EXHIBIT 99.3
ASSET PURCHASE AGREEMENT
between
HIGH SPEED ACCESS CORP.
and
CHARTER COMMUNICATIONS HOLDING COMPANY, LLC
Dated as of September 28, 2001
GLOSSARY OF DEFINED TERMS
DEFINED TERMS ON PAGE
Accounts Payable.....................................................2
Accounts Receivable..................................................2
Acquired Assets.....................................................11
Acquired Current Assets..............................................2
Acquisition Proposal................................................38
Adjusted Accounts Receivable.........................................2
Adjustment Holdback.................................................16
Adjustment Item.....................................................17
Affiliate............................................................2
Apportioned Obligations.............................................44
Approved Leave of Absence...........................................40
Arapahoe Facility...................................................34
Assigned Security Deposits...........................................2
Assigned Voice & Data Circuits.......................................2
Assumed Capital Lease Liabilities....................................3
Assumed Capital Leases...............................................2
Assumed Contracts....................................................3
Assumed Current Liabilities..........................................3
Assumed Liabilities.................................................13
Assumed Operating Lease Liabilities..................................3
Assumed Operating Leases.............................................3
Assumed Real Estate Lease Liabilities................................3
Assumed Real Estate Leases...........................................3
Beneficiary.........................................................43
Benefit Plans........................................................3
Billing Letter Agreement.............................................1
Business.............................................................1
Business Day.........................................................3
Cable Modem Business.................................................1
Capital Leases.......................................................3
Cash Amount.........................................................16
CCI .................................................................1
CCI Receivables......................................................2
Charter Ventures.....................................................1
Charter Warrants....................................................22
Closing.............................................................20
Closing Date........................................................20
Closing Statement...................................................17
CMB Business Records.................................................3
CMB Claims...........................................................4
CMB Employee Schedule...............................................38
DEFINED TERMS ON PAGE
CMB Employees.......................................................38
CMB Intellectual Property............................................4
CMB Sites............................................................4
Code.................................................................4
Confidential Information............................................45
Confidentiality Agreement...........................................34
Contracts............................................................4
Copyrights...........................................................6
Corrections.........................................................17
Customer Care Matters................................................4
Damages.............................................................51
DGCL................................................................24
Disagreement Notice.................................................17
Employee Claims......................................................4
Environmental Law....................................................5
ERISA................................................................5
Excluded Assets.....................................................12
Excluded Damages....................................................52
Excluded Liabilities................................................13
Excluded Stockholders................................................4
Expenses............................................................43
Final Allocation....................................................20
First Release Amount................................................55
First Release Date..................................................55
Fixtures and Equipment...............................................5
Full Turnkey Agreement...............................................5
GAAP.................................................................5
Governmental Authority...............................................5
Hazardous Substances.................................................5
Hired Employee Costs.................................................5
Hired Employees.....................................................39
Holdco...............................................................1
Holdco Indemnitees..................................................51
▇▇▇▇▇▇▇▇ ▇▇▇▇▇.......................................................6
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Opinion...............................................6
HSA Common Stock.....................................................6
HSR Act..............................................................6
HSR Date.............................................................6
Indemnification Holdback............................................16
Indemnitor..........................................................53
Independent Accounting Firm.........................................19
Information.........................................................30
Intellectual Property................................................6
DEFINED TERMS ON PAGE
Intercompany Payments................................................6
Launch Fees..........................................................6
Legal Requirement....................................................7
▇▇▇▇▇▇..............................................................30
▇▇▇▇▇▇ Opinion.......................................................7
Liabilities..........................................................7
License Agreement....................................................1
Liens................................................................7
Losses...............................................................7
Management Agreement.................................................1
Marks................................................................6
Maskworks............................................................6
Material Adverse Effect..............................................7
Material Contract....................................................7
Maximum Sick Time Accrual...........................................40
Maximum Vacation Accrual............................................40
▇▇▇▇▇▇▇ ▇▇▇▇▇.......................................................32
Modem Inventory......................................................8
Non-CCI Receivables..................................................2
Offer Schedule......................................................38
Officer's Certificate...............................................55
Operating Equipment Leases...........................................8
Other Current Assets.................................................8
Other Current Liabilities............................................8
Other Inventory......................................................8
Patents..............................................................6
Permits..............................................................8
Permitted Liens......................................................8
Person...............................................................9
Post-Employment Hiring Prohibition..................................30
Prepayments..........................................................9
Proxy Statement.....................................................25
Purchase Price......................................................16
Real Estate Leases...................................................9
Review Schedule.....................................................38
Schedule 13E-3......................................................31
Second Disagreement Notice..........................................18
Second NSA Agreement.................................................9
Second Release Date.................................................55
Security Deposits....................................................9
Seller...............................................................1
Seller Indemnitees..................................................52
Seller Requisite Vote...............................................24
DEFINED TERMS ON PAGE
Seller Stockholder Meeting..........................................35
Seller's Board......................................................23
Series D Preferred Stock.............................................9
Settlement Date.....................................................19
Software.............................................................6
Subsidiaries.........................................................9
Superior Proposal...................................................38
Taking..............................................................15
Tax or Taxes.........................................................9
Technology and Know-How..............................................9
Third Party Claim...................................................53
Threshold Amount....................................................51
Trade Secrets........................................................6
Transaction Documents...............................................10
Transactions........................................................10
Transfer Tax or Transfer Taxes......................................10
Transfer Tax Returns................................................44
Voting Agreement.....................................................1
Vulcan...............................................................1
WARN Act............................................................10
TABLE OF CONTENTS
ARTICLE I DEFINITIONS..................................................................2
Section 1.01. Specified Definitions.................................................2
Section 1.02. Other Terms..........................................................10
Section 1.03. Interpretation.......................................................10
ARTICLE II TRANSFER OF ASSETS AND LIABILITIES..........................................11
Section 2.01. Purchase and Sale of Assets..........................................11
Section 2.02. Excluded Assets......................................................12
Section 2.03. Assumption of Liabilities............................................13
Section 2.04. Excluded Liabilities.................................................13
Section 2.05. Risk of Loss; Condemnation...........................................15
Section 2.06. Assignment of Contracts, Etc.........................................15
ARTICLE III PURCHASE PRICE..............................................................16
Section 3.01. Purchase Price.......................................................16
Section 3.02. Holdbacks............................................................16
Section 3.03. Purchase Price Adjustments...........................................16
Section 3.04. Determination of Adjustments.........................................17
Section 3.05. Allocation of Purchase Price.........................................20
ARTICLE IV THE CLOSING.................................................................20
Section 4.01. Closing Date.........................................................20
Section 4.02. Deliveries by Seller at the Closing..................................21
Section 4.03. Deliveries by Holdco at the Closing..................................21
ARTICLE V REPRESENTATIONS AND WARRANTIES OF SELLER....................................23
Section 5.01. Organization, Standing and Power.....................................23
Section 5.02. Corporate Authorization..............................................23
Section 5.03. Non-Contravention....................................................24
Section 5.04. Governmental Filings; Consents.......................................24
Section 5.05. Acquired Assets......................................................24
Section 5.06. Absence of Certain Changes or Events.................................24
Section 5.07. Proxy Statement......................................................25
Section 5.08. Compliance with Applicable Laws......................................25
Section 5.09. Litigation; Decrees..................................................25
