EXHIBIT 3
ASSET PURCHASE AGREEMENT
by and among
PEGASUS COMMUNICATIONS CORPORATION
and
CLEARVISION, INC.
and its Shareholders listed on Exhibit 1
--------------------------------
Dated as of January 25, 1997
--------------------------------
Table of Contents
ARTICLE I DEFINITIONS.................................................................................1
1.1 Certain Definitions.................................................................1
1.2 Other Definitions...................................................................7
ARTICLE II BASIC TRANSACTION...........................................................................9
2.1 Sale of Assets. ...................................................................9
2.2 Purchase Price......................................................................9
2.3 Escrow Arrangements.................................................................9
2.4 Current Liabilities Adjustment......................................................9
2.5 Operating Adjustment...............................................................10
2.6 Liabilities........................................................................12
2.7 Closing............................................................................12
2.8 Transactions at Closing............................................................12
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER AND
SHAREHOLDERS...............................................................................12
3.1 Organization and Qualification.....................................................12
3.2 Authority and Validity.............................................................13
3.3 No Breach or Violation.............................................................13
3.4 Consents and Approvals.............................................................13
3.5 Title to Assets....................................................................14
3.6 Intellectual Property..............................................................14
3.7 Compliance with Legal Requirements.................................................14
3.8 Financial Information..............................................................14
3.9 Subsequent Events..................................................................15
3.10 Undisclosed Liabilities............................................................15
3.11 Legal Proceedings..................................................................15
3.12 Taxes Relating to the Business.....................................................15
3.13 Employee Benefits; Employees.......................................................16
3.14 Contracts..........................................................................17
3.15 Books and Records; Accounts Receivable.............................................18
3.16 Business Information...............................................................18
3.17 Insurance..........................................................................18
3.18 Disclosure.........................................................................19
3.19 Brokers or Finders.................................................................19
3.20 Certain Payments...................................................................20
3.21 Subscribers........................................................................20
3.22 Favorable Business Relationships...................................................20
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ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PURCHASER................................................20
4.1 Organization and Qualification.....................................................20
4.2 Authority and Validity.............................................................20
4.3 No Breach or Violation.............................................................21
4.4 Consents and Approvals.............................................................21
4.5 Legal Proceedings..................................................................21
4.6 Disclosure.........................................................................21
4.7 Brokers or Finders.................................................................22
ARTICLE V PRE-CLOSING COVENANTS OF SELLER AND SHAREHOLDERS...........................................22
5.1 Additional Information.............................................................22
5.2 Exclusivity........................................................................22
5.3 Continuity and Maintenance of Operations...........................................22
5.4 Consents and Approvals.............................................................23
5.5 Securities Filings.................................................................24
5.6 Notification of Certain Matters....................................................24
5.7 Employee Matters. ................................................................24
5.8 Supplements to Schedules...........................................................24
5.9 Satisfaction of Liabilities and Obligations........................................25
5.10 Duty of Good Faith and Fair Dealing................................................25
ARTICLE VI PRE-CLOSING COVENANTS OF PURCHASER.........................................................25
6.1 Consents and Approval..............................................................25
6.2 Notification of Certain Matters....................................................26
6.3 Duty of Good Faith and Fair Dealing................................................26
ARTICLE VII CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER...........................................26
7.1 Accuracy of Representations........................................................26
7.2 Covenants..........................................................................27
7.3 Consents...........................................................................27
7.4 Delivery of Documents..............................................................27
7.5 No Material Adverse Change.........................................................28
7.6 No Litigation......................................................................28
7.7 Minimum Subscribers................................................................28
7.8 Transition Arrangements............................................................28
7.9 NRTC Compliance Certificate........................................................29
7.10 Dealer Arrangements................................................................29
ARTICLE VIII CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER AND
SHAREHOLDERS...............................................................................29
8.1 Accuracy of Representations........................................................29
8.2 Covenants..........................................................................29
8.3 Consents...........................................................................29
8.4 Delivery of Documents..............................................................30
8.5 Litigation.........................................................................30
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ARTICLE IX POST-CLOSING COVENANTS.....................................................................30
9.1 Transition.........................................................................30
9.2 Transfer Taxes and Fees............................................................30
9.3 NRTC Patronage.....................................................................31
9.4 Subscriber Acquisition Commissions.................................................31
9.5 NRTC Invoices......................................................................31
9.6 Financial Statements...............................................................31
9.7 Liability Insurance................................................................31
9.8 Books and Records..................................................................31
9.9 United States Satellite Broadcasting; Home Shopping Network........................31
9.10 Equipment Receivables..............................................................32
ARTICLE X TERMINATION................................................................................32
10.1 Events of Termination..............................................................32
10.2 Liabilities in Event of Termination................................................33
10.3 Procedure Upon Termination.........................................................33
ARTICLE XI REMEDIES FOR BREACH OF THIS AGREEMENT......................................................33
11.1 Survival of Representations and Warranties.........................................33
11.2 Indemnification Provisions for Benefit of Purchaser................................33
11.3 Indemnification Provisions for Benefit of Seller...................................34
11.4 Matters Involving Third Parties....................................................35
11.5 Determination of Adverse Consequences..............................................36
ARTICLE XII MISCELLANEOUS..............................................................................37
12.1 Parties Obligated and Benefited....................................................37
12.2 Notices............................................................................38
12.3 Attorneys' Fees....................................................................38
12.4 Waiver.............................................................................38
12.5 Headings...........................................................................39
12.6 Choice of Law......................................................................39
12.7 Rights Cumulative..................................................................39
12.8 Further Actions....................................................................39
12.9 Time of the Essence................................................................39
12.10 Late Payments......................................................................39
12.11 Counterparts.......................................................................39
12.12 Entire Agreement...................................................................39
12.13 Amendments and Waivers.............................................................39
12.14 Construction.......................................................................40
12.15 Expenses...........................................................................40
12.16 Bulk Sales.........................................................................40
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Exhibits
Exhibit 1 ClearVision Shareholders
Exhibit 2 Service Areas
Exhibit 3 Escrow Agreement
Exhibit 4 Consultancy Agreement
Exhibit 5 Noncompetition Agreement
Exhibit 6 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Certificate
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ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT ("Agreement") is made as of the 25th day
of January, 1997, by and among PEGASUS COMMUNICATIONS CORPORATION ("Purchaser"),
a Delaware corporation, CLEARVISION, INC. ("Seller"), a Mississippi corporation,
and all of the shareholders of Seller, who are listed on Exhibit 1
("Shareholders"). Purchaser, Seller and Shareholders are collectively referred
to herein as the "Parties."
RECITALS:
WHEREAS, Seller is a party to that certain NRTC Distribution Agreement
(as defined below) with the National Rural Telecommunications Cooperative
("NRTC"), pursuant to which NRTC has granted to Seller the right to distribute
DIRECTV(R) ("DIRECTV") programming offered by DirecTV, Inc. in the counties and
zipcode areas of Mississippi identified in Exhibit 2 ("Service Areas"); and
WHEREAS, Purchaser desires to purchase the Assets (as hereinafter
defined), including the NRTC Distribution Agreement from Seller, and Seller
desires to sell the Assets to Purchaser, upon the terms and subject to the
conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and mutual promises
herein made, and in consideration of the representations, warranties, covenants
and agreements herein contained, and intending to be legally bound hereby, the
Parties agree as follows:
ARTICLE I
DEFINITIONS
1.1 Certain Definitions. The following terms shall, when used in this
Agreement, have the following meanings:
"Accountant" means Coopers & ▇▇▇▇▇▇▇ L.L.P.
"Accounts Receivable" mean the accounts receivable identified
in the Books and Records, except for accounts receivable relating to the
Equipment Receivables.
"Adverse Consequences" mean all actions, suits, proceedings,
hearings, investigations, charges, complaints, claims, demands, injunctions,
judgments, orders, decrees, rulings, damages, assessments, dues, penalties,
fines, interest, costs, amounts paid in settlement, Liabilities, obligations,
Taxes, liens, losses, expenses and fees (including court costs, settlement
costs, legal, accounting, experts' and other fees, costs and expenses).
"Affiliate" means, with respect to any Person: (i) any Person
directly or indirectly owning, controlling, or holding with power to vote 10% or
more of the outstanding voting securities of such other Person; (ii) any Person
10% or more of whose outstanding voting securities are directly or indirectly
owned, controlled, or held with power to vote, by such other Person; (iii) any
Person directly or indirectly controlling, controlled by, or under common
control
with such other Person; and (iv) any officer, director or partner of such other
Person. "Control" for the foregoing purposes shall mean the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of a Person, whether through the ownership of voting securities or
voting interests, by contract or otherwise.
"Applicable Rate" means the prime rate reported in The Wall
Street Journal, plus 3%.
"Assets" mean all properties, assets, privileges, powers,
rights, interests and claims of every type and description that are owned,
leased or held by, and used or useful in the Business and in which Seller has
any right, title or interest or in which Seller acquires any right, title or
interest on or before the Closing Date, wherever located, whether known or
unknown, and whether or not now or on the Closing Date on the Books and Records
of Seller, including Accounts Receivable and Equipment Receivables, Books and
Records, Contracts, Intangibles, Intellectual Property, Inventory (to the extent
Purchaser elects at Closing to purchase Inventory as provided in this Agreement,
for which there will be a corresponding credit in the Operating Adjustments),
NRTC Patronage Capital, Personal Property and Subscribers, but excluding cash
and cash equivalents, the 1997 GMC Suburban owned by Seller and Seller's lease
for the real property located at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇.
"Assumed Liabilities" mean:
(a) Seller's obligations to Subscribers for: (i) Subscriber
deposits held by Seller as of the Closing Date and which are refundable, in the
amount for which Purchaser receives credit under Section 2.5; (ii) Subscriber
deferred or prepaid income held by Seller as of the Closing Date for services to
be rendered by the Business after the Closing Date, in the amount for which
Purchaser receives credit under Section 2.5, except as relates to the $200
Rebate Program of DirecTV, Inc., (for which Purchaser will receive no credit);
(iii) the delivery of DIRECTV services to subscribers of the Business after the
Closing Date;
(b) obligations accruing and relating to periods after the
Closing Date under the NRTC Distribution Agreement;
(c) the Closing Current Liabilities, including items
identified on Schedule 1.1(a); and
(d) obligations under those certain contracts with South
Central ▇▇▇▇ relating to yellow page advertising.
Notwithstanding anything in this Agreement to the contrary, the Assumed
Liabilities shall not include: (i) any Liability of Seller and Shareholders or
their Affiliates for income, transfer, sales, use and other Taxes arising in
connection with the consummation of the transactions contemplated hereby; (ii)
any other Liability of Seller and Shareholders or their Affiliates for Taxes;
(iii) any Liability of Seller and Shareholders for costs and expenses incurred
in connection with this Agreement, the Collateral Documents or the transactions
contemplated hereby or thereby; (iv) any obligation of Seller and Shareholders
under this Agreement or the Collateral Documents; (v) any Liability of Seller
and Shareholders for current or long-term obligations and
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Liabilities except as otherwise specifically provided in this Agreement; (vi)
any Liability of Seller to employees or independent contractors of Seller
whether under any contract, Employee Benefit Plan or otherwise; (vii) any
Liability of Seller and Shareholders relating to civil, criminal and/or
administrative cases, proceedings, hearings or investigations, or awards of
arbitration tribunals; or (viii) any other Liability of Seller and Shareholders
not specifically included in Assumed Liabilities pursuant to (a), (b) and (c)
above.
"Basis" means any past or present fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act or transaction that forms or could form the
basis for any specified consequence.
"Books and Records" mean all books and records relating to the
Business, including purchase and sale order files, invoices, sales materials and
records, customer lists, mailing lists, personnel records and files, technical
data and records, all correspondence with and documents pertaining to NRTC,
DIRECTV, DSS Systems, Subscribers, suppliers, Governmental Authorities and other
third parties, all records evidencing the accounts receivable and a schedule of
accounts receivable aging and all other financial records; provided that the
Books and Records shall not include organizational, minute and stock record
books.
"Business" means the DIRECTV distribution business conducted
by Seller on the date of this Agreement and through the Closing Date pursuant to
rights granted under the NRTC Distribution Agreement.
"Business Day" means any day other than Saturday, Sunday or a
day on which banking institutions in New York, New York are required or
authorized to be closed.
"Closing Current Liabilities" mean (i) amounts payable by the
Business in the future to, but not yet invoiced by, the NRTC on account of the
period prior to Closing; and (ii) other current liabilities of the Business
which the Parties agree in writing are to be assumed by Purchaser hereunder
(other than the Equipment Financing Facility, which shall not be assumed by
Purchaser).
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral Documents" mean the Noncompetition Agreement,
Escrow Agreement and any other documents, instruments and certificates to be
executed and delivered by the Parties hereunder or thereunder.
"Committed Member Residence" has the meaning assigned to it in
the NRTC Distribution Agreement.
"Consultancy Agreement" means the form of consultancy and
noncompetition agreement attached hereto as Exhibit 4.
"DSS System" means the satellite receiving system for DIRECTV
consisting of an eighteen inch satellite antenna dish, an integrated receiver
decoder and a remote control.
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"Employee Benefit Plan" means any: (a) nonqualified deferred
compensation or retirement plan or arrangement that is an Employee Pension
Benefit Plan; (b) qualified defined contribution retirement plan or arrangement
that is an Employee Pension Benefit Plan; (c) qualified defined benefit
retirement plan or arrangement that is an Employee Pension Benefit Plan
(including any Multiemployer Plan); or (d) Employee Welfare Benefit Plan or
material fringe benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in
ERISA Section 3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in
ERISA Section 3(l).
"Encumbrance" means any mortgage, pledge, lien, encumbrance,
charge, security interest, security agreement, conditional sale or other title
retention agreement, limitation, option, assessment, restrictive agreement,
restriction, adverse interest, restriction on transfer or any exception to or
defect in title or other ownership interest (including restrictive covenants,
leases and licenses).
"Equipment Financing Facility" means those Promissory Notes
dated September 1, 1995 of Seller in favor of Deposit Guaranty National Bank in
the principal amounts of $1 million and $600,000, and the Security Agreement
dated December 7, 1994 between Seller and Deposit Guaranty National Bank.
"Equipment Receivables" mean the Retail Installment Contracts
and Security Agreements between Seller and certain customers of Seller whose DSS
Systems have been financed by means of the Equipment Financing Facility, which
are identified on the Equipment Receivables Closing Schedule.
"Equipment Receivables Closing Schedule" means the schedule
identifying Equipment Receivables by customer name, account balance and account
status (current, 60-90 days and 90-120 days), which schedule shall be prepared
by Seller and delivered to Purchaser three Business Days prior to Closing.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Escrow Agent" means IBJ ▇▇▇▇▇▇▇▇ Bank & Trust Company.
"Escrow Agreement" means the form of escrow agreement attached
hereto as Exhibit 3.
