EXHIBIT 10.26
LIMITED LIABILITY COMPANY INTEREST
PURCHASE AND SALE AGREEMENT
BY AND BETWEEN
WAVE DIVISION NETWORKS, LLC
AND
NORTHLAND CABLE TELEVISION, INC.
DATED AS OF
OCTOBER 28, 2002
CONTENTS
1. Definitions.................................................................................. 2
1.1 Defined Terms....................................................................... 2
1.2. Other Definitions................................................................... 7
1.3 Usage............................................................................... 10
2. Asset Drop Down.............................................................................. 10
3. Consideration................................................................................ 11
3.1 Purchase Price...................................................................... 11
3.2 The Holdback........................................................................ 11
3.3 Adjustments to Purchase Price....................................................... 12
3.4 Determination of Adjustments........................................................ 13
3.5 Seller Liquidation.................................................................. 14
3.6 Allocation of Consideration......................................................... 15
4. Assumed Liabilities, Excluded Assets and Advertising Assets.................................. 15
4.1 Assignment and Assumption........................................................... 15
4.2 Excluded Assets..................................................................... 16
4.3 Advertising Assets.................................................................. 17
5. Representations and Warranties of Seller..................................................... 18
5.1 Organization and Qualification...................................................... 18
5.2 Authority and Validity.............................................................. 18
5.3 No Breach or Violation.............................................................. 18
5.4 Assets.............................................................................. 19
5.5 Governmental Permits................................................................ 20
5.6 Seller Contracts.................................................................... 20
5.7 Real Property....................................................................... 21
5.8 Environmental Matters............................................................... 22
5.9 Compliance with Law................................................................. 23
5.10 Patents, Trademarks and Copyrights.................................................. 25
5.11 Financial Statements and Solvency................................................... 26
5.12 Legal Proceedings................................................................... 26
5.13 Tax Returns......................................................................... 27
5.14 Employment Matters.................................................................. 27
5.15 System Information.................................................................. 29
5.16 Finders and Brokers................................................................. 30
5.17 Accounts Receivable................................................................. 30
5.18 Franchise Renewal Rights............................................................ 30
5.19 Bonds............................................................................... 31
5.20 Required Consents................................................................... 31
5.21 Disclosure.......................................................................... 31
6. Buyer's Representations and Warranties....................................................... 31
6.1 Organization and Qualification...................................................... 32
PAGE i
6.2 Authority and Validity.............................................................. 32
6.3 No Breach or Violation.............................................................. 32
6.4 Financial Capability of Buyer....................................................... 32
6.5 Finders and Brokers................................................................. 33
7. Additional Covenants......................................................................... 33
7.1 Access to Premises and Records...................................................... 33
7.2 Continuity and Maintenance of Operations; Financial Statements...................... 33
7.3 Employee Matters.................................................................... 36
7.4 Required Consents and Franchise Renewals and Extensions............................. 38
7.5 Title Commitments and Policies...................................................... 40
7.6 No Shopping......................................................................... 40
7.7 Notification of Certain Matters..................................................... 41
7.8 Risk of Loss; Condemnation.......................................................... 41
7.9 Lien and Judgment Searches.......................................................... 43
7.10 Transfer Taxes...................................................................... 43
7.11 Updated Schedules................................................................... 44
7.12 Use of Seller's Name................................................................ 44
7.13 Subscriber Billing Services......................................................... 45
7.14 Certain Notices..................................................................... 45
7.15 Satisfaction of Conditions.......................................................... 45
7.16 Confidentiality..................................................................... 46
7.17 Covenant Not to Compete............................................................. 46
7.18 Retention of Books and Records...................................................... 47
7.19 Tax Matters......................................................................... 47
7.20 Advertising Services................................................................ 49
7.21 Post-Closing Arrangements........................................................... 50
8. Closing...................................................................................... 50
9. Conditions to Closing........................................................................ 51
9.1 Conditions to the Obligations of Buyer and Seller................................... 51
9.2 Conditions to the Obligations of Buyer.............................................. 51
9.3 Conditions to Obligations of Seller................................................. 53
10. Termination.................................................................................. 55
10.1 Events of Termination............................................................... 55
10.2 Liabilities in Event of Termination................................................. 57
10.3 Procedure Upon Termination.......................................................... 57
11. Survival of Representations and Warranties; Indemnification.................................. 58
11.1 Survival of Representations and Warranties.......................................... 58
11.2 Indemnification by Seller........................................................... 58
11.3 Indemnification by Buyer............................................................ 59
11.4 Limitations on Indemnity............................................................ 60
11.5 Third Party Claims.................................................................. 61
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11.6 Payments for Indemnification Amounts................................................ 62
11.7 Exclusive Remedy.................................................................... 62
12. Miscellaneous................................................................................ 62
12.1 Parties Obligated and Benefited..................................................... 62
12.2 Attorneys' Fees..................................................................... 62
12.3 Notices............................................................................. 63
12.4 Waiver.............................................................................. 64
12.5 Captions............................................................................ 64
12.6 Choice of Law....................................................................... 64
12.7 Further Actions..................................................................... 64
12.8 Time................................................................................ 64
12.9 Late Payments....................................................................... 65
12.10 Counterparts........................................................................ 65
12.11 Entire Agreement.................................................................... 65
12.12 Severability........................................................................ 65
12.13 Construction........................................................................ 65
12.14 Expenses............................................................................ 65
12.15 Right to Specific Performance....................................................... 65
12.16 Rights Cumulative................................................................... 66
PAGE iii
EXHIBITS:
Exhibit A - Form of Certificate of Formation
Exhibit B - Form of Statutory Warranty Deed
Exhibit C - Form of ▇▇▇▇ of Sale & Assignment and Assumption
Agreement
Exhibit D - Form of Lease Assignment
Exhibit E - Form of LLC Interest Assignment and Assumption,
including Manager Consent, Manager Resignation,
Manager Appointment and Manager Acceptance
Exhibit F - Form of FIRPTA Certificate
Exhibit G - Form of Holdback Agreement
Exhibit H - Intentionally Deleted
Exhibit I - Form of Noncompetition Agreement
SCHEDULES:
Schedule 1 - System
Schedule 2 - Governmental Permits
Schedule 3 - Seller Contracts
Schedule 4 - Required Consents
Schedule 5 - Equipment
Schedule 6 - Real Property
Schedule 7 - Encumbrances
Schedule 4.2 - Excluded Assets
Schedule 4.3 - Advertising Assets
Schedule 5.4 - Affiliate Assets
Schedule 5.9.6 - Compliance with Legal Requirements
Schedule 5.9.7 - Towers
Schedule 5.12 - Litigation
Schedule 5.13 - Tax Matters
Schedule 5.14.1 - System Employees
Schedule 5.14.2 - Seller's Plans
Schedule 5.14.3 - Union and Employment Contracts
Schedule 5.15.1 - System Information
Schedule 5.15.2 - System Rate Cards and Channel Lineups
Schedule 5.17 - Accounts Receivable Exceptions
Schedule 5.19 - Bonds
Schedule 7.12 - Trademark Guidelines
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LIMITED LIABILITY COMPANY INTEREST
PURCHASE AND SALE AGREEMENT
This Limited Liability Company Interest Purchase and Sale Agreement
(this "AGREEMENT") is made as of the 28th day of October, 2002, by and between
Wave Division Networks, LLC, a Washington limited liability company ("BUYER"),
and Northland Cable Television, Inc., a Washington corporation ("SELLER").
RECITALS
A. Seller owns and operates a cable television Business (as
defined herein) that includes franchises in Clallam County, Washington and the
City of Port Angeles, Washington and other Assets (as defined herein).
B. Seller will contribute all of the Asset to a newly formed
limited liability company.
C. Buyer wishes to purchase, and Seller wishes to sell, all of
the membership and any other ownership interests in the newly formed limited
liability company, subject to the terms and conditions set forth herein.
D. Buyer's obligation to purchase of the membership interests in
the limited liability company shall be conditioned upon Buyer's simultaneous
purchase of all of the membership interests in another limited liability company
into which Northland Cable Properties Seven Limited Partnership shall have
contributed certain of its assets pertaining to the cable television systems it
owns and operates in the cities of Sequim and Stanwood, Washington and the
counties of Clallam, Skagit, Whatcom, Island and Snohomish, Washington (the
"NCP7 SYSTEM") pursuant to a Limited Liability Company Interest Purchase and
Sale Agreement entered into on this same date (the "NCP7 AGREEMENT") and Buyer's
purchase of all of the membership interests in another limited liability company
into which Northland Cable Television Inc. shall have contributed certain of its
assets pertaining to the cable television systems it owns and operate in the
County of Skagit, Washington, the Town of La Conner, Washington, the Swinomish
Indian Tribal Community, Washington and the Shelter Bay Community, Inc.,
Washington (the "NCP8 SYSTEM") pursuant to a Limited Liability Company Interest
Purchase and Sale Agreement entered into of this same date (the "NCP8
AGREEMENT"). (The System (as defined herein) and the NCP7 and NCP8 Systems shall
be collectively referred to as the "NORTHLAND SYSTEMS.")
AGREEMENT
In consideration of the above recitals and the mutual agreements stated
in this Agreement, the parties agree as follows:
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1. DEFINITIONS
1.1 DEFINED TERMS
In addition to terms defined elsewhere in this Agreement, the following
capitalized terms, when used in this Agreement, will have the meanings set forth
below:
"AFFILIATE" shall mean with respect to any Person, any other
Person controlling, controlled by or under common control with such Person, with
"control" for such purpose meaning 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. Without limiting the foregoing, Northland
Telecommunications Corporation, Northland Cable Properties Eight Limited
Partnership, Northland Communications Corp. Inc., Northland Cable Television
Inc., Northland Cable Properties, Inc. and the Principals shall be considered
Affiliates of Seller.
"ASSETS" shall mean all properties, privileges, rights,
interests and claims, real and personal, tangible and intangible, of every type
and description that are owned, leased, held, used or useful in the Business
including those in which Seller or the LLC has any right, title or interest or
in which Seller or the LLC acquires any right, title or interest on or before
the Closing Date, including Governmental Permits, Intangibles, Seller Contracts,
Equipment, Books and Records, Real Property and deposits relating to the
Business that are held by third parties for the account of Seller or for
security for Seller's performance of its obligations, but excluding any Excluded
Assets.
"BASIC SERVICES" shall mean the Basic Services, as described
in SCHEDULE 5.15.2.
"BASIC SUBSCRIBERS" shall mean any customer account that is
billed by individual unit and pays the standard monthly rate (without discount)
for Basic Service as set forth in SCHEDULE 5.15.2.
"BOOKS AND RECORDS" shall mean all engineering records, files,
data, drawings, blueprints, schematics, reports, lists, plans and processes and
all other files of correspondence, lists, records and reports concerning the
Business or the LLC, whether in tangible or intangible form or embodied in any
electronic or other format, including subscribers and prospective subscribers of
the System, signal and program carriage and dealings with Governmental
Authorities with respect to the System, including all reports filed with respect
to the System by or on behalf of Seller or any of its Affiliates with the FCC
and statements of account filed with respect to the System by or on behalf of
Seller or any of its Affiliates with the U.S. Copyright Office, but excluding
all documents, reports and records relating to the employees of the System.
"BROADCAST BASIC SERVICES" shall mean the Broadcast Basic
Services, as described in SCHEDULE 5.15.2.
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"BROADCAST BASIC SUBSCRIBERS" shall mean any customer account
that is billed by individual unit and pays the standard monthly rate (without
discount) for Broadcast Basic Service as set forth in SCHEDULE 5.15.2.
"BUSINESS" shall mean the cable television business and all of
the activities and operations ancillary thereto and as described in the Book,
including the provision of cable modem internet access services, advertising
services and other income generating businesses, conducted or carried on through
the System in the Service Areas.
"BUSINESS DAY" shall mean any day other than Saturday, Sunday
or a day on which banking institutions in Seattle, Washington are required or
authorized to be closed.
"CABLE ACT" shall mean the Communications Act of 1934, as
amended, and all other provisions of the Cable Communications Policy Act of 1984
and the Cable Television Consumer Protection and Competition Act of 1992, and
the Telecommunications Act of 1996, as each may be amended from time to time,
and the FCC rules, regulations and policies promulgated thereunder.
"CLOSING" shall mean the consummation of the transactions
contemplated by this Agreement, as described in SECTION 2.2.
"CLOSING DATE" shall mean the date upon which Closing occurs.
"CLOSING TIME" shall mean 11:59 p.m., local time on the
Closing Date.
"ENCUMBRANCE" shall mean any mortgage, lien, security
interest, security agreement, conditional sale or other title retention
agreement, limitation, pledge, option, charge, assessment, restrictive
agreement, restriction, encumbrance, adverse interest, restriction on transfer
or any exception to or defect in title or other ownership interest (including
reservations, rights of way, possibilities of reverter, encroachments,
easements, rights of entry, restrictive covenants, leases and licenses).
"ENVIRONMENTAL LAW" shall mean any Legal Requirement relating
to pollution or protection of public or employee health, safety or welfare or
the environment, including those relating to emissions, discharges, releases or
threatened releases of Hazardous Substances into the environment (including
ambient air, surface water, ground water or land), or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Substances.
"EQUIPMENT" shall mean all electronic devices, trunk and
distribution coaxial and optical fiber cable, amplifiers, power supplies,
conduit, vaults and pedestals, grounding and pole hardware, subscriber's devices
(including converters, encoders, transformers behind television sets and
fittings), headend hardware (including origination, earth stations, transmission
and distribution system), test equipment, vehicles, towers, tower equipment,
microwave equipment, office equipment, computers, billing equipment, furniture,
fixtures,
PAGE 3
supplies, inventory and other tangible personal property owned, leased, used or
held for use in the Business.
"EQUIVALENT BASIC SUBSCRIBERS" (or "EBSs") shall mean, as of
any date of determination, the sum (without duplication) of (i) the number of
Basic Subscribers of the System; (ii) the number of Broadcast Basic Subscribers
of the System not otherwise included as Basic Subscribers but in no event shall
more than 275 Broadcast Basic Subscribers (the "BROADCAST BASIC LIMIT") be
included for purposes of this clause (ii); and (iii) the number that is obtained
by dividing (A) the aggregate monthly ▇▇▇▇▇▇▇▇ for the most recent billing
period ended prior to the date of determination for (1) each commercial
establishment or multiple dwelling unit that pays a bulk rate for Basic Services
and (2) each Broadcast Basic Subscriber in excess of the Broadcast Basic Limit
(excluding, in all cases for purposes of the preceding clauses (1) and (2) any
charges for premium service, pay-per-view programming, a la carte tiers, digital
tiers, internet access, franchise fees and any other pass through items, taxes,
second connects, additional outlets, installation fees, deposits and other
non-recurring items and any charges for rental converters, remote control
devices and other like charges for equipment), by (B) the non-discounted monthly
rate for Basic Services in effect during such billing period (which rate will
not be less than the applicable current rate charged by the System as of the
date of this Agreement and set forth in SCHEDULE 5.15.2). The number of
Equivalent Basic Subscribers of a System shall not include any Basic Subscriber,
Broadcast Basic Subscriber or commercial or bulk account which (I) has not
received and paid in full for at least one (1) full month of Basic Service in
the case of Basic Subscribers, one (1) full month of Broadcast Basic Service in
the case of Broadcast Basic Subscribers and one (1) full month at the bulk rates
in the case of commercial establishment and multiple dwelling unit subscribers
obligated to pay bulk rates at the Systems' standard rates as of the date of
determination, (II) is more than sixty (60) days delinquent in payment for any
service provided by the System, with a balance in excess of $7.50, (III) is
pending disconnection for any reason, or (IV) was solicited during the sixty
(60) day period preceding Closing by extraordinary promotions or offers, or
discounts. For purposes of this definition, payments on account of monthly
▇▇▇▇▇▇▇▇ will be deemed due on the first day of the period for which the service
to which such ▇▇▇▇▇▇▇▇ relate is provided. In determining the number of
Equivalent Basic Subscribers, the calculation shall be made using customer and
billing data as of the most recent date for which reasonably accurate
information is available, but in no event any earlier than the end of the most
recent billing period
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended, and the rules and regulations promulgated thereunder and
published interpretations with respect thereto.
"ERISA AFFILIATE" shall mean any corporation, partnership,
limited liability company, sole proprietorship, trade, business or other entity
or organization that, together with Seller, is or was treated as a single
employer under Section 414(b), (c), (m) or (o) of the Code, or as under "common
control" within the meaning of Section 4001(a)(14) of ERISA.
"FCC" shall mean the Federal Communications Commission.
PAGE 4
"GAAP" shall mean generally accepted accounting principles,
consistently applied, as in effect from time to time in the United States of
America.
"GOVERNMENTAL AUTHORITY" shall mean (a) the United States of
America, (b) any state, commonwealth, territory or possession of the United
States of America and any political subdivision thereof (including counties,
municipalities and the like), (c) any foreign (as to the United States of
America) sovereign entity and any political subdivision thereof, or (d) any
agency, authority or instrumentality of any of the foregoing, including any
court, tribunal, department, bureau, commission or board.
"GOVERNMENTAL PERMITS" shall mean all franchises, approvals,
authorizations, permits, licenses, easements, registrations, qualifications,
leases, variances and similar rights obtained from any Governmental Authority in
connection with the Business.
"HAZARDOUS SUBSTANCES" shall mean any pollutant, contaminant,
chemical, industrial, toxic, hazardous or noxious substance or waste which is
regulated by any Governmental Authority, including (a) any petroleum or
petroleum compounds (refined or crude), flammable substances, explosives,
radioactive materials or any other materials or pollutants which pose a hazard
or potential hazard to the Real Property or to Persons in or about the Real
Property or cause the Real Property to be in violation of any laws, regulations
or ordinances of federal, state or applicable local governments; (b) asbestos or
any asbestos-containing material of any kind or character; (c) polychlorinated
biphenyls (PCBs), as regulated by the Toxic Substances Control Act, 15 U.S.C.
Section 2601 et seq., as amended, and the rules and regulations promulgated
thereunder; (d) any materials or substances designated as "hazardous substances"
pursuant to the Clean Water Act, 33 U.S.C. Section 1251 et seq., as amended, and
the rules and regulations promulgated thereunder; (e) "economic poison," as
defined in the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C.
Section 135 et seq., as amended, and the rules and regulations promulgated
thereunder; (f) "chemical substance," "new chemical substance" or "hazardous
chemical substance or mixture" pursuant to the Toxic Substances Control Act, 15
U.S.C. Section 2601 et seq., as amended, and the rules and regulations
promulgated thereunder; (g) "hazardous substances" pursuant to the Comprehensive
Environmental Response, Compensation, and Liability Act, 42 U.S.C. Section 9601
et seq., as amended, and the rules and regulations promulgated thereunder; (h)
"hazardous waste" pursuant to the Resource Conservation and Recovery Act, 42
U.S.C. Section 6901 et seq., as amended, and the rules and regulations
promulgated thereunder; and (i) any substance regulated under the provisions of
any Legal Requirement pertaining to underground storage tanks.
"INTANGIBLES" shall mean all intangible assets, including
subscriber lists, accounts receivable, claims (excluding any claims relating to
Excluded Assets), causes of action (unless identified as an Excluded Asset),
copyrights, going concern value and goodwill, if any, owned, used or held for
use in the Business.
PAGE 5
"LEGAL REQUIREMENT" shall mean any statute, ordinance, code,
law, rule, regulation, order 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.
"LOSSES" shall mean any and all damage, loss, liability,
obligation, deficiency and expense (including, without limitation, reasonable
expenses of investigation and reasonable attorneys' fees and expenses in
connection with any action, suit or proceeding).
"PAY TV" shall mean premium programming services selected by
and sold to subscribers on an a la carte basis for monthly fees in addition to
the fee for Basic Service or Broadcast Basic Service.
"PERMITTED ENCUMBRANCES" shall mean the following
Encumbrances: (a) liens for taxes, assessments and governmental charges not yet
due and payable or being contested in good faith by appropriate proceedings; (b)
zoning laws and ordinances and similar Legal Requirements; (c) rights reserved
to any Governmental Authority to regulate the affected property; (d) as to Real
Property interests, any easements, rights-of-way, servitudes, permits,
restrictions and minor imperfections or irregularities in title whether or not
reflected in the public records and which do not individually or in the
aggregate interfere with the right or ability to own, use or operate the Real
Property as it is currently being used or operated by Seller in the ordinary
course of business, and which do not materially impair the value or use of the
Real Property as it is currently being used by Seller in the ordinary course of
business; and (e) any Assumed Liability (as defined in SECTION 4.1) to the
extent also an Encumbrance. Liens to be released and discharged in full at or
prior to Closing, which are listed in SCHEDULE 7, shall be considered Permitted
Encumbrances prior to Closing but not at or after Closing. Permitted
Encumbrances will not include any item which could adversely affect in any
material way the conduct of the Business.
"PERSON" shall mean any natural person, corporation,
partnership, trust, unincorporated organization, association, limited liability
company, Governmental Authority or other entity.
"PRINCIPALS" shall mean ▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇.
"REAL PROPERTY" shall mean all assets consisting of realty
that are owned, leased, held, used or useful in the Business, including
appurtenances, improvements and fixtures located on such realty, and any other
interests in real property, including fee interests, leasehold interests and
easements, wire crossing permits, and rights of entry (except agreements related
to multiple dwelling units) including those described on SCHEDULE 3.
"REQUIRED CONSENTS" shall mean all authorizations, approvals
and consents required under Governmental Permits, Seller Contracts or otherwise
for Seller to transfer the
PAGE 6
Assets and the Business to the LLC, for the LLC to perform and discharge the
Assumed Liabilities after the Contribution Date and for the LLC Interest to be
conveyed to Buyer.