Section 5.10. Security Deposits....................................................25
Section 5.11. Contracts............................................................25
Section 5.12. Real Property........................................................26
Section 5.13. Title to and Condition of the Acquired Assets........................26
Section 5.14. Compliance with Environmental Laws...................................27
Section 5.15. Intellectual Property Rights.........................................27
Section 5.16. Taxes................................................................29
Section 5.17. Employees, Labor Matters, etc........................................29
Section 5.18. Employee Benefit Plans...............................................30
Section 5.19. Brokers..............................................................30
Section 5.20. Solvency of Seller...................................................30
Section 5.21. Opinion of Financial Advisors........................................30
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF HOLDCO....................................30
Section 6.01. Organization, Standing and Power.....................................30
Section 6.02. Corporate Authorization..............................................31
Section 6.03. Non-Contravention....................................................31
Section 6.04. Governmental Filings; Consents.......................................31
Section 6.05. Information Supplied; Schedule 13E-3.................................31
Section 6.06. Brokers..............................................................32
Section 6.07. Assignment of Agreements.............................................32
Section 6.08. Interested Stockholder...............................................32
ARTICLE VII COVENANTS RELATED TO THE CONDUCT OF CABLE MODEM BUSINESS....................32
Section 7.01. Conduct of Cable Modem Business in the Ordinary Course...............32
Section 7.02. Arapahoe Facility....................................................34
Section 7.03. Access to Information................................................34
ARTICLE VIII ADDITIONAL AGREEMENTS.......................................................35
Section 8.01. Seller Stockholder Meeting...........................................35
Section 8.02. Proxy Statement; Schedule 13E-3......................................35
Section 8.03. Governmental Approvals...............................................35
Section 8.04. Third Party Consents.................................................36
Section 8.05. Notification of Certain Matters......................................37
Section 8.06. Bulk Transfer Laws...................................................37
Section 8.07. Further Assurances...................................................37
Section 8.08. Acquisition Proposals................................................37
Section 8.09. Employee Matters.....................................................38
Section 8.10. CMB Business Records; Transitional Arrangements......................42
Section 8.11. Publicity............................................................43
Section 8.12. Fees and Expenses....................................................43
Section 8.13. Cancellation of Charter Warrants.....................................43
Section 8.14. Letter of Credit.....................................................43
Section 8.15. Taxes................................................................44
Section 8.16. Use of Seller's Name.................................................45
Section 8.17. Non-solicitation.....................................................45
Section 8.18. Confidentiality......................................................45
Section 8.19. Limitations on Seller's Representations and Warranties...............45
Section 8.20. Launch Fees..........................................................46
Section 8.21. Termination of Charter Contracts.....................................46
Section 8.22. CSR Classes..........................................................46
Section 8.23. Customer Care Matters................................................47
ARTICLE IX CONDITIONS..................................................................47
Section 9.01. Conditions to Each Party's Obligation................................47
Section 9.02. Conditions to Obligation of Holdco...................................47
Section 9.03. Conditions to Obligation of Seller...................................48
ARTICLE X TERMINATION, AMENDMENT AND WAIVER...........................................49
Section 10.01. Termination..........................................................49
Section 10.02. Notice of Termination................................................49
Section 10.03. Effect of Termination and Abandonment................................50
Section 10.04. Amendments...........................................................50
Section 10.05. Extension; Waiver....................................................50
ARTICLE XI INDEMNIFICATION.............................................................51
Section 11.01. Indemnification by Seller............................................51
Section 11.02. Indemnification by Holdco............................................52
Section 11.03. Exclusive Remedy; No Consequential Damages...........................53
Section 11.04. Characterization of Indemnification and Other Payments...............53
Section 11.05. Damages Net of Insurance; Tax Benefits...............................53
Section 11.06. Procedures Relating to Third Party Claims............................53
Section 11.07. Indemnification Holdback.............................................55
ARTICLE XII GENERAL PROVISIONS..........................................................56
Section 12.01. Notices..............................................................56
Section 12.02. Entire Agreement.....................................................57
Section 12.03. Severability.........................................................57
Section 12.04. Third Party Beneficiaries............................................57
Section 12.05. Assignment...........................................................58
Section 12.06. Specific Performance.................................................58
Section 12.07. Governing Law........................................................58
Section 12.08. Waiver of Jury Trial.................................................58
Section 12.09. Exhibits and Schedules...............................................58
Section 12.10. No Strict Construction...............................................58
Section 12.11. Counterparts; Effectiveness..........................................58
Execution Copy
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT dated as of September 28, 2001,
between High Speed Access Corp., a Delaware corporation ("Seller"), and Charter
Communications Holding Company, LLC, a Delaware limited liability company
("Holdco").
RECITALS
WHEREAS, Seller is engaged in the business of providing
broadband Internet access over cable and related services (the "Business");
WHEREAS, a significant portion of the Business conducted by
Seller relates to the provision of high speed internet access to residential and
commercial customers of Holdco and its Affiliates via cable modems pursuant to
the Full Turnkey Agreement and Second NSA Agreement (each as hereinafter
defined), and includes research and development and implementation of that
business (the "Cable Modem Business");
WHEREAS, Seller desires to sell, transfer and assign to
Holdco, and Holdco desires to purchase and assume from Seller, certain of the
assets and liabilities of the Cable Modem Business, namely, the Acquired Assets
and Assumed Liabilities, upon the terms and subject to the conditions set forth
herein;
WHEREAS, Seller has notified its cable partners that it
intends to exit from certain one-way cable television markets and to exit all of
its turnkey contracts with cable operators other than Holdco;
WHEREAS, in order to induce Seller and Holdco to enter into
this Agreement, as of the date hereof, Seller, Charter Communications Ventures,
LLC ("Charter Ventures"), Vulcan Ventures Incorporated ("Vulcan") and certain
other stockholders of Seller are entering into a Voting Agreement, substantially
in the form attached as Exhibit A hereto (the "Voting Agreement");
WHEREAS, in order to induce Holdco to enter into this
Agreement, as of the date hereof, Charter Communications, Inc., a Delaware
corporation ("CCI") and Seller are entering into a Services and Management
Agreement, substantially in the form attached as Exhibit B hereto (the
"Management Agreement");
WHEREAS, in order to induce Seller to enter into this
Agreement, as of the date hereof, Holdco and Seller are entering into a License
Agreement, substantially in the form attached as Exhibit C hereto (the "License
Agreement"); and
WHEREAS, in order to induce Holdco to enter into this
Agreement, as of the date hereof, Holdco and Seller are entering into a Billing
Letter Agreement, substantially in the form attached as Exhibit D hereto (the
"Billing Letter Agreement").
NOW, THEREFORE, in consideration of the mutual covenants,
representations and warranties herein contained, the parties hereto, intending
to be legally bound, hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Specified Definitions. As used in this
Agreement, the following capitalized terms have the meanings specified below:
"Accounts Payable" means the accounts payable by Seller
arising out of the operation of the Cable Modem Business as of the Closing Date
(to the extent not paid or retained by Seller as of or at the Closing),
excluding the Intercompany Payments and the Excluded Liabilities.
"Accounts Receivable" means the accounts receivable, as of
the Closing Date, of Seller arising out of the operation of the Cable Modem
Business, including the Adjusted Accounts Receivable.
"Acquired Current Assets" means Adjusted Accounts
Receivable, Assigned Security Deposits and Prepayments.
"Adjusted Accounts Receivable" means the sum of the
following:
(a) 100% of all Seller's accounts receivable from Holdco
related to the Second NSA Agreement plus amounts billed and outstanding from
September 1, 2001 through the Closing Date with respect to circuits and web
hosting plus any outstanding Incremental Costs (as such term is defined in the
Management Agreement) (collectively, the "CCI Receivables"), excluding the
Intercompany Payments; and
(b) amounts due to Seller from users of Seller's services
in the Cable Modem Business as of the Closing Date that are not more than 90
days past the date of the applicable invoice (being not more than 60 days past
the end of the applicable service period), which amounts are calculated as set
forth on Schedule 1.01(a) (the "Non-CCI Receivables").
"Affiliate" of a Person means a Person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such Person.
"Assigned Security Deposits" means the Security Deposits
set forth on Schedule 1.01(b).
"Assigned Voice & Data Circuits" means voice circuits, data
circuits and related contracts and agreements pertaining primarily to the CMB
Sites set forth on Schedule 1.01(c).
"Assumed Capital Leases" means the Capital Leases set forth
on Schedule 1.01(d).
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"Assumed Capital Lease Liabilities" means all Liabilities
of Seller under the Assumed Capital Leases, valued at their GAAP carrying value
on the Closing Date.
"Assumed Contracts" means all of the Contracts set forth on
Schedule 5.11(a)(i), together with (i) subscription agreements with individual
residential subscribers or commercial establishments for the services provided
by Seller with respect to the Cable Modem Business in the ordinary course of
business; (ii) miscellaneous service Contracts or buyer's requirements Contracts
with Seller's vendors terminable at will or upon notice of thirty (30) days or
less without penalty; and (iii) any Contract not involving a monetary obligation
in excess of $25,000 payable within 12 months.
"Assumed Current Liabilities" means the Accounts Payable,
Hired Employee Costs and Other Current Liabilities.
"Assumed Operating Leases" means the Operating Leases set
forth on Schedule 1.01(e).
"Assumed Operating Lease Liabilities" means all Liabilities
of Seller under the Assumed Operating Leases.
"Assumed Real Estate Leases" means the Real Estate Leases
set forth on Schedule 1.01(f).
"Assumed Real Estate Lease Liabilities" means all
Liabilities of Seller under the Assumed Real Estate Leases.
"Benefit Plans" means all "employee benefit plans" as
defined in Section 3(3) of ERISA and all bonus or other incentive compensation,
deferred compensation, supplemental retirement, employee loan, salary
continuation, severance, retention, vacation, sick leave, stock or other
equity-related award, option or purchase, educational assistance or leave of
absence agreements, arrangements, policies or plans maintained directly or
indirectly by Seller or any Affiliate of Seller relating to CMB Employees,
officers, directors, or other service providers.
"Business Day" means any day other than a Saturday, a
Sunday or a day on which banking institutions in New York, New York are
authorized or obligated by law, regulation or executive order to be closed.
