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EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
THIS ASSET
PURCHASE AGREEMENT (this "Agreement") is made and entered
into
as of this 12th day of May,
2004, by and between Sprint Spectrum L.P., a
Delaware limited partnership
("Sprint"), and Horizon Personal Communications,
Inc., an Ohio corporation
("Horizon").
PREAMBLE
A. On this date,
Sprint and certain of its affiliates and Horizon have
entered into a Settlement
Agreement and Mutual Release (the "Release").
B. Pursuant to
the Release, each party is waiving certain obligations
of
the other party under the
Management Agreement, dated June 8, 1998, as amended,
between Horizon, Sprint and
certain of its affiliates (the "Management
Agreement") respecting the
wireless telecommunications business in the
territories covered by the
Network Services Agreement (the "NSA"), dated as of
August 12, 1999, between
Virginia PCS Alliance, LC and West Virginia PCS, LC
(collectively, "nTelos") and
Horizon (the "nTelos Service Area") will be
terminated.
C. Sprint and
Horizon desire that Sprint purchase Horizon's economic
interests in the subscribers
in the nTelos Service Area, as well as other
related assets, upon the
terms and conditions set forth herein.
NOW, THEREFORE,
for and in consideration of the mutual covenants and
promises contained herein,
and other good and valuable consideration, the
receipt and sufficiency of
which are hereby acknowledged, the parties hereto,
intending to be legally
bound, hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF PURCHASED ASSETS
1.1 PURCHASED
ASSETS. Subject to and upon the terms and conditions set
forth herein, Horizon agrees
to sell to Sprint, and Sprint agrees to purchase
from Horizon, at the Closing
(as defined below) the following assets
(collectively, the "Purchased
Assets"):
(a) All of the economic and other interests and rights with respect
to
the subscribers of Horizon
within the nTelos Service Area as of the Closing
except for subscribers
located in the Customer Service Areas listed on Schedule
1.1(a) attached hereto
(collectively, the "Subscribers"), including, without
limitation, all of Horizon's
rights under all outstanding subscriber contracts
(the "Subscriber Contracts")
for the Subscribers;
(b) All of Horizon's interest, if any, in customer records related
to
the Subscribers;
(c) Any interest of Horizon in the NPA-NXXs associated directly
with
the nTelos Service Area,
including, without limitation, any unused NPA-NXX
blocks;
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(d) Any security deposits made by Subscribers and held by Horizon
and
any prepayments made by
Subscribers and held by Horizon for services rendered or
to be rendered on or after
the Effective Date;
(e) All of Horizon's rights as lessee under the lease
agreements
related to Horizon's seven
retail stores in the nTelos Service Area (the "Retail
Stores"), as identified on
Schedule 1.1(e) attached hereto (collectively, the
"Assigned
Leases");
(f) All of Horizon's right, title and interest (whether an
ownership
interest, leasehold interest,
as licensee or otherwise) in and to all furniture,
fixtures, equipment,
furnishings and leasehold improvements located within
the
Retail Stores as of the
Closing, as identified on Schedule 1.1(f);
(g) All of Horizon's right, title and interest (whether an
ownership
interest, leasehold interest,
as licensee or otherwise) in (i) the data-related
equipment which is owned by
Horizon and which resides at the nTelos switches
located in the nTelos Service
Area, and (ii) the signal repeaters owned by
Horizon and which reside at
certain Radio Shack locations in the nTelos Service
Area, all as identified on
Schedule 1.1(g); and
(h) All handset and accessory inventory within the Retail Stores as
of
the Closing (the
"Inventory").
1.2 NO LIENS OR
ENCUMBRANCES. Horizon agrees that the Purchased Assets
will
be transferred and conveyed
to Sprint at Closing free and clear of all claims,
liens, encumbrances,
easements, security interests and similar interests of
any
kind or nature whatsoever
(collectively, "Encumbrances").