"SELLER CONTRACTS" shall mean all contracts and agreements,
written and oral, leases, licenses, private easements, rights of way, rights of
access, pole line or pole attachment agreements, joint line agreements,
underground conduit agreements, wire or cable crossing agreements, contracts
with subscribers, programming agreements, bulk and commercial service
agreements, other than Governmental Permits, pertaining to the ownership,
operation and maintenance of the Assets or the Business or used or held for use
in the Business.
"SERVICE AREA" shall mean Clallam County, WA
"SYSTEM" shall mean the cable television reception and
distribution system owned and operated in the conduct of the Business. The
System consists of one or more headends, subscriber drops and associated
electronic and other equipment, and is, or is capable of being without
modification, operated as an independent system without interconnections to
other systems. SCHEDULE 1 describes the System by headend location and city,
town, county or other political subdivision served by such headend.
"TAXES" shall mean any and all governmental or
quasi-governmental fees (including, without limitation, license, filing and
registration fees), taxes (including, without limitation, income, gross
receipts, franchise, sales, use, property, real or personal, tangible or
intangible taxes), interest equalization and stamp taxes, assessments, levies,
imposts, duties, charges, required contributions or withholdings of any kind or
nature whatsoever, including without limitation, income, capital, excise,
employment, occupancy, property, ad valorem, sales, transfer, recording,
documentary, registration, motor vehicle, franchise use and gross receipts taxes
imposed by any Governmental Authority, together with any and all penalties,
fines or interest thereon or additions attributable thereto. For purposes of
determining any Tax cost or Tax benefit to any person, such amount will be the
actual cost or benefit recognized by such person at the time of actual
recognition of the Tax benefit.
"THIRD PARTY" shall mean, with respect to Seller, any Person
other than Seller and its Affiliates and, with respect to Buyer, any Person
other than Buyer and its Affiliates.
1.2. OTHER DEFINITIONS
The following terms are defined in the Sections indicated:
DEFINED TERM SECTION REFERENCE
------------ -----------------
Action 11.2.1
Adjustment Deposit 3.5
Advertising Assets 4.3
Agreement Preamble
Applicable Franchises 5.18
Asset Drop Down 2.2
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DEFINED TERM SECTION REFERENCE
------------ -----------------
Assumed Liabilities 4.1
Base Purchase Price 3.1
Book 7.6
Broadcast Basic Limit Definition of Equivalent
Basic Subscriber
Buyer Preamble
Buyer's Closing Notice 8
Buyer 394 Information 7.4.2
Buyer's Consent Contribution 7.4.1
Buyer's Indemnification Threshold 11.4.1
Code 5.14.2
Commitment Letters 10.1.7
Consent and Extension Deadline 10.1.2
Consent Fees 7.4.1
Contribution Date 2.2
Cost of Service Election 5.9.6
Distribution Date 3.2
DOL 5.14.2
Due Diligence Deadline 10.1.6
Escrow Agent 3.2
Escrow Agreement 3.2
Excluded Advertising Receivables 4.2
Excluded Assets 4.2
Excluded Liabilities 11.4.1
Extension Request 7.4.3
FAA 5.9.3
Final Adjustments Report 3.4.2
Financial Statements 5.11
Financing Deadline 10.1.7
Franchise Extensions 7.4.3
Holdback 3.1
Indemnification Ceiling 11.4.2
Indemnified Party 11.5
Indemnifying Party 11.5
IRS 5.14.2
Liquidation Notice 3.5
LLC 2.1
LLC Interest 3.1
NCP7 Agreement Recital D
NCP7 System Recital D
NCP8 Agreement Recital D
NCP8 System Recital D
PAGE 8
DEFINED TERM SECTION REFERENCE
------------ -----------------
Noncompetition Agreement 7.17.4
Northland Systems Recital D
One Year Survival Period 11.1
Other Party 7.19.4
Post-Closing Consent Arrangement 7.21
Preliminary Adjustments Report 3.4.1
Preparer 7.19.4
Prime Rate 11.6
Purchase Price 3.1
Restricted Business 7.17.1
Retained Employees 7.3.1
Retained Liabilities 4.1
Revenue Ruling 7.10
Sales Tax Returns 7.10
Sales Taxes 7.10
Seller Preamble
Seller Marks 7.12
Seller's Indemnification Threshold 11.4.1
Seller's Objection Notice 3.4.3
Seller's Plans 5.14.2
Split Period 7.19.1
Statement 7.19.4
Surveys 7.5
Survival Period 11.1
System Employee 5.14.1
Taking 7.8.4
Tax Arbitrator 7.19.4
Title Commitments 7.5
Title Company 7.5
Title Defect 7.5
Title Policies 7.5
Transaction Documents 5.2
Transferred Employees 7.3.1
Transfer Request Filing Deadline 7.4.2
Transitional Billing Services 7.13
Voluntarily Discharge 7.19.5
WARN 5.14.1
1.3 USAGE
The definitions in Article 1 shall apply equally to both the singular
and plural forms of the terms defined. Whenever the context may require, any
pronoun shall include the
PAGE 9
corresponding masculine, feminine and neuter forms. All references herein to
Articles, Sections, Exhibits and Schedules shall be deemed to be references to
Articles and Sections of, and Exhibits and Schedules to, this Agreement unless
the context shall otherwise require. All Exhibits and Schedules attached hereto
shall be deemed incorporated herein as if set forth in full herein and, unless
otherwise defined therein, all terms used in any Exhibit or Schedule shall have
the meaning ascribed to such term in this Agreement. The words "include,"
"includes" and "including" shall be deemed to be followed by the phrase "without
limitation." The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement. Unless otherwise expressly
provided herein, any agreement, instrument or statute defined or referred to
herein or in any agreement or instrument that is referred to herein means such
agreement, instrument or statute as from time to time amended, modified or
supplemented, including (in the case of agreements or instruments) by waiver or
consent and (in the case of statutes) by succession of comparable successor
statutes and references to all attachments thereto and instruments incorporated
therein. All accounting terms not otherwise defined in this Agreement will have
the meanings ascribed to them under GAAP.
2. ASSET DROP DOWN
2.1 Within thirty (30) days after the date of this Agreement,
Seller shall cause to be formed a Washington limited liability company (the
"LLC") using the Certificate of Formation in the form attached hereto as EXHIBIT
A and Seller shall be, and remain until the Closing, the only member of the LLC
and Northland Communications Corporation shall be, and remain until Closing, the
only manager of the LLC.
2.2 Subject to the terms and conditions set forth in this
Agreement, at least one (1) but not more than two (2) Business Days prior to the
Closing Date (the "CONTRIBUTION DATE"), Seller will convey, as a contribution to
the capital of the LLC (the "ASSET DROP DOWN"), all of the Assets to the LLC
free and clear of all Encumbrances, other than Permitted Encumbrances, and the
LLC will assume all of the Assumed Liabilities. The conveyance of the Assets
will be made pursuant to the Deed, ▇▇▇▇ of Sale, Assignment and Assumption forms
attached hereto as EXHIBITS B, C AND D and acceptance of the Assets and
assumption of the Assumed Liabilities shall be pursuant to the same ▇▇▇▇ of
Sale, Acceptance and Assumption form attached hereto as EXHIBITS C AND D. At
Closing, Northland Communications Corporation shall resign as Manager of the LLC
pursuant to the Resignation in the form attached hereto as EXHIBIT E.
3. CONSIDERATION
3.1 PURCHASE PRICE
Buyer will pay to Seller, for all the outstanding limited liability
company membership interests and any other ownership interests in the LLC (the
"LLC INTEREST"), total cash consideration of Eleven Million Seven Hundred
Sixteen Thousand Dollars ($11,716,000.00)
PAGE 10
(the "PURCHASE PRICE"), of which (a) Ten Million Eight Hundred Thirty Seven
Thousand and Three Hundred Dollars ($10,837,300.00), subject to adjustment as
provided in SECTIONS 3.4 AND 3.5, will be paid to Seller on the Closing Date (as
adjusted, the "BASE PURCHASE PRICE") and (b) Eight Hundred Seventy Eight
Thousand and Seven Hundred Dollars ($878,700.00) (the "HOLDBACK") will be
deposited in an escrow account, and Seller will convey the LLC Interest to Buyer
free and clear of any Encumbrances, other than any transfer restrictions
applicable under state or federal securities laws, and Northland Communications
Corporation, as Manager of the LLC, shall consent to the transfer of the LLC
Interest to Buyer, all pursuant to the form of Assignment and Consent attached
hereto as EXHIBIT E. The Base Purchase Price and the Holdback will be paid or
deposited by wire transfer of immediately available funds.
3.2 THE HOLDBACK
The Holdback will be paid at Closing and will be held in a one (1) year
escrow by U.S. Bank NA, as escrow agent ("ESCROW AGENT"), and will be payable to
Seller or Buyer, as the case may be, pursuant to the terms of an escrow
agreement to be entered into between Buyer, Seller and Escrow Agent as of
Closing, in the form set forth in EXHIBIT G (the "ESCROW AGREEMENT"). The Escrow
Agreement shall set forth the agreement of Buyer and Seller to, among other
things, (a) appoint Escrow Agent to act as the escrow agent, (b) maintain a fund
for the payment of Seller's post-closing indemnification obligations under this
Agreement, (c) authorize the Escrow Agent to release to Seller, one (1) year
after the Closing Date (the "DISTRIBUTION DATE") the difference, if any, between
(i) the balance of the Holdback Amount (including any interest accrued thereon)
remaining after all indemnification payments to be paid to Buyer under this
Agreement have been paid and (ii) the aggregate amount of the then outstanding
claims of Buyer timely made and properly asserted under this Agreement and (d)
authorize the Escrow Agent to continue to hold the remaining balance of the
Holdback Amount (including any interest accrued thereon), if any, until it
receives a final, unappealable order of a court of competent jurisdiction or
joint written instructions of Seller and Buyer regarding disposition of the
remaining balance of the Holdback Amount (including any interest accrued
thereon).
3.3 ADJUSTMENTS TO PURCHASE PRICE
3.3.1 The Base Purchase Price, and correspondingly the
Purchase Price, will be reduced by an amount equal to Two Thousand Fifty-six
Dollars ($2,056.00) for every Equivalent Basic Subscriber below 5,650 as of the
Closing Time, subject to the provisions of SECTION 9.2.3 below.
3.3.2 If Buyer has not Closed within two (2) Business Days
after the date that is one hundred and twenty (120) days after the Transfer
Request Filing Deadline (the "Increased Purchase Price Deadline"), then the Base
Purchase Price, and correspondingly the Purchase Price, will be increased by an
amount equal to $2,056 multiplied by the excess, if any, of (a) the aggregate
number of System EBSs as of the Closing Time over (b) 5,750.
PAGE 11
Notwithstanding the foregoing, in no event will the Purchase Price be increased
by the adjustments described in this SECTION 3.3.2 by more than $350,000.00.
3.3.3 The Purchase Price will be adjusted on a pro rata
basis as of the Closing Time for all prepaid expenses, excluding inventory (but
only to the extent the full benefit of such prepaid expenses will be realizable
by Buyer within twelve (12) months after the Closing Date), accrued expenses
(including real and personal property taxes), prepaid income, accounts payable
and subscriber prepayments and accounts receivable related to the Business, all
as determined in accordance with this Agreement and GAAP consistently applied,
and to reflect the principle that all expenses and income attributable to the
Business for the period prior to the Closing Time are for the account of Seller,
and all expenses and income attributable to the Business for the period after
the Closing Time are for the account of Buyer. Seller shall be entitled to an
amount equal to (i) 100% of the face amount of all accounts for EBSs receivable
that are thirty (30) or fewer days past due as of the Closing Time, (ii) 90% of
the face amount of all accounts receivable for EBSs that are more than thirty
(30) days but sixty (60) days or fewer past due as of the Closing Time, and
(iii) 0% for any accounts receivable for EBSs that are more than sixty (60) days
past due as of the Closing Time. Notwithstanding the foregoing, no adjustment
shall be made for any account receivable identified in SCHEDULE 5.17 below or
for any item of income or expense allocable to any Excluded Asset. Adjustments
may also be made as provided in SECTION 7.3.
3.3.4 To the extent such payments or deposits are not
actually contributed to the LLC, all obligations arising out of advance payments
to or relating to funds of third parties on deposit with, Seller as of the
Closing Time (including any accrued interest on such payments and deposits),
relating to the Business, including advance payments and deposits by subscribers
served by the Business for converters, encoders, decoders, cable television
service and related sales, will be assumed by the LLC to the extent that the
Purchase Price is reduced.
3.4 DETERMINATION OF ADJUSTMENTS
Preliminary and final adjustments to the Purchase Price will be
determined as follows:
3.4.1 Not later than a date Seller reasonably believes is
at least ten (10) Business Days prior to the Closing, Seller will deliver to
Buyer a report (the "PRELIMINARY ADJUSTMENTS Report"), certified as to
completeness and accuracy by the Seller's President (in his or her official but
not personal capacity), showing in detail the preliminary determination of the
adjustments referred to in SECTION 3.3, which are calculated as of the Closing
Time (or as of any other date agreed by the parties) and any documents
substantiating the adjustments proposed in the Preliminary Adjustments Report.
The Preliminary Adjustments Report will include a complete list of subscribers,
a detailed calculation of the number of Equivalent Basic Subscribers and a
schedule setting forth advance payments and deposits made to or by Seller, as
well as accounts receivable information with relevant aging information relating
to the Business (showing sums due and their respective aging as of the Closing
Time). Seller also will furnish to Buyer its billing report for the most current
period
PAGE 12
as of the Closing Date. Following receipt of such schedule, Buyer shall have
five (5) Business Days to review such schedule and supporting information and to
notify Seller of any disagreements with Seller's estimates. If Buyer provides a
notice of disagreement with Seller's estimates of the adjustments referred to in
SECTION 3.3 within such five (5) Business Day period, Buyer and Seller shall
negotiate in good faith to resolve any such dispute and to reach an agreement
prior to the Closing Date on such estimated adjustments as of the Closing Time.
The estimate so agreed upon by Buyer and Seller or (if Buyer fails to provide a
notice of disagreement with Seller's estimates of such adjustments within the
time provided) the estimates of such adjustments set forth in the Preliminary
Adjustments Report shall be the basis for determining the Base Purchase Price.
If the parties are unable to agree upon the appropriate calculations for the
Base Purchase Price, the Base Purchase Price shall be determined by an
independent accounting firm acceptable to both parties whose determination will
be conclusive until the preparation of the Final Adjustments Report; provided,
however, any amount in dispute shall be deposited in a mutually acceptable
escrow account and Closing shall not be delayed pending resolution of the
dispute by the accounting firm. If the parties cannot agree on an acceptable
accounting firm within ten (10) days after the parties have determined that a
dispute exists the parties agree to use ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, P.S. Seller and Buyer
will bear equally the fees and expenses payable to such firm in connection with
such determination.
3.4.2 Within sixty (60) days after the Closing, Buyer will
deliver to Seller a report (the "FINAL ADJUSTMENTS REPORT"), similarly certified
as to completeness and accuracy by Buyer, showing in detail the final
determination of all adjustments which were not calculated as of the Closing
Time and containing any corrections to the Preliminary Adjustments Report,
together with any documents substantiating the adjustments proposed in the Final
Adjustments Report. Seller will provide Buyer with reasonable access to all
records which Seller has in its possession and which are necessary for Buyer to
prepare the Final Adjustments Report.
3.4.3 Within thirty (30) days after receipt of the Final
Adjustments Report, Seller will give Buyer written notice of Seller's
objections, if any, to the Final Adjustments Report. If Seller makes any such
objection, the parties will agree on the amount, if any, which is not in dispute
within thirty (30) days after Buyer's receipt of Seller's notice of objections
to the Final Adjustments Report ("SELLER'S OBJECTION NOTICE"). Any undisputed
amounts resulting in a net payment to Buyer will be paid by Seller within three
(3) Business Days; provided, however, Buyer may, at Buyer's option, receive
funds from the Holdback, to satisfy all or any portion of any obligation of
Seller hereunder. Any remaining deficiency in such net payment shall be
satisfied by Seller. Any undisputed amounts resulting in a net payment to Seller
will be paid to Seller within three (3) Business Days. Any disputed amounts will
be determined within ten (10) Business Days following Buyer's receipt of
Seller's Objection Notice by an independent accounting firm acceptable to both
parties whose determination will be conclusive. If the parties cannot agree on
an acceptable accounting firm within three (3) days after the parties have
determined that a dispute exists, the parties agree to use ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, P.S.
Seller and Buyer will bear equally the fees and expenses payable to such firm in
connection with such determination. The payment required after
PAGE 13
determination of all disputed amounts will be made by the responsible party by
wire transfer of immediately available funds to the other party within three (3)
Business Days after the final determination; provided, however, Buyer may, at
Buyer's option, receive funds from the Holdback to satisfy all or any portion of
any obligation of Seller hereunder.
3.5 SELLER LIQUIDATION
Seller shall not liquidate all or substantially all its assets prior to
the earlier of (i) Buyer and Seller agreeing upon all aspects of the Final
Adjustments Report and, if any payment is due from Seller pursuant to SECTION
3.4 based on the Final Adjustments Report, the final payment owed by Seller
having been received in full by Buyer or (ii) Seller paying the undisputed
amount owed by Seller to Buyer following delivery of Seller's Objection Notice
and depositing into the Holdback additional funds equal to the disputed amount
together with an amount reasonably sufficient to pay for Seller's share of the
cost of resolving the issues raised by Seller's Objection Notice (the
"ADJUSTMENT DEPOSIT"), which funds shall be held in the Holdback pending
resolution of issues raised by Seller's Objection Notice and the portion of the
Adjustment Deposit payable to Buyer, if any, following resolution of all
disputes concerning the Final Adjustment Amount shall be immediately paid to
Buyer and the balance of the Adjustment Deposit, if any, immediately paid to the
Seller. Without in any way extending the time periods specified in SECTION
3.4.3, Buyer agrees, upon written notice from Seller (the "LIQUIDATION NOTICE")
setting forth Seller's good faith belief of a possible liquidation of Seller
within fifty (50) days of Closing, to accelerate production and delivery of the
Final Adjustments Report within the later of thirty (30) days following the
Closing Date or ten (10) days after Seller's delivery of the Liquidation Notice,
provided adequate records are available at that time to complete the Final
Adjustments Report. Seller shall notify Buyer of any distribution of any assets
prior to the parties agreeing upon the Final Adjustments Report that may result
in Seller being unable to satisfy in a timely manner any obligations under
SECTION 3.4 without recourse to the Holdback. Each party's obligations and
covenants under this SECTION 3.5 shall survive Closing.
3.6 ALLOCATION OF CONSIDERATION
The Purchase Price shall be allocated as follows:
LLC Interest Purchase Price, as adjusted, less $79,000.00
Non-Competition Agreement $79,000.00
For federal tax purposes, within sixty (60) days following the Closing Date,
Buyer will deliver to Seller a draft schedule of values for the Assets and the
corresponding proposed allocation of the LLC Interest portion of the Purchase
Price. Thereafter, Seller shall be given a reasonable opportunity to comment
thereon prior to Buyer and the LLC adopting the proposed allocation. Seller and
Buyer agree to work in good faith to resolve any disagreement regarding Buyer's
proposed allocation. The parties agree to be bound by the allocation set forth
herein and the allocation proposed by Buyer for federal tax purposes after
PAGE 14
Closing, unless Seller provides a timely written objection to Buyer's proposed
allocation, which objection must be received by Buyer within thirty (30) days
after Seller's receipt of Buyer's proposed allocation. If Seller does timely
object, any disagreement regarding the proposed allocation that cannot be
resolved by Buyer and Seller within thirty (30) days shall be resolved pursuant
to the process described in SECTION 3.4.3. Neither Seller nor Buyer will take
any position inconsistent with any such allocations and will file all returns
and reports with respect to the transactions contemplated by this Agreement,
including all federal, state and local tax returns, on the basis of such
allocations. Notwithstanding the foregoing, for purposes of the Title Policies,
a value mutually acceptable to Buyer and Seller reflecting actual current fair
market value shall be allocated to the Real Property within thirty (30) days
after the date of this Agreement.
4. ASSUMED LIABILITIES, EXCLUDED ASSETS AND ADVERTISING ASSETS
4.1 ASSIGNMENT AND ASSUMPTION
On the Contribution Date, Seller will assign to the LLC and the LLC
will assume and, after the Closing Time, perform, the following "ASSUMED
LIABILITIES": (a) Seller's obligations to subscribers and advertisers of the
Business for (i) subscriber and advertiser deposits held by Seller as of the
Closing Date and which are refundable, up to the amount for which Buyer received
credit under SECTION 3.2, and (ii) subscriber and advertiser advance payments
held by Seller as of the Closing Date for services to be rendered by a System
after the Closing Time, up to the amount for which Buyer received credit under
SECTION 3.2; and (b) obligations accruing and relating to periods after the
Closing Time relating to the LLC's ownership of the Assets or its conduct of the
business or operation of the Systems, under Governmental Permits listed on
SCHEDULE 2 (to the extent that such Governmental Permits are transferable) and
Seller Contracts listed on SCHEDULE 3. The LLC and Buyer will not assume or have
any responsibility for any liabilities or obligations of Seller other than the
Assumed Liabilities. All obligations and liabilities, contingent, fixed or
otherwise, arising out of or relating to the System other than the Assumed
Liabilities ("RETAINED LIABILITIES") will remain and be the obligations and
liabilities solely of Seller including: (i) any obligation, liability or claim
relating to or arising pursuant to rate refunds to subscribers of the System
with respect to rates charged to such subscribers during periods through and
including the Closing Date; (ii) any suit, action or proceeding pending or
threatened related to an event occurring at any time prior to Closing regardless
of whether such litigation is commenced prior to or after Closing; (iii) any
liability of Seller or any Affiliate of Seller that relates to, or that arises
out of, any Excluded Asset, or that arises out of the distribution to, or
ownership by Seller or any Affiliate of Seller of any Excluded Asset or
associated with the realization of the benefits of any Excluded Asset; (iv) any
liability of Seller, any Affiliate of Seller relating to or arising out of
Seller, the System, the Business or any Asset, and based upon, arising out of or
resulting from any fact, circumstance, occurrence, condition, act or omission
existing or occurring on or prior to the Closing Date; (v) any liability of
Seller or any Affiliate of Seller arising out of the operation or conduct by
Seller or any Affiliate of Seller of any business other than the Business; (vi)
any liability of the Seller or any Affiliate of Seller (A) arising out of any
actual or alleged breach by Seller or any Affiliates of Seller, or
nonperformance by
PAGE 15
Seller or any Affiliate of Seller under any contract, agreement or commitment
(including any Seller Contract or Governmental Permits) on or prior to Closing
or (B) accruing under any contract, agreement or commitment (including any
Seller Contract or Governmental Permit included in the Assets) with respect to
any period on or prior to the Closing Date; (vii) except to the extent an
adjustment is made to the Purchase Price for Buyer's benefit, any account
payable of Seller or any Affiliate of Seller arising on or prior to the Closing
Date; (viii) except to the extent waived in writing by Buyer, any liability of
Seller or any Affiliate of Seller to any Third Party as a result of the failure
to obtain a consent to assign a Seller Contract or Governmental Permit to the
LLC or to assign the LLC Interest to Buyer; and (ix) any liability of Seller or
any Affiliate of Seller to each other or to any of their Affiliates.