"Capital Leases" means capital leases with any Person under
which Seller is the lessee of, or holds or uses, any machinery, equipment,
vehicles or other tangible personal property owned by any Person.
"CMB Business Records" means any documents, books, records,
files or papers of Seller, whether in hard copy or computer format, primarily
related to the Acquired Assets, Assumed Liabilities or the Cable Modem Business,
including, without limitation, all training materials, sales and promotional
literature, manuals and data, sales and purchase correspondence, personnel and
employment records, customer lists, supplier lists, catalogs, research material,
e-mail addresses, Charter system IP address blocks, passwords, URLs and domain
3
names, but excluding any and all internal e-mail between Seller's directors,
officers and employees residing on Seller's corporate domain whether in relation
to the Cable Modem Business or otherwise.
"CMB Claims" means rights, claims, actions and causes of
action that Seller may have against any third party to the extent relating to
the Cable Modem Business, Acquired Assets or the Assumed Liabilities, including
all rights of Seller under or pursuant to all warranties, representations,
guarantees and service agreements if any, made by suppliers, manufacturers and
contractors in connection with products sold to or services provided to Seller
for the Cable Modem Business, or affecting the property, machinery or equipment
owned or leased by Seller and used in the conduct of the Cable Modem Business.
"CMB Intellectual Property" means any and all Intellectual
Property used or held for use or in development for use by or for Seller
primarily in relation to or necessary for the Cable Modem Business, other than
Seller's website at ▇▇▇.▇▇▇▇▇▇▇.▇▇▇.
"CMB Sites" means Seller's call center and network
operating center in Louisville, Kentucky and Seller's data centers (or Internet
hosting sites) located at the addresses set forth on Schedule 1.01(g) provided
in Washington, D.C. by Exodus Communications, Inc. and in Denver, Colorado by
Virado (FKA FirstWorld, Inc.) and Inflow.
"Code" means the Internal Revenue Code of 1986, as amended.
"Contracts" means contracts, agreements, commitments and
other legally binding arrangements, including, without limitation, customer,
supplier and subscriber contracts, in each case whether oral or written,
relating primarily to the Cable Modem Business to which Seller or any of its
Subsidiaries is a party or bound, but excluding Operating Leases, Capital Leases
and Real Estate Leases.
"Customer Care Matters" means all customer care service
issues and complaints (including, without limitation, open Remedy tickets and
complaints), third party infringement claims regarding cable modem subscribers'
data files and activities (e.g., RIAA and Software Alliance), and law
enforcement subpoenas and court orders seeking, without limitation, subscriber
database information and activity logs.
"Excluded Stockholders" means (1) Holdco, Vulcan and their
respective Affiliates and (2) any executive officer or director of Seller who
will be entitled to receive any change of control, severance or other payment or
benefit in the nature of compensation that is contingent upon consummation of
the Transactions (other than solely in his or her capacity as a stockholder of
Seller).
"Employee Claims" means any allegations of sexual
harassment, workplace harassment, unlawful discrimination; violations of city,
state and federal equal employment laws; violations of wage/hour laws; unfair
employment practices of any type; unfair labor practices; violations of family
and medical leave laws; any harm to an employee, independent contractor, or
consultant arising from the employment relationship or the termination of that
relationship; slander, tortious interference with contract, intentional
infliction of emotional distress, invasion of privacy and generally any common
law tort of any type; breach of contract; failure to pay benefits due under any
arrangement, including any Benefit Plan; violations of the WARN Act; any harm to
4
an individual arising from or through the individual's employment relationship
or the termination of that relationship with Seller; unpaid salary or benefits
or otherwise, made by any employee of Seller or any of its Subsidiaries against
Seller or any of its Subsidiaries.
"Environmental Law" means any applicable Legal Requirement
relating to pollution or the protection of the environment (including, ambient
air, surface water, ground water or land), including, but not limited to any
applicable provisions of the Comprehensive Environmental Response, Compensation
and Liability Act of 1980 (42 ▇.▇.▇.▇▇.▇▇. 9601 et seq.), the Resource
Conservation and Recovery Act of 1976 (42 ▇.▇.▇.▇▇.▇▇. 6901 et seq.), the Toxic
Substances Control Act (42 ▇.▇.▇.▇▇.▇▇. 2601 et seq.), the Federal Insecticide,
Fungicide and Rodenticide Act (7 ▇.▇.▇.▇▇.▇▇. 136 et seq.), the Hazardous
Materials Transportation Act (49 U.S.C. ▇▇.▇▇. 1801 et seq.), or the Clean Water
Act (33 ▇.▇.▇.▇▇. 1251 et seq.).
"ERISA" means the Employee Retirement Income Security Act
of 1974, as amended.
"Fixtures and Equipment" means all furniture, fixtures,
furnishings, machinery, vehicles, equipment and other tangible personal property
(excluding Modem Inventory and Other Inventory) owned or leased by Seller or its
Subsidiaries and used or held for use primarily in relation to or necessary for
the Cable Modem Business and the CMB Sites, including all Seller-owned or leased
equipment in Holdco's systems headends and subscriber homes (but excluding
Fixtures and Equipment the subject of the Capital Leases and Operating Leases
described in Sections 2.02(e) and (f)).
"Full Turnkey Agreement" means the Network Services
Agreement, dated November 25, 1998, by and among Seller, CCI and Marcus Cable,
Inc., as assigned by CCI to Holdco pursuant to the Assignment of the Network
Services Agreement between Seller, Holdco and CCI dated November 8, 1999.
"GAAP" means United States generally accepted accounting
principles, consistently applied.
"Governmental Authority" means any agency, board, bureau,
court, commission, department, instrumentality or administration of any foreign
government, the United States government, any state government or any local or
other governmental body in a state, territory or possession of the United States
or the District of Columbia.
"Hazardous Substances" means any substance, material or
waste that is classified, characterized or otherwise regulated by any applicable
Environmental Law as hazardous, toxic, pollutant, contaminant, or words of
similar meaning and effecting, including but not limited to (a) any petroleum or
petroleum compounds (refined or crude); (b) asbestos or asbestos-containing
material; and (c) polychlorinated biphenyls.
"Hired Employee Costs" means the sum of (a) the accrued and
unpaid base salary and base wages as of the Closing Date, together with accrued
(in accordance with GAAP) and unpaid employer taxes with respect thereto, (b)
the economic value of unused vacation and sick time as of the Closing Date,
together with accrued (in accordance with GAAP) and unpaid employer taxes with
5
respect thereto, and (c) up to $750,000 of accrued bonuses, in each case to be
paid or credited to Hired Employees by Holdco pursuant to Section 8.09 hereof.
"▇▇▇▇▇▇▇▇ ▇▇▇▇▇" means ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇
Financial Advisors, Inc.
"▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Opinion" means the opinion rendered by
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ to the Board of Directors of Seller, dated September 21, 2001, to
the effect that, as of such date, the Cash Amount (as adjusted pursuant to
Section 3.03), together with the assumption by Holdco of the Assumed
Liabilities, constitutes fair consideration and reasonably equivalent value for
the Acquired Assets.
"HSA Common Stock" means the common stock of Seller, par
value $0.01 per share.
"HSR Act" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of 1976, as amended.
"HSR Date" means the date upon which the waiting period
applicable to the transactions contemplated hereby under the HSR Act shall have
terminated or expired.
"Intellectual Property" means any or all of the following
and all intellectual property rights in, arising out of, or associated
therewith: (i) all United States and other patents and utility models and
applications therefor and all reissues, divisions, renewals, extensions,
provisionals, continuations and continuations-in-part thereof, and equivalent or
similar rights anywhere in the world in inventions and discoveries ("Patents"),
(ii) all inventions (whether patentable or not), improvements, trade secrets,
proprietary information, know how, technology, technical data and customer
lists, and all documentation embodying or evidencing any of the foregoing
("Trade Secrets"), (iii) all copyrights, copyright registrations and
applications therefor and all other rights corresponding thereto throughout the
world ("Copyrights"), (iv) all mask works, mask work registrations and
applications therefor, and any equivalent or similar rights in semiconductor
masks, layouts, architectures or topology ("Maskworks"); (v) all industrial
designs and any registrations and applications therefor throughout the world;
(vi) all trade names, logos, common law trademarks and service marks, trademark
and service ▇▇▇▇ registrations and applications therefor and all goodwill
associated therewith throughout the world ("Marks"), (viii) all rights in
interactive or noninteractive computer program instruction code, whether in
human-readable source code form, machine-readable binary form, firmware,
scripts, interpretive text, or otherwise, along with any technical, user, or
other documentation related thereto, and including any related data files or
data objects, and all media on which any of the foregoing is recorded
("Software"), (ix) all rights in worldwide web addresses, Uniform Resource
Locators, and domain names, and (x) any similar, corresponding or equivalent
rights to any of the foregoing anywhere in the world.
