Exhibit 1
AGREEMENT AND PLAN OF MERGER
by and among
PEGASUS COMMUNICATIONS CORPORATION,
PEGASUS SATELLITE TELEVISION OF INDIANA, INC.,
and
DBS OF INDIANA, INC.
--------------------------------
Dated as of January 21, 1997
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Table of Contents
ARTICLE I DEFINITIONS.................................................. 1
1.1 Certain Definitions.................................. 1
1.2 Other Definitions.................................... 7
ARTICLE II BASIC TRANSACTION............................................ 8
2.1 Merger; Surviving Corporation........................ 8
2.2 Certificate of Incorporation......................... 8
2.3 By-Laws.............................................. 8
2.4 Directors and Officers............................... 8
2.5 Effective Time....................................... 8
2.6 Conversion of Company Shares......................... 9
2.7 Exchange of Certificates............................. 9
2.8 Merger Consideration................................. 9
2.9 Manner of Payment.................................... 10
2.10 Closing.............................................. 10
2.11 Transactions at Closing.............................. 10
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY................ 11
3.1 Organization and Qualification....................... 11
3.2 Capitalization....................................... 11
3.3 Authority and Validity............................... 11
3.4 No Breach or Violation............................... 12
3.5 Consents and Approvals............................... 12
3.6 Title to Assets...................................... 12
3.7 Intellectual Property................................ 13
3.8 Compliance with Legal Requirements................... 13
3.9 Financial Information................................ 13
3.10 Events Subsequent to ................................ 13
3.11 Undisclosed Liabilities.............................. 14
3.12 Legal Proceedings.................................... 14
3.13 Taxes................................................ 14
3.14 Employee Benefits; Employees......................... 15
3.15 Contracts............................................ 16
3.16 Books and Records; Accounts Receivable............... 17
3.17 Business Information................................. 17
3.18 Insurance............................................ 17
3.19 Disclosure........................................... 18
3.20 Brokers or Finders................................... 19
3.21 Certain Payments..................................... 19
3.22 Subscribers.......................................... 19
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PEGASUS AND MERGER
SUB.......................................................... 19
4.1 Organization and Qualification....................... 19
4.2 Authority and Validity............................... 20
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4.3 No Breach or Violation............................... 20
4.4 Consents and Approvals............................... 20
4.5 Legal Proceedings.................................... 21
4.6 Capitalization....................................... 21
4.7 Compliance with Legal Requirements................... 21
4.8 Financial Information................................ 21
4.9 Undisclosed Liabilities.............................. 22
4.10 Brokers or Finders................................... 22
4.11 Disclosure........................................... 22
ARTICLE V PRE-CLOSING COVENANTS OF THE COMPANY AND THE
SHAREHOLDERS................................................. 22
5.1 Additional Information............................... 22
5.2 Exclusivity.......................................... 23
5.3 Continuity and Maintenance of Operations............. 23
5.4 Consents and Approvals............................... 24
5.5 Adoption by Shareholders............................. 25
5.6 Securities Filings; Financial Information............ 25
5.7 Notification of Certain Matters...................... 25
5.8 Employee Matters. .................................. 26
5.9 Schedules............................................ 26
5.10 Removal of Encumbrances.............................. 26
5.11 Duty of Good Faith and Fair Dealing.................. 26
5.12 Shareholder Investment Representations............... 26
ARTICLE VI PRE-CLOSING COVENANTS OF PEGASUS AND MERGER SUB.............. 27
6.1 Consents and Approval................................ 27
6.2 Loan................................................. 27
ARTICLE VII CONDITIONS PRECEDENT TO OBLIGATIONS OF PEGASUS AND
MERGER SUB................................................... 27
7.1 Accuracy of Representations.......................... 27
7.2 Covenants............................................ 28
7.3 Consents............................................. 28
7.4 Delivery of Documents................................ 28
7.5 No Material Adverse Change........................... 29
7.6 No Litigation........................................ 29
7.7 Minimum Subscribers.................................. 29
7.8 NRTC Compliance Certificate.......................... 30
7.9 Dissenters' Rights................................... 30
7.10 Software License..................................... 30
7.11 Repayment of Shareholder Liabilities................. 30
ARTICLE VIII CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY........... 30
8.1 Accuracy of Representations.......................... 30
8.2 Covenants............................................ 30
8.3 Consents............................................. 31
8.4 Delivery of Documents................................ 31
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8.6 Litigation........................................... 32
ARTICLE IX POST-CLOSING COVENANTS....................................... 32
9.1 Taxes................................................ 32
9.2 Territorial Compliance............................... 32
9.3 Payment of Fees...................................... 33
ARTICLE X TERMINATION.................................................. 33
10.1 Events of Termination................................ 33
10.2 Liabilities in Event of Termination.................. 33
10.3 Procedure Upon Termination........................... 34
ARTICLE XI REMEDIES FOR BREACH OF THIS AGREEMENT........................ 34
11.1 Survival of Representations and Warranties........... 34
11.2 Indemnification Provisions for
Benefit of Pegasus................................ 34
11.3 Indemnification Provisions for
Benefit of the Company............................ 36
11.4 Matters Involving Third Parties...................... 36
11.5 Indemnity Net of Insurance Proceeds.................. 37
ARTICLE XII MISCELLANEOUS................................................ 38
12.1 Parties Obligated and Benefited...................... 38
12.2 Notices.............................................. 38
12.3 Waiver............................................... 39
12.4 Headings............................................. 39
12.5 Choice of Law........................................ 39
12.6 Rights Cumulative.................................... 39
12.7 Further Actions...................................... 39
12.8 Time of the Essence.................................. 39
12.9 Counterparts......................................... 40
12.10 Entire Agreement..................................... 40
12.11 Amendments and Waivers............................... 40
12.12 Construction......................................... 40
12.13 Expenses............................................. 40
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Exhibits
Exhibit 1 Shareholders
Exhibit 2 Service Areas
Exhibit 3 Escrow Agreement
Exhibit 4 Noncompetition Agreement
Exhibit 5 Consultancy Agreement
Exhibit 6 DGCL Certificate of Merger
Exhibit 7 IBCL Articles of Merger
Exhibit 8 Stockholders' Agreement
Exhibit 9 Terms of Pegasus Preferred Stock
Exhibit 10 Current Balance Sheet
Exhibit 11 Lockup Agreement
Exhibit 12 Shareholder Investment Letter
Exhibit 13 Tax Certificate
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER ("Agreement") is made as of the 21st
day of January, 1997, by and among PEGASUS COMMUNICATIONS CORPORATION, a
Delaware corporation ("Pegasus"), PEGASUS SATELLITE TELEVISION OF INDIANA, INC.,
a Delaware corporation ("Merger Sub"), and DBS OF INDIANA, INC., an Indiana
corporation (the "Company"). Pegasus, Merger Sub and the Company are
collectively referred to herein as the "Parties."
RECITALS:
WHEREAS, the Company is a party to that certain NRTC Distribution
Agreement (as defined below) with the National Rural Telecommunications
Cooperative ("NRTC"), pursuant to which NRTC has granted to the Company the
right to distribute DIRECTV(R) ("DIRECTV") programming offered by DirecTV, Inc.
in the zip code areas of Indiana identified in Exhibit 2 ("Service Areas");
WHEREAS, the Parties intend for Pegasus to acquire the Business (as
hereinafter defined), including the NRTC Distribution Agreement, by means of the
merger of the Company with and into Merger Sub, upon the terms and subject to
the conditions set forth herein; and
WHEREAS, the Persons identified on Exhibit 1 (individually a
"Shareholder" and collectively the "Shareholders") own beneficially and of
record all the issued and outstanding capital stock of the Company.
NOW, THEREFORE, in consideration of the premises and mutual promises
herein made, and in consideration of the representations, warranties, covenants
and agreements herein contained, and intending to be legally bound hereby, the
Parties agree as follows:
ARTICLE I
DEFINITIONS
1.1 Certain Definitions. The following terms shall, when used
in this Agreement, have the following meanings:
"Accounts Receivable" mean the accounts receivable identified
in the Books and Records.
"Adverse Consequences" mean all actions, suits, proceedings,
hearings, investigations, charges, complaints, claims, demands, injunctions,
judgments, orders, decrees, rulings, damages, assessments, dues, penalties,
fines, interest, costs, amounts paid in settlement, Liabilities, obligations,
Taxes, liens, losses, expenses and fees (including court costs, settlement
costs, legal, accounting, experts' and other fees, costs and expenses).
"Affiliate" means, with respect to any Person: (i) any Person
directly or indirectly owning, controlling, or holding with power to vote 10% or
more of the outstanding voting securities of such other Person; (ii) any Person
10% or more of whose outstanding voting securities are directly or indirectly
owned, controlled, or held with power to vote, by such other Person; (iii) any
Person directly or indirectly controlling, controlled by, or under common
control with such other Person; and (iv) any officer, director or partner of
such other Person. "Control" for the foregoing purposes shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities or voting interests, by contract or otherwise.
"Assets" mean all properties, assets (including cash),
privileges, powers, rights, interests and claims of every type and description
that are owned, leased, held, used or useful in the Business and in which the
Company has any right, title or interest or in which the Company acquires any
right, title or interest on or before the Closing Date, wherever located,
whether known or unknown, and whether or not now or on the Closing Date recorded
on the Books and Records of the Company, including Accounts Receivable, Books
and Records, Contracts, Intangibles, Intellectual Property, Inventory, NRTC
Patronage Capital, Personal Property and Closing Subscribers.
"Basis" means any past or present fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act or transaction that reasonably forms or could
reasonably form the basis for any specified consequence.
"Books and Records" mean all of the Company's books and
records, including minute and stock books, purchase and sale order files,
invoices, sales materials and records, customer lists, mailing lists, personnel
records and files, technical data and records, all correspondence with and
documents pertaining to NRTC, DIRECTV, DSS Systems, subscribers, suppliers,
Governmental Authorities and other third parties, all records evidencing the
accounts receivable and a schedule of accounts receivable aging and all other
financial records.
"Business" means the DIRECTV distribution business conducted
by the Company on the date of this Agreement and through the Closing Date
pursuant to rights granted under the NRTC Distribution Agreement.
"Business Day" means any day other than Saturday, Sunday or a
day on which banking institutions in New York, New York are required or
authorized to be closed.
"Closing Subscribers" means the active DIRECTV subscriber
accounts of the Business as of the Closing Date, excluding the number of
subscribers who (i) reside outside the Service Area or are not otherwise
Committed Member Residences; (ii) are reported as Level 2 disconnections based
upon the most recent "disconnect report" generated by the NRTC prior to Closing,
which number shall be decreased by the product of the total number of active
DIRECTV subscriber accounts of the Business as of the Closing Date times a
2
fraction, the numerator of which is the average number of "total reconnects"
reported on the previous three Performance Indicator Reports generated by the
NRTC with respect to the Business, and the denominator of which is the average
total subscriber count reported on the same previous three Performance Indicator
Reports; (iii) are 60 days or more past due in the payment of any amount payable
to the Company; and (iv) have become subscribers pursuant to marketing
promotions subsequent to the execution of the Letter of Intent that are not
marketing promotions conducted in the Ordinary Course.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral Documents" mean the Lockup Agreement,
Noncompetition Agreement, Consultancy Agreement, Escrow Agreement, Stockholders'
Agreement and any other documents, instruments and certificates to be executed
and delivered by the Parties or the Shareholders hereunder or thereunder,
including the agreements described in Section
5.12.
"Committed Member Residence" has the meaning assigned to it in
the NRTC Distribution Agreement.
"Confidentiality Agreement" means that certain Confidentiality
Agreement dated September 13, 1996 between Pegasus and the Company.
"Consultancy Agreement" means the form of consultancy and
noncompetition agreement attached hereto as Exhibit 5 among Summe, Pegasus and
the Surviving Corporation.
"DSS System" means the satellite receiving system for DIRECTV
consisting of an eighteen inch satellite antenna dish, an integrated receiver
decoder and a remote control.
"Employee Benefit Plan" means any: (a) nonqualified deferred
compensation or retirement plan or arrangement that is an Employee Pension
Benefit Plan; (b) qualified defined contribution retirement plan or arrangement
that is an Employee Pension Benefit Plan; (c) qualified defined benefit
retirement plan or arrangement that is an Employee Pension Benefit Plan
(including any Multiemployer Plan); or (d) Employee Welfare Benefit Plan or
material fringe benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in
ERISA Section 3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in
ERISA Section 3(l).