"Estimated Current Liabilities" mean Liabilities from the
operations of the Business incurred in the Ordinary Course which (i) are
estimated to be payable by the Business in the future to, but not yet invoiced
by, the NRTC on account of the period prior to Closing; and (ii) the Parties
agree are to be assumed by Purchaser hereunder (other than the Equipment
Financing Facility which shall not be assumed by Purchaser) and are estimated as
of the Closing Date and set forth on the Estimated Current Liabilities Schedule
(which include items identified on Schedule
4
1.1(a), and exclude any Liabilities on account of Subscriber deposits and
deferred or prepaid income and any Liabilities on account of the $200 Rebate
Program of DirecTV, Inc.).
"Estimated Current Liabilities Schedule" means the schedule of
Estimated Current Liabilities to be delivered by Seller and agreed upon by the
Parties on the earliest to occur of three Business Days prior to Closing or
February 15, 1997, with such supporting documentation as may be reasonably
required by Purchaser.
"Estimated Operating Adjustments" means the Operating
Adjustments estimated as of the Closing Date and set forth on the Estimated
Operating Adjustments Schedule.
"Estimated Operating Adjustments Schedule" means the schedule
of the Estimated Operating Adjustments to be delivered by Seller and agreed upon
by the Parties on the earliest to occur of three Business Days prior to Closing
or February 15, 1997, with such supporting documentation as may be reasonably
required by Purchaser.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder.
"GAAP" means United States generally accepted accounting
principles as in effect from time to time.
"Governmental Authority" means: (i) the United States of
America; (ii) any state, commonwealth, territory or possession of the United
States of America and any political subdivision thereof (including counties,
municipalities and the like); (iii) any foreign (as to the United States of
America) sovereign entity and any political subdivision thereof; or (iv) any
agency, authority or instrumentality of any of the foregoing, including any
court, tribunal, department, bureau, commission or board.
"▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Certificate" means the form of certificate
of ▇▇▇▇▇▇ attached hereto as Exhibit 6.
"▇▇▇▇▇▇" means ▇▇▇▇▇ ▇▇▇▇▇▇, a Shareholder and President of
Seller.
"Intangibles" mean all accounts, notes and other receivables,
claims, deposits, prepayments, refunds, causes of action, choses in action,
rights of recovery, rights of set-off, rights of recoupment and other intangible
assets owned, used or held for use in the Business.
"Intellectual Property" means all of the following that are
owned, used or held solely for use in the Business: (i) trademarks, service
marks, trade dress, logos, trade names and corporate names, together with all
translations, adaptations, derivations and combinations thereof and all
applications, registrations and renewals in connection therewith; (ii) all
copyrightable works, all copyrights and all applications, registrations and
renewals in connection therewith; (iii) trade secrets and confidential business
information (including ideas, research and development, know-how, formulas,
compositions, manufacturing and production processes and techniques, technical
data, designs, drawings, specifications, customer and supplier lists, pricing
and cost
5
information and business and marketing plans and proposals); (iv) all computer
software (including data and related documentation); (v) all other proprietary
rights; and (vi) all copies and tangible embodiments thereof (in whatever form
or medium).
"Inventory" means the DSS Systems and other equipment held and
owned by Seller for sale, lease or rent to or use by Subscribers.
"Legal Requirement" means any statute, ordinance, law, rule,
regulation, code, plan, injunction, judgment, order, decree, ruling, charge or
other requirement, standard or procedure enacted, adopted or applied by any
Governmental Authority, including judicial decisions applying common law or
interpreting any other Legal Requirement.
"Letter of Intent" means that certain Letter of Intent dated
November 21, 1996 between Purchaser and Seller.
"Liability" means any liability (whether known or unknown,
whether asserted or unasserted, whether absolute or contingent, whether accrued
or unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
"Multiemployer Plan" has the meaning set forth in ERISA
Section 3(37).
"Noncompetition Agreement" means the form of noncompetition
agreement attached hereto as Exhibit 5.
"NRTC Distribution Agreement" means any contract, commitment,
agreement, instrument or other document pursuant to which NRTC and/or DirecTV,
Inc. and/or any of their Affiliates has granted Seller rights relating to the
marketing and distribution of DIRECTV, including that certain NRTC/Member
Agreement for Marketing and Distribution of DBS Services between NRTC and
Seller, as amended and supplemented (Contract Number 1061).
"NRTC Patronage Capital" means any equity interest in NRTC
allocated to Seller or if such equity interest is not transferrable to Purchaser
at Closing, the right to receive any distributions on account of such equity
interest.
"Ordinary Course" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Permit" means any license, permit, consent, approval,
registration, authorization, qualification or similar right granted by a
Governmental Authority.
"Person" means any natural person, corporation, partnership,
trust, unincorporated organization, association, limited liability company,
Governmental Authority or other entity.
"Personal Property" means the personal property of Seller
identified on Schedule 1.1(d).
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"Representative" means any director, officer, employee, agent,
consultant, adviser or other representative of a Person, including legal
counsel, accountants and financial advisors.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations thereunder.
"Seller's Accountant" means ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, P.A.
"Subscriber" means any active DIRECTV subscriber account of
the Business, excluding the account of any subscriber who (i) resides outside
the Service Areas or is not otherwise a Committed Member Residence
("Extraterritorial Subscriber"), other than a subscriber who became an
Extraterritorial Subscriber in the Ordinary Course without a breach of Section
3.21; (ii) is disconnected or pending disconnection for any reason; (iii) has
not paid at least $199.95 for a DSS System or installation of a DSS System (or
financed at least such amount); or (iv) receives any free service (excluding
service under the $200 Rebate Program of DirecTV, Inc.).
"Tax" means any federal, state, local or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental, customs duties, capital stock,
franchise, profits, withholding, social security (or similar), unemployment,
disability, real property, personal property, sales, use, transfer,
registration, value added, alternative or add-on minimum, estimated or other tax
of any kind whatsoever, including any interest, penalties, fees, deficiencies,
assessments, additions or other charges of any nature with respect thereto,
whether disputed or not.
"Tax Return" means any return, declaration, report, claim for
refund or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
"Termination Date" means March 15, 1997.
1.2 Other Definitions. The following terms shall, when used in this
Agreement, have the meanings assigned to such terms in the Sections indicated.
Term Section
---- -------
"Accountant's Current Liabilities Report"........................................................................2.4
"Accountant's Operating Adjustments Report"...................................................................2.5(b)
"Adjusted Accountant's Current Liabilities Report................................................................2.4
"Adjusted Accountant's Operating Adjustments Report"..........................................................2.5(b)
"Agreement".................................................................................................Preamble
"Audited Financial Statements"...................................................................................3.8
"Closing"........................................................................................................2.7
"Closing Accounts Receivable"....................................................................................2.2
"Closing Date"...................................................................................................2.3
"Contracts".....................................................................................................3.14
7
"Current Liabilities Objection Period"...........................................................................2.4
"Current Liabilities Report".....................................................................................2.4
"DIRECTV"...................................................................................................Recitals
"Equipment Receivables Price"....................................................................................2.2
"Equipment Receivables Margin"..................................................................................9.10
"Equipment Receivables Write-Offs"..............................................................................9.10
"Escrow Deposit".................................................................................................2.3
"Expiration Date"............................................................................................11.6(b)
"Financial Statements"...........................................................................................3.8
"Financial Statement Procedures".................................................................................3.8
"Indemnification Notice".....................................................................................11.6(b)
"Look-Back Period"...............................................................................................9.7
"1996 Period"....................................................................................................3.8
"NRTC"......................................................................................................Recitals
"Operating Adjustment"........................................................................................2.5(b)
"Operating Adjustment Objection Period".......................................................................2.5(b)
"Operating Adjustments Report"................................................................................2.5(b)
"Parties"...................................................................................................Preamble
"Permanent Subscribers"..........................................................................................9.7
"Purchase Price"..............................................................................................2.2(a)
"Purchaser".................................................................................................Preamble
"Recent Subscriber Adjustment"...................................................................................9.7
"Recent Subscriber Deposit....................................................................................2.3(b)
"Second Current Liabilities Objection Period"....................................................................2.4
"Second Operating Adjustments Objection Period"...............................................................2.5(b)
"Service Areas".............................................................................................Recitals
"Survival Period"...............................................................................................11.1
"Transfer".......................................................................................................5.2
ARTICLE II
BASIC TRANSACTION
2.1 Sale of Assets. Subject to the terms and conditions of this
Agreement, Seller agrees to sell, transfer, assign, convey and deliver to
Purchaser at Closing, all of Seller's right, title and interest in, to and under
the Assets, free and clear of all Encumbrances, for the consideration set forth
in Section 2.2 below.
2.2 Purchase Price. In consideration for Seller's sale of the Assets to
Purchaser, Purchaser shall pay to Seller at Closing cash in an amount equal to
("Purchase Price"): (w) $14 million; plus (x) the face amount of Accounts
Receivable as of the Closing Date that are not more than 60 days past due
("Closing Accounts Receivable"); plus (y) an amount equal to the outstanding
balance on the Equipment Financing Facility ("Equipment Receivables Price") up
to $1,042,000; minus (z) the amount of the Estimated Current Liabilities; plus
or minus, as applicable (zz) the Estimated Operating Adjustments.
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The Purchase Price shall be subject to the escrow arrangements
set forth in Section 2.3 and the Purchase Price adjustments set forth in
Sections 2.4 and 2.5.
2.3 Escrow Arrangements. Within three Business Days of execution of
this Agreement by the parties, Purchaser shall pay to the Escrow Agent a portion
of the Purchase Price equal to $280,000 ("Escrow Deposit"), which Escrow Deposit
shall be held by the Escrow Agent pursuant to the terms and conditions of the
Escrow Agreement and applied in accordance with Section 11.6.
2.4 Current Liabilities Adjustment. Within 45 days after Closing,
Purchaser shall deliver to Seller a report (the "Current Liabilities Report"),
showing in detail its final determination of Closing Current Liabilities,
together with any documents substantiating the Current Liabilities Report.
Seller shall provide Purchaser with reasonable access to all records that Seller
has in its possession and that are necessary or appropriate for Purchaser to
prepare the Current Liabilities Report, and Purchaser shall provide Seller with
reasonable access to all records that Purchaser has in its possession and that
are necessary or appropriate for Seller to evaluate the Current Liabilities
Report. Within 20 days after receipt of the Current Liabilities Report ("Current
Liabilities Objection Period"), Seller shall give Purchaser written notice of
its objections, if any, to the Current Liabilities Report. In the event that
Seller notifies Purchaser of objections to the Current Liabilities Report within
the Current Liabilities Objection Period, Purchaser and Seller shall either
agree upon Closing Current Liabilities or instruct the Accountant to make a
determination ("Accountant's Current Liabilities Report") of the Closing Current
Liabilities within 20 days after delivery of such instructions, whereupon the
Accountant shall deliver the Accountant's Current Liabilities Report to
Purchaser and Seller. Within 20 days after receipt of the Accountant's Current
Liabilities Report ("Second Current Liabilities Objection Period"), Seller shall
give Purchaser written notice of Seller's objections, if any, to the
Accountant's Current Liabilities Report. In the event that Seller notifies
Purchaser of objections to the Accountant's Current Liabilities Report,
Purchaser and Seller shall instruct the Accountant to deliberate with Seller's
Accountant and make a final and binding determination of the Closing Current
Liabilities acceptable to Seller's Accountant ("Adjusted Accountant's Current
Liabilities Report"). Within 20 days after (x) the Accountant delivers the
Adjusted Accountant's Current Liabilities Report to Purchaser and Seller, (y)
expiration of the Second Current Liabilities Objection Period without notice of
objections from Seller or (z) agreement by Purchaser and Seller upon Closing
Current Liabilities or expiration of the Current Liabilities Objection Period
without notice of objections from Seller, as applicable, Purchaser shall pay to
Seller cash in an amount equal to the excess of the Estimated Current
Liabilities over the Closing Current Liabilities, or Seller shall pay to
Purchaser cash in an amount equal to the excess of the Closing Current
Liabilities over the Estimated Current Liabilities. The Parties shall provide to
the Accountant such information and assistance as the Accountant may reasonably
request for purposes of preparing the Accountant's Current Liabilities Report.
Each of Seller and Purchaser shall pay one-half of the professional fees charged
by the Accountant and Seller's Accountant for the engagements required
hereunder.
2.5 Operating Adjustment.
(a) The Purchase Price shall be adjusted as follows
("Operating Adjustments") in accordance with the procedures set forth in Section
2.5(b):
9
i. Adjustments on a pro rata basis as of the
Closing Date shall be made for all expenses prepaid and deposits made by Seller,
all as determined in accordance with GAAP consistently applied, and to reflect
the principle that all such expenses and deposits attributable to the Business
for the period prior to the Closing Date are for the account of Seller, and all
such expenses and deposits attributable to the Business for the period on and
after the Closing Date are for the account of Purchaser.
ii. All Subscriber deposits which have not been
applied or refunded as of the Closing Date shall be retained by Seller and shall
constitute a corresponding decrease in the Purchase Price credited to the
account of Purchaser.
iii. All deferred or prepaid income as of the
Closing Date shall be retained by Seller and shall constitute a corresponding
decrease in the Purchase Price credited to the account of Purchaser (excluding
any adjustment on account of the $200 Rebate Program of DirecTV, Inc.).
iv. All DSS System access card changeover costs
for Subscribers that have been or will be billed by NRTC pursuant to NRTC's
memorandum of August 7, 1996, as updated, shall be paid by Purchaser and shall
constitute a decrease in the Purchase Price credited to the account of
Purchaser, except for those costs previously paid by Seller.
v. To the extent that Purchaser elects at
Closing to purchase Inventory, Seller shall receive credit therefor in an amount
equal to (x) the number of units transferred to Purchaser multiplied by (y) the
book value of such units; provided, however, that Purchaser shall purchase all
new DSS Systems held in Inventory at Closing with a book value of $240 per DSS
System, and at least 125 new DSS Systems held in Inventory at Closing which have
a book value of greater than $240 but less than $300 per single access DSS
System and a book value of not greater than $325 per dual access DSS System, and
Seller shall receive credit therefor.
vi. All Closing Accounts Receivable that become
90 days or more past due within 60 days after Closing shall constitute a
decrease in the Purchase Price credited to the account of Purchaser.
vii. All Accounts Receivable that are more than
60 days past due as of the Closing Date and are collected within 60 days after
Closing shall constitute an increase in the Purchase Price credited to the
Account of Seller.