"Intercompany Payments" means, collectively, the fixed
amounts payable by Seller and Holdco pursuant to Sections 4.02(a) and 4.03(b)
hereof.
"Launch Fees" means fees payable by Seller to Holdco
pursuant to the Second NSA Agreement with respect to the launch of new cable
modem services.
6
"Legal Requirement" means any statute, ordinance, code,
law, rule, regulation, permit, agency notice or order, approval, consent decree,
order or other written requirement, standard or procedure enacted, adopted or
applied by any Governmental Authority, together with all related amendments,
implementing regulations, and reauthorizations including any judgment, writ,
order, injunction, award or decree of any court, judge, justice or magistrate,
including any bankruptcy court or judge or the arbitrator in any binding
arbitration.
"▇▇▇▇▇▇ Opinion" means the opinion rendered by ▇▇▇▇▇▇ to
the Board of Directors of Seller, dated September 21, 2001, to the effect that,
as of such date, the consideration to be received by Seller pursuant to this
Agreement is fair to Seller from a financial point of view.
"Liabilities" means, as to any Person, all debts, adverse
claims, liabilities and obligations, direct, indirect, absolute or contingent,
known or unknown, of such Person, whether accrued, vested or otherwise, whether
in contract, tort, strict liability or otherwise and whether or not actually
reflected, or required by GAAP to be reflected, in such Person's balance sheet
or other books and records.
"Liens" means mortgages, liens (including Tax liens),
security interests, easements, rights of way, pledges, restrictions or
encumbrances of any nature whatsoever.
"Losses" means any and all demands, claims, complaints,
actions or causes of action, suits, proceedings, investigations, arbitrations,
assessments, losses, damages, liabilities, obligations (including those arising
out of any action, such as any settlement or compromise thereof or judgment or
award therein) and any reasonable costs and expenses, including, without
limitation, attorney's and other advisors' fees and disbursements.
"Material Adverse Effect" means an effect or change that,
when taken together with all other effects or changes, is materially adverse to
(i) the condition or value of the Acquired Assets or to the business, financial
condition or results of operations of the Cable Modem Business or (ii) the
ability of Seller to perform its obligations under this Agreement or the
Management Agreement or to consummate the Transactions, provided that none of
the following shall be deemed in and of itself, either alone or in combination,
to constitute a Material Adverse Effect on Seller: (A) any changes in general
economic conditions; (B) any changes generally affecting the industries in which
Seller and its Subsidiaries operate that do not disproportionately affect
Seller; or (C) any changes negatively affecting the Cable Modem Business to the
extent arising from or relating to actions taken by CCI pursuant to the terms of
the Management Agreement.
"Material Contract" means any Contract other than: (i)
subscription agreements with individual residential subscribers or commercial
establishments for the services provided by Seller with respect to the Cable
Modem Business in the ordinary course of business; (ii) miscellaneous service
Contracts or buyer's requirements Contracts with Seller's vendors terminable at
will or upon notice of thirty (30) days or less without penalty; (iii) any
Contract not involving a monetary obligation in excess of $25,000 payable within
a 12 month period; and (iv) employment contracts for Persons who are not Hired
Employees.
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"Modem Inventory" means modems and related supplies and
parts owned by Seller at the CMB Sites or in transit from or to the CMB sites.
"Operating Leases" means operating leases with any Person
under which Seller is the lessee of, or holds or uses, any machinery, equipment,
vehicles or other tangible personal property owned by any Person (and does not
include Capital Leases).
"Other Current Assets" means any current assets of Seller
used in or primarily relating to or necessary for the Cable Modem Business as of
the Closing Date, included in the Acquired Assets and transferred to Holdco at
the Closing, determined in accordance with GAAP, other than Adjusted Accounts
Receivable, Assigned Security Deposits and Prepayments. Other Current Assets
shall not include Other Inventory, the Intercompany Payments or Excluded Assets.
"Other Current Liabilities" means accrued expenses and
other current Liabilities (determined in accordance with GAAP) of Seller as of
the Closing Date in relation to the Cable Modem Business that are included in
the Assumed Liabilities and assumed by Holdco at the Closing. Other Current
Liabilities shall include, without limitation, (a) all accrued and unpaid real
property and personal property taxes (taking into account Section 8.15(b)), (b)
accrued (in accordance in with GAAP) and unpaid expenses relating to the
Acquired Assets for periods prior to the Closing Date and (c) any amounts due
with respect to franchise fees. Notwithstanding the foregoing, Other Current
Liabilities shall not include Assumed Capital Lease Liabilities, Assumed Real
Estate Lease Liabilities, Assumed Operating Lease Liabilities, CSR Charges (as
defined in Section 8.22 below), Accounts Payable, Hired Employee Costs, real
property and personal property taxes and accrued and unpaid expenses relating to
the Acquired Assets attributable to post-Closing periods (taking into account
Section 8.15(b)), Transfer Taxes and any liability of Seller in respect of Taxes
in accordance with Section 2.04(e) hereof.
"Other Inventory" means all inventory owned by Seller other
than the Modem Inventory.
"Permits" means any permits, licenses, franchises and other
authorizations by or of any Governmental Authority that are owned or held by or
otherwise have been granted to or for the benefit of Seller and that relate to
the operation of the Cable Modem Business or the CMB Sites.
"Permitted Liens" means the following Liens: (a) Liens for
Taxes, assessments and governmental charges not yet due and payable or Taxes
being contested in good faith by appropriate proceedings, all of which as of the
date hereof are disclosed on Schedule 1.01(i); (b) zoning laws and ordinances
and similar Legal Requirements; (c) any right reserved to any Governmental
Authority to regulate the affected property; (d) in the case of any leased
Acquired Asset, (i) the rights of any lessor and (ii) any Lien granted by any
lessor of such leased Acquired Asset; (e) inchoate materialmens', mechanics',
workmen's, repairmen's or other like inchoate Liens arising in the ordinary
course of business which constitute Assumed Liabilities; (f) in the case of Real
Property Leases, any easements, rights-of-way, servitudes, permits, restrictions
and minor imperfections or irregularities in title which do not individually or
in the aggregate materially interfere with the right to convey such leasehold or
other interest; or (g) any Lien that does not individually or in the aggregate
8
together with other Permitted Liens interfere with the continued use of the
Acquired Assets subject thereto or the operation of the Cable Modem Business as
currently being conducted; provided, that the dollar amount of the financial
obligations to which any Permitted Lien or Liens relate shall not exceed $50,000
in the aggregate (provided, further that such $50,000 limit shall not apply to
the Liens described in subparagraph (a) above).
"Person" means any individual, corporation, partnership,
limited liability company, joint venture, trust, unincorporated organization,
other form of business or legal entity or Governmental Authority.
"Prepayments" means all prepaid expenses of Seller as of
the Closing Date described on Schedule 1.01(h).
"Real Estate Leases" means leases or subleases of real
property under which Seller is a lessee or sub-lessee.
"Second NSA Agreement" means the Network Services
Agreement, dated May 12, 2000, by and between Seller and CCI, as assigned by CCI
to Holdco pursuant to the Assignment and Assumption Agreement between CCI and
Holdco dated August 1, 2000.
"Security Deposits" means security, restricted cash,
vendor, utility or other deposits.
"Series D Preferred Stock" means Series D Senior
Convertible Preferred Stock of Seller, par value $0.01 per share.
"Subsidiaries" means any entity directly or indirectly
controlled by Seller, including HSA Telecom Operating Co., Inc., HSA
International, Inc. and Digital Chainsaw, Inc.
"Tax" or "Taxes" means all taxes of any kind, charges,
fees, customs, duties, imposts, levies, required deposits or other assessments,
including, without limitation, all net income, gross receipts, ad valorem, value
added, alternative or add-on minimum (including taxes under Section 59A of the
Code), transfer, gains, franchise, profits, inventory, net worth, capital stock,
asset, sales, use, license, estimated, withholding, payroll, transaction,
capital, employment, social security, workers compensation, unemployment,
excise, severance, stamp, occupation, and personal and real property taxes,
together with any interest and any penalties, additions to tax or additional
amounts, imposed by any Federal, state, local or foreign taxing authority,
whether disputed or not, and shall include any liability pursuant to Treasury
Regulation ss.1.1502-6 or any tax sharing or contribution agreement and any
transferee or successor liability in respect of Taxes.
"Technology and Know-How" means all Trade Secrets,
engineering information, specifications, designs, drawings, processes and
quality control data, computer hardware, management information systems,
Software, Marks, and any other intangible property and applications for the same
used or held for use or in development for use by or for Seller primarily in
relation to or necessary for the operation of the Cable Modem Business,
including any technology evaluation reports and white papers, other than
9
technology, know-how and other intangible property and applications that are
non-confidential and generally known and used in the high speed Internet access
industry.