"Encumbrance" means any mortgage, pledge, lien, encumbrance,
charge, security interest, security agreement, conditional sale or other title
retention agreement, restriction on transfer or any exception to or defect in
title or other ownership interest (including
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restrictive covenants, leases and licenses), but not including (i) encumbrances
for current Taxes not delinquent or being contested in good faith, (ii)
mechanics', carriers', workers', repairers' or other similar liens arising or
incurred in the Ordinary Course, and (iii) purchase money security interests in
personal property which secure only the purchase price of the relevant property
identified on Schedule 1.1(a) hereto.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Escrow Agent" means IBJ ▇▇▇▇▇▇▇▇ Bank & Trust Company.
"Escrow Agreement" means the form of escrow agreement attached
hereto as Exhibit 3.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder.
"GAAP" means United States generally accepted accounting
principles as in effect from time to time.
"Governmental Authority" means: (i) the United States of
America; (ii) any state, commonwealth, territory or possession of the United
States of America and any political subdivision thereof (including counties,
municipalities and the like); (iii) any foreign (as to the United States of
America) sovereign entity and any political subdivision thereof; or (iv) any
agency, authority or instrumentality of any of the foregoing, including any
court, tribunal, department, bureau, commission or board.
"Intangibles" mean all accounts, notes and other receivables,
claims, deposits, prepayments, refunds, causes of action, choses in action,
rights of recovery, rights of set-off, rights of recoupment and other intangible
assets owned, used or held for use in the Business.
"Intellectual Property" means all of the following that are
owned, used or held solely for use in the Business: (i) trademarks, service
marks, trade dress, logos, trade names and corporate names, together with all
translations, adaptations, derivations and combinations thereof and all
applications, registrations and renewals in connection therewith; (ii) all
copyrightable works, all copyrights and all applications, registrations and
renewals in connection therewith; (iii) trade secrets and confidential business
information (including ideas, research and development, know- how, formulas,
compositions, manufacturing and production processes and techniques, technical
data, designs, drawings, specifications, customer and supplier lists, pricing
and cost information and business and marketing plans and proposals); (iv) all
computer software (including data and related documentation) other than the
proprietary subscriber management, lead management and dealer management
software to be transferred to the Shareholders or an entity owned or controlled
by the Shareholders prior to the Closing; (v) all other proprietary rights; and
(vi) all copies and tangible embodiments thereof (in whatever form or medium).
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"Inventory" means the DSS Systems and other equipment owned by
the Company for sale, lease or rent to or use by Subscribers.
"Legal Requirement" means any statute, ordinance, law, rule,
regulation, code, plan, injunction, judgment, order, decree, ruling, charge or
other requirement, standard or procedure enacted, adopted or applied by any
Governmental Authority, including judicial decisions applying common law or
interpreting any other Legal Requirement.
"Letter of Intent" means that certain Letter of Intent dated
December 4, 1996 between Pegasus and the Company.
"Liability" means any liability (whether known or unknown,
whether asserted or unasserted, whether absolute or contingent, whether accrued
or unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes, but excluding any Liability to Pegasus
or Merger Sub.
"Lockup Agreement" means the lockup agreement of even date
herewith between Pegasus and Summe, in substantially the form attached hereto as
Exhibit 11.
"Majority Shareholder" means ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇.
"Multiemployer Plan" has the meaning set forth in ERISA
Section 3(37).
"Noncompetition Agreement" means the form of noncompetition
agreement attached hereto as Exhibit 4 among each Shareholder (other than
Summe), Pegasus and the Surviving Corporation.
"NRTC Distribution Agreement" means any contract, commitment,
agreement, instrument or other document pursuant to which NRTC and/or DirecTV,
Inc. and/or any of their Affiliates has granted the Company rights relating to
the marketing and distribution of DIRECTV, including that certain NRTC/Member
Agreement for Marketing and Distribution of DBS Services between NRTC and the
Company, as amended and supplemented (Contract Number 1065).
"NRTC Patronage Capital" means any equity interest in NRTC
allocated to the Company or if such equity interest is not transferrable to
Merger Sub at Closing, the right to receive any distributions on account of such
equity interest.
"Ordinary Course" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Pegasus Class A Common Stock" means the Class A Common Stock,
par value $0.01 per share, of Pegasus.
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"Pegasus Preferred Stock" means the Series B Preferred Stock,
par value $.01 per share, of Pegasus having the terms on Exhibit 9.
"Pegasus Prospectus" means the prospectus dated October 3,
1996, relating to Pegasus's initial public offering of Class A Common Stock.
"Pegasus Satellite Holdings" means Pegasus Satellite Holdings,
Inc., a subsidiary of Pegasus that will own all of the outstanding capital stock
of Merger Sub and a majority of the voting stock of other subsidiaries engaged
in the DIRECTV distribution business.
"Pegasus 10-Q" means Pegasus's quarterly report for the
quarter ended September 30, 1996 on Form 10-Q to the Securities and Exchange
Commission.
"Permit" means any license, permit, consent, approval,
registration, authorization, qualification or similar right granted by a
Governmental Authority.
"Person" means any natural person, corporation, partnership,
trust, unincorporated organization, association, limited liability company,
Governmental Authority or other entity.
"Personal Property" means the personal property of the Company
identified on Schedule 1.1(b).
"Representative" means any director, officer, employee, agent,
consultant, adviser or other representative of a Person, including legal
counsel, accountants and financial advisors.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations thereunder.
"Stockholders' Agreement" means the form of stockholders'
agreement attached hereto as Exhibit 8.
"Summe" means ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Chairman and President of the
Company and a Shareholder.
"Tax" means any federal, state, local or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental, customs duties, capital stock,
franchise, profits, withholding, social security (or similar), unemployment,
disability, real property, personal property, sales, use, transfer,
registration, value added, alternative or add-on minimum, estimated or other tax
of any kind whatsoever, including any interest, penalties, fees, deficiencies,
assessments, additions or other charges of any nature with respect thereto,
whether disputed or not.
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"Tax Certificate" means the form of certificate from the
Company and the Shareholders to tax counsel for Pegasus, in the form attached
hereto as Exhibit 13.
"Tax Return" means any return, declaration, report, claim for
refund or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
"Termination Date" means February 28, 1996.
1.2 Other Definitions. The following terms shall, when used in
this Agreement, have the meanings assigned to such terms in the Sections
indicated.
Term Section
"Agreement".........................................................Preamble
"Annual Financial Statements"............................................3.9
"Cash Consideration"..................................................2.9(c)
"Closing"...............................................................2.10
"Closing Balance Sheet"...............................................5.6(b)
"Closing Date"..........................................................2.10
"Closing Value"..........................................................2.8
"Company Common Stock"...................................................2.6
"Contracts".............................................................3.15
"Current Balance Sheet"..................................................3.9
"DCGL"...................................................................2.1
"DIRECTV"...........................................................Recitals
"Effective Time".........................................................2.5
"Escrow Funds".......................................................11.2(c)
"Escrow Property"....................................................11.2(c)
"Escrow Shares".......................................................2.9(b)
"IBCL"...................................................................2.1
"Financial Statement Procedures".........................................3.9
"Financial Statements"...................................................3.9
"Interim Financial Statements"...........................................3.9
"Merger".................................................................2.1
"Merger Consideration"...................................................2.8
"NRTC"..............................................................Recitals
"Parties"...........................................................Preamble
"Pegasus Securities"....................................................3.24
"Service Areas".....................................................Recitals
"Surviving Corporation"..................................................2.1
"Survival Period".......................................................11.1
"Transfer"...............................................................5.2
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ARTICLE II
BASIC TRANSACTION
2.1 Merger; Surviving Corporation. In accordance with the provisions of
this Agreement, the General Corporation Law of the State of Delaware ("DGCL")
and the Business Corporation Law of the State of Indiana ("IBCL"), at the
Effective Time the Company shall be merged with and into Merger Sub (the
"Merger"), and Merger Sub shall be the surviving corporation in the Merger
(hereinafter sometimes called the "Surviving Corporation") and shall continue
its corporate existence under the laws of the State of Delaware. At the
Effective Time, the separate existence of the Company shall cease. All
properties, franchises and rights belonging to the Company and Merger Sub, by
virtue of the Merger and without further act or deed, shall be deemed to be
vested in the Surviving Corporation, which shall thenceforth be responsible for
all the liabilities and obligations of each of Merger Sub and the Company.
2.2 Certificate of Incorporation. Merger Sub's Certificate of
Incorporation, as amended, as in effect immediately prior to the Effective Time
shall thereafter continue in full force and effect as the Certificate of
Incorporation of the Surviving Corporation until altered or amended as provided
therein or by law.
2.3 By-Laws. Merger Sub's By-Laws, as amended, in effect immediately
prior to the Effective Time shall be the By-Laws of the Surviving Corporation
until altered, amended or repealed as provided therein or by law.
2.4 Directors and Officers. The directors of Merger Sub immediately
prior to the Effective Time shall serve as directors of the Surviving
Corporation following the Effective Time in accordance with the Certificate of
Incorporation and By-laws of the Surviving Corporation and the DGCL. The
officers of Merger Sub immediately prior to the Effective Time shall serve in
such capacities at the pleasure of the Board of Directors of the Surviving
Corporation following the Effective Time in accordance with the Certificate of
Incorporation and By-Laws of the Surviving Corporation and the DGCL.
2.5 Effective Time. The Merger shall become effective at the time and
date that the last of the following two events has occurred: (i) the acceptance
for filing of a certificate of merger (the "DGCL Certificate of Merger"), in the
form attached hereto as Exhibit 6, by the Secretary of State of the State of
Delaware in accordance with the provisions of Section 252 of the DGCL; and (ii)
the acceptance for filing of articles of merger (the "IBCL Articles of Merger"),
in the form attached hereto as Exhibit 7, by the Secretary of State of the State
of Indiana in accordance with Section 23-1-40-5 of the IBCL. The DGCL
Certificate of Merger and the IBCL Articles of Merger shall be executed by
Merger Sub and the Company and delivered to the Secretary of State of the State
of Delaware and the Secretary of State of the State of Indiana, respectively,
for filing, as stated above, on the Closing Date. The date and time when the
Merger shall become effective are referred to herein as the "Effective Time."
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2.6 Conversion of Company Shares. All shares of common stock, no par
value, of the Company ("Company Common Stock") issued and outstanding
immediately prior to the Effective Time shall, by virtue of the Merger and
without any action on the part of the holders thereof, be converted at the
Effective Time into the Merger Consideration.
2.7 Exchange of Certificates. At the Closing, immediately after the
Effective Time of the Merger, the Shareholders shall surrender to the Surviving
Corporation all of the outstanding certificates theretofore representing shares
of Company Common Stock, free and clear of all Encumbrances, in exchange for the
Merger Consideration payable to the Shareholders at Closing. Until such
certificates are surrendered, outstanding certificates formerly representing
shares of Company Common Stock shall be deemed for all purposes as evidencing
the right to receive the Merger Consideration into which such shares have been
converted as though said surrender and exchange had taken place. In no event
will a holder of shares of Company Common Stock be entitled to interest on the
Merger Consideration issuable in respect of such shares.
2.8 Merger Consideration.
(a) All of the issued and outstanding shares of Company Common
Stock shall be converted at the Effective Time of the Merger into:
i. cash in an amount equal to (A) $4.9 million, plus (B) $500
for each Closing Subscriber in excess of 6,000, plus (C) the book value of
rented DSS Systems and the book value of the Accounts Receivable related to
financed DSS Systems which are included in the Assets as of the Closing Date, up
to a maximum of $400,000.00, minus (D) if Pegasus and Merger Sub shall waive the
condition precedent set forth in Section 7.7, $2,000 for each Closing Subscriber
less than 6,000, minus (E) the amount, if any, by which the loan made to the
Company pursuant to Section 6.2 hereof exceeds $3.5 Million; and
ii. shares of Pegasus Class A Common Stock and Pegasus
Preferred Stock having an aggregate Closing Value of $5.6 million in such
proportion as each Shareholder shall have notified Pegasus in writing not later
than five Business Days before the Closing Date
(the consideration referred to in paragraphs (i) and (ii) being referred to as
the "Merger Consideration").
(b) As used in subsection (a)(ii), "Closing Value" means (1)
with reference to the Pegasus Preferred Stock, its liquidation preference, and
(2) with reference to the Pegasus Class A Common Stock, the last reported sale
price of the Pegasus Class A Common Stock between a buyer and a seller that are
not Affiliates of Pegasus on the Nasdaq National Market System on the third
Business Day before the Closing Date, or, if no such sale is made on such day,
the average of the closing bid and asked price on such system on such day.
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2.9 Manner of Payment.