(b) Within 60 days after Closing, Purchaser shall deliver to
Seller a report (the "Operating Adjustments Report"), showing in detail its
final determination of any Operating Adjustment owed to Seller or Purchaser,
together with any documents substantiating the adjustment set forth in the
Operating Adjustments Report. Seller shall provide Purchaser with reasonable
access to all records that Seller has in its possession and that are necessary
or appropriate for Purchaser to prepare the Operating Adjustments Report, and
Purchaser shall provide Seller with reasonable access to all records that
Purchaser has in its possession and that are necessary or appropriate for Seller
to evaluate the Operating Adjustments Report. Within 20 days after receipt of
the Operating Adjustments Report ("Operating Adjustments Objection Period"),
Seller shall give Purchaser written notice of its objections, if any, to the
Operating
10
Adjustments Report. In the event that Seller notifies Purchaser of objections to
the Operating Adjustments Report within the Operating Adjustments Objection
Period, Purchaser and Seller shall either agree upon the Operating Adjustment or
instruct the Accountant to make a determination ("Accountant's Operating
Adjustments Report") of the Operating Adjustment within 20 days after delivery
of such instructions, whereupon the Accountant shall deliver the Accountant's
Operating Adjustments Report to Purchaser and Seller. Within 20 days after
receipt of the Accountant's Operating Adjustments Report ("Second Operating
Adjustments Objection Period"), Seller shall give Purchaser written notice of
Seller's objections, if any, to the Accountant's Operating Adjustments Report.
In the event that Seller notifies Purchaser of objections to the Accountant's
Operating Adjustments Report, Purchaser and Seller shall instruct the Accountant
to deliberate with Seller's Accountant and make a final and binding
determination of the Operating Adjustment acceptable to Seller's Accountant
("Adjusted Accountant's Operating Adjustments Report"). Within 20 days after (x)
the Accountant delivers the Adjusted Accountant's Operating Adjustments Report
to Purchaser and Seller, (y) expiration of the Second Operating Adjustments
Objection Period without notice of objections from Seller or (z) agreement by
Purchaser and Seller upon the Operating Adjustments or expiration of the
Operating Adjustments Objection Period without notice of objections from Seller,
as applicable, Purchaser shall pay to Seller cash in an amount equal to any
Operating Adjustments owed to Seller (adjusted for any Estimated Operating
Adjustments paid by Purchaser to Seller at Closing), or Seller shall pay to
Purchaser cash in an amount equal to any Operating Adjustments owed to Purchaser
(adjusted for any reduction in Purchase Price at Closing on account of any
Estimated Operating Adjustments). Purchaser and Seller shall provide to the
Accountant such information and assistance as the Accountant may reasonably
request for purposes of preparing the Accountant's Operating Adjustments Report.
Each of Seller and Purchaser shall pay one-half of the professional fees charged
by the Accountant and Seller's Accountant for the engagements required
hereunder.
2.6 Liabilities. Subject to the terms and conditions of this
Agreement, Purchaser shall assume and become responsible for all of the Assumed
Liabilities at Closing. The Parties agree that neither Purchaser nor any of its
Affiliates shall assume, nor shall it be deemed to have assumed, nor shall it
pay, perform, discharge or be liable in any manner whatsoever for, nor shall it
have any responsibility with respect to any obligation or Liability of the
Business or Seller or Shareholders or any of Seller's and/or Shareholders'
Affiliates not included within the definition of Assumed Liabilities.
2.7 Closing. The Closing of the transactions contemplated by this
Agreement and the Collateral Documents ("Closing") shall take place at the
offices of Purchaser, or at such other location as the parties may agree on the
next billing cycle cut-off date after satisfaction of all conditions precedent
to Closing set forth in Articles VII and VIII, but not later than March 15, 1997
("Closing Date").
2.8 Transactions at Closing. At the Closing:
(a) Seller shall:
i. sell, transfer, convey, assign and deliver
the Assets to Purchaser, free and clear of any Encumbrances other than the
Assumed Liabilities;
11
ii. deliver to Purchaser such documents,
instruments and certificates as are required by this Agreement to be delivered
by Seller.
(b) Purchaser shall deliver to Seller:
i. the Purchase Price (subject to the escrow
arrangements and adjustments set forth in Sections 2.3, 2.4 and 2.5) by wire
transfer of immediately available funds to such account or accounts as Seller
shall designate to Purchaser prior to the Closing; and
ii. such documents, instruments and certificates
as are required by this Agreement to be delivered by Purchaser.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER AND SHAREHOLDERS
Seller and Shareholders, jointly and severally, represent and warrant
to Purchaser that the statements contained in Article III are correct and
complete as of the date of this Agreement and will be correct and complete as of
the Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout Article III).
3.1 Organization and Qualification. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Mississippi, with all requisite power and authority to own, lease and use its
assets as they are currently owned, leased and used and to conduct its business
as it is currently conducted. Seller is duly qualified or licensed to do
business and in good standing in each jurisdiction in which the character of the
properties owned, leased or used by it or the nature of the activities conducted
by it make such qualification necessary, except any such jurisdiction where the
failure to be so qualified or licensed would not have a material adverse effect
on the Assets or the Business or on the validity, binding effect or
enforceability of this Agreement or the Collateral Documents.
3.2 Authority and Validity. Each of Seller and Shareholders has
all requisite power and authority to execute and deliver, to perform its
obligations under, and to consummate the transactions contemplated by, this
Agreement and the Collateral Documents to which it is a party. The execution and
delivery by Seller of, the performance by Seller of its obligations under, and
the consummation by Seller of the transactions contemplated by, this Agreement
and the Collateral Documents to which it is a party have been duly authorized by
all requisite corporate action of Seller. This Agreement has been duly executed
and delivered by each of Seller and Shareholders and is the legal, valid, and
binding obligation of each of Seller and Shareholders, enforceable against each
in accordance with its terms. Upon the execution and delivery of the Collateral
Documents to which it is a party by Seller and Shareholders, the Collateral
Documents will be the legal, valid and binding obligations of each of Seller and
Shareholders, enforceable against each in accordance with their respective
terms.
3.3 No Breach or Violation. Subject to obtaining the consents,
approvals, authorizations, and orders of and making the registrations or filings
with or giving notices to Governmental Authorities and Persons recited in the
exception to Section 3.4, the execution, delivery and performance by each of
Seller and Shareholders of this Agreement and the Collateral
12
Documents to which it is a party, and the consummation of the transactions
contemplated hereby and thereby in accordance with the terms and conditions
hereof and thereof, do not and will not conflict with, constitute a violation or
breach of, constitute a default or give rise to any right of termination or
acceleration of any right or obligation of Seller or Shareholders under, or
result in the creation or imposition of any Encumbrance upon Seller, the Assets
or the Business by reason of the terms of (i) the certificate of incorporation,
by-laws or other charter or organizational document of Seller, (ii) any material
contract, agreement, lease, indenture or other instrument to which Seller or any
of the Shareholders is a party or by or to which Seller or any of the
Shareholders or the Assets may be bound or subject, (iii) any order, judgment,
injunction, award or decree of any arbitrator or Governmental Authority or any
statute, law, rule or regulation applicable to Seller or any of the Shareholders
or (iv) any Permit of Seller, which in the case of (ii), (iii) or (iv) above
would have a material adverse effect on the Assets or the Business or the
ability of Seller or any of the Shareholders to perform its obligations under
this Agreement or any Collateral Document.
3.4 Consents and Approvals. Except (i) as required under the NRTC
Distribution Agreement, and (ii) as set forth in Schedule 3.4 hereto, no
consent, approval, authorization or order of, registration or filing with, or
notice to, any Governmental Authority or any other Person is necessary to be
obtained, made or given by Seller and Shareholders in connection with the
execution, delivery and performance by them of this Agreement or any Collateral
Document or for the consummation by them of the transactions contemplated hereby
or thereby.
3.5 Title to Assets. Seller has exclusive, good and marketable
title to the Assets, free and clear of any and all Encumbrances of any kind and
nature. Except as provided by this Agreement and except for that certain
shareholders' agreement among the Shareholders and Seller, no Person has any
right to acquire, directly or indirectly, any interest in Seller or the Assets,
and there is no agreement to which Seller or any Shareholder is a party or is
otherwise bound relating to the direct or indirect sale of the capital stock or
assets of Seller.
3.6 Intellectual Property.
(a) Seller neither uses nor holds any copyrights, tradenames,
servicemarks, service names, logos, licenses, permits or other similar
intellectual property rights and interests in the operations of the Business
that do not incorporate the name "ClearVision" or variations thereof.
(b) To the best knowledge of Seller and Shareholders, Seller
has not in its operation of the Business interfered with, infringed upon,
misappropriated or otherwise come into conflict with, and the operation of the
Business as currently conducted does not violate or infringe upon, any
Intellectual Property rights of third parties, and Seller has not received any
charge, complaint, claim, demand or notice alleging any such interference,
infringement, misappropriation or violation (including any claim that Seller or
its predecessor in interest must license or refrain from using any Intellectual
Property rights of any third party). To the best knowledge of Seller, no third
party has interfered with, infringed upon, appropriated or otherwise come into
conflict with any Intellectual Property rights of Seller.
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3.7 Compliance with Legal Requirements. Except as set forth on
Schedule 3.7, Seller has operated the Business in compliance in all material
respects with all Legal Requirements and requirements of the NRTC (including
NRTC's by-laws, policies and procedures) applicable to Seller. No action, suit,
proceeding, hearing, investigation, charge, complaint, claim, demand or notice
has been filed, commenced or, to the best of Seller's and Shareholders'
knowledge, threatened against Seller or Shareholders alleging any failure to so
comply and there is no Basis for any claim that such a failure to comply exists.
3.8 Financial Information. Seller has delivered, or will deliver
not later than the Closing Date to Purchaser the following financial statements
("Financial Statements"): (i) Seller's audited balance sheet and statements of
operations, changes in stockholders' equity and cash flows as of and for the
fiscal year ended December 31, 1994 ("Audited Financial Statements"); and (ii)
Seller's unaudited balance sheets and statements of operations, changes in
stockholders' equity and cash flows as of and for the year ended January 15,
1996 and for the nine month period ended October 19, 1996 with auditors'
compilation reports ("Compiled Financial Statements"). The Financial Statements
(including the notes thereto) have been prepared in accordance with GAAP applied
on a consistent basis throughout the periods covered thereby, fairly reflect the
Books and Records, are complete in all material respects, and present fairly the
financial condition of Seller and results of operations as of the dates and for
the periods indicated ("Financial Statement Procedures"), except Equipment
Receivables are not accurately presented in the Compiled Financial Statements
for the nine month period ended October 19, 1996.
3.9 Subsequent Events. Except as set forth on Schedule 3.9, since
year ended January 15, 1996: (i) Seller has not sold, leased, transferred or
assigned any assets of the Business, tangible or intangible, except in the
Ordinary Course; (ii) Seller has not entered into any agreement, contract, lease
or license (or series of related agreements, contracts, leases and licenses)
involving more than $2,500 or outside the Ordinary Course; (iii) no third party
has accelerated, terminated, modified or canceled any material agreement,
contract, lease or license (or series of related agreements, contracts, leases
and licenses) relating to Seller or the Business; (iv) Seller has not imposed or
permitted the imposition of any Encumbrance upon any assets of the Business,
tangible or intangible; (v) Seller has not made any capital investment in, any
loan to, or any acquisition of the securities or assets of, any other Person (or
series of related capital investments, loans or acquisitions); (vi) Seller has
not issued any note, bond or other debt security or created, incurred, assumed
or guaranteed any indebtedness for borrowed money or capitalized lease
obligations; (vii) Seller has not delayed or postponed the payment of accounts
payable and other Liabilities outside the Ordinary Course; (viii) Seller has not
canceled, compromised, waived or released any right or claim (or series of
related rights and claims) involving more than $1,000 or outside the Ordinary
Course; (ix) Seller has not granted any license or sublicense of any rights
under or with respect to any Intellectual Property used or useful in the
Business; (x) there has not been any other material occurrence, event, incident,
action, failure to act or transaction outside the Ordinary Course involving
Seller except that is generally known by other NRTC members and affiliates; and
(xi) Seller has not committed to any of the foregoing. Since the year ended
January 15, 1996, there has been no material adverse change in, and to the best
knowledge of Seller and Shareholders, no event has occurred which is likely,
individually or in the aggregate, to result in any material adverse change in,
the operations, assets, prospects or condition (financial or otherwise) of
Seller.
14
3.10 Undisclosed Liabilities. To the best of Seller's and
Shareholders' knowledge, Seller has no Liability and there is no Basis for any
present or future action, suit, proceeding, hearing, investigation, charge,
complaint, claim or demand against Seller giving rise to any Liability, except
for Liabilities set forth in Schedule 3.10 (none of which results from, arises
out of, relates to, is in the nature of, or was caused by any breach of
contract, breach of warranty, tort, infringement or violation of any Legal
Requirement) or requirement of the NRTC.
3.11 Legal Proceedings. Except as set forth on Schedule 3.11, there
are no outstanding judgments or orders against or otherwise affecting Seller,
the Business or the Assets. Except as set forth on Schedule 3.11, there is no
action, suit, complaint, proceeding or investigation, judicial, administrative
or otherwise, that is pending or, to the best of Seller's and Shareholders'
knowledge, threatened and which, if adversely determined, might materially and
adversely affect Seller, the Business or the Assets or which challenges the
validity or propriety of any of the transactions contemplated by this Agreement
or the Collateral Documents. Except as set forth on Schedule 3.11, to the best
of Seller's and Shareholders' knowledge, there is no Basis upon which any such
action, suit, proceeding or investigation could be brought or initiated
(including claims arising out of or relating to the Equipment Receivables).
3.12 Taxes Relating to the Business. Seller has duly and timely
filed in proper form all Tax Returns for all Taxes required to be filed with the
appropriate Governmental Authority. All Taxes due and payable by Seller (or
claimed to be due and payable) have been paid (regardless whether Tax Returns
relating to such Taxes have been duly and timely filed or if filed, regardless
whether such Tax Returns are deficient), except such amounts as are being
contested diligently and in good faith and are not in the aggregate material and
for which Seller has adequately reserved in its financial statements. Except as
set forth in Schedule 3.12, there are no pending Tax audits, claims or
proceedings relating to Seller, the Assets or the Business and income therefrom.
Seller has not agreed to any waiver or extension of any statute of limitations
relating to any Tax.
3.13 Employee Benefits; Employees.
(a) Neither Seller nor any Employee Benefit Plan maintained by
Seller is in violation of the provisions of ERISA; no reportable event, within
the meaning of Sections 4043(c)(1), (2), (3), (5), (6), (7), (10) or (13) of
ERISA, has occurred and is continuing with respect to any such Employee Benefit
Plan; and no prohibited transaction, within the meaning of Title I of ERISA, has
occurred with respect to any such Employee Benefit Plan. Buyer is not required
under ERISA, the Code or any collective bargaining agreement to establish,
maintain or continue any Employee Benefit Plan maintained by Seller or any
Affiliate of Seller.
(b) There are no collective bargaining agreements applicable
to any Persons employed by Seller, and Seller has no duty to bargain with any
labor organization with respect to any such Person. There are not pending any
unfair labor practice charges against Seller, nor is there any demand for
recognition, or any other request or demand from a labor organization for
representative status with respect to any person employed by Seller.