ARTICLE II
PURCHASE PRICE; ASSUMPTION OF LIABILITIES
2.1 PURCHASE
PRICE. The purchase price for the Purchased Assets (the
"Purchase Price") shall be
determined as follows:
The Purchase Price for all of the Purchased Assets shall be an
amount
equal to (a) the product of
(i) $390 and (ii) the number of Qualified
Subscribers (as determined
below) as of the date of the Closing (the "Effective
Date") plus (b) the actual
cost paid by Horizon for the Inventory existing as of
the Effective Date. For
purposes of this Agreement, "Qualified Subscribers"
shall mean only those
Subscribers who as of the Effective Date are currently
active in any Sprint wireless
billing system. The number of Qualified
Subscribers as of the
Effective Date shall be determined as follows: On the
day
before the Closing, Sprint
will provide Horizon with a written notice of the
number of Qualified
Subscribers as of the most recent practicable date prior
thereto. At the Closing,
Sprint will pay Horizon the Purchase Price based on
this preliminary number of
Qualified Subscribers. Within thirty (30) days after
the Effective Date,
representatives of Sprint and Horizon will confer to
determine the actual number
of Qualified Subscribers as of the Effective Date.
If the parties are unable to
agree upon a final determination of the number of
Qualified Subscribers as of
the Effective Date within such thirty day period,
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either party may initiate the
dispute resolution provision of Section 14.2 of
the Management Agreement. On
the day before the Closing, Horizon will provide
Sprint with a written notice
of the estimated Inventory as of the Closing. At
the Closing, Sprint will pay
Horizon the Inventory based portion of the Purchase
Price based on this estimate
of Inventory. Within thirty (30) days after the
Effective Date,
representatives of Sprint and Horizon will confer to
determine
the actual Inventory as of
the Effective Date. If the parties are unable to
agree upon a final
determination of the actual Inventory as of the
Effective
Date within such thirty day
period, either party may initiate the dispute
resolution provision of
Section 14.2 of the Management Agreement. Upon a final
agreement of the parties or
arbitration award as to the number of Qualified
Subscribers or Inventory on
the Effective Date, the applicable party will make
an adjustment payment to the
other party, which will reflect the difference
between (a) the preliminary
number of Qualified Subscribers and the actual
number of Qualified
Subscribers and (b) the estimated Inventory and the
actual
Inventory. The parties agree
that, from the date hereof through the Effective
Date, the parties will
continue to report the number of Subscribers and
Subscriber deactivations,
will conduct the Subscriber collections and
deactivation process, will
conduct Subscriber sales practices, and will conduct
Subscriber credit practices,
in the ordinary course of business, consistent with
past practice.
2.2 ASSUMED
LIABILITIES. At the Closing, Sprint shall assume only
the
following obligations and
liabilities of Horizon (collectively, the "Assumed
Liabilities"):
(a) All of the executory duties and obligations to the Subscribers
and
under the Subscriber
Contracts arising from and after the Closing (including,
if
applicable, any return of
deposits made by Subscribers); and
(b) All of the executory duties and obligations of Horizon as a
party
under the Assigned Leases
arising from and after the Closing.
2.3 EXCLUDED
LIABILITIES. Except for the Assumed Liabilities, it is
expressly understood and
agreed that Sprint will not assume or have any
liability or obligation with
respect to any of Horizon's other obligations,
contracts, debts and
agreements (collectively, the "Excluded Liabilities"),
including but not limited
to:
(a) any liability or obligation of Horizon for any Taxes of any
kind
accrued during, applicable to
or arising from any period (or portion of any
period) ending on or before
the Effective Date;
(b) the amounts necessary to cure monetary defaults of Horizon
under
the contracts contained in
the Purchased Assets (collectively, the "Cure
Amounts"); or
(c) any liability or obligation of Horizon under any
Environmental,
Heath and Safety Requirements
arising from any period ending on or before the
Effective Date.
