms set forth herein.

 

1.8            Further Assurances . Each of the Sellers shall from time to time after the Closing, at the reasonable request of the Buyer and without further consideration, execute and deliver further documents, instruments of transfer, conveyance, endorsement, direction, authorization or assignment and take such other action as the Buyer may reasonably require to more effectively transfer and assign to, and vest in, the Buyer the Purchased Assets and all of Sellers’ rights thereto (as provided herein), and to fully implement the provisions of this Agreement.

 

1.9            Transfer Taxes (a) . All sales, income, recording, stamp, conveyance, value added, use, or similar asset transfer taxes, fees and duties or charges under applicable law incurred in connection with the sale and transfer of the Purchased Assets under this Agreement will be borne and paid by the Sellers.

 

1.10          Purchase Price Adjustment .

 

(a)            As used herein, for the purposes of this Section, (i) “Net Working Capital” shall mean Current Assets minus Current Liabilities; (ii) “Current Assets” shall mean the following current assets of the Sellers, combined, calculated in accordance with generally accepted accounting principles consistently applied (“GAAP”) to the extent included as Purchased Assets: (A) cash, cash equivalents of CassTel and CassTel LD; and (B) accounts receivable (net of reserves for doubtful accounts and excluding intercompany accounts receivable and pre-Closing accounts receivable from T-Mobile) as represented on Schedule 1.10; and (iii) “Current Liabilities” shall mean the following current liabilities of Sellers, combined, calculated in accordance with GAAP; (A) accounts payable and accrued expenses related to the Purchased Assets but excluding any intercompany payables; (B) taxes, to the extent payable by the Buyer; (C) customer deposits; (D) accrued compensation; and (E) any other Assumed Liability that would be classified as a current liability in accordance with GAAP.

 

(b)            The “Purchase Price Adjustment” is an adjustment to the Purchase Price representing the obligation of the Sellers to have not less than zero dollars in Net Working Capital at the close of business on the day before the Closing Date. If, as of the close of business as of the day before the Closing Date, Net Working Capital (as estimated in good faith by the Sellers in consultation with and as agreed to by the Buyer) exceeds $0, then the Purchase Price Adjustment shall credit Sellers (and increase the Purchase Price at Closing) for the amount by which Net Working Capital exceeds $0. If as of the close of business as of the day before the Closing Date, Net Working Capital (as estimated in good faith by the Sellers in consultation with the Buyer) is less than $0, then at Closing, the Purchase Price Adjustment shall credit the Buyer

 

6

 

(and decrease the Purchase Price at Closing) for the amount by which Net Working Capital is less than $0. For illustration purposes only, the Purchase Price Adjustment shall be determined as represented on Schedule 1.10 annexed hereto.

 

(c)            The Sellers shall prepare and submit to the Buyer for Buyer’s approval and consent, not later than five (5) business days prior to the expected or agreed upon Closing Date, a written good faith estimate of the amount of the Net Working Capital as of the close of business as of the day before the Closing Date (the “Purchase Price Adjustment Estimate”), which amount shall be used to adjust the Purchase Price at Closing.

 

(d)            Within thirty (30) days following the Closing Date, the Sellers will prepare and submit to the Buyer financial statements (balance sheets, income and cash flow statements) for the period from the execution of this Agreement through the Closing Date (the “Closing Financials”). Within thirty (30) days after receiving the Closing Financials, Buyer shall prepare and deliver to Sellers for review and comment a closing statement (the “Closing Statement”) reasonably detailing as of the close of the business day prior to the Closing the Buyer’s determination of the amount of the final Net Working Capital of Sellers as of the business day prior to the Closing Date. If Sellers object to any amounts reflected on the Closing Statement, then Sellers must, within ten (10) days after their receipt of the Closing Statement, give written notice (the “Notice”) to Buyer specifying in reasonable detail any objections, or Buyer’s determination of the final Net Working Capital and the final Purchase Price Adjustment shall be final, binding and conclusive on the parties on such tenth (10 ^th ) day. With respect to any disputed amounts, the parties shall meet in person and negotiate in good faith during the ten (10) day business day period (the “Resolution Period”) after the date of Buyer’s receipt of the Notice to resolve any such disputes. If the parties are unable to resolve all such disputes within the Resolution Period, then within five (5) business days after the expiration of the Resolution Period, all disputes shall be submitted to arbitration. The determination of the final Purchase Price Adjustment by arbitration shall be final, binding and conclusive on the parties hereto. From and after the Closing Date, each of the parties shall provide the other access to their books, records and personnel as such requesting party reasonably determines is necessary to prepare, review or dispute the Closing Statement.