(c) Seller is in substantial compliance with all applicable
Legal Requirements respecting employment conditions and practices, has withheld
all amounts required by any
15
applicable Legal Requirements or Contracts to be withheld from the wages or
salaries of its employees, and is not liable for any arrears of wages or any
Taxes or penalties for failure to comply with any of the foregoing.
(d) Seller has not engaged in any unfair labor practice within
the meaning of the National Labor Relations Act and has not violated any Legal
Requirement prohibiting discrimination on the basis of race, color, national
origin, sex, religion, age, marital status, or handicap in its employment
conditions or practices. There are not pending or, to Seller's knowledge,
threatened unfair labor practice charges or discrimination complaints relating
to race, color, national origin, sex, religion, age, marital status, or handicap
against Seller before any Governmental Authority nor, to Seller's knowledge,
does any Basis therefor exist.
(e) There are no existing or, to Seller's knowledge,
threatened, labor strikes, disputes, grievances or other labor controversies
affecting Seller. There are no pending or, to Seller's knowledge, threatened
representation questions respecting Seller's employees. There are no pending or,
to Seller's knowledge, threatened arbitration proceedings under any Contract. To
Seller's knowledge, there exists no Basis for any of the above.
(f) Seller is not a party to any employment agreement, written
or oral, relating to its employees which cannot be terminated at will by Seller.
(g) Schedule 3.13 sets forth a true and complete list of the
names, titles and rates of compensation of all of Seller's employees.
3.14 Contracts. Schedule 3.14 contains a true, correct and complete
list of each contract agreement or commitment of the following types, whether
written or oral, to which Seller is a party or to which any of Shareholders is a
party that relates to or affects the Business ("Contracts"):
i. the NRTC Distribution Agreement and any
other agreement with NRTC or DirecTV, Inc. or any of their Affiliates;
ii. any agreement (or group of related
agreements) relating to the lease or rental of personal property to or from any
Person (including any form of lease or rental agreements for DSS Systems
accompanied by an itemized list of the Subscribers who are parties to such
agreements and the expiration dates of such agreements);
iii. any agreement (or group of related
agreements) for the purchase or sale of supplies, products or other personal
property, or for the furnishing or receipt of services (including any forms of
agreement or purchase order relating to the sale of DSS Systems or the sale of
DIRECTV services);
iv. any agreement concerning a partnership or
joint venture;
v. any agreement (or group of related
agreements) under which Seller or any Shareholder has created, incurred, assumed
or guaranteed any indebtedness for borrowed
16
money, or any capitalized lease obligation, or under which Seller or any
Shareholder has imposed an Encumbrance;
vi. any agreement concerning confidentiality or
noncompetition;
vii. any agreement involving any officer,
director or Shareholder of Seller or any of their Affiliates;
viii. any agreement for the employment of any
individual on a full-time, part-time, consulting or other basis;
ix. any agreement relating to the services of
sales representatives, agents and other independent contractors (including
agreements relating to the installation of DSS Systems);
x. any agreement under which Seller has
advanced or loaned any amount to any employees or any of Seller's current or
former directors, officers or shareholders;
xi. any agreement under which the consequences
of a default or termination could have an adverse effect on the financial
condition, operations, results of operations or future prospects of the Seller,
the Assets or the Business; and
xii. any other agreement (or group of related
agreements) which cannot be terminated on less than 90 days notice or the
performance of which involves consideration in excess of $5,000.
Seller has delivered to Purchaser a correct and complete copy of each
written agreement listed on Schedule 3.14 and a written summary setting forth
the terms and conditions of each oral agreement listed therein. With respect to
each such agreement (or if such agreement is a form of agreement, the completed
and executed form(s) of agreement): (A) the agreement is legal, valid, binding,
enforceable and in full force and effect; (B) the agreement will continue to be
legal, valid, binding, enforceable and in full force and effect on identical
terms following the consummation of the transactions contemplated hereby; (C) no
party is in breach or default, and to the best knowledge of Seller and
Shareholders, no event has occurred which with notice or lapse of time would
constitute a breach or default, or permit termination, modification or
acceleration, under the agreement; and (D) no party has repudiated any provision
of the agreement.
3.15 Books and Records; Accounts Receivable. Schedule 3.15
identifies and describes all of the Books and Records. The Books and Records
accurately and fairly represent the Business and its results of operations in
all material respects. All Accounts Receivable and Inventory of the Business are
reflected properly on such Books and Records. The Accounts Receivable are valid
receivables subject to no setoffs or counterclaims.
3.16 Business Information. Schedule 3.16 sets forth a materially
true and accurate description of the following information as of the date set
forth in such Schedule: (i) the approximate number of Committed Member
Residences in the Service Area; (ii) the approximate
17
number of Committed Member Residences that are cabled; (iii) the approximate
number of Committed Member Residences that are uncabled; (iv) the rates charged
to Subscribers; (v) the marketing, promotional and advertising programs
currently in effect for the Business and any other such program that has been in
effect at any time since January 1, 1995; and (vi) cable systems (identified by
over or under 40 channel capacity) and direct-to-home service providers in the
Service Areas.
3.17 Insurance. Schedule 3.17 sets forth the following information
with respect to each insurance policy relating to the Business (including
policies providing property, casualty, liability and workers' compensation
coverage and bond and surety arrangements) to which Seller has been a party, a
named insured, or otherwise the beneficiary of coverage at any time:
i. the name, address, and telephone number of
the agent;
ii. the name of the insurer, the name of the
policyholder and the name of each covered insured;
iii. the policy number and the period of
coverage;
iv. the scope (including an indication of
whether the coverage was on a claims made, occurrence or other basis) and amount
(including a description of how deductibles and ceilings are calculated and
operate) of coverage; and
v. a description of any retroactive premium
adjustments or other loss-sharing arrangements.
With respect to each such insurance policy: (A) the policy is legal,
valid, binding, enforceable, and in full force and effect; (B) neither Seller,
nor any predecessor in interest nor any other party to the policy is in breach
or default (including with respect to the payment of premiums or the giving of
notices), and to the best knowledge of Seller and Shareholders, no event has
occurred which, with notice or the lapse of time, would constitute such a breach
or default, or permit termination, modification or acceleration, under the
policy; and (C) no party to the policy has repudiated any provision thereof. The
Business and the Assets have been covered since the beginning of Business
operations in scope and amount customary and reasonable for such a business and
in the case of workers' compensation coverage, in scope and amount required by
applicable Legal Requirements. Schedule 3.17 describes any self-insurance
arrangements affecting the Assets or the Business. Schedule 3.17 also sets forth
each insurance claim (other than medical claims) made or loss incurred relating
to the Business pursuant to property, casualty, liability, workers' compensation
and bond and surety policies and, except as indicated therein, no such claim is
outstanding.
3.18 Disclosure. No representation or warranty of Seller or
Shareholders in this Agreement or the Collateral Documents and no statement in
any certificate, report, instrument, list or other document furnished or to be
furnished by Seller or Shareholders pursuant to this Agreement or the Collateral
Documents or in connection with the transactions contemplated hereby or thereby,
contained, contains or will contain on the date such agreement, certificate,
report, instrument, list or other document was or is delivered, any untrue
statement of a material
18
fact, or omitted, omits or will omit on such date to state any material fact
necessary in order to make the statements made, in light of the circumstances
under which they were made, not misleading, nor will any such representation or
warranty or statement contain on the Closing Date any untrue statement of a
material fact or omit on the Closing Date to state any material fact necessary
in order to make the statements made, in light of the circumstances under which
they were made, not misleading. There is no fact known to Seller or Shareholders
and not disclosed in this Agreement that is not applicable to or known by
Purchaser and the other NRTC members and affiliates providing DIRECTV services
and which fact materially or adversely affects or may in the future materially
or adversely affect, the Business or the Assets.
3.19 Brokers or Finders. No broker or finder has acted directly or
indirectly for Seller in connection with the transactions contemplated by this
Agreement, and Seller has incurred no obligation to pay any brokerage or
finder's fee or other commission in connection therewith.
3.20 Certain Payments. Neither Seller nor its Representatives has
directly or indirectly, on behalf of or for the purpose of assisting the
Business, made any contribution, gift, bribe, rebate, payoff, influence payment,
kickback, or other similar payments to any Person, private or public, regardless
of form, whether in money, property or services, to obtain favorable treatment
in securing business, to pay for favorable treatment for business secured, to
obtain special concessions or for special concessions already obtained, or in
violation of any Legal Requirement, nor has any such person established or
maintained any fund or asset that has not been recorded in the Books and
Records.
3.21 Subscribers. Seller has neither solicited nor encouraged any
Representative or any other Person to solicit, nor has Seller employed any
scheme or device for the purpose of encouraging, nor has Seller encouraged any
Representative or any other Person to employ any scheme or device for the
purpose of encouraging, Persons residing outside the Service Areas or Persons
who would not be deemed Committed Member Residences to become subscribers of the
DIRECTV service offered by the Business.
3.22 Favorable Business Relationships. To the best knowledge of
Seller and Shareholders, there are no favorable business relationships relating
to the Business with lessors, licensors, Subscribers, suppliers or other
business associates of Seller which will terminate after Closing.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Seller and Shareholders that the
statements contained in this Article IV are correct and complete as of the date
of this Agreement and will be correct and complete as of the Closing Date (as
though made then and as though the Closing Date were substituted for the date of
this Agreement throughout this Article IV).
4.1 Organization and Qualification. Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, with all requisite power and authority to own, lease and use
its assets and to conduct its business as it is currently conducted. Purchaser
is duly qualified or licensed to do business in and is in good standing in
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each jurisdiction in which the character of the properties owned, leased or used
by it or the nature of the activities conducted by it makes such qualification
necessary, except any such jurisdiction where the failure to be so qualified or
licensed and in good standing would not have a material adverse effect on
Purchaser or on the validity, binding effect or enforceability of this
Agreement.
4.2 Authority and Validity. Purchaser has all requisite power and
authority to execute and deliver, to perform its obligations under, and to
consummate the transactions contemplated by, this Agreement and the Collateral
Documents. The execution and delivery by Purchaser of, the performance by
Purchaser of its obligations under, and the consummation by Purchaser of the
transactions contemplated by, this Agreement and the Collateral Documents have
been duly authorized by all requisite corporate action of Purchaser. This
Agreement has been duly executed and delivered by Purchaser and is the legal,
valid and binding obligation of Purchaser, enforceable against Purchaser in
accordance with its terms. Upon Purchaser's execution and delivery of the
Collateral Documents to which it is a party, the Collateral Documents shall be
the legal, valid and binding obligations of Purchaser, enforceable against
Purchaser in accordance with their respective terms.
4.3 No Breach or Violation. Subject to obtaining the consents,
approvals, authorizations, and orders of and making the registrations or filings
with or giving notices to Governmental Authorities and Persons recited in the
exception to Section 4.4, the execution, delivery and performance by Purchaser
of this Agreement and the Collateral Documents to which it is a party and the
consummation of the transactions contemplated hereby and thereby in accordance
with the terms and conditions hereof and thereof, do not and will not conflict
with, constitute a violation or breach of, constitute a default or give rise to
any right of termination or acceleration of any right or obligation of Purchaser
under, or result in the creation or imposition of any Encumbrance upon the
property of Purchaser by reason of the terms of (i) the certificate of
incorporation, by-laws or other charter or organizational document of Purchaser,
(ii) any material contract, agreement, lease, indenture or other instrument to
which Purchaser is a party or by or to which Purchaser or its property may be
bound or subject, (iii) any order, judgment, injunction, award or decree of any
arbitrator or Governmental Authority or any statute, law, rule or regulation
applicable to Purchaser or (iv) any Permit of Purchaser, which in the case of
(ii), (iii) or (iv) above would have a material adverse effect on the ability of
Purchaser to perform its obligations under this Agreement or any Collateral
Document.
4.4 Consents and Approvals. Except (i) as required under the NRTC
Distribution Agreement, (ii) as required under the Securities Act and the
Exchange Act, and (iii) as set forth in Schedule 4.4 hereto, no consent,
approval, authorization or order of, registration or filing with, or notice to,
any Governmental Authority or any other Person is necessary to be obtained, made
or given by Purchaser in connection with the execution, delivery and performance
by Purchaser of this Agreement or any Collateral Documents or for the
consummation by Purchaser of the transactions contemplated hereby or thereby.
4.5 Legal Proceedings. There is no action, suit, proceeding or
investigation, judicial, administrative or otherwise, that is pending or, to the
best knowledge of Purchaser, threatened against Purchaser and that challenges
the validity or propriety of, or may prevent or delay, any of the transactions
contemplated by this Agreement or the Collateral Documents.
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4.6 Disclosure. No representation or warranty of Purchaser in this
Agreement or the Collateral Documents and no statement in any certificate,
report, instrument, list or other document furnished or to be furnished by
Purchaser pursuant to this Agreement or the Collateral Documents or in
connection with the transactions contemplated hereby or thereby, contained,
contains or will contain on the date such agreement, certificate, report,
instrument, list or other document was or is delivered, any untrue statement of
a material fact, or omitted, omits or will omit on such date to state any
material fact necessary in order to make the statements made, in light of the
circumstances under which they were made, not misleading, nor will any such
representation or warranty or statement contain on the Closing Date any untrue
statement of a material fact or omit on the Closing Date to state any material
fact necessary in order to make the statements made, in light of the
circumstances under which they were made, not misleading.
4.7 Brokers or Finders. No broker or finder has acted directly or
indirectly for Purchaser in connection with the transactions contemplated by
this Agreement, and Purchaser has incurred no obligation to pay any brokerage or
finder's fee or other commission in connection therewith.
ARTICLE V
PRE-CLOSING COVENANTS OF SELLER AND SHAREHOLDERS
5.1 Additional Information. Seller shall provide to Purchaser and
its Representatives (i) full and free access to all of the Assets and
Liabilities of Seller and (ii) such financial, operating and other documents,
data and information relating to Seller, the Business and the Assets as
Purchaser may reasonably request. Such access shall include the right of
Purchaser and its Representatives to inspect the records and reports of NRTC and
DIRECTV and discuss such records and reports with NRTC, and Seller shall take
all action necessary to facilitate the foregoing. In addition, Seller shall take
all action necessary to enable Purchaser and its Representatives to inspect,
review and audit the Assets, the Liabilities and Business and discuss the same
with Seller's officers, employees, independent accountants, and counsel.
Notwithstanding any investigation that Purchaser may conduct of Seller, the
Business and the Assets, Purchaser may fully rely on Seller's and Shareholders'
representations, warranties, covenants and indemnities set forth in this
Agreement, the Collateral Documents and any documents, instruments or
certificates delivered hereunder and thereunder, which will not be waived or
affected by or as a result of such investigation; provided, that if Purchaser
obtains actual knowledge that any representation or warranty of Seller and/or
Shareholders is not true, Purchaser shall immediately inform Seller of such
inaccuracy.