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ARTICLE III
CLOSING
3.1 BANKRUPTCY
COURT APPROVAL. Promptly after the execution of this
Agreement, Horizon will use
reasonable best efforts, and Sprint will reasonably
cooperate with Horizon, to
seek entry of an order (the "Sale Order") by the
Bankruptcy Court in the
Chapter 11 proceeding filed by Horizon and its
affiliates on August 15, 2003
in the United States Bankruptcy Court for the
Southern District of Ohio
(the "Chapter 11 Case") approving (a) the sale of the
Purchased Assets, on the
terms set forth in this Agreement, in accordance with
11 U.S.C. 363, which Sale
Order shall include a finding that Sprint is a good
faith purchaser pursuant to
11 U.S.C. 363(m) and shall provide for the sale of
the Purchased Assets free and
clear of any Encumbrances to the extent permitted
by law; (b) the assumption
and assignment of the Assigned Leases effective as of
the Closing in accordance
with 11 U.S.C. 365; and (c) the compromise and
settlement provided for in
the Release pursuant to Bankruptcy Rule 9019. The
Closing shall occur on the
first business day following the date all conditions
to Closing set forth in
Section 7 have been satisfied or waived. At the Closing,
Sprint shall pay, via wire
transfer instructions provided by Horizon, the
aggregate amount of the
Purchase Price in full as calculated based upon the
initial determination of
Qualified Subscribers and Inventory pursuant to Section
2.1.
ARTICLE IV
OTHER COVENANTS AND AGREEMENTS
4.1 TRANSITION
COMPENSATION. Subject to the terms and conditions of
this
Section 4.1, Sprint agrees to
compensate Horizon for the net operating losses
which Horizon will incur in
the operation of the nTelos Service Area from the
date of this Agreement to the
earliest to occur of the following (i) August 2,
2004; (ii) the Effective
Date; (iii) entry by the Bankruptcy Court of a final
order of the Bankruptcy Court
denying Horizon's motion to approve this Agreement
and the Release; or (iv) the
mutual written agreement of the parties (the
"Transition Period"). The
compensation payment will be equal to $25,000
multiplied by the number of
days during the Transition Period (the "Transition
Payment"). The Transition
Payment shall be due in full upon the earliest to
occur of (a) the Effective
Date and (b) 3 business days following the expiration
of the Transition Period. The
Transition Payment shall be treated as additional
Purchase Price for the
Purchased Assets. Notwithstanding any provision herein
to
the contrary, in no event
will the Transition Payment exceed $2 million.
4.2 EMPLOYEE
MATTERS. Sprint shall, in good faith, consider whether
to
employ the Horizon employees
who are currently associated with the Retail Stores
and the sales, marketing and
sales support activities of Horizon within the
nTelos Service Area, as
identified on Schedule 4.2(a) (the "Current Employees").
Sprint shall have the right
and option, but not the obligation, to offer
employment to and hire any of
the Current Employees as of or after the Closing
and shall have the right to
interview the Current Employees at any time after
the date hereof. At Sprint's
election (in its sole discretion), Current
Employees hired at Closing or
within thirty (30) days thereafter by Sprint may
be given credit, under and in
accordance with applicable employee benefit plans
of Sprint, toward eligibility
and vesting for the period of time prior to
Closing during which such
persons were employees of Horizon if such period of
time would
otherwise
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qualify for eligibility and
vesting under Sprint's plans. Sprint shall be solely
liable for all duties and
obligations arising from and after the Effective Date
to Current Employees hired by
Sprint hereunder. Horizon shall be responsible for
any severance payments
payable to Current Employees as a result of the
transactions contemplated
herein.
4.3 CONDUCT OF
BUSINESS BY HORIZON PENDING THE CLOSING.
(a) Ordinary Course. Horizon covenants and agrees that, unless
Sprint
shall otherwise consent in
writing (which consent will not be unreasonably
withheld or delayed) and
except as otherwise set forth herein, between the date
hereof and the Closing,
Horizon shall conduct its business in the nTelos Service
Area only in, and Horizon
shall not take any action except in, the ordinary
course of Horizon's business
and in a manner consistent with past practice
(including, without
limitation, the acquisition of new Subscribers).
(b) Certain Actions. By way of amplification and not
limitation,
except as expressly provided
for in this Agreement, Horizon shall not, between
the date hereof and the
Closing, do any of the following without the prior
written consent of Sprint,
which consent will not be unreasonably withheld or
delayed:
(i) sell any of the Purchased Assets, except for the sale
of
Inventory in the ordinary
course of Horizon's business in the nTelos Service
Area;
(ii) pledge, remove, dispose of, or encumber any of the
Purchased
Assets or enter into any
material contract or agreement, except for the
incurrence of purchase money
security interests in the ordinary course of
Horizon's business in the
nTelos Service Area;
(iii) amend any Assigned Lease or breach the provisions of
any
Assigned Lease; or
(iv) take any action with respect to increasing the
compensation
of any Current Employee,
except in the ordinary course of business.