(a) Upon presentation of the certificates representing the
shares of Company Common Stock owned by the Shareholders, Pegasus shall, subject
to the escrow provisions of subsection (b), make payment of the Merger
Consideration payable to the Shareholders. The Merger Consideration shall be
allocated among the Shareholders in proportion to the number of shares of
Company Common Stock owned by each Shareholder at the Effective Time of the
Merger. The Cash Consideration shall be paid in immediately available U.S.
dollars by wire transfer of funds to a bank account designated by each
Shareholder.
(b) At the Closing, immediately after the delivery to the
Shareholders of certificates for the shares of Pegasus Class A Common Stock and
Pegasus Preferred Stock to be issued in the Merger, the Shareholders shall
deliver to the escrow agent under the Escrow Agreement a certificate or
certificates representing in the aggregate a total number of such shares having
a Closing Value of $700,000 (the "Escrow Shares"), duly endorsed in blank for
transfer by the Shareholders, to be held in escrow by the Escrow Agent pursuant
to the terms and conditions of the Escrow Agreement.
2.10 Closing. The Closing of the transactions contemplated by this
Agreement and the Collateral Documents ("Closing") shall take place at the
offices of ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ Merchants Bank Building, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, or at such other location as the parties
may agree, on January 31, 1997; provided that if the conditions precedent to
Closing set forth in Article VII and VIII of this Agreement have not been met as
of January 31, 1997, the Closing shall occur on February 7, 1997 or, if such
conditions have not yet been met as of such date, on the third business day
following the satisfaction or waiver of all such conditions, but not later than
February 28, 1997. The date on which the Closing actually occurs is referred to
herein as the "Closing Date." The parties hereby agree to use their best
reasonable efforts to cause the Closing to occur on January 31, 1997.
2.11 Transactions at Closing. At the Closing:
(a) The Shareholders shall surrender certificates representing
Company Common Stock pursuant to Section 2.7, the Company shall deliver the
Books and Records (which shall be located at the Company's principal office),
and the Company and the Shareholders shall deliver to Pegasus and the Surviving
Corporation such documents, instruments and certificates as are required by this
Agreement to be delivered. The Shareholders shall be entitled to retain a copy
of the Books and Records for their files.
(b) Pegasus shall deliver to the Shareholders: (i) the Merger
Consideration (subject to the escrow arrangements set forth in Section 2.9(b);
and (ii) such documents, instruments and certificates as are required by this
Agreement to be delivered by Pegasus and Merger Sub.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
The Company represents and warrants to Pegasus and Merger Sub that the
statements contained in Article III are correct and complete as of the date of
this Agreement.
3.1 Organization and Qualification. The Company is a corporation duly
organized and validly existing under the laws of the State of Indiana, with all
requisite power and authority to own, lease and use its assets as they are
currently owned, leased and used and to conduct its business as it is currently
conducted. The Company is duly qualified or licensed to do business and is in
good standing in each jurisdiction in which the character of the properties
owned, leased or used by it or the nature of the activities conducted by it make
such qualification necessary, except any such jurisdiction where the failure to
be so qualified or licensed would not have a material adverse effect on the
Assets or the Business or on the validity, binding effect or enforceability of
this Agreement or the Collateral Documents.
3.2 Capitalization. The Company's authorized, issued and outstanding
capital stock and its other securities are fully and accurately described in
Schedule 3.2. The Company has no issued and outstanding capital stock other than
the Company Common Stock. The Shareholders own all of the issued and outstanding
shares of Company Common Stock, beneficially and of record, in the numbers and
percentages set forth in Exhibit 1, and no other person has any rights, title or
interest, whether legal or equitable, in said shares. No person has any
preemptive or other rights with respect to any such capital stock or securities
and there are no offers, options, warrants, rights, agreements or commitments of
any kind (contingent or otherwise) relating to the issuance, conversion,
registration, sale or transfer of any equity interests or other securities of
the Company or obligating the Company or any other person to purchase or redeem
any such equity interests or other securities. All of the issued and outstanding
shares of Company Common Stock have been duly authorized and are validly issued
and outstanding, fully paid and nonassessable, have been issued in compliance
with applicable securities laws and other Legal Requirements, and to the
Company's knowledge, are subject to no Encumbrances.
3.3 Authority and Validity. The Company has all requisite power to
execute and deliver, to perform its obligations under, and to consummate the
transactions contemplated by, this Agreement. Each Shareholder has all requisite
power to execute and deliver, to perform his obligations under, and to
consummate the transactions contemplated by the Collateral Documents. The
execution and delivery by the Company of, the performance by the Company of its
obligations under, and the consummation by the Company of the transactions
contemplated by, this Agreement have been duly authorized by all requisite
corporate action of the Company. This Agreement has been duly executed and
delivered by the Company and is the legal, valid, and binding obligation of the
Company, enforceable against it in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency, moratorium, fraudulent
conveyance or other laws relating to or limiting creditors' rights generally or
by general principles of equity, regardless of whether such enforceability
11
is considered in a proceeding at law or in equity. Upon the execution and
delivery by the Shareholders of the Collateral Documents, the Collateral
Documents will be the legal, valid and binding obligations of each of the
Shareholders, enforceable against each in accordance with their respective
terms, except as enforcement may be limited by bankruptcy, insolvency,
moratorium, fraudulent conveyance or other laws relating to or limiting
creditors' rights generally or by general principles of equity, regardless of
whether such enforceability is considered in a proceeding at law or in equity.
3.4 No Breach or Violation. Subject to obtaining the consents,
approvals, authorizations, and orders of and making the registrations or filings
with or giving notices to Governmental Authorities and Persons recited in the
exception to Section 3.5, the execution, delivery and performance by the Company
of this Agreement and by the Shareholders of the Collateral Documents, and the
consummation of the transactions contemplated hereby and thereby in accordance
with the terms and conditions hereof and thereof, do not and will not conflict
with, constitute a violation or breach of, constitute a default or give rise to
any right of termination or acceleration of any right or obligation of the
Company or the Majority Shareholder under, or result in the creation or
imposition of any Encumbrance upon the Company, the Assets or the Business by
reason of the terms of (i) the articles of incorporation, by-laws or other
charter or organizational document of the Company, (ii) any material contract,
agreement, lease, indenture or other instrument to which the Company or the
Majority Shareholder is a party or by or to which the Company or the Majority
Shareholder or the Assets may be bound or subject, (iii) any order, judgment,
injunction, award or decree of any arbitrator or Governmental Authority or any
statute, law, rule or regulation applicable to the Company or the Majority
Shareholder or (iv) any Permit of the Company, which in the case of (ii), (iii)
or (iv) above would have a material adverse effect on the Company, the Assets or
the Business or the ability of the Company or any of the Shareholders to perform
its obligations under this Agreement or any Collateral Document.
3.5 Consents and Approvals. Except (i) as required under the NRTC
Distribution Agreement, and (ii) as set forth in Schedule 3.5 hereto, no
consent, approval, authorization or order of, registration or filing with, or
notice to, any Governmental Authority or any other Person is necessary to be
obtained, made or given by the Company or the Majority Shareholder in connection
with the execution, delivery and performance by them of this Agreement or any
Collateral Document or for the consummation by them of the transactions
contemplated hereby or thereby.
3.6 Title to Assets. The Company has exclusive, good and marketable
title to the Assets, free and clear of any and all Encumbrances. Except as
provided by this Agreement, no Person has any right to acquire, directly or
indirectly, any interest in the Company or the Assets, and there is no agreement
to which the Company or the Majority Shareholder is a party or is otherwise
bound relating to the direct or indirect sale of the capital stock or assets of
the Company, other than (i) a sale of Assets in the Ordinary Course, and (ii) an
agreement to transfer certain subscriber management, lead management and dealer
management software to the Shareholders or an entity owned or controlled by the
Shareholders prior to Closing.
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3.7 Intellectual Property.
(a) Except as are used pursuant to the NRTC Distribution
Agreement, the Company neither uses nor holds any copyrights, tradenames,
servicemarks, service names, logos, licenses, permits or other similar
intellectual property rights and interests in the operations of the Business
that do not incorporate the name "Channelspan" or variations thereof.
(b) To the Company's knowledge, the Company has not in its
operation of the Business interfered with, infringed upon, misappropriated or
otherwise come into conflict with, and the operation of the Business as
currently conducted does not violate or infringe upon, any Intellectual Property
rights of third parties, and the Company has not received any charge, complaint,
claim, demand or notice alleging any such interference, infringement,
misappropriation or violation (including any claim that the Company or its
predecessor in interest must license or refrain from using any Intellectual
Property rights of any third party). To the knowledge of the Company, no third
party has interfered with, infringed upon, appropriated or otherwise come into
conflict with any Intellectual Property rights of the Company.
3.8 Compliance with Legal Requirements. The Company has operated the
Business in compliance in all material respects with all Legal Requirements and
requirements of the NRTC (including NRTC's by- laws, policies and procedures)
applicable to the Company. No action, suit, proceeding, hearing, investigation,
charge, complaint, claim, demand or notice has been filed, commenced or, to the
Company's knowledge, threatened against the Company alleging any failure to so
comply and, to the Company's knowledge, there is no Basis for any claim that
such a failure to comply exists.
3.9 Financial Information. The Company has delivered to Pegasus the
following financial statements ("Financial Statements"): (i) the Company's
unaudited balance sheet and income statement as of December 31, 1993; (ii) the
Company's unaudited balance sheet and income statement for the quarters ended
March 31, 1994 and June 30, 1994; (iii) the Company's unaudited balance sheet
and income statement as of each month ended from July, 1994 to and including
November, 1996; and (iv) the Company's unaudited balance sheet as of November
30, 1996, which is attached to this Agreement as Exhibit 10 (the "Current
Balance Sheet"). The Current Balance Sheet has been prepared in all material
respects in accordance with GAAP, subject only to normal year-end adjustments
and the omission of footnotes. To the Company's knowledge, the income statement
for the month ended November 30, 1996 has been prepared in all material respects
in accordance with GAAP, subject only to normal year end adjustments and the
omission of footnotes. The Financial Statements are complete and correct in all
material respects, and present fairly the financial condition of the Company and
results of operations as of the dates and for the periods indicated.
3.10 Events Subsequent to November 30, 1996. Except as set forth on
Schedule 3.10, since November 30, 1996: (i) the Company has not sold, leased,
transferred or assigned any
13
assets of the Business, tangible or intangible, except in the Ordinary Course or
as contemplated by Section 3.6 hereof; (ii) the Company has not entered into any
agreement, contract, lease or license (or series of related agreements,
contracts, leases and licenses) involving more than $1,000 or outside the
Ordinary Course; (iii) no third party has accelerated, terminated, modified or
canceled any material agreement, contract, lease or license (or series of
related agreements, contracts, leases and licenses) relating to the Company or
the Business other than in the Ordinary Course; (iv) the Company has not imposed
or permitted the imposition of any Encumbrance upon any assets of the Business,
tangible or intangible; (v) the Company has not made any capital investment in,
any loan to, or any acquisition of the securities or assets of, any other Person
(or series of related capital investments, loans or acquisitions); (vi) the
Company has not issued any note, bond or other debt security or created,
incurred, assumed or guaranteed any indebtedness for borrowed money or
capitalized lease obligations; (vii) the Company has not delayed or postponed
the payment of accounts payable and other Liabilities outside the Ordinary
Course; (viii) the Company has not canceled, compromised, waived or released any
right or claim (or series of related rights and claims) involving more than
$1,000 or outside the Ordinary Course; (ix) the Company has not granted any
license or sublicense of any rights under or with respect to any Intellectual
Property used or useful in the Business; (x) there has not been any other
material occurrence, event, incident, action, failure to act or transaction
outside the Ordinary Course involving the Company except that is generally known
by other NRTC members and affiliates; and (xi) the Company has not committed to
any of the foregoing. Since November 30, 1996, there has been no material
adverse change in, and no event has occurred which is reasonably likely,
individually or in the aggregate, to result in any material adverse change in,
the operations, assets, prospects or condition (financial or otherwise) of the
Company.
3.11 Undisclosed Liabilities. Except as set forth in Schedule 3.11, the
Company has no material Liabilities, and, to the Company's knowledge, there is
no Basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand against the Company giving
rise to material Liabilities, except for (1) Liabilities reflected in the
Current Balance Sheet which are fully detailed in Schedule 3.11, and (2)
Liabilities incurred in the Ordinary Course since November 30, 1996.
3.12 Legal Proceedings. Except as set forth on Schedule 3.12, there are
no outstanding judgments or orders against or otherwise affecting the Company,
the Business or the Assets. There is no action, suit, complaint, proceeding or
investigation, judicial, administrative or otherwise, that is pending or, to the
Company's knowledge, threatened and which, if adversely determined, might
materially and adversely affect the Company, the Business or the Assets or which
challenges the validity or propriety of any of the transactions contemplated by
this Agreement or the Collateral Documents. To the Company's knowledge, there is
no Basis upon which any such action, suit, proceeding or investigation could be
brought or initiated.