5.2 Exclusivity. Neither Seller nor Shareholders shall (i)
solicit, initiate or encourage the submission of any proposal or offer from any
Person relating to the direct or indirect sale or transfer of any of Seller's
capital stock or the Assets ("Transfer"); (ii) participate in any discussions or
negotiations regarding, furnish any information with respect to, assist or
participate in or facilitate in any other manner any effort or attempt by any
Person to do or seek a Transfer; or (iii) authorize or knowingly permit any
Affiliate, employee, representative or agent to engage in the foregoing on
behalf of Seller or Shareholders. Seller and Shareholders shall provide to
Purchaser copies of any written proposals, offers or inquiries, with respect to
a Transfer received by Seller or Shareholders after the execution of the Letter
of Intent.
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5.3 Continuity and Maintenance of Operations.
(a) Seller shall: (i) use its best efforts to comply with all
Legal Requirements applicable to Seller and all requirements of the NRTC
applicable to Seller (including NRTC's by-laws, policies and procedures)
relating to the Business; (ii) fulfill in all material respects all of its
obligations under and maintain in full force and effect all Contracts, including
the NRTC Distribution Agreement, and shall not, without the prior written
consent of Purchaser, alter, modify or amend any of the foregoing; (iii) use its
best efforts in consultation with Purchaser and its Affiliates, to promote the
financial success of the Business and promptly notify Purchaser of any adverse
change in the prospects or condition (financial or otherwise) of the Business;
and (iv) use its best efforts to promote, develop and preserve its relationships
with the NRTC, DSS retailers, participating cooperatives and its present
employees as well as the goodwill of its suppliers, customers and others having
business relations with it, and promptly notify Purchaser of any adverse change
in its relationship with any such Person. Without limiting the generality of the
foregoing, Seller shall maintain the Assets in good order, condition and repair,
shall maintain insurance relating to the Business as in effect on the date of
this Agreement, shall continue the pricing, marketing, advertising, promotion
and other activities with respect to the Business (including, without
limitation, billing, collection and subscriber matters), shall maintain
Inventory of not less than 25 new DSS Systems and shall keep and maintain all of
the Books and Records in the Ordinary Course. Other than in the Ordinary Course,
Seller shall not itself pay or credit in any way any Accounts Receivable prior
to the Closing Date, and shall not permit any of its agents or employees, or any
officers, directors or Shareholders, to do so either. Seller shall continue to
enforce its procedures for disconnection and discontinuance of service to
Subscribers whose accounts are delinquent in accordance with customary policies
and procedures in effect on the date of this Agreement.
(b) Seller shall not, without the prior written consent of
Purchaser: (i) except as set forth on Schedule 5.3, deviate from DIRECTV
national programming packages or rates; (ii) engage in marketing promotions
other than in the Ordinary Course consistent with past practices; (iii) sell,
lease, transfer, convey or assign any of the Assets (or enter into any contract
to do any of the foregoing) or permit the creation of any Encumbrance on any of
the Assets; (v) permit the amendment or cancellation of the NRTC Distribution
Agreement or any other Contract; or (iv) enter into any contract, commitment or
agreement or incur any indebtedness or other liability or obligation of any kind
involving an expenditure outside the Ordinary Course and in excess of $2,500;
(c) Neither Seller nor Shareholders shall take or omit to take
any action that would cause Seller or Shareholders to be in breach of any
representations, warranties or covenants in this Agreement or the Collateral
Documents or that would, if such action had been taken or omitted on or before
the date of this Agreement, have been required to be disclosed on Schedule 3.9.
5.4 Consents and Approvals.
(a) As soon as practicable after execution of this Agreement,
Seller shall use its best efforts to obtain any necessary consent, approval,
authorization or order of, make any registration or filing with or give any
notice to, any Governmental Authority or Person as is
22
required to be obtained, made or given by Seller to consummate the transactions
contemplated by this Agreement and the Collateral Documents, including, without
limitation: (i) consents required under the NRTC Distribution Agreement; and
(ii) any authorizations, consents, approvals, actions, filings or notices set
forth in Schedule 3.4. Notwithstanding anything in this Section 5.4(a) to the
contrary, Seller shall not be required to agree to the imposition on Seller by
NRTC of any condition to the transfer to Purchaser of the NRTC Distribution
Agreement (other than the preparation of transfer documentation and the
requirement that Seller pay currently any amounts due to NRTC and DirecTV, Inc.
on account of the Business for the period prior to the Closing Date).
(b) Seller shall cooperate with Purchaser in providing such
information and reasonable assistance as may be required in connection with the
obligations of Purchaser under Section 6.1.
5.5 Securities Filings. Seller shall promptly after execution of
this Agreement, provide such information and documents to Purchaser and its
Affiliates concerning Seller and the Business as may be required or appropriate
for inclusion in any filing, notification or report made by Purchaser or any
Affiliate of Purchaser under the Securities Act or the Exchange Act; and shall
cause its counsel and independent accountants to cooperate with Purchaser, its
Affiliates and their investment bankers, counsel and independent accountants in
the preparation of such filings, notifications and reports. Seller represents
and warrants to Purchaser that no information or document provided by Seller for
inclusion in any filing, notification or report made by Purchaser or any
Affiliate under the Securities Act or the Exchange Act will contain any untrue
statement of material fact or omit to state any material fact necessary in order
to make the statements made therein, in light of the circumstances under which
they were made, not misleading.
5.6 Notification of Certain Matters. Seller shall promptly provide
to Purchaser copies of any material notices from or correspondence from and to
the NRTC or DIRECTV or any Affiliates of DIRECTV. Seller shall also promptly
notify Purchaser of any fact, event, circumstance or action that, if known on
the date of this Agreement, would have been required to be disclosed to
Purchaser pursuant to this Agreement or the existence or occurrence of which
would cause any of Seller's or Shareholders' representations or warranties under
this Agreement not to be correct and/or complete. In addition, Seller shall give
prompt written notice to Purchaser of any adverse development causing a breach
of any of Seller's or Shareholders' representations and warranties in Article
III. No disclosure by Seller pursuant to this Section 5.6, however, shall be
deemed to amend or supplement this Agreement or to prevent or cure any
misrepresentation, breach of warranty, or breach of covenant by Seller.
5.7 Employee Matters. Immediately prior to Closing, Seller shall
terminate all of its employees other than such of those employees whom Seller
may have agreed to retain as its employees after Closing. Purchaser may offer
(but is not obligated to offer) employment to any or all of the employees of
Seller. Seller shall be responsible for and shall cause to be discharged and
satisfied in full all amounts owed to any employee of Seller through the Closing
Date, including wages, salaries, accrued vacation, any employment, incentive,
compensation or bonus agreements, or other benefits or payments on account of
termination, and shall indemnify and hold Purchaser harmless from any Adverse
Consequences resulting therefrom. Seller shall comply with
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the employee notification requirements, if applicable, of the Federal Worker
Adjustment and Retraining Notification Act.
5.8 Supplements to Schedules. Each of Purchaser, Seller and
Shareholders shall, from time to time prior to Closing, supplement the Schedules
to this Agreement with additional information that, if existing or known to it
on the date of this Agreement, would have been required to be included in one or
more Schedules to this Agreement. For purposes of determining the satisfaction
of any of the conditions to the obligations of Purchaser, Seller or Shareholders
in Articles VII and VIII, the Schedules to this Agreement shall be deemed to
include only (a) the information contained therein on the date of this Agreement
and (b) information added to the Schedules by written supplements to such
Schedules delivered prior to Closing by the Party making such amendment that (i)
are accepted in writing by the other Party or (ii) reflect actions expressly
permitted by this Agreement to be taken prior to Closing.
5.9 Satisfaction of Liabilities and Obligations. Seller shall take
all necessary actions: (i) to cause the termination, release, and removal on or
prior to the Closing Date, of all Encumbrances relating to Seller, the Assets or
the Business, including without limitation the discharging or other satisfaction
of related claims and obligations (such as the Equipment Financing Facility);
and (ii) to discharge, pay or satisfy all other outstanding Liabilities and
obligations of or relating to Seller, the Assets or the Business (including the
Equipment Financing Facility and amounts required by NRTC to be paid in
anticipation of Closing), except as otherwise specifically provided in this
Agreement, in each case without incurring any obligations on the part of
Purchaser or otherwise adversely affecting Purchaser.
5.10 Duty of Good Faith and Fair Dealing. Seller agrees that it
will act in good faith with regard to all matters that are the subject of this
Agreement, and will neither intentionally nor knowingly take any action or omit
to take any action at any time for the primary purpose of depriving the other
Party unfairly of any right or benefit that the other Party has at such time
under this Agreement.
ARTICLE VI
PRE-CLOSING COVENANTS OF PURCHASER
Purchaser covenants and agrees as follows:
6.1 Consents and Approvals.
(a) As soon as practicable after execution of this Agreement,
Purchaser shall use its best efforts to obtain any necessary consent, approval,
authorization or order of, make any registration or filing with or give notice
to, any Governmental Authority or Person as is required to be obtained, made or
given by Purchaser to consummate the transactions contemplated by this Agreement
and the Collateral Documents, including without limitation: (i) consents
required under the NRTC Distribution Agreement; and (ii) any authorizations,
consents, approvals, actions, filings or notices set forth in Schedule 4.4.
Notwithstanding anything in this Section 6.1 to the contrary, Purchaser shall
not be required to agree to any amendments, modifications or changes in, the
waiver of any terms or conditions of, or the imposition of any condition to the
transfer to
24
Purchaser of, the NRTC Distribution Agreement in order to obtain the consents
required under the NRTC Distribution Agreement.
(b) Purchaser shall cooperate with Seller in providing such
information and reasonable assistance as may be required in connection with
Seller's obligations under Section 5.4(a).
6.2 Notification of Certain Matters. Purchaser shall promptly
provide to Seller copies of any material notices or correspondence from the NRTC
or DIRECTV or any Affiliates of DIRECTV relating to the transaction contemplated
by this Agreement. Purchaser shall also promptly notify Seller of any fact,
event, circumstance or action that, if known on the date of this Agreement,
would have been required to be disclosed to Seller pursuant to this Agreement or
the existence or occurrence of which would cause any of Purchaser's
representations or warranties under this Agreement not to be correct and/or
complete. In addition, Purchaser shall give prompt written notice to Seller of
any adverse development causing a breach of any of Purchaser's representations
and warranties in Article IV. No disclosure by Purchaser pursuant to this
Section 6.2, however, shall be deemed to amend or supplement this Agreement or
to prevent or cure any misrepresentation, breach of warranty, or breach of
covenant by Purchaser.
6.3 Duty of Good Faith and Fair Dealing. Purchaser agrees that it
will act in good faith with regard to all matters that are the subject of this
Agreement, and will neither intentionally nor knowingly take any action or omit
to take any action at any time for the primary purpose of depriving the other
Party unfairly of any right or benefit that the other Party has at such time
under this Agreement.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
All obligations of Purchaser under this Agreement shall be subject to
the fulfillment at or prior to Closing of each of the conditions set forth in
this Article VII, it being understood that Purchaser may, in its sole
discretion, to the extent permitted by applicable Legal Requirements, waive any
or all of such conditions in whole or in part. Notwithstanding the foregoing,
the representations and warranties of Seller and Shareholders set forth in
Article III shall be deemed true in all respects after February 15, 1997 solely
for the purpose of determining Purchaser's obligations to close the transaction
contemplated by this Agreement, unless any Schedule or Schedules to such
representations and warranties fail to disclose information required to be
disclosed by such representations and warranties, which information is material
and not known to Purchaser on February 15, 1997 (information shall be deemed to
be material for purposes of this clause if it has financial consequences of at
least $50,000).
7.1 Accuracy of Representations. All representations and
warranties of Seller and Shareholders contained in this Agreement, the
Collateral Documents and any other document, instrument or certificate delivered
by Seller or Shareholders at or prior to Closing shall be, if specifically
qualified by materiality, true in all respects and, if not so qualified, shall
be true in all material respects, in each case on and as of the Closing Date
with the same effect as if made on and as of the Closing Date. Seller and
Shareholders shall have delivered to Purchaser a certificate dated the Closing
Date to the foregoing effect.
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7.2 Covenants. Seller and Shareholders shall, in all material
respects, have performed and complied with each of the covenants, obligations,
conditions and agreements contained in this Agreement and the Collateral
Documents that are to be performed or complied with by them at or prior to
Closing. Seller and Shareholders shall have delivered to Purchaser a certificate
dated the Closing Date to the foregoing effect.
7.3 Consents.
(a) All consents, approvals, authorizations and orders
required to be obtained from, and all registrations, filings and notices
required to be made with or given to, any Governmental Authority or Person as
provided in Sections 5.4(a) and 6.1(a) shall have been duly obtained, made or
given, as the case may be, and shall be in full force and effect, and any
waiting period required by Applicable Law or any Governmental Authority in
connection with such transactions shall have expired or have been earlier
terminated, unless the failure to obtain, make or give any such consent,
approval, authorization, order, registration, filing or notice, or to allow any
such waiting period to expire or terminate would not have a material adverse
effect on Seller, the Assets or the Business or the ability of Seller or
Shareholders to consummate the transactions contemplated by this Agreement and
the Collateral Documents.
(b) Notwithstanding the foregoing, this condition precedent
shall not have been satisfied if any consent, approval, authorization or order
obtained in connection with the transactions contemplated by this Agreement and
the Collateral Documents has been conditioned upon the amendment, modification,
cancellation or termination of, or waiver of any term or condition of, any
contract, commitment or agreement, or imposes upon Purchaser any condition or
requirement not now imposed upon Seller.
(c) Purchaser shall have been furnished with appropriate
evidence, reasonably satisfactory to it and its counsel, of the granting of such
consents, approvals, authorizations and orders, the making of such registrations
and filings and the giving of such notices referred to in paragraph (a) above.
7.4 Delivery of Documents. Seller and Shareholders, as applicable,
shall have executed and delivered to Purchaser the following documents in
addition to the other documents required to be delivered by this Agreement:
i. Escrow Agreement.
ii. Consultancy Agreement.
iii. Noncompetition Agreement.
iv. ▇▇▇▇ of Sale and Assignment evidencing
transfer of the Assets to Purchaser in form reasonably satisfactory to
Purchaser.
v. Opinion of Brunini, Grantham, Grower &
▇▇▇▇▇, PLLC, counsel to Seller and Shareholders, dated the Closing Date,
addressed to Purchaser, in form and substance
26
reasonably satisfactory to Purchaser and its counsel (including an opinion that
the form of Equipment Receivables complies with Mississippi law).
vi. ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Certificate.
vii. Pay-off statement of Deposit Guaranty
National Bank evidencing the outstanding balance under the Equipment Financing
Facility as of the Closing Date.
viii. Equipment Receivables Closing Schedule,
which shall be certified by ▇▇▇▇▇▇ on behalf of ClearVision as true and correct
in all material respects.
ix. Schedule evidencing satisfaction of Section
7.7, certified by ▇▇▇▇▇▇ on behalf of ClearVision as true and correct in all
material respects.
x. Such other documents and instruments as
Purchaser may reasonably request: (A) to evidence the sale, assignment,
conveyance and transfer to Purchaser of all of Seller's right, title and
interest in, to and under the Assets; and (B) to otherwise facilitate the
consummation or performance of any of the transactions contemplated by this
Agreement and the Collateral Documents.