"Transactions" means the sale and purchase of the Acquired
Assets, the assumption of the Assumed Liabilities, and the other transactions
contemplated by this Agreement and the other Transaction Documents.
"Transaction Documents" means this Agreement, the Voting
Agreement, the Management Agreement, the License Agreement, the Billing Letter
Agreement and all other documents and instruments to be executed and delivered
in connection with the transactions contemplated by this Agreement.
"Transfer Tax" or "Transfer Taxes" means any Federal,
state, county, local, foreign and other sales, use, transfer, conveyance,
documentary transfer, recording or other similar tax, fee or charge imposed upon
the sale, transfer or assignment of property or any interest therein or the
recording thereof, and any penalty, addition to tax or interest with respect
thereto, but such term shall not include any tax on, based upon or measured by,
the net income, gains or profits from such sale, transfer or assignment of the
property or any interest therein.
"WARN Act" means the Worker Adjustment and Retraining
Notification Act of 1988, as amended, and any successor Legal Requirement, and
the rules and regulations thereunder and under any successor law.
Terms defined in the singular shall have a comparable
meaning when used in the plural, and vice versa.
Section 1.02. Other Terms. Other capitalized terms may be
defined elsewhere in this Agreement and, unless otherwise indicated, shall have
such meaning throughout this Agreement.
Section 1.03. Interpretation.
(a) When a reference is made in this Agreement to a
Section, Schedule or Exhibit, such reference shall be to a Section of, or a
Schedule or Exhibit to, this Agreement unless otherwise indicated.
(b) The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
(c) Whenever the words "include", "includes" or "including"
are used in this Agreement they shall be deemed to be followed by the words
"without limitation".
(d) Words denoting any gender shall include all genders.
Where a word or phrase is defined herein, each of its other grammatical forms
shall have a corresponding meaning.
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(e) A reference to any party to this Agreement or any other
agreement or document shall include such party's successors and permitted
assigns.
(f) A reference to any legislation or to any provision of
any legislation shall include any modification or re-enactment thereof, any
legislative provision substituted therefor and all regulations and statutory
instruments issued thereunder or pursuant thereto.
(g) All references to "$" and dollars shall be deemed to
refer to United States currency unless otherwise specifically provided.
(h) Unless otherwise specifically provided herein, all
references to any financial or accounting terms shall be defined in accordance
with GAAP.
(i) The term "day", unless specified as a "Business Day",
means a calendar day.
(j) The phrases "the date of this Agreement", "the date
hereof", and terms of similar import, unless the context otherwise requires,
shall be the date referenced in the Recitals hereto.
ARTICLE II
TRANSFER OF ASSETS AND LIABILITIES
Section 2.01. Purchase and Sale of Assets. On the terms and
subject to the conditions of this Agreement, at the Closing, Seller will sell,
assign, transfer, convey and deliver to Holdco, and Holdco will purchase,
acquire and accept from Seller, all right, title and interest of Seller or any
of its Subsidiaries in and to the Acquired Assets free and clear of all Liens
other than Permitted Liens. The term "Acquired Assets" means all of the
business, properties, assets, contracts, permits, licenses, authorizations,
interests, claims, goodwill and rights of Seller, whether real or personal,
tangible or intangible, and wherever located, that are owned, leased, used or
held for use by Seller or any of its Subsidiaries primarily in, or primarily
relating to or necessary to the performance of, the Cable Modem Business, other
than the Excluded Assets. The Acquired Assets include, without limitation, the
following:
(a) the Assumed Real Estate Leases;
(b) the Assumed Capital Leases;
(c) the Assumed Operating Leases;
(d) the Assigned Security Deposits;
(e) subject to Section 2.02(h), all Fixtures and Equipment,
including, but not limited to, those set forth on Schedule 2.01(e);
(f) the Assigned Voice & Data Circuits;
(g) all Accounts Receivable;
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(h) the Assumed Contracts;
(i) the CMB Intellectual Property, including, but not
limited to, the CMB Intellectual Property set forth on Schedule 2.01(i);
(j) the Technology and Know-How, including, but not limited
to, the Technology and Know-How set forth on Schedule 2.01(j);
(k) all Permits, including, but not limited to, those set
forth on Schedule 2.01(k);
(l) all CMB Claims;
(m) all Prepayments;
(n) the Other Current Assets;
(o) all Modem Inventory;
(p) the CMB Business Records; and
(q) all goodwill related to the foregoing assets.
Seller and Holdco acknowledge that the Accounts Receivable,
Prepayments, CMB Claims, Other Current Assets, Modem Inventory and CMB Business
Records included in the Acquired Assets may change in the ordinary course of
business consistent with Section 7.01.
Section 2.02. Excluded Assets. The term "Excluded Assets"
means all assets of Seller other than the Acquired Assets, including the
following:
(a) the capital stock in each of the Subsidiaries;
(b) all contracts, agreements, commitments and other
legally binding arrangements, whether oral or written, other than the Assumed
Contracts;
(c) all Security Deposits other than the Assigned Security
Deposits;
(d) all Real Estate Leases other than the Assumed Real
Estate Leases;
(e) all Capital Leases other than the Assumed Capital
Leases;
(f) all Operating Leases other than the Assumed Operating
Leases;
(g) all voice circuits, data circuits and related contracts
and agreements other than the Assigned Voice & Data Circuits, including those
set forth on Schedule 2.02(g)
(h) the Fixtures and Equipment set forth on Schedule
2.02(h);
(i) all Other Inventory;
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(j) all assets (including, without limitation, facilities,
equipment, intellectual property, technology, permits and licenses) that are
both (i) used primarily in businesses other than the Cable Modem Business and
(ii) not necessary for the performance of the Cable Modem Business;
(k) all cash on hand or in banks and all cash equivalents
or similar type investments, uncollected checks, bank accounts, certificates of
deposit, Treasury bills and other marketable securities;
(l) all insurance policies of Seller and rights thereunder,
including, without limitation, all insurance proceeds received prior to the
Closing, or rights to insurance proceeds receivable after the Closing (except as
otherwise provided in Section 2.05 hereof);
(m) all rights, claims and causes of action relating to any
of the Excluded Liabilities or the Excluded Assets;
(n) all rights and claims for refunds of, or credits
against, Taxes (including all investment tax credits, research credits and
credits for prepayments of Taxes), except as otherwise provided in Section
8.15(b); and
(o) the miscellaneous assets set forth on Schedule 2.02(o).
Section 2.03. Assumption of Liabilities. On the terms and
subject to the conditions of this Agreement, Holdco hereby agrees to assume,
effective as of the Closing, and agrees to pay, perform and discharge when due,
the following (collectively the "Assumed Liabilities"):
(a) Except as set forth in Section 2.03(b) below, all
Liabilities of Seller accruing and relating to periods on or after the Closing
Date in respect of the Acquired Assets as assigned and transferred to Holdco at
the Closing (taking into account Section 8.15); and
(b) the following Liabilities of Seller without regard to
the periods to which such Liabilities relate:
(i) the Assumed Current Liabilities;
(ii) the Assumed Capital Lease Liabilities;
(iii) the Assumed Operating Lease Liabilities; and
(iv) the Assumed Real Estate Lease Liabilities.
Section 2.04. Excluded Liabilities. All Liabilities of
Seller or any of its Subsidiaries, whether or not arising out of the Acquired
Assets or the Cable Modem Business, other than the Assumed Liabilities, will
remain and be the obligations and liabilities solely of Seller and will be
"Excluded Liabilities", including, without limitation, the following:
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(a) any Liabilities of Seller or any of its Subsidiaries to
the extent not arising out of, relating to or otherwise in respect of the
Acquired Assets or the Cable Modem Business (or the operations thereof);
(b) any Liability of Seller or any of its Subsidiaries (i)
for or arising out of any indebtedness of Seller or any of its Subsidiaries for
borrowed money, (ii) for any credit, loan or other agreements arising out of or
relating to the Acquired Assets and pursuant to which Seller or any of its
Subsidiaries has created, incurred, assumed or guaranteed indebtedness for
borrowed money or under which any Lien securing such indebtedness has been or
may be imposed on any Acquired Asset or (iii) with respect to any financial
obligation underlying any Permitted Lien existing as of the Closing Date;
(c) all Liabilities arising out of the leasing or operation
of (i) the CMB Sites before the Closing Date and (ii) any property or facility
other than the CMB Sites at any time, including without limitation any
Liabilities relating to personal injury, property damage, the environment,
on-site or off-site waste disposal or any contractual indemnification provided
in connection with such property or facility;
(d) any Liability of Seller or any of its Subsidiaries
under contracts, agreements, commitments and other legally binding arrangements,
whether written or oral to which Seller or any of its Subsidiaries is a party or
is bound, other than (1) Liability under the Assumed Contracts to the extent
such Contracts are validly assigned to Holdco and do not relate to acts or
omissions of Seller occurring prior to the Closing Date or which are to be paid,
performed or satisfied prior to the Closing Date and (2) Assumed Current
Liabilities to the extent that such Liabilities relate to Assumed Contracts that
are validly assigned to Holdco;
(e) any Liability of Seller or any of its Subsidiaries in
respect of Taxes (including real or personal property Taxes) for all periods
ending on or prior to the Closing Date (except as otherwise provided in Section
8.15 hereof);
(f) any Liability with respect to (i) any employment
agreement or understanding with any employee of Seller, whether written or oral
(except with respect to the Hired Employee Costs), (ii) any agreement, plan or
policy relating to Seller's employees or employment matters, including, without
limitation, any stock option or other incentive plan, Benefit Plan, consulting,
severance, change of control or similar agreement and (iii) any Employee Claims
to the extent relating to events occurring prior to the Closing Date; and
(g) any claim, action, suit, proceeding, arbitration,
investigation or hearing, any tolling, settlement or license agreement with
respect to any of the foregoing, or any other activity or procedure, or any
notice of any of the foregoing which could result in any judgment, writ, order,
injunction, award or decree of any court, judge, justice or magistrate,
including any bankruptcy court or judge or the arbitrator in any binding
arbitration, and any order of or by any Governmental Authority arising out of or
relating to the Acquired Assets and commenced, or related to an event occurring,
on or prior to the Closing Date.