3.13 Taxes. The Company has duly and timely filed in proper form all
Tax Returns for all Taxes required to be filed with the appropriate Governmental
Authority. All Taxes due and payable by the Company (or claimed to be due and
payable) have been paid
14
(regardless whether Tax Returns relating to such Taxes have been duly and timely
filed or if filed, regardless whether such Tax Returns are deficient), except
such amounts as are being contested diligently and in good faith and are not in
the aggregate material and for which the Company has adequately reserved in its
financial statements. The Company has furnished to Pegasus true and correct
copies of its 1993, 1994 and 1995 federal and state income tax returns, which
are accurate and complete in all material respects. Except as set forth in
Schedule 3.13, there are no pending Tax audits, claims or proceedings relating
to the Company, the Assets or the Business and income therefrom. The Company has
not agreed to any waiver or extension of any statute of limitations relating to
any Tax.
3.14 Employee Benefits; Employees.
(a) Neither the Company nor any Employee Benefit Plan
maintained by the Company is in violation of the provisions of ERISA; no
reportable event, within the meaning of Sections 4043(c)(1), (2), (3), (5), (6),
(7), (10) or (13) of ERISA, has occurred and is continuing with respect to any
such Employee Benefit Plan; and no prohibited transaction, within the meaning of
Title I of ERISA, has occurred with respect to any such Employee Benefit Plan.
Pegasus and Merger Sub are not required under ERISA, the Code or any collective
bargaining agreement to establish, maintain or continue any Employee Benefit
Plan maintained by the Company or any Affiliate of the Company.
(b) There are no collective bargaining agreements applicable
to any Persons employed by the Company, and the Company has no duty to bargain
with any labor organization with respect to any such Person. There are not
pending any unfair labor practice charges against the Company, nor is there any
demand for recognition, or any other request or demand from a labor organization
for representative status with respect to any person employed by the Company.
(c) The Company is in substantial compliance with all
applicable Legal Requirements respecting employment conditions and practices,
has withheld all amounts required by any applicable Legal Requirements or
Contracts to be withheld from the wages or salaries of its employees, and is not
liable for any arrears of wages or any Taxes or penalties for failure to comply
with any of the foregoing.
(d) There are not pending or, to the Company's knowledge,
threatened unfair labor practice charges or discrimination complaints relating
to race, color, national origin, sex, religion, age, marital status, or handicap
against the Company before any Governmental Authority nor, to the Company's
knowledge, does any Basis therefor exist.
(e) There are no existing or, to the Company's knowledge,
threatened, labor strikes, disputes, grievances or other labor controversies
affecting the Company. There are no pending or, to the Company's knowledge,
threatened representation questions respecting the Company's employees. There
are no pending or, to the Company's knowledge, threatened arbitration
proceedings under any Contract. To the Company's knowledge, there exists no
Basis for any of the above.
15
(f) Except as set forth in Schedule 3.14, the Company is not a
party to any employment agreement or arrangement, written or oral, relating to
its employees which cannot be terminated at will by the Company.
(g) Schedule 3.14 sets forth a true and complete list of the
names, titles and rates of compensation of all of the Company's employees.
3.15 Contracts. Schedule 3.15 contains a true, correct and complete
list of each contract agreement or commitment, whether written or oral, to which
the Company is a party that meet the following description or criteria
("Contracts"):
i. the NRTC Distribution Agreement and any other agreement
with NRTC or DirecTV, Inc. or any of their Affiliates;
ii. any agreement (or group of related agreements) for the
lease or rental of real or personal property from any Person, and any form of
lease or rental agreements for DSS Systems used by the Company in its lease and
rental programs (prior to the Closing, the Company will provide to Pegasus and
Merger Sub an itemized list of the subscribers who are parties to such
agreements and the expiration dates of such agreements);
iii. any agreement for an amount in excess of $3,000 per
year for the purchase or sale of supplies, products or other personal property,
and any forms of agreement or purchase orders used by the Company relating to
the sale of DSS Systems or the sale of DIRECTV services;
iv. any agreement concerning a partnership or joint venture;
v. any agreement (or group of related agreements) under
which the Company has created, incurred, assumed or guaranteed any indebtedness
for borrowed money, or any capitalized lease obligation;
vi. any agreement concerning confidentiality or
noncompetition;
vii. any agreement involving any officer, director or
Shareholder of the Company or any of their Affiliates;
viii. any agreement for the employment of any individual on
a full-time, part-time, consulting or other basis for a specified term;
ix. the most current commission schedule used by the Company
relating to the services of sales representatives and agents, and any agreements
with independent contractors for the installation of DSS Systems;
16
x. any agreement under which the Company has advanced or
loaned any amount to any employees or any of the Company's current or former
directors, officers or shareholders;
xi. any agreement under which the consequences of a default
or termination could have a material adverse effect on the financial condition,
operations, results of operations or future prospects of the Company, the Assets
or the Business; and
xii. any other agreement the performance of which involves
consideration in excess of $5,000.
Within ten (10) days after the execution of this Agreement, the Company
will deliver to Pegasus a correct and complete copy of each written agreement
listed on Schedule 3.15 and a written summary setting forth the terms and
conditions of each oral agreement listed therein. With respect to each such
agreement: (A) the agreement is legal, valid, binding, enforceable and in full
force and effect, except as enforcement may be limited by bankruptcy,
insolvency, moratorium, fraudulent conveyance or other laws relating to or
limiting creditors' rights generally or by general principles of equity,
regardless of whether such enforceability is considered in a proceeding at law
or in equity; (B) the agreement will continue to be legal, valid, binding,
enforceable and in full force and effect, subject to the qualifications set
forth in (A), on identical terms following the consummation of the transactions
contemplated hereby; (C) no party is in material breach or default, and no event
has occurred which with notice or lapse of time would constitute a material
breach or default, or permit termination, modification or acceleration, under
the agreement; and (D) no party has repudiated any provision of the agreement.
3.16 Books and Records; Accounts Receivable. The Books and Records
accurately and fairly represent the Business and its results of operations in
all material respects. All Accounts Receivable and Inventory of the Business are
reflected properly on such Books and Records in all material respects. The
Accounts Receivable are valid receivables and properly reflected on the Current
Balance Sheet in accordance with GAAP.
3.17 Business Information. Schedule 3.17 sets forth a materially true
and accurate description of the following information as of the date set forth
in such Schedule: (i) the approximate number of Committed Member Residences in
the Service Area; (ii) the approximate number of Committed Member Residences
that are cabled; (iii) the approximate number of Committed Member Residences
that are uncabled; (iv) the rates charged to subscribers; (v) marketing,
promotional and advertising programs which are representative of the programs
currently in effect for the Business or which have been in effect at any time
since January 1, 1996; and (vi) cable systems (identified by over or under 40
channel capacity) in major markets in the Service Areas.
3.18 Insurance. Schedule 3.18 sets forth the following information with
respect to each insurance policy relating to the Business (including policies
providing property, casualty,
17
liability and workers' compensation coverage and bond and surety arrangements)
to which the Company is a party, a named insured, or otherwise the beneficiary
of coverage at any time:
i. the name, address, and telephone number of the agent;
ii. the name of the insurer, the name of the policyholder
and the name of each covered insured;
iii. the policy number and the period of coverage;
iv. the scope (including an indication of whether the
coverage was on a claims made, occurrence or other basis) and amount (including
a description of how deductibles and ceilings are calculated and operate) of
coverage; and
v. a description of any retroactive premium adjustments or
other loss-sharing arrangements.
With respect to each such insurance policy: (A) the policy is
legal, valid, binding, enforceable in accordance with its terms, and in full
force and effect; (B) neither the Company, nor any predecessor in interest nor,
to the Company's knowledge, any other party to the policy is in breach or
default (including with respect to the payment of premiums or the giving of
notices), and no event has occurred which, with notice or the lapse of time,
would constitute such a breach or default, or permit termination, modification
or acceleration, under the policy; and (C) no party to the policy has repudiated
any provision thereof. The Business and the Assets have been covered since the
beginning of Business operations in scope and amount customary and reasonable
for such a business and in the case of workers' compensation coverage, in scope
and amount required by applicable Legal Requirements. Schedule 3.18 describes
any self-insurance arrangements affecting the Assets or the Business. Schedule
3.18 also sets forth each material pending insurance claim (other than medical
claims) made or loss incurred relating to the Business pursuant to property,
casualty, liability, workers' compensation and bond and surety policies and,
except as indicated therein, no such material pending claim is outstanding.
3.19 Disclosure. No representation or warranty of the Company in this
Agreement or of the Shareholders in the Collateral Documents and no statement in
any certificate, report, instrument, list or other document furnished or to be
furnished by the Company pursuant to this Agreement or by the Shareholders in
the Collateral Documents or in connection with the transactions contemplated
hereby or thereby, contained, contains or will contain on the date such
agreement, certificate, report, instrument, list or other document was or is
delivered, any untrue statement of a material fact, or omitted, omits or will
omit on such date to state any material fact necessary in order to make the
statements made, in light of the circumstances under which they were made, not
misleading, nor will any such representation or warranty or statement contain on
the Closing Date any untrue statement of a material fact or omit on the Closing
Date to state any material fact necessary in order
18
to make the statements made, in light of the circumstances under which they were
made, not misleading.
3.20 Brokers or Finders. Except as set forth on Schedule 3.20, no
broker or finder has acted directly or indirectly for the Company in connection
with the transactions contemplated by this Agreement, and the Company has
incurred no obligation to pay any brokerage or finder's fee or other commission
in connection therewith.
3.21 Certain Payments. Neither the Company nor, to the Company's
knowledge, its Representatives has directly or indirectly, on behalf of or for
the purpose of assisting the Business, made any contribution, gift, bribe,
rebate, payoff, influence payment, kickback, or other similar payments to any
Person, private or public, regardless of form, whether in money, property or
services, to obtain favorable treatment in securing business, to pay for
favorable treatment for business secured, to obtain special concessions or for
special concessions already obtained, or in violation of any Legal Requirement,
nor has any such person established or maintained any fund or asset that has not
been recorded in the Books and Records.
3.22 Subscribers. The Company has neither solicited nor encouraged any
Representative or any other Person to solicit, nor has the Company employed any
scheme or device for the purpose of encouraging, nor has the Company encouraged
any Representative or any other Person to employ any scheme or device for the
purpose of encouraging, Persons residing outside the Service Areas or Persons
who would not be deemed Committed Member Residences to become subscribers of the
DIRECTV service offered by the Business. The Business does not provide DIRECTV
service to Persons who reside outside the Service Areas or are not otherwise
Committed Member Residences.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PEGASUS AND MERGER SUB
Pegasus and Merger Sub jointly and severally represent and warrant to
the Company that the statements contained in this Article IV are correct and
complete as of the date of this Agreement.
4.1 Organization and Qualification. Pegasus and Merger Sub each is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, with all requisite power and authority to own, lease
and use its assets and to conduct its business as it is currently conducted.
Pegasus and Merger Sub each is duly qualified or licensed to do business in and
is in good standing in each jurisdiction in which the character of the
properties owned, leased or used by it or the nature of the activities conducted
by it makes such qualification necessary, except any such jurisdiction where the
failure to be so qualified or licensed and in good standing would not have a
material adverse effect on Pegasus or Merger Sub, as the case may be, or on the
validity, binding effect or enforceability of this Agreement.
19
4.2 Authority and Validity. Pegasus and Merger Sub each has all
requisite power and authority to execute and deliver, to perform its obligations
under, and to consummate the transactions contemplated by, this Agreement and
the Collateral Documents. The execution and delivery by Pegasus and Merger Sub
of, the performance by Pegasus and Merger Sub of their respective obligations
under, and the consummation by Pegasus and Merger Sub of the transactions
contemplated by, this Agreement and the Collateral Documents have been duly
authorized by all requisite corporate action of Pegasus and Merger Sub. This
Agreement has been duly executed and delivered by each of Pegasus and Merger Sub
and is the legal, valid and binding obligation of Pegasus and Merger Sub,
enforceable against each of them in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency, moratorium, fraudulent
conveyance or other laws relating to or limiting to creditors rights generally
or by general principles of equity, regardless of whether such enforceability is
considered in a proceeding at law or in equity. Upon Pegasus's and Merger Sub's
execution and delivery of the Collateral Documents to which it is a party, the
Collateral Documents will be the legal, valid and binding obligations of Pegasus
or Merger Sub, as the case may be, enforceable against them in accordance with
their respective terms, except as enforcement may be limited by bankruptcy,
insolvency, moratorium, fraudulent conveyance or other laws relating to or
limiting to creditors rights generally or by general principles of equity,
regardless of whether such enforceability is considered in a proceeding at law
or in equity.