 

(e)            If the final Purchase Price Adjustment (as finally determined in accordance with the provisions set forth above) differs from the Purchase Price Adjustment Estimate, then within five (5) business days after such final determination, Buyer will pay the Sellers, or the Buyers will be entitled to recover from the Escrow Account, the difference in immediately available funds, in accordance with the provisions above, or as otherwise directed by such arbitration decision.

 

ARTICLE II

 

REPRESENTATIONS AND WARRANTIES OF THE SELLERS

 

The Sellers hereby represent and warrant, jointly and severally, to the Buyer that:

 

2.1            Organization and Existence . LEC is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Maryland and is qualified to

 

7

 

do business as a foreign limited liability company and is in good standing in each jurisdiction in which such qualification is required, including but not limited to, Missouri and Kansas. CassTel is a limited partnership duly organized, validly existing and in good standing under the laws of the State of Maryland and is qualified to do business as a foreign limited partnership and is in good standing in each jurisdiction in which such qualification is required, including but not limited to Missouri and Kansas. CassTel LD is a corporation duly organized, validly existing and in good standing under the laws of the State of Missouri and is qualified to do business as a foreign corporation and is in good standing in each jurisdiction in which such qualification is required including but not limited to Kansas. Each of LEC, CassTel and CassTel LD has all requisite power and authority to own its properties and to carry on its business as it is now being conducted or contemplated. The Sellers have heretofore made available to Buyer complete and correct copies of the Partnership Agreement of CassTel, the Articles of Organization and Operating Agreement of LEC and the Articles of Incorporation and By-Laws of CassTel LD. None of the Sellers is in violation of any term of its respective organizational, operating or governing documents or any judgment, decree, order, law, statute, ordinance, rule or government regulation applicable to it.

 

2.2            Authority Relative to this Agreement . Each of the Sellers has the requisite power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. This Agreement and the consummation by each of the Sellers of the transactions contemplated hereby have been duly and validly authorized by each of the Sellers and no other authorizations or proceedings on the part of any of the Sellers is necessary to authorize this Agreement or to consummate the transactions contemplated hereby. The Sellers have each provided evidence of its authority to enter into the Agreement and consummate the transactions contemplated hereby to the Buyer. This Agreement has been duly and validly executed and delivered by each Seller and this Agreement constitutes the valid and binding agreement of each, enforceable against each Seller in accordance with its terms, except that such enforceability may be limited by (i) bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors’ rights generally, and (ii) general principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at law).

 

2.3            Consents and Approvals; No Violation . Neither the execution and delivery of this Agreement nor the consummation by any of the Sellers of the transactions contemplated hereby will:

 

(a)            conflict with or result in any breach of any provision of the respective operating or governing documents of or laws applicable to any of the Sellers;

 

(b)            except as set forth on Schedule 2.3(b) , require any consent, approval, authorization or permit of, or filing with or notification to, any Governmental Entity or other third party;

 

(c)            except as set forth in Schedule 2.3(c) , violate or result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, cancellation or acceleration or lien or other charge or encumbrance) under any of the terms, conditions or provisions of any contract, indenture,

 

8

 

obligation, commitment, note, license, agreement or other instrument or obligation to which the Sellers are parties, or by which any of their respective assets may be bound, except for such violations, breaches and defaults (or rights of termination, cancellation or acceleration or lien or other charge or encumbrance) as to which requisite waivers or consents have been obtained;

 

(d)            assuming the consents, approvals, authorizations or permits and filings or notifications referred to in this Section 2.3 (including Schedule 2.3(b)  and Schedule 2.3(c) ) are duly and timely obtained or made, violate or constitute a default under any judgment, order, restriction, writ, injunction, decree, law, statute, ordinance, rule or regulation applicable to any of the Sellers or to any of their respective assets; or

 

(e)            create (directly or indirectly with or without notice of or lapse of time or both) any Lien on any of the Purchased Assets except pursuant to this Agreement and the agreements contemplated hereby.