4.2 EXCLUDED ASSETS
The "EXCLUDED ASSETS," which will be retained by Seller, will consist
of the following: (a) programming contracts, retransmission consent agreements
and pole attachment agreements that are either not used in or useful to the
operation of the System or listed in SCHEDULE 4.2; (b) insurance policies and
rights and claims thereunder, except as otherwise provided in SECTION 7.8.3; (c)
bonds, letters of credit, surety instruments and other similar items that are
not Seller Contracts and are listed in SCHEDULE 4.2; (d) cash and cash
equivalents; (e) Seller's patents, trademarks, trade names, service marks,
service names, and logos (subject to Buyer's rights under SECTION 7.12); (f)
subscriber billing contracts and related equipment (subject to Buyer's rights
under SECTION 7.13) listed in SCHEDULE 4.2; (g) Seller's Plans as defined in
SECTION 5.14.2 and any cash, reserve, trust or funding arrangement held or set
aside for the payment of benefits; (h) any employment, compensation, bonus or
deferred compensation agreements; (i) account books of original entry, general
ledgers, financial records and personnel files and non-operational records used
in connection with the System provided that copies of such books and records
will be retained by and made available to Buyer and the LLC for review and
copying for a period of three (3) years (and six (6) years in the case of tax
reports and returns and underlying books and records and for such longer period
as may be required under SECTION 17.19.8) from the Closing Date upon reasonable
request; and provided further that copies of any such personnel files will be
made available to Buyer for a period of three (3) years from the Closing Date
upon reasonable request by Buyer accompanied by a consent from the employee(s)
in question; (j) corporation or partnership books and records solely related to
internal shareholder matters and financial relationships with Seller's lenders
and its Affiliates and Seller's shareholder; (k) advertising sales agency or
representation contracts providing any Third Party or Seller Affiliate the right
to sell available advertising time for any System (except for those set forth on
SCHEDULE 3) listed in SCHEDULE 4.2; (l) Seller's rights and obligations under
any agreement governing or evidencing an obligation of Seller for borrowed
money; (m) any of Seller's claims, rights or interest in and to any refunds for
federal, state or local franchise, income or other taxes or fees for periods
prior to the Closing Time, including fees paid to the U.S. Copyright Office or
to any programmers, or any choses in action relating to such refunds (except to
the extent that Seller received the benefit of an adjustment for any prepaid
expense in respect of which such refund is made) listed in SCHEDULE 4.2; (n)
Seller's Articles of Incorporation and bylaws , Seller's management
PAGE 16
contract with Northland Communications Corporation and billing contract with
Northland Cable Services Corporation; (o) all accounts receivable related to
advertising on the System (the "EXCLUDED ADVERTISING RECEIVABLES"); and (p) the
assets described on SCHEDULE 4.2. Except for those programming contracts which
require Seller to assign the rights and obligations thereunder to an acquiror of
any of the Systems (all of which are specifically identified in SCHEDULE 3) and
for which Buyer does not either (i) assume such programming contract as an
Assumed Liability or (ii) enter into a separate agreement with such programmer
with respect to the Systems', Buyer shall have the right to have any programming
agreements to which Seller is a party be considered an Excluded Asset; provided
Buyer notifies Seller that Buyer desires to have the programming agreement be
considered an Excluded Asset within thirty (30) days after the date the
schedules are updated in accordance with SECTION 7.11.1.
4.3 ADVERTISING ASSETS
Certain advertising support services are provided to Seller by Cable Ad
Concepts, Inc., an Affiliate of Seller. In addition to contributing the Assets
to the LLC on the Contribution Date, if the LLC or Buyer employs ▇▇▇▇▇
Copperonol after the Closing Date, Seller will also cause Cable Ad Concepts,
Inc. to transfer to the LLC on the Contribution Date the assets related to
advertising support services provided to Seller, including those assets
identified in SCHEDULE 4.3 (the "ADVERTISING ASSETS"). The Advertising Assets
include one or more software licenses which will be assigned to and assumed by
the LLC on the Closing Date and which shall be included in the Assumed
Liabilities (which licenses provide for annual aggregate license fees not in
excess of $20,000 as of the Closing Date) unless Buyer, prior to the
Contribution Date, elects to have any such software license be considered an
Excluded Asset.
5. REPRESENTATIONS AND WARRANTIES OF SELLER
To induce Buyer to enter into this Agreement, Seller represents and
warrants to Buyer, as of the date of this Agreement and as of the Closing, as
follows:
5.1 ORGANIZATION AND QUALIFICATION
Seller is a corporation duly organized and validly existing under the
laws of Washington and has all requisite corporate power and authority to own,
lease and use the Assets as they are currently owned, leased and used and to
conduct the Business as it is currently conducted. Seller's sole shareholder is
Northland Telecommunications Corporation, a Washington corporation which is duly
organized and validly existing under the laws of Washington.
5.2 AUTHORITY AND VALIDITY
Seller has all requisite corporatepower and authority to execute and
deliver, to perform its obligations under, and to consummate the transactions
contemplated by, this Agreement and all other documents and instruments to be
executed and delivered in
PAGE 17
connection with the transactions contemplated by this Agreement (collectively,
the "TRANSACTION DOCUMENTS") to which Seller is a party, without any further
action or approvals from the shareholder of Seller. 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 Transaction Documents to which Seller is a party have been duly and validly
authorized by all requisite corporate action of Seller. This Agreement is, and
when executed and delivered by Seller the Transaction Documents will be, the
valid and binding obligation of Seller, enforceable against Seller in accordance
with its terms, except insofar as enforceability may be affected by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws now or
hereafter in effect affecting creditors' rights generally or by principles
governing the availability of equitable remedies.
5.3 NO BREACH OR VIOLATION
Subject to obtaining the Required Consents, all of which are listed on
SCHEDULE 4, the execution, delivery and performance of this Agreement and the
Transaction Documents to which Seller is a party by Seller do not and will not:
(a) conflict with or violate any provision of the organizational documents of
Seller; (b) violate any Legal Requirement; (c) require any consent, approval or
authorization of, or any filing with or notice to, any Person; or (d) (i)
violate, conflict with or constitute a breach of or default under (without
regard to requirements of notice, passage of time or elections of any Person),
(ii) permit or result in the termination, suspension or modification of any
obligation of Seller under, (iii) result in the acceleration of (or give any
Person the right to accelerate) the performance of Seller under, or (iv) result
in the creation or imposition of any Encumbrance under, any Seller Contract,
Governmental Permit or any other instrument evidencing any of the Assets or any
instrument or other agreement to which Seller is a party or by which Seller or
any of the Assets is bound or affected.
5.4 ASSETS
Seller has good and marketable title to (or, in the case of Assets that
are leased, valid leasehold interests in) the Assets (other than Real Property,
as to which the representations and warranties in SECTION 5.7 and the Deeds
apply) and, at Closing, (i) the LLC will have good and marketable title to (or,
in the case of Assets that are leased, valid leasehold interests in) the Assets
(other than Real Property, as to which the representations and warranties in
SECTION 5.7 and the Deeds apply) and (ii) Seller will have good and marketable
title to the LLC Interest. The Assets (other than Real Property, as to which the
representations and warranties in SECTION 5.7 and Deeds apply) are, and at
Closing will be, free and clear of all Encumbrances of any kind or nature,
except (a) Encumbrances disclosed on SCHEDULE 7, all of which will be removed
and released at or prior to the Closing, (b) Permitted Encumbrances, and (c)
restrictions stated in the Governmental Permits. None of the Encumbrances
disclosed on SCHEDULE 7 include loans, credit arrangements, borrowings or other
obligations that are cross-collateralized with the assets of any other Affiliate
of Seller. Except as set forth on SCHEDULE 2 OR 3, none of the Equipment is
leased from any other Person. The Assets, together with the Excluded Assets, are
all the assets, rights and interests
PAGE 18
necessary to permit the LLC to conduct the Business and to operate the System
substantially as it is currently being conducted and operated and in material
compliance with all applicable Legal Requirements, Seller Contracts and
Governmental Permits as of the Closing. All the Equipment listed in SCHEDULE 5
is in good operating condition and repair, ordinary wear and tear excepted and
is suitable and adequate for continued use in the manner in which it is
presently used. To Seller's knowledge, no Person (other than Seller with respect
to the Business) has been granted or has applied for a cable television
franchise in any Service Area or is operating a cable television system or other
non-satellite multichannel video programming distribution system in any Service
Area. To Seller's knowledge, no restoration, repaving, repair or other work is
required to be made by Seller to any street, sidewalk or abutting or adjacent
area pursuant to the requirement of any ordinance, code, permit, easement or
contract relating to the installation, construction or operation of any of the
System. No property of any Person has been damaged, destroyed, disturbed or
removed in the process of construction or maintenance of the System which has
not been, or will not be prior to Closing, repaired, restored or replaced and
which damage, loss or disruption is material or material to the operation of the
System. No Person, other than Seller, owns any assets that are used in the
operation of the System, other than as set forth in SCHEDULE 4.3 and SCHEDULE
5.4. No Assets have been owned by Seller but located outside the State of
Washington within the previous five (5) years.
5.5 GOVERNMENTAL PERMITS
Complete and correct copies of the Governmental Permits, all of which
are listed on SCHEDULE 2, have been or will be, within three (3) Business Days
after the date of this Agreement, delivered by Seller to Buyer. The Governmental
Permits are currently in full force and effect, are not in default, and are
valid under all applicable Legal Requirements according to their terms. There is
no legal action, governmental proceeding or investigation, pending of which
Seller has received notice or, to Seller's knowledge, threatened, to terminate,
suspend or modify any Governmental Permit and Seller is in material compliance
with the terms and conditions of all the Governmental Permits and with other
applicable requirements of all Governmental Authorities (including the FCC and
the Register of Copyrights) relating to the Governmental Permits, including all
requirements for notification, filing, reporting, posting and maintenance of
logs and records. The Governmental Permits contain all of the commitments and
obligations of Seller to the applicable Governmental Authority under any
franchise issued by a Governmental Authority with respect to the construction,
ownership and operation of the System. The Governmental Permits are currently in
full force and effect and are valid and enforceable under all applicable Legal
Requirements in accordance with their terms. The franchises included in the
Governmental Permits represent all the franchises necessary operate the Business
and provide the cable television services in the area currently served by the
System. All areas served by the Business are served by the System pursuant to
one of the franchises listed on SCHEDULE 2. The current term of each franchise
owned by Seller and used in the Business is accurately set forth and described
on SCHEDULE 2.
PAGE 19
5.6 SELLER CONTRACTS
All of the Seller Contracts are described on SCHEDULE 3. Complete and
correct copies of all Seller Contracts will be made available to Buyer and
Buyer's representatives, for inspection and copying, at Seller's principal
office in Seattle, Washington. Such documents constitute the entire agreement
with the other party. Each Seller Contract is in full force and effect and
constitutes the valid, legal, binding and enforceable obligation of Seller and
Seller is not, and to Seller's knowledge, each other party thereto is not, in
breach or default of any terms or conditions thereunder. The Seller Contracts
(including all contracts relating to Real Property described on SCHEDULE 6)
represent all the contracts and agreements necessary to operate the System.
Except as described on SCHEDULE 2 (Governmental Permits) and SCHEDULE 3 (Seller
Contracts), Seller is not bound or affected by any of the following that relate
to the Business: (i) leases of real or personal property; (ii) franchises for
the construction, ownership or operation of cable television systems or
contracts of substantially equivalent effect; (iii) other licenses,
authorizations, consents or permits of the FCC or any other Governmental
Authority; (iv) material easements, rights of access, underground conduit
agreements, crossing agreements or other interests in real property; (v) pole
line or attachment agreements; (vi) multiple dwelling unit agreements, including
bulk agreements, and commercial service agreements; (vii) agreements pursuant to
which the System receives or provides advertising sales representation services;
(viii) agreements pursuant to which the System or Seller has constructed or
agreed to construct for third parties an institutional network or otherwise
provides to third parties telecommunications services other than one-way video;
(ix) construction and development agreements (other than installation agreements
where services are provided in the ordinary course of business on an as-needed
basis) or (x) Contracts relating to the operation of the Business, that are not
terminable by Seller without cost or penalty on not more than ninety (90) days'
prior written notice and which require the payment of, or the provision of
services worth more than $500 per month. Seller is a party to all Seller
Contracts and no Affiliate of Seller is a party to any Seller Contracts. The
management agreement identified in SCHEDULE 4.2, the advertising support
services described in SECTION 4.3, and the billing services provided by
Northland Cable Services Corporation, Seller has not entered into any contract
or other arrangement or transaction with any Affiliate of Seller for the
provision of any goods or services used in the operation or conduct of the
Business.
5.7 REAL PROPERTY
5.7.1 All the Assets consisting of owned or leased Real
Property interests are described on SCHEDULE 6. Except as otherwise disclosed on
SCHEDULE 6, Seller holds good, marketable and indefeasible fee simple title to
the Real Property shown as being owned by Seller on SCHEDULE 6 and the valid and
enforceable right to use and possess such Real Property, subject only to the
Permitted Encumbrances. Seller has valid and enforceable leasehold interests in
Real Property shown as being leased by Seller on SCHEDULE 6 and, with respect to
other Real Property not owned or leased by Seller, Seller has the valid and
enforceable right to use all such other Real Property pursuant to the easements,
licenses,
PAGE 20
rights-of-way or other rights described on SCHEDULE 6, subject only to Permitted
Encumbrances.
5.7.2 The documents made available by Seller to Buyer as
evidence of each lease of Real Property constitute the entire agreement with the
landlord in question. To the knowledge of Seller, there are no leases or other
agreements, oral or written, granting to any Person other than Seller the right
to occupy or use any Real Property, except as described on SCHEDULE 6. All
easements, rights-of-way and other rights appurtenant to, or which are necessary
for Seller's current use of, any owned Real Property are valid and in full force
and effect, and Seller has not received any notice with respect to the
termination, breach or impairment of any of those rights. To the knowledge of
Seller, each parcel of owned or leased Real Property, any improvements
constructed thereon and their current use conform to (a) all applicable Legal
Requirements, and (b) all restrictive covenants, if any, or other Encumbrances
affecting all or part of such parcel.
5.7.3 Except for ordinary wear and tear and routine
repairs, all of the improvements, leasehold improvements and the premises of the
Real Property and the premises demised under the leases and other documents
evidencing the Real Property are in good condition and repair and are suitable
for the purposes used. Each parcel of Real Property and any improvements thereon
and their current use (a) has access to and over public streets or private
streets for which Seller has a valid and legally created right of ingress and
egress pursuant to a written agreement or instrument, (b) each parcel of Real
Property conforms in its current use and occupancy to all material governmental
land use requirements without reliance upon a variance issued by a Governmental
Authority or a classification of the parcel in question as a nonconforming use,
(c) conforms in its current use to all restrictive covenants, if any, or other
Encumbrances affecting all or part of such parcel and (d) is available for
immediate use in the conduct of the Business or operation of the System, subject
to the Permitted Encumbrances. With respect to each parcel of Real Property, all
buildings, towers, guy wires and anchors, headend equipment, earth-receiving
dishes and related facilities used in the operation of the System are located
entirely on the Real Property and are maintained, placed and located in
accordance with the provisions of all applicable Legal Requirements, deeds,
leases, licenses, permits or other legally enforceable arrangements. There are
no pending condemnation, expropriation, eminent domain or similar proceedings of
which Seller has received notice or has knowledge affecting, in any material
respect, all or any portion of the Real Property. Seller has performed all
obligations under the leases; Seller is not in breach or default under any such
leases; there exists no condition or event which, after the giving of notice or
lapse of time or both would constitute such breach or default; and all payments
required to be paid under each of the leases have been paid in a timely manner.
5.7.4 All fee interests in all of the Real Property will be
conveyed to the LLC as of the Contribution Date by statutory warranty deed in
the form set forth in EXHIBIT B.
PAGE 21
5.8 ENVIRONMENTAL MATTERS
5.8.1 Seller's use of the Real Property has and currently
complies with and, to Seller's knowledge, the Real Property has previously been
operated in compliance with, all Environmental Laws. Seller has not generated,
released, stored, used, treated, handled, discharged or disposed of any
Hazardous Substances at, on, under, in or about, or in any other manner
affecting, any Real Property, transported any Hazardous Substances to or from
any Real Property or discharged any Hazardous Substances from any Real Property
into any body of water, directly or indirectly, and, to Seller's knowledge, no
other present or previous owner, tenant, occupant or user of any Real Property
or any other Person has committed or suffered any of the foregoing. To Seller's
knowledge, no release of Hazardous Substances outside the Real Property has
entered or threatens to enter any Real Property, nor is there any pending or
threatened claim based on Environmental Laws which arises from any condition of
the land surrounding any Real Property. No claim or investigation based on
Environmental Laws which relates to any Real Property or any operations on it
(a) has been asserted or conducted during the period of Seller's ownership or is
currently pending against or with respect to Seller or, to Seller's knowledge,
any other Person, or (b) to Seller's knowledge, is threatened or contemplated.
5.8.2 To Seller's knowledge, (a) no underground storage
tanks are currently or have been located on any Real Property, (b) no Real
Property has been used at any time as a gasoline service station or any other
facility for storing, pumping, dispensing or producing gasoline or any other
petroleum products or wastes, (c) no building or other structure on any Real
Property contains asbestos, asbestos-containing material or material presumed to
be asbestos-containing material under any Environmental Law, and (d) there are
no incinerators, septic tanks or cesspools on the Real Property and all waste is
discharged into a public sanitary sewer system.
5.8.3 Seller will make available to Buyer and Buyer's
representatives, for inspection and copying, at Seller's principal office in
Seattle, Washington, complete and correct copies of (a) all studies, reports,
surveys or other materials in Seller's possession relating to the presence or
alleged presence of Hazardous Substances at, on or affecting the Real Property,
(b) all notices or other materials in Seller's possession that were received
from any Governmental Authority having the power to administer or enforce any
Environmental Laws relating to current or past ownership, use or operation of
the Real Property or activities at the Real Property and (c) all materials in
Seller's possession relating to any claim, allegation or action by any private
Third Party under any Environmental Law.
5.9 COMPLIANCE WITH LAW
5.9.1 The ownership, leasing and use of the Assets as they
are currently owned, leased and used by Seller and the conduct of the Business
as it is currently conducted do not violate any Legal Requirement. Neither
Seller nor any Affiliate of Seller has received any notice claiming a violation
by Seller or the Business of any Legal Requirement applicable
PAGE 22
to Seller or the Business as it is currently conducted and to Seller's
knowledge, there is no basis for any claim that such a violation exists.
5.9.2 Intentionally Deleted.
5.9.3 Other than with respect to those must-carrys
identified on SCHEDULE 3, no written notices or demands have been received from
the FCC, from any television station or from any other Person or Governmental
Authority (x) challenging the right of the System to carry any television
broadcast station or deliver the same or (y) claiming that the System failed to
carry a television broadcast station required to be carried pursuant to the
Communications Act or has failed to carry a television broadcast station on a
channel designated by such station consistent with the requirements of the
Communications Act. All necessary Federal Aviation Administration ("FAA")
approvals have been obtained with respect to the height and location of towers
used in connection with the operation of the System, and such towers are being
operated in compliance in all material respects with applicable FCC and FAA
rules and neither Seller nor any Affiliate of Seller has received written notice
from any Governmental Authority with respect to an intention to enforce customer
service standards pursuant to the Cable Act, and neither Seller nor any
Affiliate of Seller has agreed with any Governmental Authority to establish
customer service standards that exceed the FCC standards promulgated pursuant to
the Cable Act.