7.5 No Material Adverse Change. There shall have been no material
adverse change in the Assets or in the business, financial condition, prospects
or operations of Seller.
7.6 No Litigation. No action, suit or proceeding shall be pending
or threatened, and no Legal Requirement or policy of the NRTC, DirecTV, Inc. or
any of their Affiliates, or any applicable regulatory authority shall have been
enacted, promulgated or issued that would: (i) prohibit or adversely affect
Purchaser's ownership or operation of all or a material portion of the Business
or the Assets or otherwise impair the ability of Purchaser to realize the
benefits of the transactions contemplated by this Agreement and the Collateral
Documents or adversely affect the value of the Assets; (ii) restrict or limit or
otherwise condition Purchaser's right to transfer and/or assign the Business or
the Assets in the future; (iii) compel Purchaser to dispose of or hold separate
all or a material portion of the Business or the Assets as a result of any of
the transactions contemplated by this Agreement and the Collateral Documents;
(iv) prevent or make illegal the consummation of any transactions contemplated
by this Agreement and the Collateral Documents; or (v) cause any of the
transactions contemplated by this Agreement and the Collateral Documents to be
rescinded following consummation.
7.7 Minimum Subscribers. As of the Closing Date, the Business
shall have total Subscribers of not less than 6,600, as evidenced by such Seller
documentation as Purchaser may request (including the DBS Wholesale Invoice
issued by NRTC for the most recent billing cycle).
7.8 Transition Arrangements. As of the Closing Date, Seller shall
sublease to Purchaser its office at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ for a
period of 60 days, at a lease rate equal to the sum of Seller's actual
documented cost for rent, property and casualty insurance, clean-up and pest
control. Purchaser shall permit ▇▇▇▇▇▇ to use a desk in the office during the
sublease period.
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7.9 NRTC Compliance Certificate. Seller shall have delivered to
Purchaser a certificate or letter from NRTC dated as of the Closing Date to the
effect that Seller is in compliance with the NRTC Distribution Agreement and
there are no payments due by Seller under the NRTC Distribution Agreement other
than payments for fees due in the Ordinary Course and not yet payable.
7.10 Dealer Arrangements. Seller shall have terminated the
following dealer arrangements and shall be responsible for any amounts owed to
dealers on account of such arrangements: (i) any arrangements with dealers to
collect cash payments from subscribers of the Business; and (ii) any
arrangements to compensate dealers for subscribers based on a percentage of
future revenues derived by Seller from such subscribers.
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS
OF SELLER AND SHAREHOLDERS
All obligations of Seller and Shareholders under this Agreement shall
be subject to the fulfillment at or prior to Closing of each of the following
conditions, it being understood that Seller and Shareholders may, in their sole
discretion, to the extent permitted by applicable Legal Requirements, waive any
or all of such conditions in whole or in part:
8.1 Accuracy of Representations. All representations and
warranties of Purchaser contained in this Agreement and the Collateral Documents
shall be, if specifically qualified by materiality, true and correct in all
respects and, if not so qualified, shall be true and correct in all material
respects, in each case on and as of the Closing Date with the same effect as if
made on and as of the Closing Date. Purchaser shall have delivered to Seller a
certificate dated the Closing Date to the foregoing effect.
8.2 Covenants. Purchaser shall, in all material respects, have
performed and complied with each of the covenants, obligations, conditions and
agreements contained in this Agreement and the Collateral Documents that are to
be performed or complied with by it at or prior to Closing. Purchaser shall have
delivered to Seller and Shareholders a certificate dated the Closing Date to the
foregoing effect.
8.3 Consents. All consents, approvals, authorizations and orders
required to be obtained from, and all registrations, filings and notices
required to be made with or given to, any Governmental Authority or Person as
provided in Section 6.1(a) shall have been duly obtained, made or given, as the
case may be, and shall be in full force and effect, and any waiting period
required by applicable law or any Governmental Authority in connection with such
transactions shall have expired or have been earlier terminated, unless the
failure to obtain, make or give any such consent, approval, authorization,
order, registration, filing or notice, or to allow any such waiting period to
expire or terminate would not have a material adverse effect on the ability of
Purchaser to consummate the transactions contemplated by this Agreement and the
Collateral Documents. Seller shall have been furnished with the appropriate
evidence, reasonably satisfactory to it and its counsel, of the granting of such
consents, approvals, authorizations and orders, the making of such registrations
and filings and the giving of such notices.
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8.4 Delivery of Documents. Purchaser shall have executed and
delivered to Seller the following documents in addition to the other documents
required to be delivered by this Agreement:
i. Escrow Agreement.
ii. Assumption Agreement evidencing the
assumption of the Assumed Liabilities by Purchaser in form reasonably
satisfactory to Seller.
iii. Opinion of ▇▇▇ ▇. Lodge, Senior Vice
President, Chief Administrative Officer and General Counsel of Purchaser, dated
the Closing Date, addressed to Seller and Shareholders, in form and substance
reasonably satisfactory to Seller and Shareholders.
iv. Such other documents and instruments as
Seller may reasonably request: (A) to evidence assumption of the Assumed
Liabilities; and (B) to otherwise facilitate the consummation or performance of
any of the transactions contemplated by this Agreement and the Collateral
Documents.
8.5 Litigation. No action, suit or proceeding shall be pending or
threatened by or before any Governmental Authority and no Legal Requirement
shall have been enacted, promulgated or issued or deemed applicable to any of
the transactions contemplated by this Agreement and the Collateral Documents
that would: (i) prevent consummation of any of the transactions contemplated by
this Agreement and the Collateral Documents; or (ii) cause any of the
transactions contemplated by this Agreement and the Collateral Documents to be
rescinded following consummation.
ARTICLE IX
POST-CLOSING COVENANTS
The Parties agree as follows with respect to the period following
Closing:
9.1 Transition. Neither Seller nor Shareholders shall take any
action that is designed or intended to have the effect of discouraging any
lessor, licensor, subscriber, supplier or other business associate of Seller or
the Business from maintaining the same business relationships with Purchaser
after Closing as it maintained with Seller prior to Closing. Seller shall refer
all subscriber inquiries relating to the Business to Purchaser from and after
Closing.
9.2 Transfer Taxes and Fees. Seller and Shareholders shall pay
any sales, use, transfer, excise, documentary or license taxes or fees with
respect to the transfer of any of the Assets pursuant to this Agreement and the
Collateral Documents.
9.3 NRTC Patronage. Seller and Shareholders shall have an ongoing
obligation after Closing and notwithstanding the survival periods provided for
in Article XI to pay to Purchaser any distributions on account of NRTC Patronage
Capital. Notwithstanding the foregoing, Seller shall be entitled to receive any
NRTC patronage distribution made in cash for 1996.
29
9.4 Subscriber Acquisition Commissions. Seller and Shareholders
shall have an ongoing obligation after Closing and notwithstanding the survival
periods provided for in Article XI to pay or reimburse Purchaser for any
commissions payable on account of or related to Subscriber acquisitions and
revenues promptly upon Seller's and/or Shareholders' receipt of invoices
therefor (which shall include adequate supporting documentation), including
commissions under the National Joint Promotion, the Committed Member Marketing
Agreement and the Enhanced Marketing Program (but only in the event commissions
under such NRTC programs are invoiced by the NRTC).
9.5 NRTC Invoices. Seller and Shareholders shall have an ongoing
obligation after Closing and notwithstanding the survival periods provided for
in Article XI to pay or reimburse Purchaser for any costs or expenses that are
invoiced by NRTC or DirecTV, Inc. and relate to the period prior to Closing.
9.6 Financial Statements. Not later than 45 days after Closing,
Seller shall provide to Purchaser Seller's audited balance sheet and statements
of operations, changes in stockholders' equity and cash flows for the year ended
January 8, 1997, which shall be prepared in accordance with the Financial
Statement Procedures and shall be accompanied by auditors' compilation reports.
Not later than 60 days after Closing, Seller shall provide to Purchaser Seller's
balance sheet and statements of operations, changes in stockholders' equity and
cash flows for each monthly billing period for the years ended January 15, 1996
and January 8, 1997, and Seller shall use its best efforts to prepare such
financial statements in accordance with the Financial Statement Procedures,
subject only to normal year-end adjustments (none of which will be material in
amount) and the omission of footnotes.
9.7 Liability Insurance. Seller agrees to maintain its existing
liability insurance policies in effect through the Survival Period.
9.8 Books and Records. Purchaser shall provide Seller reasonable
access during normal business hours to the Books and Records relating to the
period prior to Closing for the purpose of preparing Seller's tax returns or as
otherwise contemplated by this Agreement.
9.9 United States Satellite Broadcasting; Home Shopping Network.
Purchaser shall have an ongoing obligation after Closing and notwithstanding the
Survival Periods provided for in Article XI to pay Seller for any commissions
received by Purchaser on account of United States Satellite Broadcasting, Home
Shopping Network and similar commissions earned by Seller during the period
prior to Closing. Purchaser shall provide to Seller a report detailing such
commissions, if any, along with payment therefor, 180 days after Closing.
9.10 Equipment Receivables. In the event that Purchaser writes off
Equipment Receivables during the Survival Period, other than write-offs relating
to Equipment Receivables not more than 35 days outstanding for which Subscribers
have not initiated contact with Purchaser about terminating service ("Equipment
Receivables Write-Offs"), Purchaser shall be entitled to receive Escrow Funds
during the Survival Period on a periodic basis equal to 50 percent of the
Equipment Receivables Write-Offs in excess of the Equipment Receivables Margin;
provided that Purchaser shall in no event be entitled to more than $250,000 of
Escrow Funds under this Section 9.10. "Equipment Receivables Margin" means the
difference between the amount owed under
30
Equipment Receivables at the Closing Date that are not more than 120 days past
due and the Equipment Receivables Price. Purchaser's decisions to write off
Equipment Receivables during the Survival Period and policies related thereto
shall be made in good faith in accordance with prudent business judgment related
to collectibility of the Equipment Receivables and retention of Subscribers, and
not with a view to obtain the benefits of this Section 9.10.
ARTICLE X
TERMINATION
10.1 Events of Termination. This Agreement may be terminated and
the transactions contemplated by this Agreement may be abandoned at any time
prior to Closing as provided below:
(a) Purchaser, Seller and Shareholders may terminate this
Agreement by mutual written consent at any time prior to Closing.
(b) Purchaser may terminate this Agreement by giving written
notice to Seller:
i. at any time prior to Closing, if Seller
and/or Shareholders have breached any material representation, warranty or
covenant contained in this Agreement in any material respect, Purchaser has
notified Seller of the breach, and the breach has continued without cure for a
period of 30 days after the notice of breach or if Closing shall not have
occurred on or before the Termination Date by reason of the failure of any
condition precedent under Article VII (unless the failure results primarily from
Purchaser itself breaching any representation, warranty or covenant contained in
this Agreement); or
ii. at any time prior to February 15, 1997, if
Purchaser's due diligence investigation pursuant to Section 5.1 discloses any
information which, in Purchaser's determination, materially impairs or
materially adversely affects the value or condition of the Assets or Business.
(c) Seller may terminate this Agreement by giving written
notice to Purchaser at any time prior to Closing:
i. if Purchaser has breached any material
representation, warranty or covenant contained in this Agreement in any material
respect, Seller has notified Purchaser of the breach, and the breach has
continued without cure for a period of 30 days after the notice of breach; or
ii. if Closing shall not have occurred on or
before the Termination Date by reason of the failure of any condition precedent
under Article VIII hereof (unless the failure results primarily from Seller
and/or Shareholders breaching any representation, warranty or covenant contained
in this Agreement).
10.2 Liabilities in Event of Termination. The termination of this
Agreement will in no way limit any obligation or liability of any Party based on
or arising from a breach or default by
31
such Party with respect to any of its representations, warranties, covenants or
agreements contained in this Agreement, except as provided in Section 11.6(c).
10.3 Procedure Upon Termination. If this Agreement is terminated
by Purchaser or Seller pursuant to this Article X, notice of such termination
shall promptly be given by the terminating Party to the other Party.
ARTICLE XI
REMEDIES FOR BREACH OF THIS AGREEMENT
11.1 Survival of Representations and Warranties. All of the
representations and warranties of Purchaser, Seller and Shareholders contained
in this Agreement, the Collateral Documents and other documents, instruments and
certifications required to be delivered hereunder and thereunder shall survive
Closing (unless the damaged Party had actual knowledge of the misrepresentation
or breach of warranty at the time of Closing and did not disclose such breach to
the other party) and continue in full force and effect until April 30, 1998. The
period of survival prescribed by this Section 11.1 is referred to as the
"Survival Period." The liabilities of Purchaser, Seller and Shareholders under
their respective representations and warranties will expire as of the expiration
of the Survival Period; provided, however, that such expiration will not
include, extend or apply to any representation or warranty, the breach of which
has been asserted by Purchaser in a written notice to Seller before such
expiration or about which Seller has given Purchaser written notice before such
expiration indicating that facts or conditions exist that, with the passage of
time or otherwise, can reasonably be expected to result in a breach (and
describing such potential breach in reasonable detail). Except as otherwise
provided in this Agreement, the covenants and agreements of Purchaser, Seller
and Shareholders in this Agreement, the Collateral Documents and in the other
documents, instruments and certificates required to be delivered by Seller or
Purchaser hereunder and thereunder shall survive Closing and shall continue in
full force and effect as provided in Section 11.2(b) and Section 11.3(b).
11.2 Indemnification Provisions for Benefit of Purchaser.
(a) If Seller and/or Shareholders breach any representations
and warranties contained in this Agreement or the Collateral Documents or any
documents, instruments and certificates delivered hereunder and thereunder, and
if Purchaser makes a written claim for indemnification against Seller and/or
Shareholders within the Survival Period, then Seller and Shareholders shall
jointly and severally indemnify, defend and hold harmless Purchaser and its
Affiliates and the shareholders, directors, officers, employees, agents,
successors and assigns of any of such Persons, from and against any Adverse
Consequences that any such Person may suffer through and after the date of the
claim for indemnification (including any Adverse Consequences that any such
Person may suffer after the end of the Survival Period) resulting from, arising
out of, relating to or caused by the breach; provided, however, that
Shareholders shall not be liable for Adverse Consequences resulting from,
arising out of or relating to legal claims of Subscribers that the Equipment
Receivables do not comply with applicable law unless any such Shareholder had
reason to know prior to Closing that there existed a Basis for such claims.