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Section 2.05. Risk of Loss; Condemnation.
(a) Seller shall bear the risk of loss of, and all
obligations, if any, to insure, the Acquired Assets prior to the Closing, and
such risk of loss and obligation to insure with respect to the Acquired Assets
shall transfer, with the Acquired Assets, from Seller to Holdco at the Closing.
If any such loss or damage is so substantial as to prevent the operation of any
material portion of the Acquired Assets or Cable Modem Business or the
replacement or restoration of the lost or damaged property within 45 days after
the occurrence of the event resulting in such loss or damage, Seller will
promptly notify Holdco of that fact and Holdco, at any time within 10 days after
receipt of such notice, may elect by written notice to Seller to either (i)
waive such defect or (ii) terminate this Agreement pursuant to Article X hereof.
If Holdco elects to so terminate this Agreement, Holdco and Seller will be
discharged of any and all obligations hereunder, subject to Article X hereof.
If, on the other hand, Holdco elects to waive such defect notwithstanding such
loss or damage, there will be no adjustment to the Purchase Price on account of
such loss or damage, but upon the consummation of the transactions contemplated
by this Agreement, all insurance proceeds payable as a result of the occurrence
of the event resulting in such loss or damage (other than insurance proceeds in
respect of "business interruption" damages based upon lost profits or business
opportunities) will be delivered by Seller to Holdco, or the rights to such
proceeds will be assigned by Seller to Holdco if not yet paid over to Seller.
(b) If, prior to the Closing, all or any part of, or
interest in, the Acquired Assets is taken or condemned as a result of the
exercise of the power of eminent domain, or if a Governmental Authority having
such power informs Seller or Holdco that it intends to condemn all or any part
of the Acquired Assets (such event being called, in either case, a "Taking"),
then (i) Holdco will have the sole right, in the name of Seller, if Holdco so
elects, to negotiate for, claim and contest (and shall have the right to receive
all damages at the Closing with respect to) the Taking, (ii) Seller will be
relieved of its obligation to convey to Holdco the Acquired Assets or interests
that are the subject of the Taking, (iii) at the Closing, Seller will assign to
Holdco all of Seller's rights to all damages payable with respect to such Taking
and will pay to Holdco all damages previously paid to Seller with respect to the
Taking, and (iv) following the Closing, Seller will give Holdco such further
assurances of Seller's rights and the assignment of Seller's rights, in each
case with respect to the Taking as contemplated in clauses (i) through (iii)
above, as Holdco may from time to time reasonably request. The foregoing will
not affect or limit the scope of any representation or warranty of Seller in
this Agreement.
Section 2.06. Assignment of Contracts, Etc. Notwithstanding
anything contained herein to the contrary, no Contracts, Real Estate Leases,
Capital Leases, Operating Leases, Intellectual Property, Technology and Know-How
or Permits shall be assigned contrary to any Legal Requirement or the terms
thereof. If there are Contracts, Real Estate Leases, Capital Leases or Operating
Leases which form part of the Acquired Assets that cannot be assigned or novated
to Holdco on the Closing Date, the performance obligations of Seller thereunder
shall, if so elected by Holdco, in its sole discretion (unless not permitted by
such Contracts, Real Estate Leases, Capital Leases or Operating Leases) be
deemed to be subleased or subcontracted to Holdco until such Contracts, Real
Estate Leases, Capital Leases or Operating Leases have been assigned or novated
(it being understood that the failure to obtain such consents shall not reduce
the Purchase Price). Holdco shall take all necessary actions to perform and
15
complete all Contracts, Real Estate Leases, Capital Leases or Operating Leases
which form part of the Acquired Assets in accordance with their terms if neither
assignment, novation, subleasing nor subcontracting is permitted by the other
party. Seller shall pay over to Holdco any amounts received by Seller or its
Subsidiaries after the Closing (in so far as they relate to post-Closing periods
or performance) as a result of performance by Holdco of such Contracts, Real
Estate Leases, Capital Leases or Operating Leases, which payment shall be made
promptly, but in no event more than ten (10) days following receipt thereof by
Seller or any of its Subsidiaries (without set off or demand of any kind).
Nothing contained in this Section 2.06 shall prevent Holdco from exercising its
right to terminate this Agreement pursuant to Section 10.1(d) as a result of
conditions contained in Section 9.02 not being satisfied. Notwithstanding
anything to the contrary herein, Holdco shall be entitled to indemnification for
Damages (subject to the terms of Article XI hereof) with respect to any failure
by Seller to assign or novate any Assumed Contract, Assumed Real Estate Lease,
Assumed Capital Lease or Assumed Operating Lease.
ARTICLE III
PURCHASE PRICE
Section 3.01. Purchase Price. Subject to Sections 3.02 and
3.03, the purchase price for the Acquired Assets (the "Purchase Price") shall be
(i) $81,100,000 in cash (the "Cash Amount"), (ii) 75,000 shares of Series D
Preferred Stock, together with the cancellation of any rights to dividends with
respect to such shares, and (iii) the cancellation of the Charter Warrants.
Section 3.02. Holdbacks. At the Closing, Holdco shall set
aside and hold back the following from the Purchase Price, as adjusted pursuant
to Section 3.03:
(a) cash in the amount of Seven Hundred Fifty Thousand
Dollars ($750,000) for use in effectuating the settlement of the adjustments
under Section 3.03 (the "Adjustment Holdback"); and
(b) cash in the amount of Four Million Dollars ($4,000,000)
for use in effectuating the settlement of indemnity claims under Article XI (the
"Indemnification Holdback").
The Adjustment Holdback shall not bear interest or be subject to any charge or
expense by Holdco.
Section 3.03. Purchase Price Adjustments. At the Closing,
the Purchase Price shall be adjusted in the manner set forth on Schedule 3.03.
The Purchase Price shall be adjusted, and Schedule 3.03 shall provide, as
follows:
(a) the Cash Amount shall be reduced by the amount of each
of (i) Assumed Capital Lease Liabilities, (ii) Assumed Current Liabilities, and
(iii) the CSR Charges; and
(b) the Cash Amount shall be increased by the amount of the
Acquired Current Assets.
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For the avoidance of doubt, the dollar amount of each Adjustment Item (as
defined in Section 3.04(a) below) that will be set forth on Schedule 3.03 shall
be determined in accordance with Section 3.04(a), subject to further adjustment
in accordance with Sections 3.04(b) and (c).
Section 3.04. Determination of Adjustments.
(a) Closing Statement.