4.3 No Breach or Violation. Subject to obtaining the consents,
approvals, authorizations, and orders of and making the registrations or filings
with or giving notices to Governmental Authorities and Persons recited in the
exception to Section 4.4, the execution, delivery and performance by Pegasus and
Merger Sub of this Agreement and the Collateral Documents to which each is a
party and the consummation of the transactions contemplated hereby and thereby
in accordance with the terms and conditions hereof and thereof, do not and will
not conflict with, constitute a violation or breach of, constitute a default or
give rise to any right of termination or acceleration of any right or obligation
of Pegasus or Merger Sub under, or result in the creation or imposition of any
Encumbrance upon the property of Pegasus or Merger Sub by reason of the terms of
(i) its certificate of incorporation, by-laws or other charter or organizational
document, (ii) any material contract, agreement, lease, indenture or other
instrument to which Pegasus or Merger Sub is a party or by or to which Pegasus
or Merger Sub or its property may be bound or subject, (iii) any order,
judgment, injunction, award or decree of any arbitrator or Governmental
Authority or any statute, law, rule or regulation applicable to Pegasus or
Merger Sub or (iv) any Permit of Pegasus or Merger Sub, which in the case of
(ii), (iii) or (iv) above would have a material adverse effect on the ability of
Pegasus or Merger Sub to perform its obligations under this Agreement or any
Collateral Document.
4.4 Consents and Approvals. Except (i) as required under the NRTC
Distribution Agreement, (ii) as required under the Securities Act and the
Exchange Act, and (iii) as set forth in Schedule 4.4 hereto, no consent,
approval, authorization or order of, registration or filing with, or notice to,
any Governmental Authority or any other Person is necessary to be obtained, made
or given by Pegasus or Merger Sub in connection with the execution, delivery and
performance by Pegasus or Merger Sub of this Agreement or any Collateral
Documents
20
or for the consummation by Pegasus or Merger Sub of the transactions
contemplated hereby or thereby.
4.5 Legal Proceedings. There is no action, suit, proceeding or
investigation, judicial, administrative or otherwise, that is pending or, to the
best knowledge of Pegasus or Merger Sub, threatened against Pegasus or Merger
Sub and that challenges the validity or propriety of, or may prevent or delay,
any of the transactions contemplated by this Agreement or the Collateral
Documents.
4.6 Capitalization. Pegasus's authorized, capital stock consists of
30,000,000 shares of Class A Common Stock, per value $.01 per share, of which
4,663,229 shares are outstanding, 15,000,000 shares of Class B Common Stock, par
value $.01 per share, of which 4,581,900 shares are outstanding, and 5,000,000
shares of Preferred Stock, none of which has been designated as to series by
Pegasus's board of directors and none of which is outstanding. Pegasus has
proposed to issue in a public offering units consisting of Series A Convertible
Preferred Stock and warrants to purchase Class A Common Stock, the terms of
which, to the extent known on the date hereof, are described in Schedule 4.6.
Except as described in Schedule 4.6, no person has any preemptive or other
rights with respect to any such capital stock or securities and there are no
offers, options, warrants, rights, agreements or commitments of any kind
(contingent or otherwise) relating to the issuance, conversion, registration,
sale or transfer of any equity interests or other securities of Pegasus or
obligating Pegasus or any other person to purchase or redeem any such equity
interests or other securities. The issuance by Pegasus of additional capital
stock or other securities, or rights described in the preceding sentence,
between the date of this Agreement and the Closing Date shall not be deemed to
cause the representations and warranties in this Section to be untrue or
breached as of the Closing Date. All of the issued and outstanding shares of
Pegasus's Class A Common Stock and Class B Common Stock have been duly
authorized and are validly issued and outstanding, fully paid and nonassessable
and have been issued in compliance with applicable securities laws and other
Legal Requirements. The Pegasus Securities, when issued in accordance with this
Agreement, will have been duly authorized, validly issued and outstanding and
will be fully paid and nonassessable.
4.7 Compliance with Legal Requirements. Pegasus has operated its
business in compliance in all material respects with all Legal Requirements and
requirements of the NRTC (including NRTC's by-laws, policies and procedures)
applicable to Pegasus. No action, suit, proceeding, hearing, investigation,
charge, complaint, claim, demand or notice has been filed, commenced or, to the
best of Pegasus's knowledge, threatened against Pegasus alleging any failure to
so comply and there is no Basis for any claim that such a failure to comply
exists.
4.8 Financial Information. Pegasus has delivered to the Company the
Pegasus Prospectus and the Pegasus 10-Q. The financial statements contained in
the Pegasus Prospectus and the Pegasus 10-Q (including the notes thereto) have
been prepared in accordance with GAAP applied on a consistent basis throughout
the periods covered thereby, are complete and correct in all material respects,
and present fairly the financial condition
21
of the Persons reported on and their results of operations as of the dates and
for the periods indicated, subject in the case of the unaudited financial
statements only to normal year-end adjustments (none of which will be material
in amount) and the omission of footnotes. Since September 30, 1996, there has
been no material adverse change in, and no event has occurred which is
reasonably likely, individually or in the aggregate, to result in any material
adverse change in, the operations, assets, prospects or condition (financial or
otherwise) of Pegasus and its subsidiaries taken as a whole.
4.9 Undisclosed Liabilities. Pegasus has no material Liabilities and,
to the knowledge of Pegasus, there is no Basis for any present or future action,
suit, proceeding, hearing, investigation, charge, complaint, claim or demand
against Pegasus giving rise to any material Liability, except for (1)
Liabilities set forth in the September 30, 1996, balance sheet included in the
Pegasus 10-Q, (2) Liabilities incurred in the Ordinary Course since September
30, 1996, (3) proposed bank borrowings of up to $5 million, and (4) Liabilities
arising out of pending or completed acquisitions.
4.10 Brokers or Finders. No broker or finder has acted directly or
indirectly for Pegasus in connection with the transactions contemplated by this
Agreement, and Pegasus has incurred no obligation to pay any brokerage or
finder's fee or other commission in connection therewith.
4.11 Disclosure. No representation or warranty of Pegasus in this
Agreement or the Collateral Documents or any certificate, report, instrument,
list or other document furnished or to be furnished by Pegasus pursuant to this
Agreement or the Collateral Documents or in connection with the transactions
contemplated hereby or thereby, contained, contains or will contain on the date
such agreement, certificate, report, instrument, list or other document was or
is delivered, any untrue statement of a material fact, or omitted, omits or will
omit on such date to state any material fact necessary in order to make the
statements made, in light of the circumstances under which they were made, not
misleading, nor will any such representation or warranty or statement contain on
the Closing Date any untrue statement of a material fact or omit on the Closing
Date to state any material fact necessary in order to make the statements made,
in light of the circumstances under which they were made, not misleading. The
Pegasus Prospectus and the Pegasus 10-Q did not, as of their respective dates,
contain ▇▇▇ untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
ARTICLE V
PRE-CLOSING COVENANTS OF THE COMPANY AND THE SHAREHOLDERS
5.1 Additional Information. The Company shall provide to Pegasus and
its Representatives, during normal business hours and in a manner that does not
result in a material disruption of the operations of the Company, (i) reasonable
access to all of the Assets and (ii) such financial, operating and other
documents, data and information relating
22
to the Company, the Business and the Assets and Liabilities of the Company as
Pegasus or its Representatives may reasonably request. Such access shall include
the right of Pegasus and its Representatives to inspect the records and reports
of NRTC and DIRECTV and discuss such records and reports with NRTC, and the
Company shall take all reasonable action necessary to facilitate the foregoing.
In addition, the Company shall take all reasonable action necessary to enable
Pegasus and its Representatives (including Coopers & ▇▇▇▇▇▇▇ L.L.P.) to review,
inspect and audit the Books and Records, Tax Returns, Assets, Business and
Liabilities of the Company and discuss them with the Company's officers,
employees, independent accountants, and counsel. The Company shall have a right
of consultation as to any material issues. Notwithstanding any investigation
that Pegasus may conduct of the Company, the Business and the Assets, Pegasus
and Merger Sub may fully rely on the Company's and Shareholders'
representations, warranties, covenants and indemnities set forth in this
Agreement, the Collateral Documents and any documents, instruments or
certificates delivered hereunder and thereunder, which will not be waived or
affected by or as a result of such investigation.
5.2 Exclusivity. The Company shall not (i) solicit, initiate or
encourage the submission of any proposal or offer from any Person relating to
the direct or indirect sale or transfer of any of the Company's capital stock or
the Assets ("Transfer"); (ii) participate in any discussions or negotiations
regarding, furnish any information with respect to, assist or participate in or
facilitate in any other manner any effort or attempt by any Person to do or seek
a Transfer; or (iii) permit any Representative to engage in the foregoing on
behalf of the Company or any Shareholder. The Company shall provide to Pegasus
copies of any written (and summaries of any oral) proposals, offers or
inquiries, with respect to a Transfer received by the Company or any Shareholder
after the execution of the Letter of Intent.
5.3 Continuity and Maintenance of Operations.
(a) The Company shall: (i) comply in all material respects
with all Legal Requirements and requirements of the NRTC applicable to the
Company (including NRTC's by-laws, policies and procedures) relating to the
Business; (ii) fulfill in all material respects all of its obligations under and
maintain in full force and effect in all material respects all Contracts,
including the NRTC Distribution Agreement, and shall not, without the prior
written consent of Pegasus, alter, modify or amend any of the foregoing; (iii)
use its reasonable efforts in consultation with Pegasus and its Affiliates, to
promote the financial success of the Business, and shall promptly notify Pegasus
of any adverse change in the prospects or condition (financial or otherwise) of
the Business; and (iv) use its reasonable efforts to promote, develop and
preserve its relationships with the NRTC, DSS retailers, participating
cooperatives and its present employees as well as the goodwill of its suppliers,
customers and others having business relations with it, and shall promptly
notify Pegasus of any adverse change in its relationship with any such Person.
Without limiting the generality of the foregoing, the Company shall use its
reasonable efforts to maintain the Assets in good order, condition and repair,
shall use its reasonable efforts to maintain insurance relating to the Business
as in effect on the date of this Agreement, shall continue the pricing,
marketing, advertising, promotion and other activities with respect to the
Business (including, without
23
limitation, billing, collection and subscriber matters), shall use its
reasonable efforts to maintain inventories of DSS Systems and supplies at
historic levels and shall keep and maintain all of the Books and Records in the
Ordinary Course. Other than in the Ordinary Course, the Company shall not itself
pay or credit in any way any Accounts Receivable prior to the Closing Date, and
shall not permit any of its agents or employees, or any officers, directors or
Shareholders, to do so either. The Company shall continue to enforce its
procedures for disconnection and discontinuance of service to subscribers whose
accounts are delinquent in accordance with customary policies and procedures in
effect on the date of this Agreement.
(b) The Company shall not, without the prior written consent
of Pegasus: (i) change the rates charged for the Economy Choice programming
package or deviate from the programming or rates in DIRECTV national packages
(Select Choice and Total Choice); (ii) engage in marketing promotions other than
in the Ordinary Course consistent with past practices; (iii) sell, lease,
transfer, convey, distribute or assign any of the Assets (or enter into any
contract to do any of the foregoing) other than in the Ordinary Course or as
contemplated by Section 3.6 hereof or permit the creation of any Encumbrance on
any of the Assets; (iv) permit the amendment or cancellation of the NRTC
Distribution Agreement or any other Contract other than in the Ordinary Course;
(v) enter into any contract, commitment or agreement or incur any indebtedness
or other liability or obligation of any kind involving an expenditure in excess
of $1,000 other than in the Ordinary Course; (vi) make any change in the
Company's authorized or issued capital stock, grant any stock option or other
right to purchase shares of the Company's capital stock or other securities,
issue or make any commitment to issue any security, including any security
exercisable for, convertible into or exchangeable for capital stock, grant any
registration rights, pay any dividend or make any distribution on its capital
stock or other securities, or purchase, redeem, retire or make any other
acquisition of shares of its capital stock or other securities; or (vii) amend
the Company's articles of incorporation or by-laws.
(c) The Company shall not take or omit to take any action that
would cause the Company to be in breach of any representations, warranties or
covenants in this Agreement or the Collateral Documents or that would, if such
action had been taken or omitted on or before the date of this Agreement, have
been required to be disclosed on Schedule 3.10.