(b) Seller and Shareholders agree, jointly and severally, to
indemnify Purchaser and its Affiliates, and the shareholders, directors,
officers, employees, agents, successors and
32
assigns of any of such Persons, from and against the entirety of any Adverse
Consequences that any such Person may suffer resulting from, arising out of,
relating to, in the nature of, or caused by any breach of any covenant,
agreement or obligation of Seller and/or Shareholders contained in this
Agreement or the Collateral Documents or any documents, instruments and
certificates delivered hereunder and thereunder. In addition to, but not
exclusive of, any indemnity on account of the foregoing, Seller agrees to
indemnify Purchaser and its Affiliates, and the shareholders, directors,
officers, employees, agents, successors and assigns of any such Persons, from
and against the entirety of any Adverse Consequences that any such Person may
suffer resulting from, arising out of, relating to, in the nature of or caused
by any act or omission of Seller with respect to, or any event or circumstance
related to, the ownership or operation of the Assets or the conduct of the
Business, which act, omission, event or circumstance occurred or existed prior
to or at the Closing Date, without regard to whether a claim with respect to
such matter is asserted before or after the Closing Date; any Liability of
Seller and/or Shareholders or the Business that is not an Assumed Liability; any
Liability of Purchaser arising by operation of law as a consequence of the
Closing (including under any bulk transfer law of any jurisdiction or under any
common law doctrine of de facto merger or successor liability or under any
fraudulent conveyance law of any jurisdiction) that is not an Assumed Liability;
and any Liability for Taxes attributable to the use, ownership or operation of
the Assets by Seller or the Business relating to periods prior to Closing.
Except as otherwise provided in this agreement, Seller's and Shareholders'
obligations under this Section 11.2(b) shall expire at the end of the Survival
Period; provided, however, that such expiration will not include, extend or
apply to rights for indemnity with respect to any claim asserted in a written
notice to the Seller and/or Shareholders before such expiration.
(c) No Person otherwise entitled to indemnification under this
Section 11.2 shall be so entitled until the aggregate amount otherwise payable
under this Section exceeds $50,000, and shall then be entitled to the
indemnification only as to the excess. The right of Purchaser and its Affiliates
and the shareholders, directors, officers, employees, agents, successors and
assigns of any such Person to indemnity under this Section 11.2 shall be limited
to $5,000,000 in the aggregate. In addition, the liability of Shareholders other
than ▇▇▇▇▇▇ shall be limited to the following allocable portions of Adverse
Consequences relating to any indemnifiable claim: ▇▇▇▇▇ ▇▇▇▇▇▇, 1 percent; E.L.
▇▇▇▇▇▇, 11.1 percent; ▇▇▇▇▇ ▇▇▇▇▇▇, 11.1 percent.
11.3 Indemnification Provisions for Benefit of Seller and
Shareholders.
(a) If Purchaser breaches any of its representations and
warranties contained in this Agreement or the Collateral Documents or any
documents, instruments and certificates delivered thereunder and if Seller makes
a written claim for indemnification against Purchaser within the Survival
Period, then Purchaser shall indemnify, defend and hold harmless Seller and its
Shareholders, directors, officers, employees, agents, successors and assigns,
from and against any Adverse Consequences that any such Person may suffer
through and after the date of the claim for indemnification (including any
Adverse Consequences that Seller and Shareholders may suffer after the end of
the Survival Period) resulting from, arising out of, relating to or caused by
the breach (or the alleged breach).
(b) Purchaser agrees to indemnify Seller and its Shareholders,
directors, officers, employees, agents, successors and assigns against the
entirety of any Adverse
33
Consequences that any such Person may suffer resulting from, arising out of,
relating to, in the nature of, or caused by any of the following: (i) any breach
of any covenant, agreement or obligation of Purchaser contained in this
Agreement or the Collateral Documents or any documents, instruments and
certifications delivered hereunder and thereunder; (ii) any act or omission of
Purchaser with respect to, or any event or circumstance related to, the
ownership or operation of the Assets or the conduct of the Business, which act,
omission, event or circumstance occurred after the Closing Date; (iii) any
Assumed Liability after the Closing Date; and (iv) any Liability for Taxes
attributable to the use, ownership or operation of the Assets or the transferred
Business by Purchaser relating to periods after the Closing Date. The
obligations of Purchaser under Section 11.3(b)(i) shall expire at the end of the
Survival Period and the obligations of Purchaser under Section 11.3(b)(ii),
(iii) and (iv) shall survive the Closing without termination.
(c) No Person otherwise entitled to indemnification under this
Section 11.3 shall be so entitled until the aggregate amount otherwise payable
under this Section exceeds $50,000, and shall then be entitled to the
indemnification only as to the excess. The right of Seller and its Shareholders,
directors, officers, employees, agents, successors and assigns to indemnity
under this Section 11.3 shall be limited to $5,000,000 in the aggregate.
11.4 Matters Involving Third Parties.
(a) If any third party shall notify either Purchaser, Seller
and/or Shareholders (the "Indemnified Party") with respect to any matter (a
"Third Party Claim") that may give rise to a claim for indemnification against
the other (the "Indemnifying Party") under this Article XI, then the Indemnified
Party shall promptly notify the Indemnifying Party thereof in writing; provided,
however, that no delay on the part of the Indemnified Party in notifying any
Indemnifying Party shall relieve the Indemnifying Party from any obligation
hereunder unless (and then solely to the extent) the Indemnifying Party thereby
is prejudiced.
(b) Any Indemnifying Party shall have the right to defend the
Indemnified Party against the Third Party Claim with counsel of its choice
reasonably satisfactory to the Indemnified Party so long as (i) the Indemnifying
Party provides the Indemnified Party with evidence acceptable to the Indemnified
Party that the Indemnifying Party will have the financial resources to defend
against the Third Party Claim and fulfill its indemnification obligations
hereunder; (ii) the Third Party Claim involves only money damages and does not
seek an injunction or other equitable relief; (iii) settlement of, or an adverse
judgment with respect to, the Third Party Claim is not, in the good faith
judgment of the Indemnified Party, likely to establish a precedential custom or
practice adverse to the continuing business interests of the Indemnified Party;
and (iv) the Indemnifying Party conducts the defense of the Third Party Claim
actively and diligently.
(c) So long as the Indemnifying Party is conducting the
defense of the Third Party Claim in accordance with Section 11.4(b) above: (i)
the Indemnified Party may retain separate co-counsel at its sole cost and
expense and participate in the defense of the Third Party Claim; (ii) the
Indemnified Party shall not consent to the entry of any judgment or enter into
any settlement with respect to the Third Party Claim without the prior written
consent of the Indemnifying Party (not to be withheld unreasonably); and (iii)
the Indemnifying Party shall not consent to the entry of any judgment or enter
into any settlement with respect to the Third Party
34
Claim without the prior written consent of the Indemnified Party (not to be
withheld unreasonably).
(d) If any of the conditions in Section 11.4(b) above is not
or no longer satisfied, however: (i) the Indemnified Party may defend against,
and consent to the entry of any judgment or enter into any settlement with
respect to, the Third Party Claim in any manner it reasonably may deem
appropriate (and the Indemnified Party need not consult with, or obtain any
consent from, any Indemnifying Party in connection therewith); (ii) the
Indemnifying Party shall reimburse the Indemnified Party promptly and
periodically for the costs of defending against the Third Party Claim (including
attorneys' fees and expenses); and (iii) the Indemnifying Party shall remain
responsible for any Adverse Consequences the Indemnified Party may suffer
resulting from, arising out of, relating to, in the nature of or caused by the
Third Party Claim to the fullest extent provided in this Article XI.
11.5 Determination of Adverse Consequences. Purchaser, Seller and
Shareholders shall take into account the time cost of money (using the
Applicable Rate as the discount rate) in determining Adverse Consequences for
purposes of this Article XI. All indemnification payments under this Article XI
shall be deemed adjustments to the Consideration.
11.6 Escrow Deposit.
(a) Delivery Prior to Closing. In the event this Agreement is
terminated by the Parties in accordance with Section 10.1(a) or by Purchaser in
accordance with Section 10.1(b) or by Seller in accordance with Section
10.1(c)(ii), then Purchaser and Seller promptly shall send a Joint Disbursement
Notice (as defined in the Escrow Agreement) to Escrow Agent instructing Escrow
Agent to transfer the Escrow Funds (as defined in the Escrow Agreement) to
Purchaser in accordance with such Joint Disbursement Notice. In the event this
Agreement is terminated by Seller in accordance with Section 10.1(c)(i), then
Purchaser and Seller promptly shall send a Joint Disbursement Notice to Escrow
Agent instructing Escrow Agent to transfer the Escrow Funds to Seller in
accordance with such Joint Disbursement Notice.
(b) Delivery After Closing. In the event that, following
Closing, Purchaser incurs Adverse Consequences for which Purchaser believes it
is entitled to indemnification from Seller in accordance with Article XI, then
promptly after Purchaser's submission to Seller of a claim for indemnification
describing in reasonable detail the nature and, to the extent then reasonably
practicable, the extent of the Adverse Consequences that Purchaser believes are
indemnifiable by Seller (an "Indemnification Notice"), and provided that there
is no dispute as to the applicability of indemnification for such Adverse
Consequences, Purchaser and Seller promptly shall send a Joint Disbursement
Notice to Escrow Agent instructing Escrow Agent to transfer to Purchaser, in
accordance with such Joint Disbursement Notice, Escrow Funds as necessary to
indemnify Purchaser for such indemnifiable Adverse Consequences. If, by the
close of business on the last calendar day of the Survival Period (or on the
next Business Day if such last calendar day is not a Business Day) ("Expiration
Date"), Seller shall not have received an Indemnification Notice from Purchaser,
then on the Business Day next following the Expiration Date, Purchaser and
Seller shall send a Joint Disbursement Notice to Escrow Agent instructing Escrow
Agent to transfer the balance of the Escrow Funds to Seller in accordance with
such Joint Disbursement Notice. If, however, Seller has received an
Indemnification Notice on or prior to
35
the Expiration Date, then Escrow Agent shall retain control over the Escrow
Funds until the Parties have resolved Purchaser's claims for indemnification,
whereupon Buyer and Seller promptly shall send a Joint Disbursement Notice to
Escrow Agent instructing Escrow Agent to transfer Escrow Funds to Buyer and/or
Seller in accordance with the Parties' resolution of such disputes.
(c) Other Remedies. The disbursement of the Escrow Funds to
Purchaser or Seller shall not preclude such Party from exercising any other
rights or remedies provided for in this Agreement or at law or equity in the
event of a breach by the other Party of its obligations under this Agreement,
including the right to seek damages or indemnification for adverse consequences
in excess of the Escrow Funds; provided, however, that notwithstanding anything
in this Agreement to the contrary, the Escrow Funds shall constitute liquidated
damages on account of Adverse Consequences incurred by Seller and its Affiliates
and their shareholders, directors, officers, employees, agents, successors and
assigns, payable to Seller in the event that Seller terminates this Agreement
pursuant to Section 10.1(c)(i), and Purchaser and its Affiliates shall not be
responsible for any Adverse Consequences in excess of the Escrow Funds.
(d) Equipment Receivables. In the event that Purchaser is
entitled to Escrow Funds pursuant to Section 9.10 and Purchaser sends to Seller
notice thereof along with supporting documentation, Purchaser and Seller
promptly shall send a Joint Disbursement Notice to Escrow Agent instructing
Escrow Agent to transfer such Escrow Funds to Purchaser.
ARTICLE XII
MISCELLANEOUS
12.1 Parties Obligated and Benefited. This Agreement shall be
binding upon the Parties and their respective assigns and successors in interest
and shall inure solely to the benefit of the Parties and their respective
assigns and successors in interest, and no other Person shall be entitled to any
of the benefits conferred by this Agreement. Without the prior written consent
of the other Party, no Party may assign this Agreement or the Collateral
Documents or any of its rights or interests or delegate any of its duties under
this Agreements or the Collateral Documents; provided, however, that Purchaser
may assign this Agreement or any of its rights or interests or delegate any of
its duties hereunder to an Affiliate.
12.2 Notices. Any notices and other communications required or
permitted hereunder shall be in writing and shall be effective upon delivery by
hand or upon receipt if sent by certified or registered mail (postage prepaid
and return receipt requested) or by a nationally recognized overnight courier
service (appropriately marked for overnight delivery) or upon transmission if
sent by telex or facsimile (with request for immediate confirmation of receipt
in a manner customary for communications of such respective type and with
physical delivery of the communication being made by one or the other means
specified in this Section 12.2 as promptly as practicable thereafter). Notices
shall be addressed as follows:
36
(a) If to Purchaser, to:
Pegasus Communications Corporation
5 Radnor Corporate Center
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
(with a copy to ▇▇▇ ▇. Lodge at the same address)
(b) If to Seller, to:
ClearVision, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Mr. ▇▇▇▇▇ ▇▇▇▇▇▇
with a copy to:
Brunini, Grantham, Grower & ▇▇▇▇▇, PLLC
1400 Trustmark Building
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esquire
Any Party may change the address to which notices are required to be sent by
giving notice of such change in the manner provided in this Section 12.2.
12.3 Attorneys' Fees. In the event of any action or suit based upon
or arising out of any alleged breach by any Party of any representation,
warranty, covenant or agreement contained in this Agreement or the Collateral
Documents, the prevailing Party shall be entitled to recover reasonable
attorneys' fees and other costs of such action or suit from the other Party.
12.4 Waiver. This Agreement or any of its provisions may not be
waived except in writing. The failure of any Party to enforce any right arising
under this Agreement on one or more occasions will not operate as a waiver of
that or any other right on that or any other occasion.
12.5 Headings. The Article and Section headings of this Agreement
are for convenience only and shall not constitute a part of this Agreement or in
any way affect the meaning or interpretation thereof.
12.6 Choice of Law. This Agreement and the rights of the Parties
under it shall be governed by and construed in all respects in accordance with
the laws of the Commonwealth of Pennsylvania, without giving effect to any
choice of law provision or rule (whether of the Commonwealth of Pennsylvania or
any other jurisdiction that would cause the application of the laws of any
jurisdiction other than the Commonwealth of Pennsylvania).
37
12.7 Rights Cumulative. All rights and remedies of each of the
Parties under this Agreement shall be cumulative, and the exercise of one or
more rights or remedies shall not preclude the exercise of any other right or
remedy available under this Agreement or applicable law.
12.8 Further Actions. Seller, Shareholders and Purchaser shall
execute and deliver to the other, from time to time at or after Closing, for no
additional consideration and at no additional cost to the requesting party, such
further assignments, certificates, instruments, records, or other documents,
assurances or things as may be reasonably necessary to give full effect to this
Agreement and to allow each party fully to enjoy and exercise the rights
accorded and acquired by it under this Agreement.
12.9 Time of the Essence. Time is of the essence under this
Agreement. If the last day permitted for the giving of any notice or the
performance of any act required or permitted under this Agreement falls on a day
which is not a Business Day, the time for the giving of such notice or the
performance of such act shall be extended to the next succeeding Business Day.