(i) Five (5) Business Days prior to the date of the Seller
Stockholder Meeting (as defined in Section 8.01 below), Holdco and Seller shall
jointly prepare a statement (the "Closing Statement") in the form attached as
Schedule 3.03. The Closing Statement shall set forth (A) Seller's good faith
estimate of the Assumed Capital Lease Liabilities, Acquired Current Assets and
Assumed Current Liabilities, including all line items of each, in each case as
of the Closing Date, and (B) Holdco's good faith estimate of the CSR Charges as
of the Closing Date. Holdco and Seller shall deliver to each other a copy of all
supporting evidence and work papers, books and records associated with such
preparation of their respective entries on the Closing Statement as each party
may reasonably request. Holdco and Seller will have five (5) Business Days
following the completion of the Closing Statement to review the other party's
entries on the Closing Statement and supporting information and to notify the
other party of any disagreements with the other party's estimates therein. If
Holdco or Seller provides a written notice of disagreement (the "Disagreement
Notice") with all or any of the other party's entries on the Closing Statement
within such five (5) Business Day period, Holdco and Seller will negotiate in
good faith to resolve any such dispute prior to the Closing. If no Disagreement
Notice is delivered or if a Disagreement Notice is delivered and the parties
resolve any such dispute before the Closing, then they shall each sign a
certificate to that effect and the Purchase Price shall be adjusted at the
Closing by the agreed upon amount. If a dispute can not be resolved on or before
the Closing, then the Purchase Price shall be adjusted at the Closing as
follows:
(1) with respect to each line item of the Assumed Capital
Lease Liabilities, Acquired Current Assets, Assumed Current Liabilities and CSR
Charges (each such line item referred to herein as an "Adjustment Item") about
which there is no good faith dispute at the Closing, by the full amount of each
such Adjustment Item as set forth on the Closing Statement; and
(2) with respect to Adjustment Items about which there is a
good faith dispute in amount, by the undisputed amount of such item set forth on
the Disagreement Notice plus one-half of the difference between each party's
estimate of the amount of the Adjustment Item at issue.
Regardless of the amount of the Purchase Price adjustments made pursuant to this
Section 3.04(a)(i), Holdco shall hold back the entire amount of the Adjustment
Holdback.
(ii) Within thirty (30) days after the Closing Date, if
either party determines that all or any of its entries on the Closing Statement
are inaccurate, it will deliver a corrected Closing Statement to the other
party, indicating the corrections made (the "Corrections") and a copy of all
supporting evidence and work papers, books and records associated with the
Corrections. The aggregate dollar amount of the Corrections will, if undisputed
17
by the other party, be deemed to be final and binding; provided, however, that
all or any of the Corrections may be disputed pursuant to Section 3.04(a)(iii).
(iii) Within sixty (60) days after the Closing Date, Holdco
and Seller shall deliver to each other a written notice setting forth their
respective objections to the other party's entries on the Closing Statement,
including any objections to the Corrections and any adjustment made at the
Closing pursuant to Section 3.04(a)(i), together with a summary of the reasons
therefor and its determination of each Adjustment Item to which it objects
(collectively, the "Second Disagreement Notice"). In connection with its review
and verification of a Second Disagreement Notice, each party shall be permitted
to review all supporting evidence and work papers, books and records associated
with such preparation as such party may reasonably request.
(iv) If a party:
(1) does not timely deliver a Disagreement Notice or a
Second Disagreement Notice, then the other party's entries on the Closing
Statement shall be deemed final and binding as of such sixtieth (60th) day after
the Closing Date;
(2) timely delivers a Disagreement Notice and such dispute
is resolved with respect to all Adjustment Items in dispute on such Disagreement
Notice prior to the Closing pursuant to Section 3.04(a)(i) and the party that
delivered the Disagreement Notice does not timely deliver a Second Disagreement
Notice then the other party's entries on the Closing Statement and so agreed
shall be deemed final and binding as of such sixtieth (60th) day after the
Closing Date; or
(3) timely delivers a Disagreement Notice and such dispute
is not resolved with respect to all Adjustment Items in dispute on such
Disagreement Notice prior to the Closing (such that an adjustment of one or more
Adjustment Items is made at the Closing pursuant to Section 3.04(a)(i)) then if
neither party timely delivers a Second Disagreement Notice with respect to such
disputed items, such Closing adjustments shall be deemed final and binding as of
such sixtieth (60th) day after the Closing Date.
(v) Holdco and Seller shall have thirty (30) days after
delivery of a Second Disagreement Notice to object to the Second Disagreement
Notice. If the party receiving the Second Disagreement Notice does not so object
in writing within such period, then the Second Disagreement Notice shall be
deemed final and binding on the thirtieth (30th) day after delivery thereof. If
the party receiving the Second Disagreement Notice does object to such notice in
writing within such period, such written notice shall include a reasonably
specific description of the basis of its objections. Holdco and Seller shall
negotiate in good faith to resolve any dispute during the five (5) Business Day
period following delivery of the written objection. If Holdco and Seller resolve
all such differences and each signs a certificate to that effect, the Second
Disagreement Notice, as adjusted, shall be deemed final and binding for purposes
of this Agreement. If Holdco and Seller are unable to resolve all of such
differences, the Adjustment Items as to which the parties have agreed shall be
final and binding for purposes of this Agreement (and the parties shall issue an
appropriate certificate), the remaining items shall be determined as provided in
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Section 3.04(b) below and final settlement of the Adjustment Items shall be made
in accordance with Section 3.04(c) below.
(b) Adjustment Dispute Resolution. To resolve any disputes
in connection with the calculation of Adjustment Items that are not resolved
pursuant to the procedures set forth in Section 3.04(a) above, the parties shall
submit the dispute to Ernst & Young LLP, certified public accountants, or such
other nationally recognized firm of independent public accountants that does not
serve as an auditor of, or consultant to, Holdco, Seller or any of their
respective Affiliates (an "Independent Accounting Firm") as may be jointly
selected by Seller and Holdco, who shall, acting as experts and not as
arbitrators, determine on the basis of the standards set forth herein and only
with respect to the remaining differences so submitted, whether and to what
extent, if any, an Adjustment Item at issue requires adjustment. The Independent
Accounting Firm will base its determination only on evidence brought to it by
the parties and shall not conduct an audit. The Independent Accounting Firm
shall deliver its written determination to Holdco and Seller no later than the
thirtieth (30th) day after the submission to it of the Disagreement Notice
and/or Second Disagreement Notice and a statement of the objections of Holdco or
Seller, as the case may be, thereto, and, in any case, as soon as practicable
after such submission. The Independent Accounting Firm's determination shall be
conclusive and binding upon the parties. With respect to each disputed
Adjustment Item, the fees and disbursements of the Independent Accounting Firm
associated with determining that Adjustment Item shall be allocated between
Holdco and Seller in inverse proportion to the allocation of the disputed amount
of such Adjustment Item made by the Independent Accounting Firm between Holdco
and Seller. For example, if Seller contended that the amount of the Prepayments
Adjustment Item was $300,000 and Holdco delivered a Second Disagreement Notice
objecting to such amount contending that is was only $200,000, then the amount
in dispute with respect to such Adjustment Item would be $100,000. Accordingly,
if the Independent Accounting Firm determined that the correct amount was
$260,000, Holdco would pay 60% and Seller would pay 40% of the fees and
disbursements associated with the Independent Accounting Firm's determination of
the Prepayment amount. For purposes of the foregoing calculation, the parties
shall instruct the Independent Accounting Firm to provide a breakdown of its
overall fees and disbursements between each Adjustment Item which is submitted
to the Independent Accounting Firm for resolution. Holdco and Seller shall make
available to the Independent Accounting Firm all relevant books and records and
any work papers relating to the Second Disagreement Notice and all other items
reasonably requested by the Independent Accounting Firm.
(c) Final Settlement of Adjustments; Release of Adjustment
Holdback. Final settlement of the Purchase Price adjustments described in this
Section 3.04 shall be made after all, and not less than all, Adjustment Items
have been deemed final pursuant to Sections 3.04(a) and (b) above (the
"Settlement Date"). If, after giving effect to the Purchase Price adjustments to
which the parties have agreed or were deemed final and binding pursuant to
Section 3.04(a) or as determined by the Independent Accounting Firm as
contemplated in Section 3.04(b), as the case may be, the Purchase Price is
increased from the amount paid at the Closing, then Holdco shall pay such amount
together with the Adjustment Holdback to Seller no later than five (5) Business
Days after the Settlement Date. Any amount payable by Holdco pursuant to the
preceding sentence shall not bear interest. If, after giving effect to the
Purchase Price adjustments to which the parties have agreed or were deemed final
and binding pursuant to Section 3.04(a) or as determined by the Independent
19
Accounting Firm acting as contemplated in Section 3.04(b), as the case may be,
the Purchase Price is reduced from the amount paid at the Closing, then Holdco
may hold back and set-off such amount from the Adjustment Holdback and shall
return the excess amount of the Adjustment Holdback, if any, to Seller not later
than five (5) Business Days after the Settlement Date, and, if the reduction is
greater than the Adjustment Holdback, Seller shall pay such excess amount to
Holdco no later than five (5) Business Days after the Settlement Date. Any
amount payable by Holdco to Seller or by Seller to Holdco pursuant to the
preceding sentence shall not bear interest.