(c) NSA. Notwithstanding any other provision of this Section
4.3,
Horizon may file a motion
with the Bankruptcy Court to reject the NSA pursuant
to the terms of the
Release.
4.4
EXPENSES.
(a) Expenses of Sprint. All of the expenses incurred by Sprint
in
connection with the
authorization, negotiation, preparation, execution and
performance of this
Agreement, including, without limitation, all fees and
expenses of agents,
representatives, brokers, counsel and accountants for
Sprint, shall be paid by
Sprint.
(b) Expenses of Horizon. All of the expenses incurred by Horizon
in
connection with the
authorization, negotiation, preparation, execution and
performance of
this
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Agreement, including, without
limitation, all fees and expenses of agents,
representatives, brokers,
counsel and accountants for Horizon, shall be paid by
Horizon.
4.5 TAX
MATTERS.
(a) Purchase Price Allocation. The parties agree that the
Purchase
Price shall be allocated
among the Purchased Assets pursuant to Section 1060 of
the Internal Revenue Code of
1986, as amended (the "Code"), in accordance with
Schedule 4.5, to which the
parties have agreed. Horizon and Sprint agree to
report the federal, state and
local income and other tax consequences of the
transactions contemplated
hereby, and in particular to report the information
required by Section 1060(b)
of the Code, in a manner consistent with the agreed
upon allocation, and to file
all other applicable tax returns and forms
necessary to reflect the
Purchase Price allocation. Neither Sprint nor Horizon
shall take any position
inconsistent with such allocation upon any examination
of any tax return, in any
refund claim, in any litigation or otherwise unless
required to do so by
law.
(b) Post Closing Cooperation. Sprint and Horizon shall furnish
or
cause to be furnished to each
other, upon request, as promptly as practical,
such information and
assistance relating to the Purchased Assets as is
reasonably necessary for
filing of all Tax returns, including any claim for
exemption or exclusion from
the application or imposition of any Taxes or making
of any election related to
Taxes, the payment of Taxes, the preparation for any
audit by any taxing authority
and the prosecution or defense of any proceeding
relating to any Tax
return.
(c) Transfer Taxes. In the event that the transaction is not
deemed
exempt from Transfer Taxes
pursuant to Section 1146(c) of the Bankruptcy Code,
all Transfer Taxes arising
out of the transfer of the Purchased Assets and any
Transfer Taxes required to
effect any recording or filing with respect thereto
shall be borne 50% by Sprint
and 50% by Horizon. The Transfer Taxes shall be
calculated assuming that no
exemption from Transfer Taxes is available, unless
otherwise indicated in the
Sale Order or, at Closing, Sprint shall provide an
appropriate resale exemption
certificate or other evidence acceptable to Horizon
of exemption from such
Transfer Taxes. Horizon and Sprint shall cooperate to
timely determine the amount
of any Transfer Taxes and timely prepare and file
any returns or other filings
relating to such Transfer Taxes, in form and
substance satisfactory to
each party, including any claim for exemption or
exclusion from the
application or imposition of any Transfer Taxes. Horizon
shall pay such Transfer Taxes
and shall file all necessary documentation and
returns with respect to such
Transfer Taxes when due, and shall promptly
following the filing thereof
furnish a copy of such return or other filing and a
copy of a receipt showing
payment of any such Transfer Tax to Sprint, and Sprint
shall reimburse Horizon
promptly for 50% of such Transfer Taxes paid after
giving effect to the Sale
Order. Horizons' portion of any Transfer Taxes to be
paid hereunder shall be
deemed to be included in the Excluded Liabilities.