12.10 Late Payments. If either Party fails to pay the other any
amounts when due under this Agreement, the amounts due will bear interest from
the due date to the date of payment at the Applicable Rate.
12.11 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
12.12 Entire Agreement. This Agreement (including the Exhibits,
Schedules and any other documents, instruments and certificates referred to
herein, which are incorporated in and constitute a part of this Agreement)
contains the entire agreement of the Parties and supersedes all prior oral or
written agreements, understandings and representations to the extent that they
relate in any way to the subject matter hereof, including the Letter of Intent.
12.13 Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Parties. No waiver by any Party of any default, misrepresentation or breach of
warranty or covenant hereunder, whether intentional or not, shall be deemed to
extend to any prior or subsequent default, misrepresentation or breach of
warranty or covenant hereunder or affect in any way any rights arising by virtue
of any prior or subsequent such occurrence.
12.14 Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. If an ambiguity or question of
intent or interpretation arises, this Agreement shall be construed as if drafted
jointly by the parties and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any of the
provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean "including without limitation." Nothing in the
Schedules shall be deemed adequate to disclose an exception to a representation
or warranty made herein unless the Schedule identifies the exception with
particularity and describes the relevant
38
facts in detail. Without limiting the generality of the foregoing, the mere
listing (or inclusion of a copy) of a document or other item shall not be deemed
adequate to disclose an exception to a representation or warranty made herein
(unless the representation or warranty has to do with the existence of the
document or other item itself). The Parties intend that each representation,
warranty and covenant contained herein shall have independent significance. If
any Party has breached any representation, warranty or covenant contained herein
in any respect, the fact that there exists another representation, warranty or
covenant relating to the same subject matter (regardless of the relative levels
of specificity) which the Party has not breached shall not detract from or
mitigate the fact that the party is in breach of the first representation,
warranty or covenant.
12.15 Expenses. Except as otherwise provided in this Agreement, each
Party shall bear its own costs and expenses (including legal fees and expenses
and accountants' fees and expenses) incurred in connection with the negotiation
of this Agreement, the performance of its obligations and the consummation of
the transactions contemplated hereby.
12.16 Bulk Sales. Purchaser and Seller each waive compliance by the
other with bulk sales Legal Requirements applicable to the transactions
contemplated hereby.
39
IN WITNESS WHEREOF, the Parties hereto have duly executed this
Agreement as of the day and year first above written.
PEGASUS COMMUNICATIONS CORPORATION
By: /s/ ▇▇▇ ▇. Lodge
------------------------------
CLEARVISION, INC.
By: ______________________________
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/ E.L. ▇▇▇▇▇▇
------------------------------------
E.L. ▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇
40
AMENDMENT NO. 1 TO
ASSET PURCHASE AGREEMENT
This Amendment No. 1 ("Amendment") is made as of the 13th day of
February, 1997, by and among Pegasus Communications Corporation ("Purchaser"), a
Delaware corporation, ClearVision, Inc. ("Seller"), a Mississippi corporation,
and all of the shareholders ("Shareholders") of Seller. Purchaser, Seller and
Shareholders are collectively referred to herein as the "Parties."
RECITALS:
WHEREAS, Purchaser, Seller and Shareholders are parties to that certain
Asset Purchase Agreement dated as of January 25, 1997 ("Asset Purchase
Agreement"); and
WHEREAS, the Parties desire to amend the Asset Purchase Agreement as
provided herein.
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties, covenants and agreements contained herein and in
the Asset Purchase Agreement, and intending to be legally bound hereby, the
Parties agree as follows:
1. Definitions.
(a) Capitalized terms used but not defined herein shall have the
meanings assigned to them in the Asset Purchase Agreement.
(b) Subparagraph (a) of the definition of "Assumed Liabilities" in
Section 1.1 of the Asset Purchase Agreement shall be amended and
restated in its entirety to read as follows:
(a) Seller's obligations to Subscribers for: (i) Subscriber
deposits held by Seller as of the Closing Date and which are
refundable, in the amount for which Purchaser receives
credit under Section 2.5; (ii) Subscriber deferred or
prepaid income or unearned revenue held by Seller as of the
Closing Date for services to be rendered by the Business
after the Closing Date, in the amount for which Purchaser
receives credit under Section 2.5; (iii) obligations to pay
$200 in cash to Subscribers upon presentation by such
Subscribers of Cash Back Offer certificates (but
specifically excluding DIRECTV programming credits under the
Cash Back Offer program which shall be treated in accordance
with Section 2.5(a)(iii) and shall constitute assumed
liabilities in accordance with (a)(ii) above) ("Cash
Rebates"); (iv) the delivery of DIRECTV services to
subscribers of the Business after the Closing Date;
(c) The definition of "Estimated Current Liabilities" in Section
1 of the Asset Purchase Agreement shall be amended and
restated in its entirety to read as follows:
"Estimated Current Liabilities" mean Liabilities from the
operations of the Business incurred in the Ordinary Course
which (i) are estimated to be payable by the Business in the
future to, but not yet invoiced by, the NRTC on account of
the period prior to Closing; and (ii) the Parties agree are
to be assumed by Purchaser hereunder (other than the
Equipment Financing Facility which shall not be assumed by
Purchaser) and are estimated as of the Closing Date and set
forth on the Estimated Current Liabilities Schedule (which
include items identified on Schedule 1.1(a), and exclude any
Liabilities on account of Subscriber deposits and deferred
or prepaid income or unearned revenue, which shall be set
forth on the Estimated Operating Adjustments Schedule, and
any Liabilities on account of the Cash Rebates).
2. Escrow Arrangements. Section 2.3 of the Asset Purchase Agreement
shall be amended and restated in its entirety to read as follows:
2.3 Escrow Arrangements. Within three Business Days of execution of
this Agreement by the parties, Purchaser shall pay to the Escrow
Agent a portion of the Purchase Price equal to $280,000, and at
Closing Purchaser shall pay to the Escrow Agent an additional
portion of the Purchase Price equal to $95,000 (the two payments
being referred to herein as "Escrow Deposit"), which Escrow
Deposit shall be held by the Escrow Agent pursuant to the terms
and conditions of the Escrow Agreement and applied in accordance
with Section 11.6.
-2-
3. Operating Adjustments.
(a) Section 2.5(a)(iii) of the Asset Purchase Agreement shall be
amended and restated in its entirety to read as follows:
iii. All deferred or prepaid income or unearned revenue as of
the Closing Date constitute a corresponding decrease in the
Purchase Price credited to the account of Purchaser
(excluding any adjustment on account of the Cash Rebates).
(b) The following shall be added to Section 2.5(a) of the Asset
Purchase Agreement:
viii. Seller shall receive a Purchase Price increase equal to
$30 multiplied by the number of Subscribers participating
in the Cash Back Offer program between commencement of the
Cash Back Offer program and Closing.
4. Closing. Section 2.7 of the Asset Purchase Agreement shall be
amended and restated in its entirety to read as follows:
2.7 Closing. The Closing of the Transactions contemplated by this
Agreement and the Collateral Documents ("Closing") shall take
place at the offices of Purchaser, or at such other location as
the parties may agree on the next billing cycle cut-off date or
on such date as the Parties may otherwise agree after
satisfaction of all conditions precedent to Closing set forth in
Articles VII and VIII, but not later than March 15, 1997
("Closing Date").
5. Equipment Receivables. Section 9.10 of the Asset Purchase Agreement
shall be amended and restated in its entirety to read as follows:
9.10 Equipment Receivables. In the event that Purchaser writes off
Equipment Receivables during the Survival Period, other than
write-offs relating to Equipment Receivables not more than 35
days outstanding for which Subscribers have not initiated
contact with Purchaser about terminating service ("Equipment
Receivables Write-Offs"), Purchaser shall be entitled to
-3-
receive Escrow Funds during the Survival Period on a periodic
basis equal to 50 percent of the Equipment Receivables
Write-Offs in excess of the Equipment Receivables Margin;
provided that Purchaser shall in no event be entitled to more
than $375,000 of Escrow Funds under this Section 9.10. The
amount of Equipment Receivables Write-Offs shall reduced
dollar for dollar by Purchaser's receipts of late fees,
reconnect fees and lifetime service contract fees from
Subscribers who are Equipment Receivables customers.
"Equipment Receivables Margin" means the difference between
the amount owed under Equipment Receivables at the Closing
Date that are not more than 120 days past due and the
Equipment Receivables Price. Purchaser's decisions to write
off Equipment Receivables during the Survival Period and
policies related thereto shall be made in good faith in
accordance with prudent business judgment related to
collectibility of the Equipment Receivables and retention of
Subscribers, and not with a view principally to obtain the
benefits of this Section 9.10.
6. Dating of Certain Closing Documents. The Parties agree that the
documents described as numbers 6, 10, 11, 12, 14, 17, 20, 21, 22,
26, 28, and 29 on the Closing Checklist attached hereto as Exhibit
A, originally dated February 7, 1997, may be redated February 14,
1997, by interlineation.
7. Entire Agreement. This Amendment constitutes part of the Asset
Purchase Agreement and amends only those provisions of the Asset
Purchase Agreement specifically referenced herein; all other
provisions of the Asset Purchase Agreement shall remain in fall
force and effect. This Amendment along with the Asset Purchase
Agreement (including the Exhibits and Schedules thereto and any
other documents, instruments and certificates referred to therein)
contains the entire agreement of the Parties.
-4-
IN WITNESS WHEREOF, the Parties hereto have duly executed this
Amendment as of the day and year first above written.
PEGASUS COMMUNICATIONS CORPORATION
By: /s/ ▇▇▇ ▇. Lodge
-------------------------------------------
CLEARVISION, INC.
By:
-------------------------------------------
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/ E.L. ▇▇▇▇▇▇
-------------------------------------------
E.L. ▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇
-5-
ASSET PURCHASE AGREEMENT
BY AND AMONG
PEGASUS COMMUNICATIONS CORPORATION
AND
CLEARVISION, INC., AND ITS SHAREHOLDERS
January 25, 1997
Closing Checklist
-----------------
==========================================================================================================================
Contract
Number Item Reference
==========================================================================================================================
1. Equipment Receivables p.4; ss. 7.4(viii)
Closing Schedule
--------------------------------------------------------------------------------------------------------------------------
2. Estimated Current p. 5
Liabilities Schedule
--------------------------------------------------------------------------------------------------------------------------
3. Estimated Operating p. 5
Adjustment Schedule
--------------------------------------------------------------------------------------------------------------------------
4. Closing Accounts ss. 2.2
Receivable
--------------------------------------------------------------------------------------------------------------------------
5. Release of Equipment ss. 5.9
Financing Facility
--------------------------------------------------------------------------------------------------------------------------
6. Seller's Certificate ss.ss.7.1 and 7.2
--------------------------------------------------------------------------------------------------------------------------
7. NRTC Approval ss.ss.7.3 and 8.3
--------------------------------------------------------------------------------------------------------------------------
8. ▇▇▇▇▇▇ Galaxy Approval ss.ss.7.3 and 8.3
--------------------------------------------------------------------------------------------------------------------------
9. Escrow Agreement ss.ss.7.4(i) and 8.4(i)
--------------------------------------------------------------------------------------------------------------------------
10. Consultancy Agreement ss. 7.4(ii)
--------------------------------------------------------------------------------------------------------------------------
11. Noncompetition ss. 7.4(iii)
Agreement
--------------------------------------------------------------------------------------------------------------------------
12. ▇▇▇▇ of Sale and ss. 7.4(iv)
Assignment
--------------------------------------------------------------------------------------------------------------------------
13. BGGH Opinion ss. 7.4(v)
--------------------------------------------------------------------------------------------------------------------------
14. HSR Certificate ss. 7.4(vi)
--------------------------------------------------------------------------------------------------------------------------
15. DGNB Payoff Statement ss. 7.4(vii)
--------------------------------------------------------------------------------------------------------------------------
16. Schedule re Subscribers ss. 7.4(ix)
--------------------------------------------------------------------------------------------------------------------------
17. Sublease ss. 7.8
--------------------------------------------------------------------------------------------------------------------------
"A-1"
==========================================================================================================================
Contract
Number Item Reference
==========================================================================================================================
--------------------------------------------------------------------------------------------------------------------------
18. NRTC Compliance ss. 7.9
Certificate
--------------------------------------------------------------------------------------------------------------------------
19. Dealer Arrangement ss. 7.10
Terminations
--------------------------------------------------------------------------------------------------------------------------
20. Buyer's Certificate ss.ss.8.1 and 8.2
--------------------------------------------------------------------------------------------------------------------------
21. Assumption Agreement ▇▇.▇▇. 8.4(ii)
--------------------------------------------------------------------------------------------------------------------------
22. Lodge Opinion ▇▇.▇▇. 8.4(iii)
--------------------------------------------------------------------------------------------------------------------------
23. Closing Statement ss. 2.2
--------------------------------------------------------------------------------------------------------------------------
24. Updated Schedules ss. 5.8
--------------------------------------------------------------------------------------------------------------------------
25. Good Standing
Certificate of
ClearVision, Inc.
--------------------------------------------------------------------------------------------------------------------------
26. Secretary's Certificate
of ClearVision, Inc.,
as to incumbency &
authority, accompanied
by authorizing
resolutions
--------------------------------------------------------------------------------------------------------------------------
27. Good Standing
Certificates of Pegasus
Communications Corp. &
Pegasus Satellite
Television of MS, Inc.
--------------------------------------------------------------------------------------------------------------------------
28. Secretary's
Certificates of Pegasus
Communications Corp. &
Pegasus Satellite
Television of MS, Inc.,
as to incumbency &
authority, accompanied
by authorizing
resolutions
--------------------------------------------------------------------------------------------------------------------------
29. Assignment of Asset
Purchase Agreement from
Pegasus Communications
Corp. & Pegasus
Satellite Television of
MS, Inc.
--------------------------------------------------------------------------------------------------------------------------
"A-2"
==========================================================================================================================
Contract
Number Item Reference
==========================================================================================================================
--------------------------------------------------------------------------------------------------------------------------
30. Wire Transfer
Instructions from
ClearVision, Inc.
==========================================================================================================================
Post-Closing Items
==========================================================================================================================
Contract
Number Item Reference Due Date Responsibility
==========================================================================================================================
1. Current Liabilities ss.2.4 45 days Pegasus
Adjustment
--------------------------------------------------------------------------------------------------------------------------
2. Operating Adjustment ss.2.5 60 days Pegasus
--------------------------------------------------------------------------------------------------------------------------
3. Audit Report ss.9.6 45 days ▇▇▇▇▇
--------------------------------------------------------------------------------------------------------------------------
4. Monthly Financials ss.9.6 60 days ▇▇▇▇▇
--------------------------------------------------------------------------------------------------------------------------
5. Commissions Owned to ss.9.9 180 days Pegasus
ClearVision
==========================================================================================================================
"A-3"