 

2.4            Financial Statements .    The Sellers have delivered to the Buyer the consolidated balance sheets and the related consolidated statements of income and cash flows (including the related notes thereto, if any) of each of the Sellers as of and for the years ended December 31, 2004 (audited and regulatory versions), December 31, 2003 (audited and regulatory versions) and December 31, 2002 (audited and regulatory versions) and the monthly unaudited balance sheets and related statements of income and cash flows to date of each of the Sellers for the year 2005 (the “Financial Statements”). Except as set forth on Schedule 2.4 , all of the Financial Statements, as of their respective dates, were prepared in accordance with (i) to the extent required, with respect to the regulatory versions of the Financial Statements the rules and regulations of the MPSC, KCC and FCC, and (ii) with respect to all other Financial Statements, GAAP applied on a basis consistent with prior periods (except as otherwise noted therein). Except as set forth on Schedule 2.4, all of the Financial Statements, were true and correct on their respective dates, and presented fairly on their respective dates, in all material respects, the consolidated financial position and results of operation and cash flows of each of the Sellers on a consolidated and consolidating basis as of and for the years ended December 31, 2004 (the “Balance Sheet Date”), December 31, 2003 and December 31, 2002 and monthly to date for 2005 subject, in the case of the unaudited financial statements, to normal year-end audit adjustments and the absence of footnote disclosures. Except as set forth in the December 31, 2004 balance sheets that are part of the Financial Statements (the “Latest Balance Sheet”) or in Schedule 2.4 , and except for Excluded Liabilities, none of the Sellers has any material obligations, liabilities or material forward or long term commitments (including contingent liabilities). Except as provided on Schedule 2.4 with respect to the Purchased Assets, nothing has come to Sellers’ attention that would indicate that the Financial Statements were not true and correct in all material respects as of their respective dates or for the periods covered thereby.

 

2.5            Contracts . Sellers have delivered to Buyer complete and accurate copies of each of the Assumed Contracts as in effect as set forth on Schedule 1.1(e) . Each Assumed Contract is in full force and effect and is valid and enforceable against the applicable Seller in accordance with its terms. Neither the applicable Seller, nor any other party thereto, to such Sellers’ knowledge, is in breach or default of any material terms or conditions thereunder. Between the date hereof and the Closing, no Seller shall agree to any termination or modification of any of the Assumed Contracts without the prior written consent of Buyer.

 

9

 

2.6            Operations Since Balance Sheet Date .

 

(a)            Since the Balance Sheet Date, except as set forth in Schedule 2.6 , there has been no damage, destruction or loss, whether or not covered by insurance, or condemnation or other taking adversely affecting in any material respect any of the Purchased Assets or the Business.

 

(b)            Except as set forth in Schedule 2.6 and except with respect to the actions of the Sellers resulting in this Agreement, since the Balance Sheet Date, each Seller has conducted the Business only in conformity with all rules and regulations of any Governmental Entity. Without limiting the generality of the foregoing, since the Balance Sheet Date, except as set forth in such Schedule, none of the Sellers has:

 

(i)             made or permitted any amendment, cancellation or termination of any of the Assumed Contracts;

 

(ii)            with respect to the Purchased Assets, cancelled or waived any debts owed to or claims held by any of Sellers (including the settlement of any claims or litigation) other than debts owed among the Sellers to each other or a Seller Affiliate;

 

(iii)           created, incurred or assumed, guaranteed or agreed to create, incur, assume or guarantee, any indebtedness for borrowed money resulting in the imposition of a Lien on any of the Purchased Assets (other than a Permitted Lien or a Lien which Sellers are obligated to discharge at or prior to the Closing) or entered into, as lessee, any capitalized lease obligations (as defined in Statement of Financial Accounting Standards No. 13);

 

(iv)           revalued any assets or properties, or accelerated or delayed collection of or (except as contemplated by subparagraph (ii) above) written off notes or accounts receivable in advance of or beyond their regular due dates or the dates when the same would have been collected in the ordinary course of its business consistent with past practice, or increased or changed any assumptions underlying bad debt calculations or contingency or other reserves;

 

(v)            suffered, made (or committed to make) any sale, transfer, lease, license, encumbrance, loss, disposition, destruction or damage of any asset or property that, if it were held by a Seller on the Closing Date, would be part of the Purchased Assets (except as permitted under Section 4.2 hereof);

 

(vi)           acquired or disposed of assets (or entered into any agreement to do so) or entered into or become committed to enter into any other material transaction (except as permitted under Section 4.2 hereof);

 