5.4 Consents and Approvals.
(a) As soon as practicable after execution of this Agreement,
the Company shall use its best reasonable efforts to obtain any necessary
consent, approval, authorization or order of, make any registration or filing
with or give any notice to, any Governmental Authority or Person as is required
to be obtained, made or given by the Company to consummate the transactions
contemplated by this Agreement and the Collateral Documents, including, without
limitation: (i) consents required under the NRTC Distribution Agreement; and
(ii) any authorizations, consents, approvals, actions, filings or notices set
forth in Schedule 3.5.
24
(b) The Company shall cooperate with Pegasus in providing such
information and reasonable assistance as may be required in connection with the
obligations of Pegasus under Section 6.1.
5.5 Adoption by Shareholders. The Company shall use its best reasonable
efforts to secure the vote or consent of the Shareholders required by the IBCL
and the Company's articles of incorporation and bylaws to approve and adopt this
Agreement and the Merger, and the board of directors of the Company shall
recommend to the Shareholders such approval and adoption. Unless the Company
elects to obtain Shareholder approval by written consent, the Company shall take
all steps necessary to duly call, give notice of, convene and hold a meeting of
the Shareholders to be held as soon as is reasonably practicable after the date
hereof for the purpose of voting upon the approval of this Agreement and the
Merger. The Company will furnish to each Shareholder a notice of his rights to
dissent from the Merger under the IBCL and to demand an appraisal of his shares
and shall provide Pegasus with a copy of such notice prior to the Closing Date.
5.6 Securities Filings; Financial Information.
(a) The Company shall promptly after execution of this
Agreement, provide such information and documents to Pegasus concerning the
Business as may be required or appropriate for inclusion in any filing,
notification or report required to be made by Pegasus or any Affiliate of
Pegasus under the Securities Act or the Exchange Act; and shall cause its
counsel and independent accountants to cooperate with Pegasus, its Affiliates
and their investment bankers, counsel and independent accountants in the
preparation of such filings, notifications and reports. The Company represents
and warrants to Pegasus that no information or document provided by the Company
for inclusion in any filing, notification or report required to be made by
Pegasus or any Affiliate under the Securities Act or the Exchange Act will
contain any untrue statement of material fact or omit to state any material fact
necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading.
(b) Five days prior to the Closing Date, the Company shall
deliver to Pegasus the Company's unaudited balance sheet as of the most recent
month-end prior to the Closing Date (the "Closing Balance Sheet"). The Closing
Balance Sheet will accurately reflect the Books and Records, will be complete
and correct in all material respects, and will present fairly the financial
condition of the Company as of its date.
5.7 Notification of Certain Matters. The Company shall promptly provide
to Pegasus copies of any material notices or correspondence from and to the NRTC
or DIRECTV or any Affiliates of DIRECTV. The Company shall also promptly notify
Pegasus of any fact, event, circumstance or action that, if known on the date of
this Agreement, would have been required to be disclosed to Pegasus pursuant to
this Agreement or the existence or occurrence of which would cause any of the
Company's representations or warranties under this Agreement not to be correct
and/or complete in all material respects. In addition, the Company shall give
prompt written notice to Pegasus of any adverse development causing a
25
breach of any of the Company's representations and warranties in Article III. No
disclosure by the Company pursuant to this Section, however, shall be deemed to
amend or supplement this Agreement or to prevent or cure any misrepresentation,
breach of warranty, or breach of covenant by the Company.
5.8 Employee Matters. The Company has entered into letter agreements
with ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇ regarding the terms of their
employment through the Closing and the payment of certain bonuses and
termination benefits. Pegasus and Merger Sub have been provided copies of such
letter agreements. Any liability pursuant to such letters with regard to the
payment of the bonuses or termination benefits described therein shall be for
the account of the Shareholders, and neither the Company nor the Surviving
Corporation shall have any liability with respect to the payment of such bonuses
or termination benefits.
5.9 Schedules. Each of Pegasus, Merger Sub and the Company shall, from
time to time prior to Closing, supplement the Schedules to this Agreement with
additional information that, if existing or known to it on the date of this
Agreement, would have been required to be included in one or more Schedules to
this Agreement for such Schedules to be true and correct in all material
respects. For purposes of determining the satisfaction of any of the conditions
to the obligations of Pegasus, Merger Sub or the Company in Articles VII and
VIII and the liability of Pegasus or the Surviving Corporation or their rights
following Closing for breaches of representations and warranties under this
Agreement, the Schedules to this Agreement shall be deemed to include only (a)
the information contained therein on the date of this Agreement and (b)
information added to the Schedules by written supplements to such Schedules
delivered prior to Closing by the party making such amendment that (i) are
accepted in writing by the other party or (ii) reflect actions expressly
permitted by this Agreement to be taken prior to Closing.
5.10 Removal of Encumbrances. The Company shall take all necessary
actions to cause the termination, release, and removal on or prior to the
Closing Date, of all Encumbrances relating to the Company, the Assets or the
Business, including without limitation the discharging or other satisfaction of
related claims and obligations, in each case without incurring any obligation on
the part of Pegasus or Merger Sub or otherwise adversely affecting Pegasus or
Merger Sub.
5.11 Duty of Good Faith and Fair Dealing. Each Party agrees that it
will act in good faith with regard to all matters that are the subject of this
Agreement, and will neither intentionally nor knowingly take any action or omit
to take any action at any time for the primary purpose of depriving the other
Party unfairly of any right or benefit that the other party has at such time
under this Agreement.
5.12 Shareholder Investment Representations. The Company shall cause
each Shareholder who has not executed a Lockup Agreement to make written
representations, warranties and agreements to and with Pegasus to the effect set
forth in Exhibit 12.
26
ARTICLE VI
PRE-CLOSING COVENANTS OF PEGASUS AND MERGER SUB
Pegasus covenants and agrees as follows:
6.1 Consents and Approvals.
(a) As soon as practicable after execution of this Agreement,
Pegasus and Merger Sub shall use their best efforts to obtain any necessary
consent, approval, authorization or order of, make any registration or filing
with or give notice to, any Governmental Authority or Person as is required to
be obtained, made or given by Pegasus or Merger Sub to consummate the
transactions contemplated by this Agreement and the Collateral Documents,
including without limitation: (i) consents required under the NRTC Distribution
Agreement; and (ii) any authorizations, consents, approvals, actions, filings or
notices set forth in Schedule 4.4. Notwithstanding anything in this Section to
the contrary, Pegasus and Merger Sub shall not be required to agree to any
amendments, modifications or changes in, the waiver of any terms or conditions
of, or the imposition of any condition to the transfer to Pegasus of, the NRTC
Distribution Agreement in order to obtain the consents required under the NRTC
Distribution Agreement.
(b) Pegasus and Merger Sub shall cooperate with the Company in
providing such information and reasonable assistance as may be required in
connection with the Company's obligations under Section 5.4(a).
6.2 Loan. Immediately prior to Closing, Pegasus shall, or shall cause
its Affiliate to, loan to the Company an amount in cash adequate to permit the
Company to discharge all of its Liabilities to its Shareholders as of such date,
and Company shall execute documentation reflecting the terms and conditions of
such loan, which documentation shall be reasonably satisfactory to the Parties.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF PEGASUS AND MERGER SUB
All obligations of Pegasus and Merger Sub under this Agreement shall be
subject to the fulfillment at or prior to Closing of each of the following
conditions, it being understood that Pegasus and Merger Sub may, in their sole
discretion, to the extent permitted by applicable Legal Requirements, waive any
or all of such conditions in whole or in part:
7.1 Accuracy of Representations. All representations and warranties of
the Company and the Shareholders contained in this Agreement, the Collateral
Documents and any other document, instrument or certificate delivered by the
Company or the Shareholders at or prior to Closing shall be, if specifically
qualified by materiality, true in all respects and, if not so qualified, shall
be true in all material respects, in each case on and as of the Closing Date
with the same effect as if made on and as of the Closing Date. The Company shall
27
have delivered to Pegasus and Merger Sub a certificate dated the Closing Date to
the foregoing effect.
7.2 Covenants. The Company shall, in all material respects, have
performed and complied with each of the covenants, obligations, conditions and
agreements contained in this Agreement that are to be performed or complied with
by it at or prior to Closing. The Company shall have delivered to Pegasus and
Merger Sub a certificate dated the Closing Date to the foregoing effect. The
Majority Shareholder shall, in all material respects, have performed and
complied with each of the covenants, obligations and agreements contained in the
Lockup Agreement.
7.3 Consents.
(a) All consents, approvals, authorizations and orders
required to be obtained from, and all registrations, filings and notices
required to be made with or given to, any Governmental Authority or Person as
provided in Sections 5.4(a) and 6.1(a) shall have been duly obtained, made or
given, as the case may be, and shall be in full force and effect, and any
waiting period required by Applicable Law or any Governmental Authority in
connection with such transactions shall have expired or have been earlier
terminated, unless the failure to obtain, make or give any such consent,
approval, authorization, order, registration, filing or notice, or to allow any
such waiting period to expire or terminate would not have a material adverse
effect on the Company, the Assets or the Business or the ability of the Company
to consummate the transactions contemplated by this Agreement and the Collateral
Documents.
(b) Notwithstanding the foregoing, this condition precedent
shall not have been satisfied if any consent, approval, authorization or order
obtained in connection with the transactions contemplated by this Agreement and
the Collateral Documents has been conditioned upon the amendment, modification,
cancellation or termination of, or waiver of any term or condition of, any
contract, commitment or agreement, or imposes upon Pegasus or the Surviving
Corporation any condition or requirement not now imposed upon the Company.
(c) Pegasus and Merger Sub shall have been furnished with
appropriate evidence, reasonably satisfactory to it and its counsel, of the
granting of such consents, approvals, authorizations and orders, the making of
such registrations and filings and the giving of such notices referred to in
subsection (a).
7.4 Delivery of Documents. The Company and the Shareholders, as
applicable, shall have executed and delivered to Pegasus and Merger Sub the
following documents:
i. Escrow Agreement.
ii. Consultancy Agreement.
28
iii. Noncompetition Agreement.
iv. Stockholders' Agreement.
v. The agreements described in Section 5.12.
vi. Tax Certificate.
vii. Opinion of ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, counsel to the Company
and the Shareholders, dated the Closing Date, addressed to Pegasus and Merger
Sub, in form and substance reasonably satisfactory to Pegasus, Merger Sub and
their counsel.
viii. Such other documents and instruments as Pegasus may
reasonably request: (A) to evidence the performance by the Company and the
Shareholders of, or the compliance by the Company and the Shareholders with, any
covenant, obligation, condition and agreement to be performed or complied with
by the Company and/or any Shareholder under this Agreement and the Collateral
Documents; or (B) to otherwise facilitate the consummation or performance of any
of the transactions contemplated by this Agreement and the Collateral Documents.
7.5 No Material Adverse Change. There shall have been no material
adverse change in the Assets or in the business, financial condition, prospects
or operations of the Company since November 30, 1996.
7.6 No Litigation. No action, suit or proceeding shall be pending or
threatened, and no Legal Requirement or policy of the NRTC, DirecTV, Inc. or any
of their Affiliates, or any applicable regulatory authority shall have been
enacted, promulgated or issued that would: (i) prohibit or have a material
adverse effect on Pegasus's or the Surviving Corporation's ownership or
operation of all or a material portion of the Business or the Assets or
otherwise materially impair the ability of Pegasus or the Surviving Corporation
to realize the benefits of the transactions contemplated by this Agreement and
the Collateral Documents or have a material adverse effect on the value of the
Assets; (ii) materially restrict or limit or otherwise condition Pegasus's or
the Surviving Corporation's right to transfer and/or assign the Business or the
Assets in the future; (iii) compel Pegasus or the Surviving Corporation to
dispose of or hold separate all or a material portion of the Business or the
Assets as a result of any of the transactions contemplated by this Agreement and
the Collateral Documents; (iv) prevent or make illegal the consummation of any
transactions contemplated by this Agreement and the Collateral Documents; or (v)
cause any of the transactions contemplated by this Agreement and the Collateral
Documents to be rescinded following consummation.
7.7 Minimum Subscribers. As of the Closing Date, the Business shall
have Closing Subscribers of not less than 6,000, as evidenced by such Company
documentation as Pegasus may request (including the DBS Wholesale Invoice issued
by NRTC for the most recent billing cycle).