(d) Tax Proration. Except as provided in Section 4.5(c), all
real
property Taxes, personal
property Taxes and similar ad valorem obligations
levied with respect to the
Purchased Assets for a Tax period that includes (but
does not end on) the Closing
Date, whether imposed or assessed before or after
the Closing Date, shall be
apportioned between Horizon, on the one hand, and
Sprint, on the other, as of
the Closing Date, based on the number of days in any
such period falling prior to
and including the Closing Date, on the one hand,
and after the
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Closing Date, on the other
hand. Horizon shall be responsible for the portion of
such apportioned Taxes
attributable to the period up to and including the
Closing Date and Sprint shall
be responsible for the portion of such apportioned
Taxes attributable to the
period after the Closing Date. Accordingly, if any
Taxes required to be
apportioned hereunder are paid by Sprint, on the one
hand,
or Horizon, on the other
hand, then Horizon or Sprint, as the case may be, shall
promptly reimburse the paying
party for the non-paying party's share of such
apportioned Taxes. Similarly,
if Sprint, on the one hand, or Horizon, on the
other hand, receive a refund
of any Taxes that are required to be apportioned
hereunder, then the recipient
of such refund shall promptly pay to the other
party such other party's
share of such refund as determined in accordance with
the foregoing apportionment
provisions (assuming that Sprint and Horizon
contributed to the applicable
Tax payment in accordance with the first two
sentences of this Section
4.5(d)).
4.6 COLLECTION
OF ACCOUNTS RECEIVABLE. Ten business days after the
Effective Date, Sprint will
pay to Horizon the Account Receivables Payment for
all outstaying accounts
receivables of Subscribers and all unbilled usage and
other fees as of the
Effective Date. Prior to the Effective Date, Sprint and
Horizon will each cause their
respective settlements and finance groups to
determine the method of
calculating the Account Receivables Payment. The method
will be based on the
following principles:
(a) The party receiving the revenue should have responsibility for
the
liabilities associated with
generating the revenue. For example, with respect to
the MRC, if Horizon is liable
for payments to nTelos for 1/3 of the bill cycle
and Sprint for 2/3, then the
total MRC for that bill cycle would be allocated
1/3 to Horizon and 2/3 to
Sprint; and
(b) The profile percentage will be used. For purposes of
further
clarification the "profile
percentage" means the profile used by the settlements
group for Sprint in
determining "Collected Revenue" (as that term is defined
in
the Management Agreement) for
Horizon. The parties understand that the profile
percentage makes adjustment
for the 8% retainage by Sprint of Collected Revenue.
If that understanding is not
correct then the parties will take account of that
retainage by Sprint in
calculating the Qualified Accounts Receivable Payment.
Bad debt
percentages will be determined based on past experience.
The parties will
have their respective settlements groups work
cooperatively to make the
calculations contemplated by this section and will
work to satisfactorily
resolve any issues that arise because of data or system
limitations.
The parties will
settle travel for the nTelos Service Area incurred prior
to the Effective Date in
accordance with the already established settlement
processes for travel. For
purposes of clarification the parties acknowledge that
the settlement of travel may
take some time after the Effective Date because of
the timing involved with
clearing house functions and systems availability.
4.7 COOPERATION.
Following the Closing, Sprint and Horizon will cooperate
with each other and use
commercially reasonable efforts to complete in an
expeditious manner
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changes in any operations
arising from the transactions contemplated by this
Agreement, including without
limitation, the redirecting of switching from the
Horizon switches to switches
designated by Sprint and the transitioning of
Retail Stores and Current
Employees.
4.8 ALLOCATION
OF CERTAIN ITEMS. With respect to certain expenses
incurred
with respect to the Purchased
Assets, the following allocations shall be made
between Horizon and
Sprint:
(a) Utilities. Utilities, water and sewer charges shall be
apportioned
based upon the number of days
occurring prior to (and including) the Effective
Date and following the
Effective Date during the billing period for each such
charge.
(b) Lease Payments. Rent payments shall be apportioned based upon
the
number of days occurring
prior to (and including) the Effective Date and
following the Effective Date
during the billing period for each such charge.
Appropriate cash payments by
Horizon and Sprint, as the case may require, shall
be made hereunder from time
to time as soon as practicable after the facts
giving rise to the obligation
for such payments are known in the amounts
necessary to give effect to
the allocations provided for in this Section 4.8.
4.9 ASSUMPTION
AND ASSIGNMENT OF ADDITIONAL EXECUTORY CONTRACTS.
Horizon
agrees to cooperate fully
with Sprint to (i) identify any contracts, leases or
other agreements of Horizon
that relate exclusively to the nTelos Service Area
and are reasonably required
by Sprint for the use of the Purchased Assets in