(vii)          instituted any increase or decrease in any compensation payable to any employee of Sellers or adopted or made any change or amendment in any profit-sharing, bonus, incentive, deferred compensation, retention, severance, golden parachute, insurance, pension, retirement, medical, hospital, disability,

 

10

 

welfare or other benefits made available to employees of Sellers, except in each case as required by any Company Plan (as herein defined), written employment agreement, collective bargaining agreement or multi-employer health and welfare or pension plan and except as permitted under Section 4.2 hereof;

 

(viii)         made any change in the accounting methods, principles and practices used by Sellers from those applied in the preparation of the Latest Balance Sheet and the related statements of income, stockholders’, partners’ or members’ equity and cash flow as of and for the twelve months ended December 31, 2004; or

 

(ix)            experienced any strike, work stoppage, slow down, union organizing or recognition efforts, claims of unfair labor practices, grievances, labor arbitrations, or any similar significant labor difficulty of any kind, character or nature or any hiring or termination of employees or independent contractors of the Business, or any change in any employment or consulting agreements.

 

2.7            Absence of Certain Changes or Events . Except as set forth in the schedules to this Agreement, since the Balance Sheet Date, none of the Sellers has suffered any material adverse change in the properties, financial statements, business prospects, condition (financial or otherwise) or results of operation of the Business.

 

2.8            Absence of Undisclosed Liabilities . Except as set forth on Schedule 2.8 or on the Latest Balance Sheet, none of the Sellers has any absolute, accrued or contingent indebtedness, liability or liabilities arising out of any transaction or state of facts, whether accrued, to become due, contingent, or otherwise.

 

2.9            Litigation . Except as disclosed on Schedule 2.9 , there are no investigations, complaints, charges, grievances, actions, claims, suits, proceedings at law or in equity or by any governmental or administrative instrumentality or agency (including without limitation, the MPSC, KCC, FCC, NECA and USAC) (“Proceedings”) pending or, to the knowledge of Sellers, threatened against any Seller (or any of their respective managers, members, partners, directors, officers or employees) which relate to the Business or the Purchased Assets. No investigation, complaint, action, suit or proceeding is pending at law or in equity or by or before any governmental instrumentality or other agency against any Seller, or any partner, director, officer or key employee of any Seller that 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, to the Sellers’ knowledge, 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. Except as disclosed on Schedule 2.9 , there is no outstanding judgment, injunction, decree or order issued by any governmental instrumentality or other agency (including, without limitation, the MPSC, the KCC, FCC, NECA and USAC) against any Seller.

 

11

 

2.10          Taxes .

 

(a)            Tax Returns. Each Seller has timely and properly filed all federal, state, local and foreign tax returns (including but not limited to income, franchise, sales, payroll, employee withholding and social security and unemployment) (“Tax Returns”) that it was required to file since January 1, 1998. All such Tax Returns are correct and true in all material respects. Except as disclosed on Schedule 2.10 , all taxes (including interest and penalties) due and owing by Seller, or to which any of them may be liable under Treasury Regulations §1.1502-6 (or analogous state or foreign provisions) by virtue of having been a member of any affiliated group (as defined in Section 1504(a) of the Internal Revenue Code, as amended to date (the “Code”)) (or other group filing on a combined or unitary basis), have been paid. Seller was not (at any time after January 1, 1998) and is not now a party to any tax sharing agreement, nor currently is the beneficiary of any extension of time within which to file any report or return. No claim has been made since January 1, 1998 by a taxing authority in a jurisdiction where Seller does not file reports and returns that it is or may be subject to taxation by that jurisdiction. Any liability of the Sellers for taxes not yet due and payable, or which are being contested in good faith, has been provided for on the Financial Statements in accordance with GAAP or are described on Schedule 2.10 .

 

(b)            Each Seller (or any officer or employee responsible for tax matters) has no actual knowledge or reason to believe that any taxing authority will assess any additional taxes against it for any period for which returns have been filed. Except as disclosed in Schedule 2.10 , there is no dispute or claim concerning any tax liability of any Seller either (i) claimed or raised by any Governmental Entity or taxing authority in writing, or (ii) as to which such Seller has knowledge. Schedule 2.10 lists all tax returns filed with respect to Sellers for taxable periods beginning January 1, 1998 to and including the date of this Agreement, and indicates those returns that have been audited or currently are the subject of an audit. Sellers have made available to Buyer true, correct and complete copies of all federal, state and local income Tax Returns, examination reports and statements of deficiencies assessed against or agreed to by CassTel or CassTel LD for the period beginning January 1, 1998 to present.