29
7.8 NRTC Compliance Certificate. The Company shall have delivered to
Pegasus a certificate or letter from NRTC dated as of the Closing Date to the
effect that, to the knowledge of the NRTC, the Company is in compliance in all
material respects with the NRTC Distribution Agreement and that the Company has
paid all amounts due and payable to the NRTC under the NRTC Distribution
Agreement for which the NRTC has provided the Company an invoice (which amounts
do not represent fees or other costs (i) due in the Ordinary Course and not yet
payable or, (ii) relating to periods after the Closing Date).
7.9 Dissenters' Rights. No Shareholder shall have exercised dissenters'
rights under the IBCL in connection with the Merger.
7.10 Software License. Prior to or upon Closing the Shareholders or an
entity owned or controlled by the Shareholders will grant to the Company a fully
paid perpetual license to utilize that certain subscriber management, lead
management and dealer management software previously transferred to the
Shareholders or an entity owned or controlled by the Shareholders by the
Company.
7.11 Repayment of Shareholder Liabilities. The Company will provide
Pegasus and Merger Sub with evidence of the repayment by the Company of the
Liabilities of the Company to its Shareholders reflected on the Closing Balance
Sheet.
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS
OF THE COMPANY
All obligations of the Company under this Agreement shall be subject to
the fulfillment at or prior to Closing of the following conditions, it being
understood that the Company may, in its sole discretion, to the extent permitted
by applicable Legal Requirements, waive any or all of such conditions in whole
or in part.
8.1 Accuracy of Representations. All representations and warranties of
Pegasus and Merger Sub contained in this Agreement and the Collateral Documents
shall be, if specifically qualified by materiality, true and correct in all
respects and, if not so qualified, shall be true and correct in all material
respects, in each case on and as of the Closing Date with the same effect as if
made on and as of the Closing Date. Pegasus and Merger Sub shall have delivered
to the Company a certificate dated the Closing Date to the foregoing effect.
8.2 Covenants. Pegasus and Merger Sub shall, in all material respects,
have performed and complied with each obligation, agreement, covenant and
condition contained in this Agreement and the Collateral Documents and required
by this Agreement and the Collateral Documents to be performed or complied with
by Pegasus or Merger Sub at or prior to Closing. Pegasus and Merger Sub shall
have delivered to the Company a certificate dated the Closing Date to the
foregoing effect.
30
8.3 Consents. All consents, approvals, authorizations and orders
required to be obtained from, and all registrations, filings and notices
required to be made with or given to, any Governmental Authority or Person as
provided in Section 6.1(a) shall have been duly obtained, made or given, as the
case may be, and shall be in full force and effect, and any waiting period
required by applicable law or any Governmental Authority in connection with such
transactions shall have expired or have been earlier terminated, unless the
failure to obtain, make or give any such consent, approval, authorization,
order, registration, filing or notice, or to allow any such waiting period to
expire or terminate would not have a material adverse effect on the ability of
Pegasus and Merger Sub to consummate the transactions contemplated by this
Agreement and the Collateral Documents. The Company and the Shareholders shall
have been furnished with the appropriate evidence, reasonably satisfactory to
them and their counsel, of the granting of such consents, approvals,
authorizations and orders, the making of such registrations and filings and the
giving of such notices.
8.4 Delivery of Documents. Pegasus and Merger Sub, as applicable, shall
have executed and delivered to the Shareholders the following documents:
i. Escrow Agreement.
ii. Consultancy Agreement.
iii. Stockholders' Agreement.
iv. Opinion of ▇▇▇ ▇. Lodge, Senior Vice President, Chief
Administrative Officer and General Counsel of Pegasus, dated the Closing Date,
addressed to the Company and the Shareholders, in form and substance reasonably
satisfactory to the Company and the Shareholders.
v. Opinion of Drinker ▇▇▇▇▇▇ & ▇▇▇▇▇, as tax counsel to
Pegasus and Merger Sub, dated the Closing Date, addressed to the Company and
Shareholders, in form and substance reasonably satisfactory to the Company and
the Shareholders to the effect that the transactions contemplated hereby will
qualify as a tax free reorganization under Sections 368(a)(1)(A) and
368(a)(2)(D) of the Code.
vi. Such other documents and instruments as the Company may
reasonably request: (A) to evidence the performance by Pegasus and Merger Sub
of, or the compliance by Pegasus or Merger Sub with, any covenant, obligation,
condition and agreement to be performed or complied with by Pegasus or Merger
Sub under this Agreement and the Collateral Documents; or (B) to otherwise
facilitate the consummation or performance of any of the transactions
contemplated by this Agreement and the Collateral Documents.
8.5 No Material Adverse Change. There shall have been no material
adverse change in the business, financial condition, prospects or operations of
Pegasus since September 30, 1996.
31
8.6 Litigation. No action, suit or proceeding shall be pending or
threatened by or before any Governmental Authority and no Legal Requirement
shall have been enacted, promulgated or issued or deemed applicable to any of
the transactions contemplated by this Agreement and the Collateral Documents
that would: (i) prevent consummation of any of the transactions contemplated by
this Agreement and the Collateral Documents; or (ii) cause any of the
transactions contemplated by this Agreement and the Collateral Documents to be
rescinded following consummation.
ARTICLE IX
POST-CLOSING COVENANTS
The Parties agree as follows with respect to the period following
Closing:
9.1 Taxes. The Shareholders shall be responsible for all capital gains
taxes imposed by the Code or similar provisions of state taxing laws on the
Shareholders as a result of the transactions contemplated herein. Pegasus and
the Surviving Corporation shall be responsible for taxes, if any, imposed upon
the Company (or the Surviving Corporation, as transferee) as a result of the
transactions contemplated herein. As soon as practicable after the Closing, but
no later than March 7, 1997, the Company's accountant will prepare and deliver
to Pegasus the Company's 1996 federal and state income tax returns (the "1996
Returns"), which will be accurate and complete in all material respects. The
Surviving Corporation, as successor to the Company, will execute the 1996
Returns on behalf of the Company and cause them to be filed with the Internal
Revenue Service and applicable state taxing authorities on or prior to March 15,
1997. Within sixty (60) days after Closing, the Company's accountant will
prepare and deliver to Pegasus the Company's federal and state income tax
returns for the period commencing January 1, 1997 and ending on the Closing Date
(the "1997 Returns"), which will be accurate and complete in all material
respects. The Surviving Corporation, as successor to the Company, will execute
the 1997 Returns on behalf of the Company and cause them to be filed with the
Internal Revenue Service and applicable state taxing authorities on or prior to
the fifteenth day of the third month following the Closing Date. The Company
represents that it will owe no federal or state income taxes with respect to the
periods covered by the 1996 Returns and the 1997 Returns.
9.2 Territorial Compliance. If the Shareholders, or any entity owned or
controlled by the Shareholders, continue efforts to have Persons resident in the
Service Area who as of the Closing Date purchase services directly through
DIRECTV, Inc. reclassified as subscribers of the Surviving Corporation in
accordance with the terms of the NRTC Distribution Agreement, and such efforts
result in an increase in the number of subscribers of the Surviving Corporation
within 90 days after the Closing Date, then Pegasus or the Surviving Corporation
shall pay the Shareholders an amount equal to (i) $500, times (ii) such increase
in the number of subscribers resulting from such efforts (which number shall not
exceed 3% of the number of Closing Subscribers). Such payment, if any, shall be
made within five (5) days following the expiration of the 90 day period.
32
9.3 Payment of Fees. Pegasus shall pay, and shall hold the Shareholders
harmless from any claim for payment of, any fees of the type referred to in
Schedule 3.20 of this Agreement.
ARTICLE X
TERMINATION
10.1 Events of Termination. This Agreement may be terminated and the
transactions contemplated by this Agreement may be abandoned at any time prior
to Closing as provided below:
(a) Pegasus, Merger Sub and the Company may terminate this
Agreement by mutual written consent at any time prior to Closing.
(b) Pegasus and Merger Sub may terminate this Agreement by giving
written notice to the Company at any time prior to Closing:
i. if the Company has breached any material representation,
warranty or covenant contained in this Agreement in any material respect, or the
Majority Shareholder shall have breached any material representation, warranty
or covenant contained in the Lockup Agreement, Pegasus has notified the Company
or such Shareholder of the breach, and the breach has continued without cure for
a period of 30 days after the notice of breach; or
ii. if Closing shall not have occurred on or before the
Termination Date by reason of the failure of any condition precedent under
Article VII (unless the failure results primarily from Pegasus or Merger Sub
itself breaching any representation, warranty or covenant contained in this
Agreement).
(c) The Company may terminate this Agreement by giving written
notice to Pegasus at any time prior to Closing:
i. if Pegasus or Merger Sub has breached any material
representation, warranty or covenant contained in this Agreement in any material
respect, the Company has notified Pegasus of the breach, and the breach has
continued without cure for a period of 30 days after the notice of breach; or
ii. if Closing shall not have occurred on or before the
Termination Date by reason of the failure of any condition precedent under
Article VIII hereof (unless the failure results primarily from the Company or
the Majority Shareholder breaching any representation, warranty or covenant
contained in this Agreement or the Lockup Agreement, respectively).
10.2 Liabilities in Event of Termination. The termination of this
Agreement will in no way limit any obligation or liability of any Party based on
or arising from a breach or
33
default by such Party with respect to any of its representations, warranties,
covenants or agreements contained in this Agreement.
10.3 Procedure Upon Termination. If this Agreement is terminated by any
Party pursuant to this Article, notice of such termination shall promptly be
given by the terminating Party to the other Party.
ARTICLE XI
REMEDIES FOR BREACH OF THIS AGREEMENT
11.1 Survival of Representations and Warranties. All of the
representations and warranties of Pegasus, Merger Sub and the Company contained
in this Agreement shall survive Closing (even if the damaged Party knew or had
reason to know of any misrepresentation or breach of warranty at the time of
Closing) and continue in full force and effect until (i) the third anniversary
of the Closing, in the case of the representations and warranties contained in
Sections 3.13 and 3.14(a) through (d), or (ii) 30 days after the completion of
the audit of Pegasus's financial statements for the year ending December 31,
1997, but not later than April 30, 1998, in all other cases. The period of
survival prescribed by this Section is referred to as the "Survival Period." The
liabilities of Pegasus, Merger Sub and the Company under their respective
representations and warranties will expire as of the expiration of the Survival
Period; provided, however, that such expiration will not include, extend or
apply to any representation or warranty, the breach of which has been asserted
in good faith by Pegasus or Merger Sub in a written notice to the Shareholders
before such expiration or about which the Shareholders have given Pegasus
written notice in good faith before such expiration indicating that facts or
conditions exist that, with the passage of time or otherwise, can reasonably be
expected to result in a breach (and describing such potential breach in
reasonable detail). Except as otherwise provided in this Agreement, the
covenants and agreements of Pegasus, Merger Sub and the Company contained in
this Agreement shall survive Closing and shall continue in full force and effect
as provided in Section 11.2 and Section 11.3.
11.2 Indemnification Provisions for Benefit of Pegasus and Merger Sub.
(a) If the Company breaches any representations and warranties
contained in this Agreement, and if Pegasus makes a written claim for
indemnification against the Shareholders within the Survival Period, then
(subject to the limitations in subsection (c)) Pegasus, Pegasus Satellite
Holdings, Inc. and Merger Sub and the shareholders, directors, officers,
employees, agents, successors and assigns of any of such Persons shall be
entitled to be indemnified and held harmless out of the Escrow Shares, from and
against any Adverse Consequences that any such Person may suffer through and
after the date of the claim for indemnification (including any Adverse
Consequences that any such Person may suffer after the end of the Survival
Period) resulting from, arising out of or caused by the breach.
(b) Subject to the limitations in subsection (c), Pegasus,
Pegasus Satellite Holdings, Inc. and Merger Sub, the shareholders, directors,
officers, employees and agents,
34
and the successors and assigns of any of such Persons shall be entitled to be
indemnified and held harmless out of the Escrow Shares, from and against the
entirety of any Adverse Consequences that any such Person may suffer resulting
from, arising out of, or caused by any of the following: (i) any breach of any
covenant, agreement or obligation of the Company contained in this Agreement and
(ii) any Liability for Taxes attributable to the use, ownership or operation of
the Assets by the Company or the Business relating to periods prior to Closing.
Except as otherwise provided in this Agreement, such Person's rights to
indemnity under this Section shall expire upon the expiration of 30 days after
the completion of the audit of Pegasus's financial statements for the year ended
December 31, 1997, but not later than April 30, 1998; provided, however, that
such expiration will not include, extend or apply to rights for indemnity with
respect to any claim asserted in good faith in a written notice to the
Shareholders before such expiration.