5.9.4 The System is in compliance in all material respects
with the provisions of the Cable Act as such Legal Requirements relate to the
rates and other fees charged to subscribers of the System. Seller has
established rates charged to subscribers, effective since September 1, 1993,
that are or were allowable under the Cable Act and any authoritative
interpretation thereof now or then in effect, to the extent such rates are or
were subject to regulation at such time by any Governmental Authority, including
any local franchising authority and/or the FCC. Seller has delivered or will
deliver within five (5) Business Days after the date of this Agreement to Buyer
complete and correct copies of all FCC forms and other information reasonably
requested by Buyer relating to rate regulation generally or specific rates
charged to subscribers with respect to the System. Neither Seller nor any
Affiliate of Seller has entered into and are not subject to any so-called social
contract or proposed resolution with the FCC with respect to rates charged for
cable television services in the System that would be applicable to the System
following Closing and none is currently negotiating or anticipating entering
into or being subject to the same. As of the date of this Agreement, (i) there
are no outstanding or unresolved proceedings or investigations (other than those
affecting the cable industry generally) dealing with or otherwise affecting the
rates that any cable television system included in the System can charge
(whether for programming, equipment, installation, service or otherwise), (ii)
no cable television system included in the System is subject to any currently
effective order issued by a Governmental Authority that reduced the rates that
it may charge (whether for programming, equipment, installation, service
(including late fees) or otherwise), (iii) no local franchising authority has
been certified by the FCC as a rate regulating authority with respect to the
System and (iv) there is no unresolved complaint pending with respect to the
CPST tier of the System and no rate order with respect to the System that is
being appealed.
PAGE 23
5.9.5 Seller has complied in all material respects, and the
Business is in compliance in all material respects with the specifications set
forth in Part 76, Subpart K of the rules and regulations of the FCC, Section 111
of the Copyright Act of 1976 and the rules and regulations of the U.S. Copyright
Office, the Register of Copyrights and the Copyright Royalty Tribunal, the Cable
Act, the rules and regulations of the FCC, including provisions of any thereof
pertaining to signal leakage, to utility pole make ready and to grounding and
bonding of cable television systems (in each case as the same is currently in
effect), and all other applicable Legal Requirements relating to the
construction, maintenance, ownership and operation of the Assets, the System and
the Business.
5.9.6 Except as provided in SCHEDULE 5.9.6, Seller has
complied in all material respects with the must carry, retransmission consent,
and commercial leased access provisions of the Cable Act. Except with respect to
the System's tier of Basic Service, Seller is not subject to rate regulation
pursuant to a specific exemption from rate regulation contained in the Cable
Act. Except as provided in SCHEDULE 5.9.6, Seller has received no notice from
any Governmental Authority with respect to an intention to enforce customer
service standards pursuant to the Cable Act and Seller has not agreed with any
Governmental Authority to establish customer service standards that exceed the
standards in the Cable Act. Except as set forth on SCHEDULE 5.9.6, Seller has
not made any election with respect to any cost of service proceeding conducted
in accordance with Part 76.922 of Title 47 of the Code of Federal Regulations or
any similar proceeding (a "COST OF SERVICE ELECTION") with respect to any of the
Systems.
5.9.7 SCHEDULE 5.9.7 sets forth a description of the
following information with respect to each antenna structure that relates to the
System (including, but not limited to, towers, buildings and monopoles): (i) the
owner of the antenna structure; (ii) the address of the antenna structure
(including street address, city, county, state and zip code); (iii) the type of
the antenna structure (i.e., tower, building, monopole, etc.); (iv) the latitude
and longitude of the antenna structure as reported to the FAA or FCC and as
known to Seller; (v) the ground elevation of the site of the antenna structure;
(vi) the height of the antenna structure without appurtenances; (vii) the height
of the antenna structure with appurtenances, if known to Seller; (viii) the FCC
call signs associated with the antenna structure; (ix) the FAA study number
associated with the antenna structure and (x) the FCC registration number
associated with the antenna structure. Complete and correct copies of all FAA
final determination letters and FCC Forms 854 and 854R, if any, with respect to
each antenna structure have been or will be within five (5) Business Days after
the date of this Agreement delivered by Seller to Buyer. Except as set forth on
SCHEDULE 5.9.7, all necessary FAA approvals have been obtained and all necessary
FCC tower registrations have been filed with respect to the height and location
of towers used in connection with the operation of the Systems, and such towers
are being operated in compliance with applicable FCC and FAA rules. Seller has
delivered to Buyer true and correct copies of the FAA final determinations and
FCC registrations for all such towers.
PAGE 24
5.10 PATENTS, TRADEMARKS AND COPYRIGHTS
Seller has deposited with the U.S. Copyright Office all statements of
account and other documents and instruments and have paid all royalties,
supplemental royalties, fees and other sums to the U.S. Copyright Office under
the Copyright Act with respect to the Business as are required to obtain, hold
and maintain the compulsory license for cable television systems prescribed in
Section 111 of the Copyright Act. Seller has not been notified or otherwise
advised of any inquiry, claim, action or demand pending before the U.S.
Copyright Office or from any other Person which questions the copyright filings
or payments made by Seller with respect to the System. Seller has made all
requisite filings and payments with the Register of Copyrights and is otherwise
in compliance with all applicable rules and regulations of the U.S. Copyright
Office. Seller has delivered to Buyer complete and correct copies of all current
reports and filings, and all reports and filings for the past five (5) years,
made or filed pursuant to copyright rules and regulations with respect to the
Business. Seller does not possess any patent, patent right, trademark, copyright
or other intellectual property related to or material to the operation of the
System or the Business that is not included among the Assets to be conveyed to
the LLC, and neither Seller nor any Affiliate of Seller is a party to any
license or royalty agreement with respect to any patent, trademark or copyright
except for licenses respecting program material and obligations under the
Copyright Act of 1976 applicable to cable television systems generally. To
Seller's knowledge, the Business has been operated in such a manner so as not to
violate or infringe upon the rights of any Person in any copyright, trademark,
service ▇▇▇▇, patent, license, trade secret or other intellectual property.
5.11 FINANCIAL STATEMENTS AND SOLVENCY
5.11.1 Seller has delivered to Buyer copies of its unaudited
statements of operations and balance sheets related to the Systems for the years
ended December 31, 1999, 2000 and 2001, and monthly balance sheets and
statements of operations for each calendar month for 2002 through September 30,
2002 (collectively, and together with all of the financial statements to be
provided to Buyer pursuant to SECTION 7.2.3, the "FINANCIAL STATEMENTS"). The
Financial Statements were prepared and, in the case of all subsequent financial
statements to be provided to Buyer pursuant to SECTION 7.2.3, will be prepared
in accordance with GAAP applied on a consistent basis throughout the periods
covered thereby, are accurate and complete and fairly present the results of
operations of the Business for the periods indicated, subject to normal year-end
adjustments in the case of interim financial statements and the omission of
footnotes in the case of interim financial statements. Except as disclosed on
the Financial Statements Seller does not or will not have, any liability or
obligation, whether accrued, absolute, fixed or contingent (including
liabilities for taxes or unusual forward or long-term commitments) required to
be disclosed thereon in accordance with GAAP. Since July 1, 2002, (i) the
Business has been operated only in the ordinary course, (ii) Seller has not sold
or disposed of any assets, or incurred any obligation or liability (contingent
or otherwise) other than in the ordinary course of business, (iii) there has
been no material adverse change in, and no event has occurred which is likely,
individually or in the aggregate, to result in any material adverse change in,
the business, operations, assets or
PAGE 25
condition (financial or otherwise) of the Business, other than changes affecting
the cable television industry generally. Neither Seller nor any Affiliate of
Seller has any knowledge of any circumstance, condition, event or arrangement
that could reasonably be expected to result in or give rise hereafter to any
liabilities of Seller, except in the ordinary course of business consistent with
past practices.
5.11.2 Neither Seller nor any Affiliate of Seller is
entering into this Agreement or any Transaction Document or engaging in the
transactions contemplated by this Agreement or any of the Transaction Documents
with an actual intent to hinder, delay or defraud any of their respective
existing or future creditors. Seller and the Affiliates of Seller acknowledge
that the Purchase Price represents fair and reasonably equivalent value for the
LLC Interest. Neither Seller nor any Affiliate of Seller has filed, nor has a
present intention to file, a petition or request for reorganization or
protection or relief under the bankruptcy laws of the United States or any state
or territory thereof, made any general assignment for the benefit of creditors,
or consented to the appointment of a receiver or trustee, including a custodian
under the United States bankruptcy laws, whether such receiver or trustee is
appointed in a voluntary or involuntary proceeding.
5.12 LEGAL PROCEEDINGS
Except as set forth on SCHEDULE 5.12, there is no judgment or order
outstanding, or any action, suit, complaint, proceeding or investigation by or
before any Governmental Authority or any arbitrator pending, or to Seller's
knowledge, threatened, involving or affecting all or any part of the Assets or
the Business. There is no pending assertion or claim against Seller that
operations pursuant to any pole attachment agreement used in the operation of
the Business or included among the Assets have been improperly conducted or
maintained and, to Seller's knowledge, no facts or circumstances exist that
might give rise to any such assertion or claim. SCHEDULE 5.12 lists and
describes the results of any audits or investigations conducted by any of the
parties to the pole attachment agreements of Seller during the previous three
(3) years.
5.13 TAX RETURNS
Seller has filed all income, franchise, sales, use, property, excise,
payroll, unclaimed property and other Tax returns required to be filed with the
appropriate Governmental Authority. All Taxes, fees and assessments due and
payable by Seller have been paid, except such amounts as are being contested
diligently and in good faith and are not in the aggregate material, and Seller
has set up an adequate reserve for the payment of such Taxes. Seller is not
delinquent in the payment of any Tax, assessment or governmental charge. No
deficiencies for any Taxes have been proposed, asserted or assessed against
Seller that have not been finally settled or paid in full, and no requests for
waivers of the time to assess any such tax are pending. Except as set forth on
SCHEDULE 5.13, there are no outstanding agreements or waivers extending the
statutory period of limitations applicable to any federal, state, local or
foreign income Tax return for any period in connection with the Business, and
except as set forth on SCHEDULE 5.13, there are no Tax audits pending in
connection with the
PAGE 26
Business. The amount of Taxes reflected as a liability on the Financial
Statements of Seller given to Buyer including all notes therein are a full and
adequate reflection of the amount of accrued and unpaid Taxes with respect to
Seller for all taxable periods (or portions of taxable periods). Since the date
of the Financial Statements given to Buyer, Seller has not incurred or accrued
any liability for any Taxes (whether fixed or contingent) except for those Taxes
incurred or accrued in the ordinary course of business of the Seller. Neither
Seller nor any Affiliate of Seller has received any notice of, nor does any one
of them have any knowledge of, any deficiency, assessment or audit or proposed
deficiency assessment or audit from any taxing Governmental Authority which
could affect, or result in the imposition of an Encumbrance, upon the Assets or
the System.
5.14 EMPLOYMENT MATTERS
5.14.1 SCHEDULE 5.14.1 contains a complete and correct list
of the names and positions of all employees engaged in the Business, including
▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, but excluding any other senior managers or
officers working for Affiliates of Seller, as of a recent date (each, a "SYSTEM
EMPLOYEE"). Seller has complied with all applicable Legal Requirements relating
to the employment of labor, including the Worker Adjustment and Retraining
Notification Act (29 U.S.C. Section 2101), et seq. ("WARN"), ERISA, continuation
coverage requirements with respect to group health plans, and those relating to
wages, hours, collective bargaining, unemployment insurance, worker's
compensation, equal employment opportunity, age, sex, race and disability
discrimination, immigration control, and the payment and withholding of Taxes.
5.14.2 For purposes of this Agreement, "SELLER'S PLANS"
means each employee benefit plan (as defined in Section 3(3) of ERISA) and
benefit arrangement, including, without limitation, each pension benefit plan,
welfare benefit plan, employment agreement, incentive compensation arrangement
and multiemployer plan (as defined in Section 3(37) of ERISA), (i) which is
sponsored or maintained by the Seller, (ii) to which Seller contributes (or to
which Seller has an obligation to contribute), or (iii) with respect to which
Seller has or could have any obligation or liability. The Seller's Plans in
which any System Employee participates are disclosed on SCHEDULE 5.14.2. None of
the Seller's Plans, is in violation of any provision of ERISA or the Internal
Revenue Code (the "CODE"). Seller, all ERISA Affiliates and all other Persons
(including, without limitation, all fiduciaries) have, at all times, properly
performed all of their duties and obligations (whether arising by operation of
law or by contract) under of with respect to each Seller's Plan, including,
without limitation, all reporting, disclosure and notification obligations. Each
Seller's Plan that is intended to qualify under Section 401 of the Code is so
qualified and the trusts maintained pursuant thereto are exempt from federal
taxation under Section 501 of the Code, and nothing has occurred with respect to
the operation of such Seller Plan or otherwise which could cause the loss of
such qualification or exemption. No (i) "reportable event" described in Section
4043(c) of ERISA, (ii) non-exempt "prohibited transaction" (as defined in
Section 406 of ERISA or Section 4975 of the Code), (iii) "accumulated funding
deficiency" (as defined in Section 302 of ERISA), whether or not waived, or (iv)
"withdrawal liability" (as determined under Section 4201 et seq. of ERISA) has
occurred or exists and is
PAGE 27
continuing, or is reasonably expected to occur as a result of the consummation
of the transactions contemplated in this Agreement or otherwise, with respect to
any Seller's Plan. There are no actions, suits or claims (other than routine
claims for benefits) pending or, to the knowledge of Seller, threatened with
respect to (or against the assets of) any Seller's Plan, nor, to the knowledge
of Seller, is there a basis for any such action, suit or claim. To Seller's
knowledge, no Seller's Plan is currently under investigation, audit or review,
directly or directly, by the United States Internal Revenue Service (the "IRS"),
the United States Department of Labor (the "DOL") or any other governmental
entity or agency, and, to the knowledge of Seller, no such action is
contemplated or under consideration by the IRS, the DOL or any other
governmental entity or agency. After the Closing, neither Buyer nor the LLC will
be required, under ERISA, the Code, any other applicable law, any collective
bargaining agreement or this Agreement to establish, maintain or continue any
Seller's Plan currently maintained by the Seller. Neither Seller nor any ERISA
Affiliates contributes to, or at any time during the last six (6) years has
contributed to (or been obligated to contribute to) a multiemployer plan (as
defined in Section 3(37) or 4001(a)(3) of ERISA).
5.14.3 Except as disclosed on SCHEDULE 5.14.3, as of the
date of this Agreement, there are no union or collective bargaining agreements
applicable to any System Employee or other Person employed by Seller who renders
services in connection the System and Seller has no duty to bargain with any
labor organization with respect to any such System Employee or other Person and
(iii), to Seller's knowledge, there have been no union organizing activities
with respect to the System in the past three (3) years. Except as disclosed on
SCHEDULE 5.14.3, there are not pending any unfair labor practice charges against
Seller, any demand for recognition or any other request or demand from a labor
organization for representative status with respect to any System Employee or
other Person employed by Seller who renders services in connection the System.
Seller has no employment agreements, either written or oral, with any System
Employee or other Person employed by Seller who renders services in connection
the System. After the Closing, neither Buyer nor the LLC will have any liability
with respect to any multiemployer plan (as defined in Section 3(37) or
4001(a)(3) of ERISA) or any plan that is subject to Section 412 of the Code,
Section 302 of ERISA or Title IV of ERISA, whether to the plan, any participant
or beneficiary of such plan, any Governmental Authority or any other Person or
entity, as a result of Seller's participation in the transactions contemplated
by this Agreement. As of the Closing Date, the assets of each such Seller's Plan
are sufficient to provide all "benefit liabilities," as defined in Section
4001(a)(16) of ERISA, due under such Seller's Plan upon termination of such
Seller's Plan. None of Seller, any ERISA Affiliate or any other Person to which
any of them is a successor or parent corporation (within the meaning of Section
4069(b) of ERISA) has engaged in a transaction that could reasonably be expected
to result in, nor will the consummation of the transactions contemplated in this
Agreement or the Transaction Documents result in, a liability to Seller, any
ERISA Affiliate, Buyer or the LLC under Section 4069 of ERISA.
PAGE 28
5.15 SYSTEM INFORMATION
5.15.1 SCHEDULE 5.15.1 sets forth a true and accurate
description, on a System-by-System basis, of the following information relating
to the Systems as of the date or dates set forth on such Schedule:
(a) the approximate number of aerial and underground
miles of plant included in the Assets and served by each headend;
(b) the approximate number of single family homes and
residential multiple dwelling units passed by each System;
(c) the approximate miles of plant operating at the
applicable MHz capacity and channel capacity of each headend;
(d) the approximate number of EBSs served by the System
by subscriber type;
(e) the MHz capacity and channel capacity of each headend
and the HFC architecture for the System, including but not limited to
node size, fiber counts and return paths; and
(f) the cities, towns, villages, townships, boroughs,
counties or other communities served by the System (with or without the
requirement of a franchise) that have been, or are required to be,
registered with the FCC pursuant to Section 76.12 of its rules,
including each C.U.I.D. number.
5.15.2 SCHEDULE 5.15.2 sets forth a true and accurate
description in all material respects of the following information relating to
the System as of the date of this Agreement:
(a) a description of the Basic Service, Broadcast Basic
Service, Deluxe Basic Service, Pay TV and a la carte services available
from the System, and the rates charged by Seller therefor, including
all rates, tariffs and other charges for cable television or other
services provided by the System; and
(b) the stations and signals carried by the System and
the channel position of each such signal and station.
5.15.3 Neither Seller nor the Business has any obligation or
liability for the refund of monies to subscribers of the System, other than as
evidenced by their respective refund (including deposit) account credit balances
or as may be required under the rules and regulations relating to rates
promulgated or to be promulgated by the FCC under the Cable Act.
PAGE 29
5.15.4 The System is capable of providing all channels,
stations and signals reflected as being carried on such System on SCHEDULE
5.15.2.
5.16 FINDERS AND BROKERS
Neither Seller nor any of its Affiliates has employed any financial
advisor, broker or finder or incurred any liability for any financial advisory,
brokerage, finder's or similar fee or commission in connection with the
transactions contemplated by this Agreement for which Buyer could be liable.
5.17 ACCOUNTS RECEIVABLE
Except as may be set forth on SCHEDULE 5.17, all accounts receivable of
Seller (i) are reflected and properly recorded on the books and records of the
Seller, including the Financial Statements; (ii) represent sales actually made
in the ordinary course of business consistent with the Seller's past practices
for goods or services delivered or rendered in bona fide arm's-length
transactions; (iii) constitute only valid, undisputed claims; (iv) are not
subject to any assertions of set-off, reduction, counterclaim or, to the
knowledge of the Seller, dispute; (v) have not been extended or rolled over in
order to make them current; (vi) are current (except as set forth in the aging
report provided to Buyer prior to entering into this Agreement); and (vii) are
represented by one or more invoices, each of which has been generated, and
provides for payment to be made, in the name of Seller.
5.18 FRANCHISE RENEWAL RIGHTS
Seller has timely filed valid requests for renewal under Section 626 of
the Cable Act with the proper Governmental Authority with respect to all cable
television franchises of the Business that will expire within thirty-six (36)
months after any date between the date of this Agreement and the Closing Date
(the "APPLICABLE FRANCHISES"). Seller is in compliance with all rules and
regulations promulgated by the FCC with respect to the procedures for seeking
franchise renewals. Seller has received no notice from any party that the
Applicable Franchises will not be renewed or that the applicable Governmental
Authority has challenged or raised any objection to or otherwise questioned
Seller's request for renewal under Section 626 of the Cable Act and Seller has
duly and timely complied with any and all inquiries and demands by any and all
Governmental Authorities made with respect to Seller's requests for renewal and
will continue to do so with respect to any renewal request filed prior to
Closing. True, complete and correct copies of all correspondence between the
Seller and any and all Governmental Authorities concerning the renewal of any
Applicable Franchise have been and will be made available to Buyer in a timely
manner.
5.19 BONDS
Except as set forth on SCHEDULE 5.19, there are no franchise,
construction, fidelity, performance, or other bonds, letters of credit,
guarantees or escrow accounts posted, delivered or established by Seller or any
Affiliate in connection with its operation or ownership of any of the System or
Assets.
PAGE 30
5.20 REQUIRED CONSENTS
The consents, authorizations and approvals listed on SCHEDULE 4 are all
of the Required Consents for all of the transactions described in this
Agreement.
5.21 DISCLOSURE
No representation or warranty by Seller in this Agreement or in any
Schedule or Exhibit to this Agreement, or any statement, list or certificate
furnished or to be furnished by Seller in writing to Buyer pursuant to this
Agreement, contains or will contain any untrue statement of material fact, or
omits or will omit to state a material fact required to be stated therein or
necessary to make the statements contained therein not misleading in light of
the circumstances under which they were made. Without limiting the generality of
the foregoing, the information set forth in the Schedules concerning the
Business is accurate and complete in all material respects.
6. BUYER'S REPRESENTATIONS AND WARRANTIES
To induce Seller to enter into this Agreement, Buyer represents and
warrants to Seller, as of the date of this Agreement and as of the Closing, as
follows:
6.1 ORGANIZATION AND QUALIFICATION
Buyer is a limited liability company duly organized and validly
existing under the laws of Washington and has all requisite limited liability
company power and authority to carry on its business as currently conducted and
to own, lease, use and operate its assets.
6.2 AUTHORITY AND VALIDITY
Buyer 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 Transaction Documents to which Buyer is a party. The
execution and delivery by Buyer of, the performance by Buyer of its obligations
under, and the consummation by Buyer of the transactions contemplated by, this
Agreement and the Transaction Documents to which Buyer is a party have been duly
authorized by all requisite action of Buyer. This Agreement is, and when
executed and delivered by Buyer, the Transaction Documents to which Buyer is a
party will be, the valid and binding obligation of Buyer, enforceable in
accordance with its terms, except insofar as enforceability may be limited or
affected by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws now or hereafter in effect affecting creditors' rights generally or
by principles governing the availability of equitable remedies.