 

(c)            None of the Sellers is a “foreign person” within the meaning of Section 1445 of the Code. None of the Sellers is 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. None of the Sellers has 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.

 

(d)            No property of Sellers is “tax-exempt use property” within the meaning of Section 168(h) of the Code or property that the Sellers 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 1986.

 

(e)            None of the Sellers has consented to any extension of the statute of limitations with respect to any open federal, state or local tax returns. None of the Sellers has, since January 1, 1998, entered into a closing agreement pursuant to Section 7121 of the Code.

 

12

 

(f)             There are no tax liens upon any property or assets of Sellers, including but not limited to the Purchased Assets, except for liens for current taxes not yet due and payable.

 

(g)            Each Seller and each payor of benefit payments under any Company Plan, 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 since January 1, 1998. All Forms W-2 and 1099-series forms required to be filed with respect thereto have been timely and properly filed.

 

2.11          Employee Benefit Plans; Labor and Employment Matters .

 

(a)            Set forth in Schedule 2.11 is a true, correct and complete list of each of the following employee benefit plans, labor and employee matters maintained, sponsored or contributed to by the Sellers or any ERISA Affiliate at any time since January 1, 2000, or with respect to which the Sellers or any ERISA Affiliate could reasonably have any liabilities, or which provides or will provide benefits to present or former members, managers, partners, employees, officers or directors of the Sellers or any ERISA Affiliate, or their dependents, survivors or beneficiaries (the “Company Plans”):  (i) each “employee pension benefit plan” (as such term is defined in Section 3(2) of ERISA) (“Pension Plan”), (ii) each “employee welfare benefit plan” (as such term is defined in Section 3(1) of ERISA), and (iii) each employee benefit plan, program or arrangement that is not subject to ERISA, including without limitation any retirement, pension, savings, profit sharing, money purchase pension, defined benefit, deferred compensation, severance, retention, golden parachute, stock ownership, stock purchase, stock option, phantom stock, equity, performance, bonus, incentive, vacation or holiday pay, educational assistance or tuition remission or reimbursement, cafeteria, dependent care, transportation, hospitalization or other medical, disability, death benefit plan (whether provided through insurance, on a funded or unfunded basis, or otherwise), or other welfare, benefit or fringe benefit plan, policy, trust, understanding or arrangement of any kind, whether written or oral. None of the Sellers nor any ERISA Affiliate currently sponsors, maintains or is required to contribute to or make any payments in respect of, or has at any time sponsored, maintained or been required to contribute to or make any payments in respect of, (i) any Pension Plan subject to Title IV or Section 302 of ERISA or Section 412 of the Code or (ii) any “multiemployer plan” (as such term is defined in Section 3(37) of ERISA) (“Multiemployer Plan”).

 

With respect to each Company Plan, Sellers have provided to Buyer a true, correct and complete copy of each of the following that is applicable to such Company Plan:  the current plan document with all amendments thereto; any related trust or custodial agreements, insurance or annuity contracts currently in effect; the current summary plan description and any subsequent summary of material modifications; the Sellers’ current employee handbooks, personnel policies and procedures, individual employment contracts, independent contractor agreements and collective bargaining agreements, the most recent favorable IRS determination or opinion letter received; Form 5500s for the plan year ended December 31, 2004 and any Form 5330s filed with the Internal Revenue Service.

 

13

 

(b)            With respect to the Company Plans, except as set forth in Schedule 2.11 : (i) each Company Plan intended to be qualified under Section 401(a) of the Internal Revenue Code of 1986, as amended (the “Code”) has received a favorable determination letter or prototype approval letter from the Internal Revenue Service (the “IRS”) that it is so qualified and since the date of such letter there are no circumstances that are reasonably likely to affect the qualified status of such Company Plan, (ii) each Company Plan has been operated in accordance with its terms and the requirements of any applicable laws, regulations or administrative rulings, (iii) none of the Sellers nor any ERISA Affiliate has incurred or has any reason to believe that it will incur any direct or indirect liability under, arising out of or by operation of Title IV of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and no fact or event exists that is reasonably likely to give rise to any such liability, (iv) there is no pending or, to the knowledge of the Sellers, threatened claim, suit or grievance in respect of any of the Company Plans or, to the knowledge of Sellers, any basis for any such claim, suit or grievance, other than claims for benefits in the ordinary course of business, and (v) all required contributions, reserves or premium payments for the Company Plans have been made.