(c) No Person otherwise entitled to indemnification under this
Section shall be so entitled until the aggregate amount otherwise payable under
this Section exceeds $25,000, and shall then be entitled to the indemnification
only as to the excess. Any claim for indemnification under this Section shall be
satisfied only out of the Escrow Shares (or, in the event cash is substituted
for the Escrow Shares pursuant to the Escrow Agreement, such cash (the "Escrow
Funds" and, together with the Escrow Shares, the "Escrow Property")), and no
Shareholder shall be personally liable for any such claim beyond his interest in
the Escrow Property. The order in which any Escrow Property shall be used to
satisfy a claim shall be at the option of Pegasus. Escrow Shares shall be deemed
to satisfy a claim to the extent of (i) in the case of Pegasus Preferred Stock,
its liquidation preference, and (ii) in the case of Pegasus Class A Common
Stock, the higher of (A) the Closing Value of such Escrow Shares, or (B) the
last reported sale price of the Pegasus Class A Common Stock between a buyer and
a seller that are not Affiliates of Pegasus on the Nasdaq National Market System
on the Business Day before Pegasus receives such Escrow Shares, or if no such
sale is made on such day, the average of the closing bid and asked price on such
system on such day. The Escrow Property held by the Escrow Agent shall be
released on the following schedule: (i) Escrow Property having a value of
$300,000 (with Escrow Shares being valued at the Closing Value) shall be
released to the Shareholders upon the expiration of 30 days after the completion
of the audit of Pegasus's financial statements for the year ending December 31,
1997, but not later than April 30, 1998, (ii) Escrow Property having a value of
$200,000 (with Escrow Shares being valued at the Closing Value) shall be
released to the Shareholders upon the second anniversary of the Closing Date,
and (iii) the balance of the Escrow Property shall be released to the
Shareholders upon the expiration of the Survival Period; provided, however, that
if a claim for indemnification is then pending, the amount of Escrow Property
released shall be reduced by the extent necessary to insure that the amount of
Escrow Property remaining in the possession of the Escrow Agent will be
sufficient to satisfy such claims. The parties hereby agree to take all actions
necessary to obtain the release of the Escrow Property from the Escrow Agent on
the schedule set forth above.
35
11.3 Indemnification Provisions for Benefit of the Company and
Shareholders.
(a) If Pegasus or Merger Sub breaches any of its
representations and warranties contained in this Agreement and if the
Shareholders make a written claim for indemnification against Pegasus and the
Surviving Corporation within the Survival Period, then (subject to the
limitations in Subsection (c)) Pegasus and the Surviving Corporation shall
jointly and severally indemnify, defend and hold harmless the Shareholders, the
former directors, officers, employees and agents of the Company and the
successors and assigns of any of such Persons, from and against any Adverse
Consequences that any such Person may suffer through and after the date of the
claim for indemnification (including any Adverse Consequences that the
Shareholders may suffer after the end of the Survival Period) resulting from,
arising out of, or caused by the breach.
(b) Subject to the limitations in (c), Pegasus and the
Surviving Corporation agree, jointly and severally, to indemnify the
Shareholders, the former directors, officers, employees, and agents of the
Company and the successors and assigns of any such Persons against the entirety
of any Adverse Consequences that any such Person may suffer resulting from,
arising out of, or caused by any of the following: (i) any breach of any
covenant, agreement or obligation of Pegasus or Merger Sub contained in this
Agreement; (ii) any act or omission of Pegasus or Merger Sub with respect to, or
any event or circumstance related to, the ownership or operation of the Assets
or the conduct of the Business, which act, omission, event or circumstance
occurred after the Closing Date; (iii) any Liability of the Business against
which Pegasus and Merger Sub are not entitled to indemnity under Section 11.2 or
which are not the responsibility of the Shareholders pursuant to this Agreement
and the Collateral Documents; and (iv) any Liability for Taxes attributable to
the use, ownership or operation of the Assets or the transferred Business by
Pegasus or Merger Sub relating to periods after the Closing Date. The
obligations of Pegasus and Merger Sub under this Section shall expire upon the
expiration of 30 days after the completion of the audit of Pegasus's financial
statements for the year ended December 31, 1997, but not later than April 30,
1998; provided, however, that such expiration will not include, extend or apply
to rights for indemnity with respect to any claim asserted in good faith in a
written notice to Pegasus and the Surviving Corporation before such expiration.
(c) No Person otherwise entitled to indemnification under this
Section shall be so entitled until the aggregate amount otherwise payable under
this Section exceeds $25,000, and shall then be entitled to the indemnification
only as to the excess, but only in an amount not to exceed $700,000.
11.4 Matters Involving Third Parties.
(a) If any third party shall notify either Pegasus, the
Surviving Corporation or the Shareholders (the "Indemnified Party") with respect
to any matter (a "Third Party Claim") that may give rise to a claim for
indemnification against the other (the "Indemnifying Party") under this Article,
then the Indemnified Party shall promptly notify the Indemnifying Party thereof
in writing; provided, however, that no delay on the part of the Indemnified
36
Party in notifying any Indemnifying Party shall relieve the Indemnifying Party
from any obligation hereunder unless (and then solely to the extent) the
Indemnifying Party thereby is prejudiced.
(b) Any Indemnifying Party shall have the right to defend the
Indemnified Party against the Third Party Claim with counsel of its choice
reasonably satisfactory to the Indemnified Party so long as: (i) the
Indemnifying Party notifies the Indemnified Party in writing within 15 days
after the Indemnified Party has given notice of the Third Party Claim that the
Indemnifying Party will indemnify the Indemnified Party from and against the
entirety of any Adverse Consequences the Indemnified Party may suffer resulting
from, arising out of, relating to, in the nature of or caused by the Third Party
Claim; and (ii) the Third Party Claim involves only money damages and does not
seek an injunction or other equitable relief.
(c) So long as the Indemnifying Party is conducting the
defense of the Third Party Claim in accordance with subsection (b): (i) the
Indemnified Party may retain separate co-counsel at its sole cost and expense
and participate in the defense of the Third Party Claim; (ii) the Indemnified
Party shall not consent to the entry of any judgment or enter into any
settlement with respect to the Third Party Claim without the prior written
consent of the Indemnifying Party (not to be withheld unreasonably); and (iii)
the Indemnifying Party shall not consent to the entry of any judgment or enter
into any settlement with respect to the Third Party Claim without the prior
written consent of the Indemnified Party (not to be withheld unreasonably).
(d) If any of the conditions in Section 11.4(b) above is not
or no longer satisfied after seven (7) days advance written notice by the
Indemnified Party: (i) the Indemnified Party may defend against, and consent to
the entry of any judgment or enter into any settlement with respect to, the
Third Party Claim in any manner it reasonably may deem appropriate (and the
Indemnified Party need not consult with, or obtain any consent from, any
Indemnifying Party in connection therewith); (ii) the Indemnifying Party shall
reimburse the Indemnified Party promptly and periodically for the costs of
defending against the Third Party Claim (including attorneys' fees and
expenses); and (iii) the Indemnifying Party shall remain responsible for any
Adverse Consequences the Indemnified Party may suffer resulting from, arising
out of, relating to, in the nature of or caused by the Third Party Claim to the
fullest extent provided in this Article.
11.5 Indemnity Net of Insurance Proceeds. All indemnification payments
under this Article shall be net of any insurance proceeds received by the
Indemnified Party in respect of the event or circumstance giving rise to the
claim for indemnification and shall be deemed adjustments to the Merger
Consideration.
37
ARTICLE XII
MISCELLANEOUS
12.1 Parties Obligated and Benefited. This Agreement shall be binding
upon the Parties and their respective assigns and successors in interest and
shall inure solely to the benefit of the Parties and their respective assigns
and successors in interest, and no other Person shall be entitled to any of the
benefits conferred by this Agreement, except that the Shareholders shall be
entitled to enforce the Company's rights under this Agreement as third party
beneficiaries of this Agreement. Without the prior written consent of the other
Party, no Party may assign this Agreement or the Collateral Documents or any of
its rights or interests or delegate any of its duties under this Agreements or
the Collateral Documents; provided, however, that Pegasus may assign this
Agreement or any of its rights or interests or delegate any of its duties
hereunder to an Affiliate.
12.2 Notices. Any notices and other communications required or
permitted hereunder shall be in writing and shall be effective upon delivery by
hand or upon receipt if sent by certified or registered mail (postage prepaid
and return receipt requested) or by a nationally recognized overnight courier
service (appropriately marked for overnight delivery) or upon transmission if
sent by telex or facsimile (with request for immediate confirmation of receipt
in a manner customary for communications of such respective type and with
physical delivery of the communication being made by one or the other means
specified in this Section as promptly as practicable thereafter). Notices shall
be addressed as follows:
(a) If to Pegasus, Merger Sub or the Surviving
Corporation, to:
Pegasus Communications Corporation
c/o Pegasus Communications Management Company
5 Radnor Corporate Center
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
(with a copy to ▇▇▇ ▇. Lodge at the same address)
(b) If to the Company before the Closing Date or to the
Shareholders before or after the Closing Date, to:
DBS of Indiana, Inc.
▇▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
38
with a copy to:
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
1313 Merchants Bank Building
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esquire
Any party may change the address to which notices are required to be sent by
giving notice of such change in the manner provided in this Section.
12.3 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.
12.4 Headings. The Article and Section headings of this Agreement are
for convenience only and shall not constitute a part of this Agreement or in any
way affect the meaning or interpretation thereof.
12.5 Choice of Law. This Agreement and the rights of the Parties under
it shall be governed by and construed in all respects in accordance with the
laws of the Commonwealth of Pennsylvania, without giving effect to any choice of
law provision or rule (whether of the Commonwealth of Pennsylvania or any other
jurisdiction that would cause the application of the laws of any jurisdiction
other than the Commonwealth of Pennsylvania).
12.6 Rights Cumulative. All rights and remedies of each of the Parties
under this Agreement shall be cumulative, and the exercise of one or more rights
or remedies shall not preclude the exercise of any other right or remedy
available under this Agreement or applicable law.
12.7 Further Actions. The Parties shall execute and deliver to each
other, from time to time at or after Closing, for no additional consideration
and at no additional cost to the requesting party, such further assignments,
certificates, instruments, records, or other documents, assurances or things as
may be reasonably necessary to give full effect to this Agreement and to allow
each party fully to enjoy and exercise the rights accorded and acquired by it
under this Agreement.
12.8 Time of the Essence. Time is of the essence under this Agreement.
If the last day permitted for the giving of any notice or the performance of any
act required or permitted under this Agreement falls on a day which is not a
Business Day, the time for the giving of such notice or the performance of such
act shall be extended to the next succeeding Business Day.
39
12.9 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
12.10 Entire Agreement. This Agreement (including the Exhibits,
Schedules and any other documents, instruments and certificates referred to
herein, which are incorporated in and constitute a part of this Agreement)
contains the entire agreement of the Parties and supersedes all prior oral or
written agreements, understandings and representations to the extent that they
relate in any way to the subject matter hereof, including the Letter of Intent.
12.11 Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Parties. No waiver by any party of any default, misrepresentation or breach of
warranty or covenant hereunder shall be valid unless the same shall be in
writing and signed by the Person against whom its enforcement is sought, and no
such waiver whether intentional or not, shall be deemed to extend to any prior
or subsequent default, misrepresentation or breach of warranty or covenant
hereunder or affect in any way any rights arising by virtue of any prior or
subsequent such occurrence.
12.12 Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. If an ambiguity or question of
intent or interpretation arises, this Agreement shall be construed as if drafted
jointly by the parties and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any of the
provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean "including without limitation." The Parties intend
that each representation, warranty and covenant contained herein shall have
independent significance. If any Party has breached any representation, warranty
or covenant contained herein in any respect, the fact that there exists another
representation, warranty or covenant relating to the same subject matter
(regardless of the relative levels of specificity) which the Party has not
breached shall not detract from or mitigate the fact that the party is in breach
of the first representation, warranty or covenant.
12.13 Expenses. Except as otherwise provided in this Agreement, each
Party shall bear its own costs and expenses (including legal fees and expenses
and accountants' fees and expenses) incurred in connection with the negotiation
of this Agreement, the performance of its obligations and the consummation of
the transactions contemplated hereby.
40
IN WITNESS WHEREOF, the Parties hereto have duly executed this
Agreement as of the day and year first above written.
PEGASUS COMMUNICATIONS CORPORATION
By: /s/ ▇▇▇ ▇. Lodge
-----------------------------------------
▇▇▇ ▇. Lodge,
Senior Vice President
PEGASUS SATELLITE TELEVISION OF INDIANA,
INC.
By: /s/ ▇▇▇ ▇. Lodge
-----------------------------------------
▇▇▇ ▇. Lodge,
Senior Vice President
DBS OF INDIANA, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇,
President
41