6.3 NO BREACH OR VIOLATION
Except for and subject to the receipt of the Required Consents, the
execution, delivery and performance of this Agreement by Buyer will not: (a)
violate any provision of the organizational documents of Buyer; (b) violate any
Legal Requirement; (c) require any
PAGE 31
consent, approval or authorization of, or any filing with or notice to, any
Person; or (d) (i) violate, conflict with or constitute a breach of or default
under (without regard to requirements of notice, passage of time or elections of
any Person), (ii) permit or result in the termination, suspension, modification
of, (iii) result in the acceleration of (or give any Person the right to
accelerate) the performance of Buyer under any instrument or agreement to which
Buyer is a party or by which Buyer or any of its assets is bound, or (iv) result
in the creation or imposition of any Encumbrance, except for purposes of this
clause (d) such violations, conflicts, breaches, defaults, terminations,
suspensions, modifications and accelerations as would not, individually or in
the aggregate, have a material adverse effect on Buyer or on the validity,
binding effect or enforceability of this Agreement or that are provided for or
anticipated by this Agreement or that arise out of Buyer's financing of the
Purchase Price at Closing.
6.4 FINANCIAL CAPABILITY OF BUYER
Provided Buyer obtains the contemplated debt and equity financing for
the transaction described herein and in the NCP7 and NCP8 Agreements and Buyer
does not exercise its termination right under SECTION 10.1.7, Buyer will have
available on the Closing Date sufficient funds to enable it to consummate the
transactions contemplated hereby and perform its obligations hereunder,
including payment of the Purchase Price.
6.5 FINDERS AND BROKERS
Buyer has not employed any financial advisor, broker or finder or
incurred any liability for any financial advisory, brokerage, finder's or
similar fee or commission in connection with the transactions contemplated by
this Agreement for which Seller could be liable.
7. ADDITIONAL COVENANTS
7.1 ACCESS TO PREMISES AND RECORDS
Between the date of execution and delivery of this Agreement and the
Closing Date, Seller will give Buyer and its counsel, accountants and other
representatives reasonable access during normal business hours and upon
reasonable advance notice to all the premises and Books and Records of the
Business and to all the Assets and the personnel engaged in the management or
operations of the System; and will furnish to Buyer and its representatives all
such documents, financial information and other information regarding the
Business and Assets as Buyer may from time to time reasonably request provided
that no investigation by Buyer will affect or limit the scope of any of the
representations, warranties, covenants and indemnities of Seller in this
Agreement or in any Transaction Document or Seller's liability for breach of any
of the foregoing. Such information shall include, without limitation, all
monthly and quarterly revenue reports from the billing system provider that are
currently provided in the ordinary course of operations.
PAGE 32
7.2 CONTINUITY AND MAINTENANCE OF OPERATIONS; FINANCIAL STATEMENTS
Except as Buyer may otherwise agree in writing, until the Closing:
7.2.1 Seller will continue to operate the Business only in
the usual, regular and ordinary course consistent with past practices, including
making ordinary marketing, advertising and promotional expenditures and, to the
extent consistent with such conduct and operation; using commercially reasonable
efforts to: (A) preserve the current business intact in all material respects,
including preserving existing relationships with franchising authorities,
suppliers, customers and others having business dealings with the Business; (B)
complete line extensions, placing conduit or cable in new developments and
fulfill installation requests in the ordinary course of business; (C) use its
commercially reasonable efforts to keep available the services of its employees
employed in connection with the Systems; (D) not, outside the ordinary course of
business consistent with normal salary reviews, increase the rate of
compensation of Seller's employees employed in connection with the System; (E)
continue to operate the Business in material compliance with all Legal
Requirements; and (F) preserve any beneficial business relationships with key
customers, suppliers and others having business dealings with Seller relating to
the Business. Without limiting the generality of the foregoing, Seller will
maintain the Assets in good condition and repair, will maintain inventories in
its ordinary course of business at not less than normal historical levels
consistent with past practices, will maintain insurance as in effect on the date
of this Agreement and will keep all of its business books, records and files in
the ordinary course of business in accordance with past practices. Seller will
not itself, and will not permit any of its officers, directors, shareholders,
partners, agents or employees to, pay or forgive any of Seller's subscriber
accounts receivable (other than for their own residences) prior to the Closing
Date. Seller will continue to implement its procedures for disconnection and
discontinuance of service to subscribers whose accounts are delinquent in
accordance with those in effect on the date of this Agreement and consistent
with past practice. Seller will not except in the ordinary course of business or
to fulfill legal obligations engage in any hiring or employee compensation
practices except for changes in such practices implemented by Seller and its
Affiliates on a company-wide basis.
7.2.2 Seller will not, without the prior written consent of
Buyer: (a) modify, terminate, renew, suspend, abrogate or enter into any Seller
Contract, Governmental Permit or other instrument that would be included in the
Assets other than in the ordinary course of business, provided that Buyer's
consent, not to be unreasonably withheld or delayed, will be required to modify,
terminate, renew, suspend, abrogate or enter into any retransmission consent or
programming contract, any franchise, any lease or any other agreement that
contemplates payments in any twelve (12) month period exceeding $5,000
individually or $50,000 in the aggregate; (b) engage in any hiring or employee
compensation practices with respect to the System, Business or any System
Employees that are inconsistent with past practices; (c) add or delete any
program services except to the extent required under the Cable Act or any other
Legal Requirement or change the rate charged for any subscriber service in a
manner that is outside the ordinary course of business or inconsistent with
Seller's prior practice;; (d) file a Cost of Service Election with respect to
any of the Systems;
PAGE 33
(e) sell, transfer or assign any of the Assets other than in ordinary course of
business and except for assets sold or disposed of and replaced by other assets
of comparable utility and value or permit the creation of any Encumbrance, other
than a Permitted Encumbrance on any Asset; (f) permit the amendment or
cancellation of any of the Governmental Permits, Seller Contracts or any other
contract or agreement (other than those constituting Excluded Assets) which
affects or is applicable to the System or the Business; (g) enter into any
contract or commitment or incur any indebtedness or other liability or
obligation of any kind relating to the System or the Business involving an
expenditure in excess of $10,000 unless such contract or commitment has a term
expiring prior to Closing or can be terminated upon thirty (30) days' notice
without liability to Seller, Buyer or the LLC; (h) enter into any agreement with
a billing service with respect to the System of Business; (i) With respect to
the System and Business, engage in any marketing, subscriber installation,
collection or disconnection practices outside the ordinary course or
inconsistent with past practices; (j) except as in the ordinary course of
business consistent with normal salary reviews, increase the rate of
compensation or benefits payable or to become payable to any System Employees or
make any material change in personnel policies; or (k) take or omit to take any
action that would cause Seller to be in breach of any of its representations or
warranties in this Agreement. Notwithstanding the foregoing, if Buyer's consent
is requested for any proposed new or amended retransmission consent agreement
and Buyer does not object to the terms of the proposed new or amended agreement
within five (5) Business Days after receiving Seller's written notice of the
proposed terms, Buyer shall be deemed to have consented to the new or amended
terms provided they are, in Seller's reasonable judgment, not commercially
unreasonable or outside customary industry practice and convention.
7.2.3 Seller will deliver to Buyer correct and complete
copies of (a) monthly and quarterly financial statements and operating reports
for the Business and any reports with respect to the operations of a System
prepared by or for Seller and (b) all rate regulation documents at any time
between the date of this Agreement and the Closing. All financial statements so
delivered will be prepared in accordance with GAAP on a basis consistent with
the Financial Statements.
7.2.4 Seller will cause its appropriate Affiliates to be
bound by and comply with the provisions of this SECTION 7.2 to the extent such
Affiliates own, operate or manage any of the Assets or the System.
7.2.5 Except as contemplated hereby, Seller will not and
will not cause or permit the LLC to, (i) issue, deliver or sell or agree to
issue, deliver or sell to any Person any additional membership interests in, or
rights of any kind to acquire any ownership interest in the LLC of any class, or
any option, rights or warrants to acquire, or securities convertible into,
shares of capital stock or ownership interests or any stock appreciation rights
or similar rights, (ii) without the prior written consent of Buyer, amend the
Certificate of Formation or operating agreement of the LLC; (iii) with respect
to the Business or System, acquire, lease or dispose of or agree to acquire,
lease or dispose of any capital assets or any other assets, other than any
acquisition, lease or disposition that is (A) individually or in the aggregate,
immaterial in amount; (B) occurs in the ordinary course of business; or (C) is
outside the
PAGE 34
ordinary course of business but is consented to by Buyer; (iv), with respect to
the System, acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial equity interest in, or by any other manner, any
business or any corporation, partnership, association or other business
organization or division thereof; or (v) agree to do any of the foregoing.
7.2.6 Except as provided in SECTION 7.3, Seller will not,
with respect to any System Employee, except as required to comply with
applicable law or existing contracts or plans, (i) adopt or terminate or amend
any bonus, profit sharing, compensation, severance, termination, stock option,
stock appreciation rights, pension, retirement, deferred compensation,
employment plan, agreement, trust, fund or other arrangement for the benefit or
welfare of any director, officer or current or former employee (except for such
awards made in the ordinary course of business consistent with past practices
unless such award is otherwise prohibited under SECTION 7.3), (ii) increase or
decrease in any manner the compensation or fringe benefit of any director,
officer or employee (except for normal increases in the ordinary course of
business consistent with past practice), (iii) grant any awards under any bonus,
incentive, performance or other compensation plan or arrangement (except for
such awards made in the ordinary course of business consistent with past
practice unless such award is otherwise prohibited under SECTION 7.3), (iv) take
any action to fund or in any other way secure the payment of compensation or
benefits under any employee plan, agreement, contract or arrangement (except for
such actions made in the ordinary course of business consistent with past
practice) or (v) agree to do any of the foregoing;.
7.2.7 Seller will establish and organize the LLC in the
State of Washington as provided in SECTION 2.1. Northland Communications
Corporation shall be and remain the sole manager of the LLC prior to Closing.
Seller shall not permit the LLC to engage in any business activity after the
Contribution Date and prior to the Closing other than the operation of the
Business in the ordinary course and shall not permit the LLC to incur any
obligations or liabilities other than the Assumed Liabilities. Seller will not
cause, permit or authorize the LLC to do or take any action that Seller would
not be authorized to do under this SECTION 7.2.
7.3 EMPLOYEE MATTERS
7.3.1 Buyer may, but will have no obligation to, cause the
LLC to employ or offer employment to, any or all System Employees. Not less than
twenty (20) Business Days before the Closing Date, Buyer will provide notice to
Seller of which System Employees Buyer intends to hire directly or through the
LLC. Within thirty (30) days after the date of execution of this Agreement,
Seller will provide to Buyer a list of all System Employees by work location and
entity as of a recent date, showing the original hire date, the then-current
positions and rates of compensation, rate type (hourly or salary) and scheduled
hours per week, and whether the System Employee is subject to an employment
agreement, a collective bargaining agreement or represented by a labor
organization. The list will also indicate which of the System Employees Seller
desires to retain as Seller's employees (the "RETAINED EMPLOYEES"). The System
Employees that accept the LLC's offer of employment, which shall become
effective as of the Closing Time, shall be herein referred to as "TRANSFERRED
PAGE 35
EMPLOYEES." Seller agrees to cooperate in all reasonable respects with Buyer to
allow Buyer or its Affiliates to evaluate the Systems Employees to make hiring
decisions; provided, however, other than with respect to ▇▇▇▇▇ Copperonol, ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Buyer shall not undertake any employment interviews
with any System Employees until thirty (30) days prior to the anticipated
Closing Date. Subject to the foregoing limitation, Buyer will have the
opportunity to make such appropriate prehire investigation of each System
Employee, as it deems necessary, including the right to review personnel files
(subject to Seller obtaining the consent of the System Employee) and, subject to
the foregoing restriction, the right to interview such System Employees during
normal working hours so long as such interviews are conducted after notice to
Seller and do not unreasonably interfere with Seller's operations and such
investigations and interviews do not violate any law or contract. Subject to
applicable law, Buyer, may, if it wishes, condition any offer of employment upon
the System Employee being in active service on the Closing Date, the System
Employee's passing a pre-employment physical examination (including drug
screening test) and the completion of a satisfactory background check. The Buyer
will bear the expense of such examination but Seller will, upon reasonable
notice, cooperate in the scheduling of such examinations so long as the
examinations do not unreasonably interfere with the Seller's operations. As of
the Closing Date, neither Buyer nor the LLC will have any obligation to Seller,
its Affiliates or employees, with regard to any employee Buyer has determined
not to hire. Seller agrees that as of the Closing Date, the only employees of
the LLC will be the System Employees to be hired by Buyer or the LLC.
7.3.2 As of the Closing, Seller shall terminate employment
of all Transferred Employees. Seller shall be responsible for providing any
notification that may be required under WARN and any similar statute with
respect to any Transferred Employees and otherwise complying with WARN or
similar state law requirements in connection with the termination of the
employment of any Transferred Employee by Seller. Seller shall be responsible
for and shall cause to be discharged and satisfied in full all amounts owed to
any System Employee on account of termination, including wages, salaries, any
employment, incentive, compensation or bonus agreements or other benefits or
payments. Buyer and Seller shall agree to make an adjustment to the Purchase
Price to reflect a credit to Buyer for the LLC granting Transferred Employees
accrued vacation pay and compensated personal leave in lieu of Seller's payment
of such obligations upon termination, such credit to be equal to the extent to
which Seller is relieved of an obligation to pay for such benefits. Seller
agrees that for a period of sixty (60) days after the Closing Date, it will not
induce or attempt to influence directly or indirectly any Transferred Employee
to terminate his/her employment with Buyer or LLC or to work for Seller or any
other person or entity.
7.3.3 Seller shall treat all employees (and their spouses
and dependants) who terminate employment with Seller as a result of the
transactions contemplated by this Agreement (regardless of whether the employee
becomes a Transferred Employee) as "qualified beneficiaries" entitled to
continuation health coverage as described in Section 4980B of the Code and
Section 601, et seq., of ERISA and shall continue to provide such continuation
coverage for the maximum period required by law to any former employee
PAGE 36
(and the spouse and dependants of any former employee) who is receiving (or
entitled to elect) such continuation coverage on the Closing Date.
7.3.4 Notwithstanding any provision contained herein to the
contrary, nothing in this Agreement is intended to confer upon any employee or
his or her spouse, dependents, successors, assigns, heirs or legal
representatives, any rights or remedies hereunder, as a third-party beneficiary
or otherwise, including (i) any rights of employment for any specified period or
(ii) any employee benefits, severance or other compensation.
7.3.5 All claims and obligations under, pursuant to or in
connection with any welfare, medical, insurance, disability or other employee
benefit plans of Seller or arising under any Legal Requirement affecting
employees of Seller incurred on or before the Closing or resulting from or
arising from events or occurrences occurring or commencing on or before the
Closing will remain the responsibility of Seller, whether or not such employees
are hired by Buyer or the LLC as of or after the Closing. Neither Buyer nor the
LLC will have or assume any responsibility, obligation or liability under or in
connection with any Seller's Plan (and Seller shall retain all such
responsibilities, obligations and liabilities). For purposes of this Agreement,
the following claims and liabilities will be deemed to be incurred as follows:
(i) medical, dental and/or prescription drug benefits when the treatment is
provided, except with respect to such benefits provided in connection with a
continuous period of hospitalization, which will be deemed to be incurred at the
time of admission to the hospital; (ii) life, accidental death and dismemberment
and business travel accident insurance benefits and workers compensation
benefits, upon the death, disability or accident giving rise to such benefits;
and (iii) salary continuation or other short-term disability benefits, or
long-term disability, upon commencement of the disability giving rise to such
benefit.
7.3.8 Seller will remain solely responsible for, and will
indemnify and hold harmless Buyer and LLC from and against all Losses arising
from or with respect to, all salaries, commissions, deferred compensation,
severance, insurance, pension, profit sharing, disability payment, medical, sick
pay, holiday, vacation (except for accrued vacation time included in the
calculation of adjustments), continuation coverage and other compensation or
benefits to which its employees may be entitled, whether or not such employees
may be hired by Buyer, as a result of their employment by Seller or the LLC on
or prior to the Closing, the termination of their employment on or prior to the
Closing, the consummation of the transactions contemplated hereby or pursuant to
any applicable Legal Requirement or otherwise relating to their employment prior
to the Closing. Likewise, Seller will remain solely responsible for, and will
indemnify and hold harmless Buyer and LLC from and against all Losses related,
directly or indirectly, to Seller's Plans. Any liability under WARN with regard
to any employee terminated on or prior to the Closing, or not hired by Buyer or
the LLC on or after the Closing, will, as a matter of contract between the
Parties, be the responsibility of Seller.
7.3.7 If Seller has, or acquires, a duty to bargain with
any labor organization, then Seller will (i) give prompt written notice of such
development to Buyer, including notice of the date and place of any negotiating
sessions as they are planned or contemplated and
PAGE 37
permit Buyer to have a representative present at all negotiating sessions with
such labor organization and at all meetings preparatory thereto (including
making Buyer's representative a representative of the Seller's delegation if
required by the labor organization) and (ii) not, without Buyer's written
consent, enter into any Contract with such labor organization that purports to
bind Buyer, the LLC or Seller after Closing, including any successor clause or
other clause that would have this purpose or effect. Seller acknowledges and
agrees that Buyer has not agreed to be bound or to have the LLC bound after
Closing, and will not be bound, without an explicit assumption of such liability
or responsibility by Buyer, by any provision of any collective bargaining
agreement or similar Contract with any labor organization to which Seller or the
LLC are or may become bound.
7.4 REQUIRED CONSENTS AND FRANCHISE RENEWALS AND EXTENSIONS
7.4.1 Seller will use commercially reasonable efforts to
obtain, as soon as possible and at its expense (except as provided below), all
the Required Consents, in form and substance reasonably satisfactory to Buyer
and will deliver to Buyer copies of such Required Consents promptly after they
are obtained; provided, however, that Seller will afford Buyer the opportunity
to review, approve and revise the form of Required Consent prior to delivery to
the party whose consent is sought. Buyer will cooperate with Seller to obtain
all Required Consents, but Buyer will not be required to agree to any adverse
changes in, or the imposition of any condition to the transfer to Buyer of, any
Seller Contract or Governmental Permit or other Asset as a condition to
obtaining any Required Consent. Buyer agrees to pay fifty percent (50%) of all
reasonable out of pocket third party charges or fees that may be incurred by
Seller to any Third Party in order to obtain the Required Consents ("CONSENT
FEES") that exceed $10,000 in the aggregate and that may required in connection
with the processing of any request for any Required Consent, up to a maximum
payment by Buyer hereunder of $20,000 ("BUYER'S CONSENT CONTRIBUTION").
7.4.2 Within eight (8) Business Days after the date hereof,
Buyer shall furnish Seller with such information as is necessary to permit
Seller to complete Section II of FCC Form 394 with respect to each franchise as
to which a Form 394 is required, which information shall include all of the
information required of the transferee/assignee by the franchising authority,
franchise agreement or applicable state and local law (the "BUYER 394
INFORMATION"). Within four (4) Business Days after Seller's receipt of Buyer's
information, Seller will complete, execute and file with each appropriate
Governmental Authority FCC Forms 394 with respect to each franchise as to which
such Form 394 is required and appropriate transfer consent request forms for all
other franchises (including without limitation the franchise for Shelter Bay),
together with all information required of the transferor/assignor by the
franchising authority, franchise agreement or applicable state and local law
(the "TRANSFER REQUEST FILING DEADLINE").
7.4.3 Seller will, upon the written request of Buyer (an
"EXTENSION REQUEST"), use commercially reasonable efforts to obtain renewals or
extensions for any System franchises named in such written request that will
expire within thirty-six (36) months from the Closing Date, including, without
limitation, the Stanwood and Island
PAGE 38
County franchise, such that the remaining term of all franchises required in
connection with the operation of the System will have a term of not less than
thirty-six (36) months on the Closing Date and there shall be no System
franchise for which a valid notice of renewal pursuant to the formal renewal
procedures established by Section 626 of the Cable Act has not been timely
delivered to the appropriate Governmental Authority (collectively, the
"FRANCHISE EXTENSIONS"). Buyer will cooperate with the Seller in efforts to
obtain the Franchise Extensions, but will not be required to accept or agree or
accede to any renewal or extended System franchise that contains terms that
would make or are reasonably likely to make the System franchise that is being
renewed or extended more onerous in any respect or that would reduce or are
reasonably likely to reduce the benefits available under the System franchise
that is being renewed or extended. Seller's failure to obtain renewal or
extension of any System Franchise shall not give rise to any right or remedy in
favor of Buyer, provided Seller has otherwise complied with this SECTION 7.4.3,
nor shall such failure result in any diminution of the Purchase Price.
7.5 TITLE COMMITMENTS AND POLICIES
After the execution of this Agreement, Seller will obtain, at its
expense, (a) within ten (10) Business Days after the date of this Agreement,
current commitments from a title insurance company reasonably acceptable to
Buyer (the "TITLE COMPANY") for owner's title insurance policies on the 1997
ALTA owner's form for all Real Property owned by Seller, and current leasehold
title policy commitments for lessee's title insurance policies for all Real
Property leased by Seller which is used for headend or tower sites (the "TITLE
POLICIES") and (b) as soon as practicable, surveys of each parcel of Real
Property containing such items as are necessary to obtain the Title Policies to
be issued pursuant to the title commitments provided by Seller (the "TITLE
COMMITMENTS") in the full amount of the Purchase Price allocated to such Real
Property with the standard printed exceptions relating to survey matters deleted
(the "SURVEYS"), certified to Buyer, the LLC and to the Title Company issuing a
Title Policy, and such affidavits, to the extent such affidavits are factually
accurate, as are required by the Title Company in order to delete the standard
printed exceptions relating to mechanics liens and the interests of other
parties in possession. If Buyer notifies Seller within five (5) Business Days
following its receipt of both the Title Commitments and Survey for all the Real
Property of any Encumbrance (other than a Permitted Encumbrance) or other matter
affecting title to Real Property which prevents access to or which could prevent
or impede in any way the use or operation of any parcel of Real Property for the
purposes for which it is currently used or operated by Seller (other than a
Permitted Encumbrance) (a "TITLE DEFECT"), then Seller will (i) use commercially
reasonable efforts to remove such Title Defect or (ii) with the consent of the
objecting party, cause the Title Company to commit to insure over each such
Title Defect prior to the Closing. If such Title Defect cannot be removed prior
to Closing or the Title Company does not commit to insure over such Title Defect
prior to Closing and if Buyer elects to waive such Title Defect and proceed
towards consummation of the transaction in accordance with this Agreement in its
reasonable discretion, Buyer and Seller will enter into a written agreement at
Closing
PAGE 39
containing the commitment of Seller to use commercially reasonable efforts to
remedy the Title Defect following Closing on terms satisfactory to Buyer, in its
reasonable discretion. The cost of the Title Policies shall be paid by Seller on
or prior to the Closing Date.