 

(c)            None of the Sellers, to the knowledge of the Sellers, any other “disqualified person” (within the meaning of Section 4975 of the Code) or “party in interest” (within the meaning of Section 3(14) of ERISA) has taken any action with respect to any Company Plan that could subject any such plan (or its related trust), the Sellers or any member, manager, partner, officer, director or employee of any of the foregoing to a material penalty or tax under Section 502(i) or Section 502(l) of ERISA or Section 4975 of the Code.

 

(d)            Except as set forth in Schedule 2.11 , none of the Sellers maintains or contributes to any employee welfare benefit plan which provides benefits to employees after termination of employment other than as required by Part 6 of Title I of ERISA. Any employee welfare benefit plan set forth in Schedule 2.11 as described in the previous sentence can be amended or terminated at any time in the future.

 

(e)            Except as set forth in Schedule 2.11 , (i) Sellers have complied with all applicable laws, rules and regulations which relate to wages, hours, discrimination in employment and collective bargaining and are not liable for any arrears of wages or any taxes or penalties for failure to comply with any of the foregoing and (ii) there is no pending or, to the knowledge of the Sellers, threatened claim, suit, arbitration, grievance or investigation regarding employment matters against the Sellers. Except as set forth in Schedule 2.11 , (x) there is no unsatisfied award, judgment or other final resolution of a dispute regarding employment matters against the Sellers that requires continuing compliance therewith or that individually or in the aggregate constitutes a material liability and (y) none of the Sellers is a party to any collective bargaining or other labor union contracts. There is no pending or, to the knowledge of the Sellers, threatened labor dispute, strike or work stoppage against the Sellers which would interfere with the respective business activities of the Sellers and, to the knowledge of the Sellers, there are no pending or threatened union organizing or election activities involving any non-union employees of the Sellers.

 

(f)             As used herein, “ERISA Affiliate” shall mean (i) any corporation which at any time on or before the Closing Date is or was a member of the same controlled group of corporations (within the meaning of Section 414(b) of the Code) with Sellers, (ii) any

 

14

 

partnership, trade or business (whether or not incorporated) which at any time on or before the Closing Date is or was under common control (within the meaning of Section 414(c) of the Code) with Sellers, (iii) any entity which at any time on or before the Closing Date is or was a member of the same affiliated service group (within the meaning of Section 414(m) of the Code) with Sellers or any corporation described in clause (i) of this paragraph or any partnership, trade or business described in clause (ii) of this paragraph, and (iv) any entity which at any time on or before the Closing Date was required to be aggregated with Sellers under Code Section 414(o).

 

(g)            Schedule 2.11 contains a true and complete list of names and current hourly wage, monthly salary or other compensation of all directors, officers, managers, employees, consultants, independent contractors or managers of the Business, with a summary of existing bonuses, additional compensation and other benefits (whether current or deferred), if any, paid or payable to each such person for services rendered in the fiscal year ended December 31, 2004. Schedule 2.11 contains a true and complete listing and summary description of all employment, compensation, non competition, confidentiality, consulting and independent contractor agreements and any other similar agreements between either Seller and their respective members, managers, partners, directors, officers, employees, independent contractors and consultants.

 

(h)            Except as listed on Schedule 2.11 , none of the Sellers is a party to any contract with any labor organization, nor have they agreed to, been required to or been asked to recognize or negotiate any union or other collective bargaining unit, nor has any union or other collective bargaining unit been certified as representing any of their respective employees. None of the Sellers has knowledge of any organization currently being made, pursued or threatened by or on behalf of any labor union with respect to their respective employees. Except as listed on Schedule 2.11 , the Business has not, within the last three years, experienced any strike, work stoppage, slow down, lockout, grievance proceeding, claim of unfair labor practices or other significant labor difficulty of any nature, nor are any claims pending or, to the best knowledge of Sellers, threatened between any of the Sellers and their respective employees.

 

(i)             None of the Sellers has received notification as of the date of this Agreement that any of its current significant employees (or one or more employees who, when taken together, would be significant to the Sellers) presently plan to terminate or otherwise resign from employment, whether by reason of the transactions contemplated hereby or otherwise. Except as listed on Schedule 2.11 , the employment of all nonunion employees presently employed or retained in the Business is terminable at will, and the Buyer will not be, pursuant to any current contract, arrangement or understanding (including collective bargaining agreements), applicable law, or otherwise, obligated to pay any severance pay or other benefit by reason of the voluntary or involuntary termination of employment of any present or former employee (including managers), consultant, independent contractor or agent of any of the Sellers prior to, on or after the Closing.