7.6 NO SHOPPING
None of Seller, its Affiliates, shareholders, partners or officers or
any agent or representative of any of them will, during the period commencing on
the date of this Agreement and ending with the earlier to occur of the Closing
or the termination of this Agreement, directly or indirectly (a) solicit or
initiate the submission of proposals or offers from any Person for, (b)
participate in any discussions pertaining to or (c) furnish any information to
any Person other than Buyer relating to, any direct or indirect acquisition or
purchase of all or any portion of the Assets or (d) make information about the
System or the Business available to any Third Party in connection with the
possible sale of the System or Seller's Business or any ownership interests in
Seller or the LLC prior to the Closing Date or the date this Agreement is
terminated in accordance with its terms. Notwithstanding the foregoing, Buyer
acknowledges that certain informational materials on the System prepared by
Seller's broker dated March 31, 2002 (the "BOOK") have already been distributed
to certain prospective buyers and, provided that no further distribution of the
Book or the materials or information contained therein takes place or is
authorized by Seller, its Affiliates, shareholders, partners, officers and
representatives, including Seller's broker, Seller shall not be in violation of
clause (d) of this SECTION 7.6. Seller shall cause its broker to notify in
writing all Persons who received or who have possession of the Book that an
agreement to purchase the Business has been signed but without identifying Buyer
or any transaction terms, and the form of such notice shall otherwise be
reasonably acceptable to Buyer.
7.7 NOTIFICATION OF CERTAIN MATTERS
Seller will promptly notify Buyer of any fact, event, circumstance or
action (a) which, if known on the date of this Agreement, would have been
required to be disclosed to Buyer pursuant to this Agreement or (b) the
existence or occurrence of which would cause any of Seller's or Buyer's
representations or warranties under this Agreement not to be correct and
complete. Buyer will promptly notify Seller of any fact, event, circumstance or
action (a) which, if known on the date of this Agreement, would have been
required to be disclosed to Seller pursuant to this Agreement or (b) the
existence or occurrence of which would cause any of Buyer's or Seller's
representations or warranties under this Agreement not to be correct and
complete. Notwithstanding the communication of any such information shall not
limit in any way any representations or warranties made by the disclosing party
or any obligations or liabilities thereunder.
7.8 RISK OF LOSS; CONDEMNATION
7.8.1 The risk of any loss or damage to the System
resulting from fire, theft or other casualty (except reasonable wear and tear)
will be borne by Seller at all times prior to Closing. If any such loss or
damage is sufficiently substantial so as to preclude and prevent
PAGE 40
resumption of normal operations of any material portion of the System or the
replacement or restoration of the lost or damaged property within twenty (20)
days or, if earlier, prior to the Closing Date, Seller will immediately notify
Buyer in writing of that fact and subject to the other provisions of this
SECTION 7.8, Seller will use commercially reasonable efforts to repair, replace
and restore the lost or damaged property to its former condition as soon as
practicable at its sole expense, subject to SECTION 7.8.2, including applying
any insurance proceeds to restore such assets to their prior condition.
7.8.2 If the aggregate cost to Seller to repair, replace or
restore the lost or damaged property to its former condition, exclusive of any
insurance policy or self insurance plan proceeds, would exceed $500,000 or if
the cost to Seller's Affiliates of repairing, replacing or restoring property
similarly lost or damaged by fire, theft or other casualty in the other
Northland Systems, when combined with the cost to Seller under this SECTION 7.8,
would exceed $1,000,000 in the aggregate, then, in either case, Seller may,
subject to Buyer's right to consummate the Closing as described below, elect to
terminate this Agreement by written notice to Buyer at any time within ten (10)
days of the occurrence of the event of loss or damage, and SECTION 10.2 shall be
applicable upon such termination.
7.8.3 If any such loss or damage to the System is
sufficiently substantial so as to preclude and prevent resumption of normal
operations of a material portion of the System or the repair, replacement or
restoration of the lost or damaged property within twenty (20) days, or if
earlier, the Closing Date and Seller elects not to repair, replace and restore
the lost or damaged property, Buyer may elect to terminate this Agreement upon
written notice to Seller at any time within ten (10) days after it receives
written notice from Seller of the occurrence of the event of such loss or damage
and the fact that Seller is not obligated to correct the problem and has elected
not to correct the problem, and upon such termination SECTION 10.2 shall be
applicable. In the absence of a timely election to terminate this Agreement,
Buyer will be deemed to have waived such loss or damage and to have elected to
consummate the transactions contemplated by this Agreement in accordance with
all of the remaining provisions of this Agreement. Notwithstanding Seller's
election to terminate this Agreement pursuant to SECTION 7.8.2, Buyer may elect
to consummate the transactions contemplated by this Agreement in accordance with
all of the remaining provisions of this Agreement, in which event at the Closing
the amount of all insurance proceeds (except for proceeds related solely to
Excluded Assets) payable as a result of the occurrence of the event resulting in
such loss or damage to the System (in each case to the extent not used to
repair, replace or restore such lost or damaged System), or, in the event the
loss was self-insured, the amount required to repair, replace or restore the
lost or damaged property (up to an aggregate of $1,000,000 in cooperative or
self insurance proceeds among Seller, NCP7 and NCP8), except for any proceeds
from business interruption insurance relating to the loss of revenue for the
period through and including the Closing, will be delivered by Seller to Buyer
or the LLC or the rights to such proceeds will be assigned by Seller to Buyer if
not yet paid over to Buyer or the LLC, and, upon such delivery or assignment and
consummation of the Closing, Seller will have no additional liability to Buyer
in respect of any such loss or damage to the Systems.
PAGE 41
7.8.4 If, prior to the Closing, any part of or interest in
any material assets of the System is taken or condemned as a result of the
exercise of the power of eminent domain, or if a Governmental Authority having
such power informs Seller that it intends to condemn all or any part of any
material Assets (such event being called, in either case, a "TAKING"), then
Buyer may terminate this Agreement. If Buyer does not elect to terminate this
Agreement, then (i) Buyer will have the sole right, in the name of Seller if
Buyer so elects to negotiate for, claim, contest and receive all damages with
respect to the Taking (except for damages related solely to Excluded Assets),
(ii) Seller will be relieved of its obligation to convey to Buyer the Assets or
interests that are the subject of the Taking, (iii) at the Closing, Seller will
assign to the LLC all of Seller's rights to all damages payable with respect to
the Taking (except for damages related solely to Excluded Assets), and (iv)
following the Contribution Date, Seller will give Buyer such further assurances
of such rights and assignment with respect to the Taking as Buyer may from time
to time reasonably request.
7.9 LIEN AND JUDGMENT SEARCHES
Seller will obtain, at its expense, within ten (10) days after the date
of this Agreement and again within ten (10) days prior to the Contribution Date,
(a) the results of a lien search conducted by a professional search company of
records in the office of the Secretary of State of the State of Washington,
including copies of all financing statements or similar notices or filings (and
any continuation statements) discovered by such search company and (b) the
results of a search of the dockets of the clerk of each federal and state court
sitting in the city, county or other applicable political subdivision where the
principal office or any material assets of Seller may be located, with respect
to judgments, orders, writs or decrees against or affecting Seller or any of the
Assets.
7.10 TRANSFER TAXES
All Taxes arising from or payable by reason of the contribution of the
Assets to the LLC and the subsequent sale of all the membership interests in the
LLC to Buyer (the "SALES TAXES") will be paid equally by Seller and Buyer,
subject to Buyer's rights under SECTION 10.1.5. Tax returns required to be filed
in respect of Sales Taxes ("SALES TAX RETURNS") will be prepared and filed by
the party that has primary responsibility under applicable law for filing such
Sales Tax Returns. If no party has primary responsibility under applicable law
for filing a Sales Tax Return, then Seller will be responsible for preparing and
filing any such Sales Tax Return. Seller will comply with all state notification
requirements and timely file in proper form with any applicable taxing authority
any notice provided for under applicable state or local laws to confirm that tax
liabilities (other than Sales Taxes) of the Seller for the period ending on or
prior to the Closing Date will not be assumed by Buyer or the LLC. Seller shall
use commercially reasonable efforts to obtain, prior to the Contribution Date, a
written confirmation from the Department of Revenue of the State of Washington,
that all state Tax reports have been filed by Seller and all state Taxes (other
than Sales Taxes) and unemployment compensation contributions have been paid by
Seller through the date of Closing and a similar written confirmation from any
local taxing authority with respect to local Taxes (other than Sales Taxes) to
the extent available from such local
PAGE 42
taxing authority. Seller will also, within seven (7) Business Days following the
execution and delivery of this Agreement, submit a written ruling request to the
Washington Department of Revenue in the Seller's name and in a form agreeable to
Buyer confirming that no Tax, including retail sales, use, or business and
occupation tax, will be owed by any of Buyer, Seller or the LLC in connection
with the contribution of the Assets to the LLC on the Contribution Date, the
subsequent sale of all or the membership interests in the LLC to Buyer, or the
LLC's use of the Assets after the contribution (the "REVENUE RULING"). After
submitting the request, Seller will use commercially reasonable efforts to
obtain the Revenue Ruling prior to the Contribution Date. If Seller obtains a
Revenue Ruling but the Revenue Ruling is denied or later determined to be
inapplicable with respect to the Sales Taxes for any reason other than a factual
misstatement, representation or omission in Seller's Revenue Ruling application,
Seller and Buyer shall pay equally all obligations arising out of or relating to
the Sales Taxes and any failure to pay or timely pay any Sales Taxes. If the
Revenue Ruling is later determined to be inapplicable due to a factual
misstatement, representation or omission in Seller's Revenue Ruling application,
Seller shall be fully responsible for all obligations arising out of or relating
to the Sales Taxes and any failure to pay or timely pay any Sales Taxes.
7.11 UPDATED SCHEDULES
7.11.1 Buyer acknowledges and agrees that Seller shall have
the right for ten (10) Business Days after the date of this Agreement to update
SCHEDULES 1, 2, 3, 4, 5, 6, 7, 4.2, 4.3, 5.4, 5.9.6, 5.9.7, 5.12, 5.13, 5.14.1,
5.14.2, 5.14.3, 5.15.1, 5.15.2, 5.17, 5.19, AND 7.12 to this Agreement (provided
that such update shall not be effective unless and until Buyer has received such
update), and that any and all such updated Schedules shall be dated as of the
date of this Agreement and shall be deemed to be the Schedules for all purposes
of this Agreement (including for purposes of Seller's representations and
warranties and covenants in this Agreement). If Seller does submit an updated
Schedule, then the Due Diligence Deadline shall be extended by an additional day
for each day that passes after the date of this Agreement before Buyer received
the updated Schedule.
7.11.2 In addition, not less than ten (10) Business Days
prior to the Contribution Date, Seller will deliver to Buyer revised copies of
all Schedules updated and marked to show any changes occurring between the date
of this Agreement and the date of delivery; provided, however, that for purposes
of Seller's representations and warranties and covenants in this Agreement, all
references to the Schedules will mean the version of the Schedules attached to
this Agreement on the date of signing or the date on which they are provided
subsequently to Buyer pursuant to SECTION 7.11.1, and provided further that if
the effect of any such updates to Schedules is to disclose any one or more
additional properties, privileges, rights, interests or claims as Assets, Buyer,
at or before Closing, will have the right (to be exercised by written notice to
Seller) to cause any one or more of such items to be designated as and deemed to
constitute Excluded Assets for all purposes under this Agreement. Without
changing the result set forth in the preceding sentence that updated Schedules
do not serve to update representations and warranties of Seller, the updated
Schedules delivered pursuant to this Section will be accompanied by an officer's
certificate
PAGE 43
of Seller, certifying that the information set forth in such Schedules is true
and accurate in all material respects as of the date of delivery thereof and
that all information required to be given in the Schedules has been updated to
the date of delivery of the updated Schedules.
7.12 USE OF SELLER'S NAME
For a period of one hundred twenty (120) days after the Closing Date,
Buyer and the LLC may continue to use and operate the Systems using all of the
trademarks, trade names, service marks, service names, logos and similar
proprietary rights of Seller including the "Northland Cable Television" ▇▇▇▇ and
all derivations and abbreviations of such name and related marks ("SELLER
MARKS") currently in use by Seller, subject to and in accordance with the
guidelines attached hereto as SCHEDULE 7.12, which guidelines Buyer agrees to
fully comply with in the use of the Seller Marks. Notwithstanding the foregoing,
Buyer and the LLC shall be entitled to continue to use the Seller Marks, up to
an additional sixty (60) days beyond the initial one hundred twenty (120) days
following the Closing Date, provided Buyer and the LLC have been and are
continuing to use reasonable good faith efforts to transition the Business to
the use of marks owned by or license to the LLC and discontinue use of the
Seller Marks as soon as is commercially practical. Within one hundred eighty
(180) days after the Closing Date, Buyer will discontinue using and will dispose
of all items of stationery, business cards and literature bearing the Seller
Marks. Notwithstanding the foregoing, Buyer will not be required to remove or
discontinue using any such name or ▇▇▇▇ that is affixed to converters or other
items in or to be used in subscriber homes or properties, or as are used in a
similar fashion making such removal or discontinuation impracticable for Buyer
or the LLC.
7.13 SUBSCRIBER BILLING SERVICES
Seller will provide to Buyer in connection with the System for a period
of up to one hundred eighty (180) days following Closing, including access to
and the right to use its billing system computers, software and related fixed
assets ("TRANSITIONAL BILLING SERVICES"), in connection with the System acquired
by Buyer or the LLC to allow for conversion of existing billing arrangements.
Buyer will notify Seller at least ten (10) Business Days prior to the Closing as
to whether it desires Transitional Billing Services from Seller. The
Transitional Billing Services shall be without cost to the LLC or Buyer for the
first sixty (60) days. After the first sixty (60) days, Buyer shall pay Seller
$0.40 per customer for Transitional Billing Services for the next thirty (30)
days and $0.50 per customer for each of the remaining three thirty (30) day
periods. In addition, Buyer will pay for reasonable out of pocket costs incurred
by Seller in facilitating the transition of billing services to the LLC or an
outside service retained by the LLC provided such reimbursable costs are for
extraordinary services and are approved in advance by Buyer.
7.14 CERTAIN NOTICES
Seller will duly and timely file a valid request for renewal under
Section 626 of the Cable Act with the proper Governmental Authority with respect
to all cable television
PAGE 44
franchises of the Business that will expire within thirty-six (36) months after
any date between the date of this Agreement and the Closing Date.
7.15 SATISFACTION OF CONDITIONS
Each party will use its commercially reasonable efforts to satisfy, or
to cause to be satisfied, the conditions to the obligations of the other party
to consummate the transactions contemplated by this Agreement, as set forth in
SECTION 9, provided that Buyer will not be required to agree to any increase in
the amount payable with respect to, or any modification that makes more
burdensome in any material respect, any of the Assumed Liabilities or, except as
may be otherwise specifically provided in SECTIONS 7.4.1, 7.10 AND 7.13 pay any
fees, costs or charges. If and to the extent Buyer has waived satisfaction of
any Required Consent that is a condition to Closing, subsequent to the Closing,
Seller will continue to use commercially reasonable efforts to promptly obtain
in writing any Required Consent which was not obtained on or before the Closing
and will deliver copies of the same, reasonably satisfactory in form and
substance, to Buyer. Seller shall, to the extent necessary, use the Base
Purchase Price proceeds received from Buyer at Closing to cause the release of
all Encumbrances, other than Permitted Encumbrances.
7.16 CONFIDENTIALITY
7.16.2 Neither party will issue any press release or make
any other public announcement or oral or written statement to its employees or
other Third Parties regarding this Agreement or the transactions contemplated
hereby without the consent of the other party. Each party will hold, and will
cause its employees, officers, consultants, advisors and agents to hold, in
confidence, the terms of this Agreement and any non-public information
concerning the other party obtained pursuant to this Agreement. Notwithstanding
the preceding provisions, a party may disclose such information to the extent
required by any Legal Requirement (including disclosure requirements under
federal and state securities laws), but the party proposing to disclose such
information will first notify and consult with the other party concerning the
proposed disclosure, to the extent reasonably feasible. Also notwithstanding the
preceding provisions after the Due Diligence Deadline, Buyer and Seller shall
issue a joint statement informing the System Employees that a purchase agreement
has been entered into and that Buyer or the LLC anticipates retaining all or
substantially all of the System Employees after the Closing Date. Each party
also may disclose such information to employees, officers, consultants,
advisors, agents and actual or potential investors, owners or lenders whose
knowledge is necessary to facilitate the consummation of the transactions
contemplated by this Agreement. Each party's obligation to hold information in
confidence will be satisfied if it exercises the same care with respect to such
information as it would exercise to preserve the confidentiality of its own
similar information.
7.17 COVENANT NOT TO COMPETE
7.17.1 Except as permitted under SECTION 7.17.2, none of
Seller, any Principal or any Affiliate of Seller or any Principal will engage,
directly or indirectly, in any business
PAGE 45
that owns or operates a cable television business or broadband services in the
Service Area or the Service Areas described in the NCP7 Agreement or the NCP8
Agreement (a "RESTRICTED BUSINESS"); except that this SECTION 7.17.1 will not
prohibit Seller or any Principal from acquiring or holding solely for investment
purposes 5% or less of any class or series of equity securities of any Person,
which class is registered under Section 12 of the Securities Exchange Act of
1934, as amended, even if that Person is principally engaged in a Restricted
Business.
7.17.2 The restrictions set forth in SECTION 7.17.1 will
terminate and have no further force or effect as of the second anniversary of
the Closing Date.
7.17.3 Seller acknowledges and agrees that any breach or
threatened breach of any of the obligations under this SECTION 7.17, would cause
immediate and irreparable harm to Buyer and that monetary damages would not
provide adequate relief. Without prejudice to other rights and remedies that may
be available to Buyer, Buyer will be entitled to obtain an injunction or other
equitable relief if Seller or any Principal breaches or threatens to breach any
of the terms of this SECTION 7.17, including temporary injunctive relief without
notice or opportunity to be heard and without the requirement for the posting of
a bond.
7.17.4 At the Closing, Seller and the Principals will, and
Seller will cause each of the Principals to, sign and deliver to Buyer and the
LLC a Noncompetition Agreement in the form of EXHIBIT I confirming the terms of
the covenant not to compete set forth in this SECTION 7.17 (the "NONCOMPETITION
AGREEMENT").
7.18 RETENTION OF BOOKS AND RECORDS
Following the Closing, Seller shall give access to Buyer, the LLC,
their counsel, accountants and other authorized representatives during normal
business hours to Seller's materials, books, records and documents which relate
to the operations of the Business with respect to the System prior to the
Closing Date as may be reasonably necessary in connection with any legitimate
purpose (including the preparation of tax reports and returns and the
preparation of financial statements). Such access will be subject to the
generally applicable document retention policies of Seller provided they are not
in conflict with any other provision of this Agreement, shall be subject to
reasonable advance written notice (not to exceed two (2) Business Days), will be
conducted in a manner that is not disruptive to Seller's business in any
material respect, and will be subject to any other reasonable limitations
imposed by Seller provided they do not deny the principal benefits of this
provision to Buyer or the LLC. Buyer and the LLC shall have the right to make
copies of such materials at their own expense.
7.19 TAX MATTERS
7.19.1 If, with respect to any Tax, the taxable period does
not terminate on the Closing Date (a "SPLIT PERIOD"), then, unless the Tax is
otherwise allocated herein, the Tax (whether based on income, capital, ownership
of property or otherwise) attributable to the
PAGE 46
taxable period of the applicable entity that includes the Closing Date will be
allocated to (i) Seller for the period up to and including the Closing Date, and
(ii) the LLC for the period subsequent to the Closing Date. For purposes of this
SECTION 7.19.1, Taxes for the period up to and including the Closing Date will
be determined on the basis of a closing of the books as of the Closing Date,
except that any such Tax imposed annually based on ownership of assets on a
particular date, or similar Tax will be prorated based on the assessment year
for the Tax for the period prior to and including the Closing Date and the
period thereafter.
7.19.2 Notwithstanding any limitations on liability
elsewhere in this Agreement, Seller will indemnify, defend and hold harmless
Buyer and the LLC on a first-dollar basis (i) for any and all Taxes for which
the LLC or the Buyer become liable with respect to taxable periods of Seller
ending on or prior to the Closing Date, and (ii) all Taxes allocated to Seller
pursuant to SECTION 7.19.1. Buyer will indemnify, defend, and hold harmless
Seller with respect to all Taxes arising after the Closing Date allocated to the
LLC or Buyer pursuant to SECTION 7.19.1.
7.19.3 Seller will be solely responsible for and will
prepare or cause to be prepared, and file or cause to be filed, all Tax returns
of Seller with respect to periods ending on or before the Closing Date and for
Seller after the Closing Date.