 

2.12          Environmental Laws and Regulations . When used in this Section 2.12:

 

(a)            “Environmental Laws” shall mean any and all federal, state or local laws, rules, orders, regulations, statutes, common law, ordinances, codes, decrees or requirements of any Environmental Authority or any other Governmental Entity regulating, relating to or

 

15

 

imposing liability or standards of conduct concerning any Regulated Materials, environmental protection, or human health protection involving Regulated Materials or worker health and safety as currently in effect or as in effect at any time in the past;

 

(b)            “Environmental Authority” shall mean any Governmental Entity (as such term is defined in Section 8.9(c) below) responsible for the due administration and/or enforcement of any Environmental Law.

 

(c)            “Environmental Permits” shall mean all governmental approvals, authorizations, registrations, permits and licenses, including those related to environmental quality and the emission, discharge, storage, handling, treatment, use, generation or transportation of Regulated Materials required by Environmental Laws or otherwise required for the Sellers to conduct the Business.

 

(d)            “Regulated Materials” shall mean any pollutant, contaminant, hazardous material, hazardous waste, infectious medical waste, hazardous or toxic substance (and all constituents and degradation products thereof) defined or regulated as such in or under any Environmental Law, including, without limitation, petroleum, crude oil or fractions thereof, petroleum products, waste or used oil, natural or synthetic gas, asbestos or asbestos-containing materials and polychlorinated biphenyls, materials exhibiting the characteristics of ignitability, corrosivity, reactivity or extraction procedure toxicity, as such terms are defined in connection with hazardous materials or hazardous wastes or hazardous or toxic substances in any Environmental Law; and

 

(e)            “Release” shall have the same meaning as provided in the Comprehensive Environmental Response, Compensation, and Liability Act, as amended, Section 101(22), 42 U.S.C. Section 9601(22).

 

(i)             Except as set forth in Schedule 2.12 , the Sellers are in compliance in all material respects with all Environmental Laws and the conduct of the Business by the Sellers does not violate or conflict with and has not in the past violated or conflicted with any Environmental Laws in any material respect. None of the Sellers has handled any Regulated Materials on any real property used in connection with the Business that is now or previously owned or leased by any of the Sellers. To the Sellers’ knowledge, there is no asbestos located in or on any of the real property used in connection with the Business that is now owned or leased by any of the Sellers. To the Sellers’ knowledge, none of the real property used in connection with the Business that is now or previously owned or leased by any of the Sellers has been contaminated with creosote nor, to the Sellers’ knowledge, has any creosote been allowed to accumulate in the soil or ground water of any real property used in connection with the Business that is now or previously owned or leased by the Sellers.

 

(ii)            Except as set forth in Schedule 2.12 , the Sellers have obtained all necessary Environmental Permits. The Sellers’ Environmental Permits are in full force and effect, and the Sellers are in compliance therewith in all material respects.

 

16

 

(iii)           Except as set forth in Schedule 2.12 , (A) None of the Sellers have received any complaint or notice from any Environmental Authority or any other person alleging any past or present violation of any Environmental Law in connection with the operation of the Business, (B) to the Sellers’ knowledge, there is no investigative proceeding against the Sellers by any Environmental Authority in connection with the past or present operation of the Business or ownership or operation of any of the real properties identified on Schedule 2.13 , or any other real property used in connection with the Business that is leased or licensed by any of the Sellers, and (C) there are no pending claims under any Environmental Law against any of the Sellers.

 

(iv)           Except as set forth in Schedule 2.12 , none of the Sellers have been subject to any administrative or judicial enforcement action or proceeding of any kind pursuant to any Environmental Law in connection with the Business.

 

(v)            Except as set forth in Schedule 2.12 , none of the Sellers are subject to any remedial obligation or other response action (including without limitation, any assessment, containment or removal action) under any administrative order, decree, or agreement pursuant to any Environmental Law.

 

(vi)           Except as set forth in Schedule 2.12 , (A) no real property currently or formerly owned, leased, operated or used by any of the Sellers in connection with the Business (including any real property used for off-site disposal, deposit or stora