7.19.4 With respect to any Tax Return for a Split Period, if
the extended due date of such Tax Return is greater than sixty (60) days after
the Closing Date, the party preparing the return ("PREPARER") will deliver, at
least thirty (30) Business Days prior to the due date for filing of such Tax
Return (including extensions), to the party not preparing the return (the "OTHER
PARTY") a statement setting forth the amount of Taxes for which the Other Party
is responsible pursuant to this Agreement or that is allocable to the Other
Party pursuant to SECTION 7.19.1, as the case may be (the "STATEMENT"), and
copies of such Tax Return. The Other Party will have the right to review and
approve or disapprove such Tax Return and the Statement prior to the filing of
such Tax Return. Preparer and the Other Party agree to negotiate and resolve in
good faith any issue arising as a result of the review of such Tax Return and
the Statement and to mutually consent to the filing as promptly as possible of
such Tax Return. In the event the parties are unable to resolve any dispute
within ten (10) Business Days following the delivery of such Tax Return and the
Statement, Preparer and the Other Party will jointly select a public accounting
firm with nationally recognized tax expertise ("TAX ARBITRATOR") to resolve the
dispute. If the Tax Arbitrator has not resolved the dispute within five (5)
Business Days prior to the due date (including extensions) for the filing of the
Tax Return in question, then Preparer may file such Tax Return on the
determination having been made and without the Other Party's consent.
Notwithstanding the filing of such Tax Return, the Tax Arbitrator will make a
determination with respect to any disputed issue, and the amount of Taxes for
which the Other Party is responsible under this Agreement or that are allocable
to the Other Party pursuant to SECTION 7.19.1, as the case may be, will be as
determined by the Tax Arbitrator. The fees and expenses of the Tax Arbitrator
will be shared equally by Preparer and the Other Party. Not later than (i) five
(5) Business Days before the due date for the payment of Taxes with respect to
such Tax Return or (ii) in the event of a dispute, five (5) Business Days after
notice to the Other Party of resolution
PAGE 47
thereof, the Other Party will pay to Preparer an amount equal to the Taxes shown
on the Statement as being the responsibility of the Other Party under this
Agreement or allocable to the Other Party pursuant to SECTION 7.19.1, or in such
notice (as the case may be). Notwithstanding the foregoing, in the case of a
dispute, the Other Party will pay to Preparer not later than five (5) Business
Days before the due date for the payment of Taxes with respect to such Tax
Return, the amount of Taxes that the Other Party reasonably believes at such
time is properly the responsibility of the Other Party under this Agreement or
allocable to the Other Party pursuant to SECTION 7.19.1. No payment pursuant to
this SECTION 7.19.1 will excuse the Other Party from its indemnification
obligations pursuant to this Agreement if the amount of Taxes as ultimately
determined (on audit or otherwise) for the periods covered by such Tax Returns
that are the responsibility of the Other Party exceeds the amount of the Other
Party's payment under this SECTION 7.19.1.
7.19.5 Whenever any taxing authority sends a notice of an
audit, initiates an examination of Seller or the LLC or otherwise asserts a
claim, makes an assessment or disputes the amount of Taxes for any taxable
period ending on or before the Closing Date, Buyer will promptly inform Seller
and Seller will have the right to control (including control over whether and in
what manner to settle, compromise or abandon (in each case, to "VOLUNTARILY
DISCHARGE," and each such action a "VOLUNTARY DISCHARGE")), at its own cost, any
resulting proceedings and to determine whether and when to settle any such
claim, assessment or dispute. Whenever any taxing authority sends a notice of an
audit, initiates an examination of the entity which operates the System or
otherwise asserts a claim, makes an assessment or disputes the amount of Taxes
for any taxable period ending after the Closing Date, Seller will promptly
inform Buyer and Buyer will have the right to control (including control over
whether and in what manner to settle, compromise or abandon (in each case, to
"VOLUNTARILY DISCHARGE" and each such action a "VOLUNTARY DISCHARGE")), at its
own cost, any resulting proceedings and to determine whether and when to settle
any such claim, assessment or dispute.
7.19.6 Seller and Buyer will provide the other with such
assistance as may reasonably be requested by either of them in connection with
the preparation of any Tax Return, any audit or other examination by any taxing
authority, or judicial or administrative proceedings relating to liability for
Taxes, and each will retain and provide the other with any records or
information which may be relevant to such return, audit or examination,
proceedings or determination. Such assistance will include making employees
available on a mutually convenient basis to provide additional information and
explanation of any material provided hereunder and will include providing copies
of any relevant tax return and supporting work schedules. The party requesting
assistance hereunder will reimburse the other for reasonable expenses incurred
in providing such assistance.
7.19.7 Buyer and Seller will cooperate fully, as and to the
extent reasonably requested by the other party, in connection with the filing of
Tax Returns pursuant to this Section and any audit, litigation or other
proceeding with respect to Taxes. Such cooperation will include the retention
and (upon the other party's request) the provision of records and information
which are reasonably relevant to any such audit, litigation or other proceeding
PAGE 48
and making employees available on a mutually convenient basis to provide
additional information and explanation of any material provided hereunder. Each
party agrees (A) to retain all books and records with respect to Tax matters
relating to any taxable period beginning before the Closing Date until the
expiration of the statute of limitations (and, to the extent notified by Buyer,
any extensions thereof) of the respective taxable periods, and to abide by all
record retention agreements entered into with any taxing authority, and (B) to
give the other party reasonable written notice prior to transferring, destroying
or discarding any such books and records and, if the other party so requests,
each party will allow the other to take possession of such books and records.
7.20 ADVERTISING SERVICES
From and after the Closing Buyer shall cause the LLC to use
commercially reasonable efforts to collect the Excluded Advertising Receivables
for and on account of the Seller, applying the same collection efforts as
utilized by Buyer in the collection of the advertising receivables assigned to
the LLC hereunder; provided, however, neither Buyer nor the LLC shall be
obligated to incur any material out of pocket costs in attempting to collect the
Excluded Advertising Receivables. Buyer covenants to cause the LLC to utilize
▇▇▇▇▇ Copperonol to manage such collection efforts so long as Mr. Copperonol is
employed by the LLC or one of its Affiliates. Buyer shall cause the LLC to
promptly remit to Seller the proceeds of any Excluded Advertising Receivables
received by Buyer (net of any collection costs). Buyer and Seller shall
negotiate in good faith to reach agreement on a billing arrangement
incorporating commercially reasonable terms and fees, pursuant to which, for a
period of two (2) years following the Closing, the LLC will provide advertising
sales, billing and collection services for Seller's (or Seller's affiliate's)
cable television systems located in the Cities of Moses Lake and Othello,
Washington and Grant County, Washington.
7.21 POST-CLOSING ARRANGEMENTS
If Seller shall be unable to obtain a Required Consent prior to the
Closing, then, if Buyer so requests, Seller and Buyer will cooperate to enter
into a reasonable arrangement designed to enable Seller to perform its
obligations thereunder, and to provide for the assumption by Buyer of the
benefits, liabilities, risks and burdens (in each case to the extent an Assumed
Liability) of, any such Seller Contract or Governmental Permit, including
enforcement at the cost and for the account of Buyer of any and all rights of
Seller against the other party thereto arising out of the future cancellation
thereof after the Closing Date by such other party (a "POST-CLOSING CONSENT
ARRANGEMENT"). In addition, Seller shall be entitled to indemnification from
Buyer under SECTION 11.3 for any liabilities arising as a result of the failure
to obtain any Required Consent, to assign a Seller Contract or Governmental
Permit if Buyer agreed to close without the Seller having obtained such Required
Consent and the Required Consent was identified on Schedule 4. Seller shall
continue to use, for a period of at least six (6) months after the Closing Date,
commercially reasonable efforts to obtain the Required Consent. As and when,
after the Closing Date, title to, interest in and rights under any such Seller
Contract or Governmental Permit becomes transferable, the assignment to the LLC
by Seller of any title to, interest in and rights under such Seller Contract or
PAGE 49
Governmental Permit shall be deemed effective at the time such consent or
approval is effective, without any further action by Buyer, Seller or the LLC.
Nothing in this SECTION 7.21 shall be deemed to limit the LLC's obligations (to
the extent they are Assumed Liabilities) under any Seller Contract or
Governmental Permit assigned to the LLC in connection with the transactions
contemplated by this Agreement or to limit or waive the requirements or benefits
of any Closing condition.
8. CLOSING
Unless the Agreement is earlier terminated prior to Closing as provided
in SECTION 10, the Contribution Date and the Closing Date will be held on the
dates specified by Buyer in a notice to Seller ("BUYER'S CLOSING NOTICE"). If
Buyer's Closing Notice is given prior to the Increase Price Closing Deadline,
Buyer may condition Buyer's Closing Notice and Buyer's obligation to close on
certain matters occurring or not occurring provided such matters are set forth
in Buyer's Closing Notice. Without the prior consent of Seller, the Closing Date
specified by Buyer in Buyer's Closing Notice shall not be a date less than three
(3) Business Days or more than ten (10) Business Days after the date on which
Seller receives Buyer's Closing Notice. The Closing will be held at 10:00 a.m.
local time at Seller's office located at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or will be conducted by mail or at such place and time as
Buyer and Seller may agree. If all of the closing conditions set forth in
Sections 9.1, 9.2 or 9.3 have not been waived or satisfied on the closing date
specified in Buyer's Closing Notice, the Closing shall be delayed until such
time as all of the closing conditions set forth in SECTIONS 9.1, 9.2 AND 9.3
have been satisfied or waived, subject to the termination rights of the parties
set forth in SECTION 10.1.
9. CONDITIONS TO CLOSING
9.1 CONDITIONS TO THE OBLIGATIONS OF BUYER AND SELLER
The obligations of each party to consummate the transactions
contemplated by this Agreement to take place at the Closing are subject to the
satisfaction or waiver in writing, to the extent permitted by applicable Legal
Requirements, at or prior to the Closing Date of each of the following
conditions:
9.1.1 No Legal Requirement has been enacted, promulgated or
issued or become or deemed applicable to any of the transactions contemplated by
this Agreement by any Governmental Authority, which would (a) prohibit Buyer's
ownership of the LLC or the LLC's ownership and operation of all or a material
portion of any System, the Business or the Assets or (b) prevent or make illegal
the consummation of any transactions contemplated by this Agreement.
9.2 CONDITIONS TO THE OBLIGATIONS OF BUYER
The obligations of Buyer to consummate the transactions contemplated by
this Agreement to take place at the Closing are subject to the satisfaction or
waiver in writing, to
PAGE 50
the extent permitted by applicable Legal Requirements, at or prior to the
Closing Date, of each of the following conditions:
9.2.1 All representations and warranties of Seller
contained in this Agreement and any Transaction Document 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.
9.2.2 Seller shall have performed and complied with each
obligation, agreement, covenant and condition required by this Agreement and in
any Transaction Document to be performed or complied with by Seller at or prior
to the Closing; provided, however, that Buyer shall be entitled to waive this
condition and proceed to Closing without also thereby waiving any right to
assert that Seller's failure to comply with its obligations in this Agreement
resulted in Buyer being obligated to pay an increase in the Purchase Price under
SECTION 3.3.2 and to be indemnified for such a failure to comply without the
application of Seller's Indemnification Threshold if and to the extent Buyer's
Closing Notice sets forth in reasonable detail Seller's alleged non-compliance.
9.2.3 The System shall have no less than 5,415 EBSs as of
the Closing Time; provided however that this condition shall be deemed waived if
Buyer, in its sole discretion, notifies Seller in writing that it will proceed
with Closing notwithstanding the number of EBSs and that there will be no
further downward adjustments to the Purchase Price pursuant to SECTION 3.3.1 for
any EBSs to the extent less than 5,4155, unless there is a violation of the
certification made pursuant to SECTION 9.2.5(e)(iii).
9.2.4 Since the date of this Agreement, there shall not
have been any material adverse change in the Assets or the condition (financial
or otherwise) or operations of the Business or the System.
9.2.5 Seller, and each of the Principals where appropriate,
shall have executed (or caused to be executed) and delivered to Buyer at Closing
each of the following items:
(a) Assignments, including an Assignment in the form of
EXHIBIT E, and ownership certificates reasonably acceptable to Buyer
conveying to Buyer all of the LLC Interest free and clear of all
Encumbrances.
(b) Deeds, Bills of Sale, Assignments, Title
Certificates, including those in the form of EXHIBITS B, C AND D, and
such other transfer instruments as Buyer may deem necessary or
advisable to convey all of the Assets to the LLC and to perfect the
LLC's rights in and to the Assets;
(c) evidence reasonably satisfactory to Buyer that all
Encumbrances (other than Permitted Encumbrances) affecting or
encumbering the Assets have been terminated, released or waived, as
appropriate, or original instruments in form
PAGE 51
reasonably satisfactory to Buyer effecting such terminations, releases
or waivers together with the Title Policies, to be paid for by Seller;
(d) an affidavit of Seller, under penalty of perjury,
that Seller is not a "foreign person" (as defined in the Foreign
Investment in Real Property Tax Act and applicable regulations) and
that Buyer is not required to withhold any portion of the consideration
payable under this Agreement under the provisions of such Act in the
form attached as EXHIBIT F;
(e) a certificate from Seller executed by an officer of
Seller, dated the Closing Date, (a) stating that, to his or her
knowledge the condition specified in SECTION 9.2.1, 9.2.2, 9.2.3,
9.2.4, 9.2.6, 9.2.7, 9.2.8, 9.2.9 AND 9.2.12, has been satisfied; and
(b) setting forth the total number of EBSs for the System, estimated in
good faith as of the Closing Date;
(f) all of the Books and Records, including a list of all
pending subscriber hook-ups, disconnect and repair orders, supply
orders and any other lists reasonably necessary to the operation of the
System;
(g) the Noncompetition Agreement in the form of EXHIBIT
I;.
(h) the Holdback Agreement in the form of EXHIBITS G; and
(i) such other documents and instruments as may be
reasonably necessary to effect the intent of this Agreement and
consummate the transactions contemplated hereby.
9.2.6 Seller shall have delivered to Buyer evidence, in
form and substance reasonably satisfactory to it, that all of the Required
Consents have been obtained or given and are in full force and effect without
the imposition of any condition or any modification that in either case makes or
is reasonably likely to make the underlying instrument materially more onerous
in any respect or materially reduces in any respect or is reasonably likely to
materially reduce in any respect the benefits available under the instrument in
respect of which the consent relates.
9.2.7 All required retransmission consents for continued
carriage of all broadcast signals carried on the system by the LLC shall have
been obtained on terms and conditions reasonably acceptable or deemed acceptable
to Buyer.
9.2.8 Each System franchise shall be in full force and
effect for the term set forth on SCHEDULE 2.
9.2.9 Seller shall have obtained the Revenue Ruling.
9.2.10 INTENTIONALLY OMITTED.
PAGE 52
9.2.11 INTENTIONALLY OMITTED.
9.2.12 All of the closing conditions to the obligations of
Buyer and Buyer's Affiliates under the NCP7 Agreement and NCP8 Agreement shall
have been satisfied or waived and Seller and Seller's Affiliates are otherwise
ready, willing and able to close the transactions described in the NCP7
Agreement and NCP8 Agreement simultaneously with the Closing under this
Agreement.
Buyer may waive in writing any and all of the conditions set forth in this
SECTION 9.2 hereof in whole or part.
9.3 CONDITIONS TO OBLIGATIONS OF SELLER
The obligations of Seller to consummate the transactions contemplated
by this Agreement to take place at the Closing are subject to the satisfaction
or waiver in writing by Seller, to the extent permitted by applicable law, at or
prior to the Closing Date, of each of the following conditions:
9.3.1 Buyer has paid the portion of the Base Purchase Price
required to be paid at the Closing, as adjusted in accordance with this
Agreement, and has delivered the Holdback to the Escrow Agent.
9.3.2 All representations and warranties of Buyer contained
in this Agreement 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, except for changes permitted or
contemplated by this Agreement.
9.3.3 Buyer shall have performed and complied with each
obligation, agreement, covenant and condition required by this Agreement to be
performed or complied with by Buyer at or prior to the Closing.
9.3.4 Buyer shall have delivered to Seller the following:
(a) a certificate, dated the Closing Date, signed by an executive officer of
Buyer, stating that to his or her knowledge, the conditions set forth in SECTION
9.3.2 AND 9.3.3, are satisfied; (b) counterparts of the documents described in
SECTION 9.2.5 which, by their terms, require execution by Buyer and/or the LLC,
duly executed by Buyer and/or the LLC, as appropriate; and (c) such other
documents as Seller may reasonably request in connection with the transactions
contemplated by this Agreement.
9.3.5 The System shall have no less than 5,415 EBSs as of
the Closing Time; provided however that this condition shall be deemed waived if
Buyer, in its sole discretion, notifies Seller in writing that it will proceed
with Closing notwithstanding the number of EBSs and that there will be no
further downward adjustments to the Purchase
PAGE 53
Price pursuant to SECTION 3.3.1 for any EBSs to the extent less than 5,415,
unless there is a violation of the certification made pursuant to SECTION
9.2.5(e)(iii).
9.3.6 All of the closing conditions to the obligations of
Seller and Seller's Affiliates under the NCP7 Agreement and NCP8 Agreement shall
have been satisfied or waived and Buyer and Buyer's Affiliates are otherwise
ready, willing and able to close the transactions described in the NCP7
Agreement and NCP8 Agreement simultaneously with the Closing under this
Agreement.
Seller may waive in writing any and all of the conditions set forth in
this SECTION 9.3 hereof in whole or part.
10. 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 the Closing:
10.1.1 by the mutual written consent of Buyer and Seller;
10.1.2 by either party, if the conditions to such party's
obligation to close as set forth in Section 9 have not been satisfied or waived
by such party in its sole discretion within one hundred twenty (120) days after
the date on which Seller has filed complete FCC Form 394 applications together
with all of the information required by the terms of the relevant franchise
agreement or applicable state and local law, for approval of all franchise
transfers for the Northland Systems (it being understood and agreed that any
delay resulting from the Seller's failure to provide all such information shall
correspondingly toll the running of such one hundred twenty (120) day period)
(the "CONSENT AND EXTENSION DEADLINE"); provided, however, either party may
extend the Consent and Extension Deadline an additional thirty (30) days during
which, time, to the extent necessary, each of Buyer and Seller agree to
negotiate in good faith towards a mutually satisfactory arrangement to address
any third party consent issues which provides for, among other things, Buyer
paying the full Purchase Price as described in SECTION 3, and taking title to
the LLC Interests on or prior to the end of such thirty (30) day period;
10.1.3 by either party as described in SECTION 7.8;
10.1.4 by Buyer in writing, if Seller has, or by Seller in
writing, if Buyer has, breached (i) any covenant or agreement contained herein,
or (ii) any representation or warranty contained herein, and in either case such
breach has not been cured by the earlier of thirty (30) days after the date on
which written notice of such breach is given to the party committing such breach
or the Closing Date. Notwithstanding the foregoing, no notice or cure
opportunity shall be required prior to termination if the breach is not
reasonably capable of being fully cured within thirty (30) days. Notwithstanding
anything herein to the contrary, a party may terminate this Agreement by virtue
of a breach by the other party of any
PAGE 54
representation or warranty contained herein only if the Losses incurred by the
non-breaching party as a result of the misrepresentations, breaches or
impairments result in or have a reasonable potential to result in Losses
(exclusive of Transaction Expenses) of at least $75,000 in the aggregate.
10.1.5 by Buyer if Seller fails or is unable to obtain the
Revenue Ruling within sixty (60) days after the date of this Agreement.
10.1.6 by Buyer if Buyer is not satisfied, in its sole
judgment and discretion, with the results of its investigation of the System and
the Business, provided Buyer must exercise its right under this SECTION 10.1.6
to terminate the Agreement within thirty (30) days after the date of this
Agreement as such period may be extended pursuant to SECTION 7.11.1 (the "DUE
DILIGENCE DEADLINE").
10.1.7 by Buyer if Buyer has not received commitments and
assurances from prospective lenders and equity investors that are, in Buyer's
reasonable judgment, sufficient to assure Buyer that funds will be available to
Buyer to pay the Purchase Price in full on the Closing Date; provided Buyer must
exercise its right under this SECTION 10.1.7 to terminate the Agreement no later
than thirty (30) days after the date of this Agreement (the "FINANCING
DEADLINE"). Buyer shall provide Seller with a copy of the written commitment
received from Buyer's prospective primary equity investor and lender or lenders
(the "COMMITMENT LETTERS") within thirty (30) days after the date of this
Agreement.
10.1.8 by Seller if buyer has not delivered the Commitment
Letters within thirty (30) days after the date of this Agreement or if any
Commitment Letter delivered by Buyer contains conditions that are not
commercially standard and that result in Seller having a reasonable basis for
believing that there is a substantial risk of Buyer being unable to pay the
Purchase Price at Closing; provided, however, Seller may only exercise its
termination right under this SECTION 10.1.8 if (i) Seller has first notified
Buyer, in writing, no later than three (3) Business Days after receiving a copy
of the Commitment Letters of the specific concerns and conditions giving rise to
Seller's belief that there is a substantial risk of Buyer's loan and/or primary
equity financing not Closing; (ii) Buyer is unable, within ten (10) days
thereafter, to cure or otherwise address Seller's stated concerns to Seller's
reasonable satisfaction; and (iii) Seller affirmatively elects and notifies
Buyer, in writing, that it has elected to terminate this Agreement under this
SECTION 10.1.8 within five (5) Business Days after the expiration of Buyer's
cure period. The parties agree, without limiting the grounds under which Seller
can determine that there is a substantial risk that Buyer will be unable to pay
the Purchase Price, that any Commitment Letter which is either (a) contingent or
otherwise conditioned upon syndication or (b) based upon a "best efforts"
commitment to provide funding shall, in either case, presumptively constitute a
substantial risk of Buyer being unable to pay the Purchase Price at Closing.
Conversely, a condition in a Commitment Letter pertaining to the absence of a
material adverse change in the condition of the Business or Assets, including
without limitation a decline in revenues, shall not, by itself, constitute a
substantial risk of the Buyer being unable to pay the Purchase Price at Closing.
PAGE 55
10.1.9 by Buyer if, within thirty (30) days after the date
of this Agreement, Seller does not provide written assurances that are
reasonably acceptable to Buyer from Seller's lenders that the lenders consent to
the sale of the Systems and that the Base Purchase Price proceeds that will be
available to Seller on the Closing Date, after the payment of any and all other
obligations of Seller, will be sufficient to release and clear any and all
Encumbrances of the lenders and that such lenders will release any and all such
Encumbrances at Closing upon Seller's payment of such portion of the Base
Purchase Price to such lenders as specified in such written assurance; provided,
however, Buyer may only exercise its termination right under this SECTION 10.1.9
if (i) Buyer has first notified Seller, in writing, no later than three (3)
Business Days after receiving a copy of such written assurance of the specific
concerns and conditions giving rise to Buyer's belief that there is a
substantial risk of the Encumbrances not being released at Closing; (ii) Seller
is unable, within ten (10) days thereafter, to cure or otherwise address Buyer's
stated concerns to Buyer's reasonable satisfaction; and (iii) Buyer
affirmatively elects and notifies Seller, in writing, that it has elected to
terminate this Agreement under this SECTION 10.1.9 within five (5) Business Days
after the expiration of Seller's cure period. The parties agree, without
limiting the grounds under which Buyer can determine that there is a substantial
risk of the Encumbrances not being released, that any written assurances that do
not specifically confirm to Buyer that upon payment of a specific amount that is
less than the Base Purchase Price the Encumbrances will be released at closing
shall presumptively constitute a substantial risk of the Encumbrances not being
released at Closing.
10.1.10 by Buyer if Buyer's Consent Contribution obligations
will exceed $20,000 or by Seller if Seller's total obligation for Consent Fees
will exceed $30,000 unless Buyer agrees (which Buyer shall have no obligation to
do otherwise) to pay for any Consent Fees to be paid by Seller in excess of
$30,000.
10.1.11 by Buyer if there is a Title Defect that materially
impairs the value of the Real Property or Assets or has a material adverse
effect on the operation of the System that cannot be removed by Seller prior to
the Contribution Date.
10.2 LIABILITIES IN EVENT OF TERMINATION
If this Agreement is terminated pursuant to SECTION 10.1, all
obligations and liabilities of the parties hereto shall terminate, except as
expressly set forth in this Agreement (including provisions regarding sharing of
expenses) and except for the obligations set forth in SECTIONS 7.16
(Confidentiality) and 12.14 (Expenses). Except as expressly set forth in this
Agreement, each party shall bear its own costs and expenses incurred in
connection with the transactions contemplated by this Agreement. Nothing herein
shall release or release any party from any obligation or liability arising out
of any breach, default or misrepresentation giving rise to a right of
termination; provided, however, that in the event this Agreement is terminated
for any such reason prior to Closing, the damages recoverable by the terminating
party shall be limited to out of pocket expenses reasonably incurred in
connection with this transaction (the "Transaction Expenses"), but in no event
shall either party be obligated to pay consequential damages.
PAGE 56
10.3 PROCEDURE UPON TERMINATION
In the event of the termination of this Agreement by Buyer or Seller
pursuant to this SECTION 10, written notice of such termination will promptly be
given by the terminating party to the other.
11. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
11.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES
The representations and warranties of Buyer and Seller in this
Agreement and in the Transaction Documents and the covenants of Buyer and Seller
in this Agreement and the Transaction Documents to be performed prior to the
Closing will survive until the first anniversary of the Closing Date (the "ONE
YEAR SURVIVAL PERIOD") except that (a) all such representations and warranties
with respect to Taxes, Environmental Laws, ERISA, employee benefits, employment
matters or copyright matters will survive until sixty (60) days after the
expiration of the applicable statute of limitations (including any extensions)
for such Taxes, Environmental Laws, ERISA, employee benefits, employment matters
or copyright matters, respectively, and (b) the representations and warranties
as to title to the Assets and the LLC Interest in SECTION 5.4, and as to title
to Real Property set forth in SECTION 5.7, and in the statutory warranty deed or
deeds delivered with respect to Real Property will survive the Closing and the
delivery of such deeds and will continue in full force and effect without
limitation with the understanding that, notwithstanding any language contained
in any such deed, the representations and warranties as to title to Real
Property set forth in SECTION 5.7, respectively, will not be merged into any
such deed or other Transaction Document. The periods of survival of the
representations and warranties and of the covenants to be performed prior to the
Closing prescribed by this SECTION 11 are referred to as the "SURVIVAL PERIOD."
Subject to SECTIONS 11.2 AND 11.3, after the Closing Date the liabilities of
each party under its respective representations and warranties and its
respective covenants to be performed prior to the Closing will expire as of the
expiration of the applicable Survival Period; provided, however, that such
expiration will not include, extend or apply to any such representation or
warranty or covenant, the breach of which has been asserted by a party in a
written notice to the other party before such expiration or about which a party
has given the other party 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). The covenants and agreements of each party in this
Agreement and in the Transaction Documents to be performed at or after the
Closing will survive the Closing and will continue in full force and effect in
accordance with their terms.
11.2 INDEMNIFICATION BY SELLER
After Closing, Seller will indemnify, defend and hold harmless the LLC
and Buyer and their members and their and their respective Affiliates, and the
shareholders, partners,
PAGE 57
members, directors, officers, employees, agents, successors and assigns of any
of such Persons, from and against:
11.2.1 all Losses of or to Buyer or any such other
indemnified Person resulting from or arising out of (a) any breach of any
representation or warranty made by Seller in this Agreement or any Transaction
Document; (b) any breach of any covenant, agreement or obligation of Seller or
any Principal contained in this Agreement or any Transaction Document; (c) any
claim, action, suit or proceeding by any Third Party (collectively, an "ACTION")
as a result of any (i) act or omission of Seller or the LLC with respect to any
event or circumstance related to the ownership or operation of the System or the
conduct of the Business, which act, omission, event or circumstance occurred or
existed prior to or at the Closing, without regard to whether a claim with
respect to such matter is asserted before or after the Closing, including any
matter described on SCHEDULE 5.12 or (ii) breach of any representation or
warranty made by Seller in this Agreement or any Transaction Document; (d) the
failure by Seller to perform any of its obligations in respect of Retained
Liability; (e) any Title Defect relating to any of the Real Property that is not
deleted as an exception in, insured over by the applicable Title Policy or
waived by Buyer; (f) any claim that the transactions contemplated by this
Agreement to be performed by Seller violate WARN or any Legal Requirement or any
bulk transfer or fraudulent conveyance laws of any jurisdiction; (g) any claim
relating to "continuation coverage" under Code Section 4980B or Section 601, et
seq., of ERISA with respect to former employees (or their spouses or dependants)
of Seller or the System at and after the Closing Time or that Buyer or the LLC
is deemed to be a successor employer of such party under Code Section 4980B or
Section 601, et seq., of ERISA; (h) any claim, obligation, responsibility,
violation of any Legal Requirement or contractual obligation, expense or other
liability related to any Seller's Plan; (i) the presence, generation, removal or
transportation of a Hazardous Substance on or from any Real Property, including
the costs of removal or clean-up of such Hazardous Substance and other
compliance with the provisions of any Environmental Laws during Seller's
ownership of such Real Property, without regard to whether a claim with respect
to such matter is asserted before or after the Closing; (j) any rate refund or
credit, penalty and/or interest payment with respect thereto ordered by any
Governmental Authority (including judgments in a private civil action) with
respect to the System for periods through and including the Closing; and (k) any
liability or obligation arising out of an Excluded Asset for which Buyer or the
LLC become or remain liable after Closing and for which a full adjustment was
not made at Closing; and
11.2.2 all claims, actions, suits, proceedings, demands,
judgments, assessments, fines, interest, penalties, costs and expenses
(including settlement costs and reasonable legal, accounting, experts' and other
fees, costs and expenses) incident or relating to or resulting from any of the
foregoing.
11.3 INDEMNIFICATION BY BUYER
After Closing, Buyer and the LLC, jointly and severally, will
indemnify, defend and hold harmless Seller and Seller's shareholder and its and
their respective Affiliates, and the
PAGE 58
shareholders, directors, officers, employees, agents, successors and assigns of
any such Persons, from and against:
11.3.1 all Losses of or to Seller or any such other
indemnified Person resulting from or arising out of (a) any breach of any
representation or warranty made by Buyer in this Agreement or any Transaction
Document, (b) the breach of any covenant, agreement or obligation of Buyer
contained in this Agreement or any Transaction Document, (c) the failure by the
LLC to perform any of its obligations in respect of the Assumed Liabilities, or
(d) any act or omission of the LLC with respect to, or any event or circumstance
related to, the ownership or operation of the Assets or the conduct of the
Business after Closing, unless it pertains to a matter with regard to which
Seller is required to indemnify Buyer or the LLC; and
11.3.2 all claims, actions, suits, proceedings, demands,
judgments, assessments, fines, interest, penalties, costs and expenses
(including settlement costs and reasonable legal, accounting, experts' and other
fees, costs and expenses) incident or relating to or resulting from any of the
foregoing.
11.4 LIMITATIONS ON INDEMNITY
11.4.1 Notwithstanding anything to the contrary contained in
this Agreement, no indemnification for Losses may be recovered from Seller under
SECTION 11.2 of this Agreement unless and until the aggregate amount of such
indemnifiable Losses exceeds $56,250 ("SELLER'S INDEMNIFICATION THRESHOLD");
provided, however, Seller's Indemnification Threshold shall not be applicable
with respect to any of the following ("EXCLUDED LIABILITIES"): (a) any breach of
any representation or warranty made by Seller in this Agreement that was
fraudulent or intentional, (b) any breach of any covenant, agreement or
obligation of Seller contained in this Agreement, (c) any liability or
obligation arising out of an Excluded Asset for which Buyer or the LLC become or
remain liable after Closing and for which a full adjustment was not made at
Closing and (d) Seller's obligation to pay any post-Closing adjustments pursuant
to SECTION 3.3. With respect to any indemnity claim under SECTION 11.2, Losses
incurred with respect to any breach of any representation or any warranty that
is specifically qualified by materiality or any value impairment qualified by
materiality or any adverse affect qualified by materiality, the
misrepresentation, breach, value impairment or adverse affect shall be
considered material and Seller's Indemnification Threshold satisfied if the
Losses to Buyer or the LLC as a result of the misrepresentation, breach,
impairment or affect are or may be at least $56,250; provided, however, that
with regard to any representation or warranty pertaining to compliance with any
Legal Requirement or Governmental Permit, the Losses must result from a Third
Party Action requesting correction or compliance costing Buyer or the LLC in the
aggregate at least $56,250, or Persons asserting claims against Buyer or the LLC
of at least $56,250 in the aggregate. Notwithstanding anything to the contrary
contained in this Agreement, no indemnification for Losses may be recovered from
Buyer under SECTION 11.3 of this Agreement unless and until the amount of such
indemnifiable Losses for an indemnification claim exceeds $25,000 ("BUYER'S
INDEMNIFICATION THRESHOLD"); provided, however,
PAGE 59
Buyer's Indemnification Threshold shall not be applicable with respect to any of
the following: (a) any breach of any representation or warranty made by Buyer in
this Agreement that was fraudulent or intentional; (b) Buyer's obligation to pay
any post-Closing adjustments pursuant to SECTION 3.3; or (c) any failure by the
LLC to assume and discharge the Assumed Liabilities in accordance with the
Acceptance and Assumption signed by the LLC on the Contribution Date.
Notwithstanding anything herein to the contrary, if any indemnification claim
exceed $56,250 in the case of claims against Seller and $25,000 in the case of
Buyer then, subject to the application of the Indemnification Ceiling, all
Losses, including those under the Indemnification Thresholds, shall be subject
to the indemnification obligations in this SECTION 11.4.1.
11.4.2 The aggregate amount of indemnification for Losses
which may be recovered from Seller under SECTION 11.2 or Buyer or the LLC under
SECTION 11.3 shall not exceed the amount of $878,700 (the "INDEMNIFICATION
CEILING") unless the Losses relate to (a) an Excluded Liability; (b) the
obligation to pay post-Closing adjustments pursuant to SECTION 3.3; (c) in the
case of the LLC, to the LLC's Assumed Liabilities; (d) in the case of Buyer, to
payment of the Holdback; (e) in the case of Seller, to any Loses pertaining to a
breach of a representation, warranty or covenant that is not subject to the One
Year Survival Period; (f) in the case of Seller, any failure to pay any Taxes
owed by Seller or the LLC prior to the Closing Time or any failure by Seller or
ERISA Affiliate to comply with any Environmental Laws, ERISA, or relating to any
Seller's Plans or any Losses arising out of any employment or copyright matters
pertaining to the period prior to Closing; and (g) in the case of Seller, any
breach or failure of any representation or warranty of title pertaining to any
of the Assets or the LLC Interest.
11.5 THIRD PARTY CLAIMS
Promptly after the receipt by any party of notice of any Action by any
Third Party, which Action is subject to indemnification under this Agreement,
such receiving party (the "INDEMNIFIED PARTY") will give reasonable written
notice to the party from whom indemnification is claimed (the "INDEMNIFYING
PARTY"). The Indemnified Party will be entitled, at the sole expense and
liability of the Indemnifying Party, to exercise full control of the defense,
compromise or settlement of any such Action unless the Indemnifying Party,
within a reasonable time after the giving of such notice by the Indemnified
Party, (a) admits in writing to the Indemnified Party the Indemnifying Party's
liability to the Indemnified Party for such Action under the terms of this
SECTION 11, (b) notifies the Indemnified Party in writing of the Indemnifying
Party's intention to assume such defense, (c) provides evidence reasonably
satisfactory to the Indemnified Party of the Indemnifying Party's ability to pay
the amount, if any, for which the Indemnified Party may be liable as a result of
such Action and (d) retains legal counsel reasonably satisfactory to the
Indemnified Party to conduct the defense of such Action. The other party will
cooperate with the party assuming the defense, compromise or settlement of any
such Action in accordance with this Agreement in any manner that such party
reasonably may request. If the Indemnifying Party so assumes the defense of any
such Action, the Indemnified Party will have the right to employ separate
counsel and to participate in (but not control) the defense, compromise or
settlement of the
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Action, but the fees and expenses of such counsel will be at the expense of the
Indemnified Party unless (i) the Indemnifying Party has agreed to pay such fees
and expenses, (ii) any relief other than the payment of money damages is sought
against the Indemnified Party or (iii) the Indemnified Party will have been
advised by its counsel that there may be one or more defenses available to it
which are different from or additional to those available to the Indemnifying
Party, and in any such case that portion of the fees and expenses of such
separate counsel that are reasonably related to matters covered by the indemnity
provided in this SECTION 11 will be paid by the Indemnifying Party. No
Indemnified Party will settle or compromise any such Action for which it is
entitled to indemnification under this Agreement without the prior written
consent of the Indemnifying Party. No Indemnifying Party will settle or
compromise any such Action (A) in which any relief other than the payment of
money damages is sought against any Indemnified Party or (B) in the case of any
Action relating to the Indemnified Party's liability for any tax, if the effect
of such settlement would be an increase in the liability of the Indemnified
Party for the payment of any tax for any period beginning after the Closing
Date, unless the Indemnified Party consents in writing to such compromise or
settlement.
11.6 PAYMENTS FOR INDEMNIFICATION AMOUNTS
Amounts payable by either party in respect of any amounts that are
subject to the indemnification obligations of such party under SECTION 11.2 OR
SECTION 11.3 will be payable by the Indemnifying Party within five (5) days of
receiving written notice of such losses from the Indemnified Party and will bear
interest at the rate per annum publicly announced from time to time by U.S. Bank
NA as its prime rate (the "PRIME RATE") plus 200 basis points from the date such
losses are determined. At the election of either party, Buyer may satisfy any
amounts owed to it by Seller under SECTION 11.2 out of the Holdback and the
Holdback will be reduced accordingly. Nothing in the preceding sentence will be
deemed a limitation on Seller's obligations under SECTION 11.2.
11.7 EXCLUSIVE REMEDY
Except as set forth in SECTION 12.15 and the Noncompetition Agreement,
after Closing, the indemnification rights of the parties as set forth under this
Agreement shall be the sole and exclusive remedy of the Indemnified Parties with
respect to claims resulting from any violation or breach of a representation,
warranty or covenant contained in this Agreement; provided, however, this
provision shall not limit or restrict Buyer or Seller's rights under the Escrow
Agreement or to the Holdback as provided in this Agreement.
12. MISCELLANEOUS
12.1 PARTIES OBLIGATED AND BENEFITED
Subject to the limitations set forth below, this Agreement will be
binding upon the parties and their respective assigns and successors in interest
and will inure solely to the benefit of the parties and their respective assigns
and successors in interest, and no other
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Person will be entitled to any of the benefits conferred by this Agreement.
Neither party may assign any of its rights under this Agreement or delegate any
of its duties under this Agreement without the prior written consent of the
other party, provided that Buyer may, without the consent of any other party,
prior to Closing assign all of its rights and obligations under this Agreement
to any Affiliate of Buyer or any entity in which Buyer or ▇▇▇▇▇▇ ▇▇▇▇ has an
equity interest.
12.2 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, the prevailing party will be entitled to
recover reasonable attorneys' fees and other costs of such action or suit from
the other party.
12.3 NOTICES
Any notice, request, demand, waiver or other communication required or
permitted to be given under this Agreement will be in writing and will be deemed
to have been duly given only if delivered in person or by first class, prepaid,
registered or certified mail, or sent by courier or, if receipt is confirmed, by
facsimile:
To Buyer at:
WaveDivision Networks, LLC
▇▇▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇, CEO
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ Coie LLP
▇▇▇ -▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy:
To Seller at:
Northland Cable Television, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
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With a copy to:
Cairincross & ▇▇▇▇▇▇▇▇▇ ▇.▇.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇
Facsimile: ▇▇▇ ▇▇▇-▇▇▇▇
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. All
notices will be deemed to have been received on the date of delivery or on the
third (3rd) Business Day after mailing in accordance with this SECTION 12.2,
except that any notice of a change of address will be effective only upon actual
receipt.
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 CAPTIONS
The article and section captions of this Agreement are for convenience
only and do not constitute a part of this Agreement.
12.6 CHOICE OF LAW
THIS AGREEMENT AND THE RIGHTS OF THE PARTIES UNDER IT WILL BE GOVERNED
BY AND CONSTRUED IN ALL RESPECTS IN ACCORDANCE WITH THE LAWS OF THE STATE OF
WASHINGTON, WITHOUT REGARD TO THE CONFLICTS OF LAWS RULES OF ANY JURISDICTION.
12.7 FURTHER ACTIONS
Seller and Buyer will execute and deliver to the other, from time to
time at or after the 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.
12.8 TIME
Time is of the essence under this Agreement. If the giving of any
notice or the performance of any act required or permitted under this Agreement
falls on a day which is
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not a Business Day, the time for the giving of such notice or the performance of
such act will be extended to the next succeeding Business Day.
12.9 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 Prime Rate plus 200 basis points, adjusted as and when changes in
the Prime Rate are made.
12.10 COUNTERPARTS
This Agreement may be executed in counterparts, each of which will be
deemed an original.
12.11 ENTIRE AGREEMENT
This Agreement (including the Schedules and Exhibits referred to in
this Agreement, which are incorporated in and constitute a part of this
Agreement) and the Transaction Documents contain the entire agreement of the
parties and supersede all prior oral or written agreements and understandings
with respect to the subject matter. This Agreement may not be amended or
modified except by a writing signed by the parties.
12.12 SEVERABILITY
Any term or provision of this Agreement which is invalid or
unenforceable will be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining rights
of the Person intended to be benefited by such provision or any other provisions
of this Agreement provided the basic economic bargain survives.
12.13 CONSTRUCTION
This Agreement has been negotiated by Buyer and Seller and their
respective legal counsel, and legal or equitable principles that might require
the construction of this Agreement or any provision of this Agreement against
the party drafting this Agreement will not apply in any construction or
interpretation of this Agreement.
12.14 EXPENSES
Except as otherwise expressly provided in this Agreement, each party
will pay all of its expenses, including attorneys' and accountants' fees, in
connection with the negotiation of this Agreement, the performance of its
obligations and the consummation of the transactions contemplated by this
Agreement.
12.15 RIGHT TO SPECIFIC PERFORMANCE
The parties acknowledge that the unique nature of the obligations under
this Agreement render money damages an inadequate remedy for the breach by
either party of its
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obligations to consummate the transactions contemplated by this Agreement and
the parties agree that in the event one of the parties refuses to consummate the
transactions contemplated by this Agreement when obligated to do so hereunder,
the other party shall be entitled to a decree of specific performance of this
Agreement. Each of Buyer and Seller also acknowledge the unique nature of the
commitments made under SECTIONS 7.16 AND 3.5 renders money damages an inadequate
remedy for the breach of the obligations of the parties under this Agreement,
and the parties agree that in the event of such breach by one of the parties,
the other party will be entitled to a decree of specific performance of the
commitments set forth in SECTION 7.16 OR 3.5 as applicable. Nothing in this
SECTION 12.15 shall limit or restrict or be restricted by the rights or remedies
of the parties under SECTION 10.
12.16 RIGHTS CUMULATIVE
All rights and remedies of each of the parties under this Agreement
will be cumulative, and the exercise of one or more rights or remedies will not
preclude the exercise of any other right or remedy available under this
Agreement or applicable law.
[THE REMAINDER OF THIS PAGE HAS INTENTIONALLY BEEN LEFT BLANK; SIGNATURE PAGE
FOLLOWS]
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The parties have executed this Limited Liability Company Interest
Purchase Agreement as of the day and year first above written.
NORTHLAND CABLE TELEVISION, INC.
By: __________________________
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: President
WAVE DIVISION NETWORKS, LLC
By: _____________________________
Name: _____________________________
Title: _____________________________
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