Section 3.05. Allocation of Purchase Price. As soon as
practicable after the Closing, but in no event later than 120 days after the
Closing Date, Holdco will deliver to Seller a written estimate of the allocation
of the Purchase Price as adjusted pursuant to Section 3.04, plus any liabilities
assumed for Federal income tax purposes, among the Acquired Assets, as such
Acquired Assets existed immediately prior to the Closing Date consistent with
the principles of Code Section 1060. Seller shall notify Holdco in writing
within thirty (30) days after receiving Holdco's estimate of the allocation if
Seller disagrees with Holdco's allocation. If Seller does not deliver written
notice of objection to Holdco within such thirty (30) day period, then Holdco's
estimate shall be deemed to have been accepted by Seller, shall become final and
binding upon the parties (the "Final Allocation"). During the thirty (30) days
immediately following the delivery of notice of objection, Seller and Holdco
shall use reasonable good faith efforts to agree on the Final Allocation among
the Acquired Assets pursuant to the principles of Code Section 1060. If the
Purchase Price is adjusted pursuant to Section 3.04 or Section 11.04 hereof,
such adjustment shall be reflected in the Final Allocation hereunder in a manner
consistent with Code Section 1060. If at the end of such thirty (30) day period
the parties fail to reach agreement on the Final Allocation among the Acquired
Assets, then the parties shall engage an appraisal firm to determine such Final
Allocation (which determination shall be binding on the parties hereto). During
the review by the appraisal firm, Holdco and Seller will each make available to
the appraisal firm such individuals and such information, books and records as
may be reasonably required by the appraisal firm to determine the Final
Allocation. The fees and disbursements of any appraisal firm shall be shared
equally between Holdco and Seller. Holdco and Seller shall prepare and timely
file IRS Forms 8594 and any other similar forms required to be filed by any
other taxing Governmental Authority employing the Final Allocation to report the
Transactions to the Internal Revenue Service and to all other taxing
Governmental Authorities. Neither Seller nor Holdco shall take a position in any
return, Tax proceeding, Tax audit or otherwise inconsistent with the Final
Allocation, unless a contrary treatment is required by law.
ARTICLE IV
THE CLOSING
Section 4.01. Closing Date. The closing of the purchase,
assignment and sale of the Acquired Assets and the assumption of the Assumed
Liabilities (the "Closing") will take place at the offices of Paul, Hastings,
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, at 10:00 a.m. on a
date mutually agreed to by Holdco and Seller (the "Closing Date"), which date
shall be as soon as practicable (but in no event later than 5 Business Days)
after the satisfaction or waiver of the conditions set forth in Article IX
(other than those that by their nature cannot be satisfied until the time of
Closing).
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Section 4.02. Deliveries by Seller at the Closing. At the
Closing, Seller shall deliver to Holdco:
(a) by wire transfer of immediately available funds to an
account designated in writing by Holdco at least 2 Business Days prior to the
Closing, the fixed amount calculated as set forth on Schedule 4.02(a) (less any
portion thereof paid by Seller between the date hereof and the Closing Date),
which amount is due and payable by Seller to Holdco;
(b) duly executed deeds, bills of sale, assignments and
other documents and instruments of transfer providing for the sale, assignment,
transfer, conveyance and delivery of the Acquired Assets in form and substance
reasonably satisfactory to Holdco (it being understood that any such deed, ▇▇▇▇
of sale, assignment or other document or instrument shall not provide for any
representations or warranties not otherwise expressly provided for in this
Agreement);
(c) the officer's certificates required to be delivered
pursuant to Sections 9.02(a), (b) and (c);
(d) evidence of each of the consents described in Section
9.02(d) in form and substance reasonably satisfactory to Holdco;
(e) the opinion of Weil, Gotshal & ▇▇▇▇▇▇ LLP, counsel to
Seller, , as described in Section 9.02(f);
(f) any other documents or instruments that are requested
by Holdco during the period from the date of this Agreement to the Closing Date
that are necessary or reasonably appropriate to evidence the transfer of the CMB
Intellectual Property, Technology and Know-How or CMB Business Records;
(g) evidence of payment in full of all financial
obligations under the Master Agreement to Lease Equipment, dated May 18, 1999
between Seller and Cisco Systems Capital Corporation, in form and substance
reasonably satisfactory to Holdco;
(h) a FIRPTA Non-Foreign Seller Certificate from Seller
certifying that it is not a foreign person within the meaning of Section 1445 of
the Code reasonably satisfactory in form and substance to Holdco; and
(i) properly executed copies of each of the Transaction
Documents to which Seller is a party and which have not been delivered prior to
the Closing Date.
Section 4.03. Deliveries by Holdco at the Closing. At the
Closing, Holdco shall deliver to Seller:
(a) by wire transfer of immediately available funds to an
account designated in writing by Seller at least 2 Business Days prior to the
Closing, an amount equal to $81,100,000 less (i) the initial Purchase Price
adjustments set forth in Section 3.03; (ii) the Adjustment Holdback; and (iii)
the Indemnification Holdback;
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(b) by wire transfer of immediately available funds to an
account designated in writing by Seller at least 2 Business Days prior to the
Closing, the fixed amount calculated as set forth on Schedule 4.03(b) (less any
portion thereof paid by Holdco between the date hereof and the Closing Date),
which amount is due and payable by Holdco to Seller;
(c) duly executed assumption agreements and other documents
and instruments of assumption providing for the assumption of the Assumed
Liabilities in form and substance reasonably satisfactory to Seller (it being
understood that any such agreement, document or instrument shall not provide for
any representations or warranties or any Liabilities that are not otherwise
expressly provided for in this Agreement);
(d) stock certificates representing 75,000 shares of Series
D Preferred Stock, which shall be tendered to Seller for cancellation, and
Seller shall accept such shares of Series D Preferred Stock so tendered, at
which time such shares shall be retired and cancelled and no amount shall be
payable by Seller with respect thereto;
(e) an instrument in writing executed by Holdco and Vulcan
acknowledging the cancellation of any rights to dividends with respect to the
75,000 shares of Series D Preferred Stock, whether such dividends are payable
before, on or after the Closing Date in form and substance reasonably
satisfactory to Seller;
(f) the Amended and Restated Securities Purchase Warrant
dated as of May 12, 2000 by and among Seller, CCI and Holdco (which warrants
were assigned by CCI to Holdco pursuant to the Assignment and Assumption
Agreement between CCI and Holdco dated August 1, 2000) (the "Charter Warrants"),
which shall be tendered to Seller for cancellation as contemplated in Section
8.13;
(g) the officer's certificates required to be delivered
pursuant to Sections 9.03(a), (b) and (c);
(h) the opinion of Paul, Hastings, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP,
counsel to Holdco described in Section 9.03(d); and
(i) properly executed copies of each of the Transaction
Documents to which Holdco is a party and which have not been delivered prior to
the Closing Date.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Holdco as follows;
provided, that any of the representations and warranties that Seller makes with
respect to itself and the Acquired Assets shall also be deemed to be made by
Seller with respect to any Subsidiary of Seller that so holds, owns or has
rights to any of the Acquired Assets:
Section 5.01. Organization, Standing and Power. Seller is a
corporation duly organized, validly existing and in good standing under the laws
of the state of Delaware and has the requisite corporate power and authority to
own, lease and operate the Acquired Assets to be sold hereunder and to carry on
the Cable Modem Business as now being conducted. Seller is duly qualified as a
foreign corporation and is in good standing in each jurisdiction in which the
failure to be so qualified or in good standing would reasonably be expected to
have a Material Adverse Effect.
Section 5.02. Corporate Authorization.
(a) Seller has the requisite corporate power and authority
to execute and deliver this Agreement and the Transaction Documents to which
Seller is a party and to perform its obligations hereunder and thereunder. Other
than the Seller Requisite Vote (as hereinafter defined), no other corporate
proceedings on the part of Seller are necessary to authorize this Agreement or
the other Transaction Documents to which it is a party, or to consummate the
Transactions. This Agreement has been duly executed and delivered by Seller and
constitutes, and each Transaction Document to which Seller is a party will be
duly executed and delivered by Seller at or prior to the Closing and when so
executed and delivered will constitute, a legal, valid and binding obligation of
Seller enforceable against it, each in accordance with its terms, subject to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws affecting or relating to enforcement of creditor's
rights and remedies generally and subject, as to enforceability, to general
principles of equity.
(b) The Board of Directors of Seller (the "Seller's Board")
has (i) determined that this Agreement and the Transactions are fair to and in
the best interests of Seller, (ii) duly and validly authorized the execution and
delivery of this Agreement and approved the consummation of the Transactions,
and (iii) resolved to recommend that the stockholders of Seller vote in favor of
a resolution approving this Agreement and the transactions contemplated hereby.
The Seller's Board has directed that this Agreement be submitted to the
stockholders of Seller for their approval.
(c) The affirmative vote of (i) a majority of the votes
entitled to be cast by holders of outstanding shares of HSA Common Stock and
Series D Preferred Stock, voting together as a single class (it being understood
that holders of Series D Preferred Stock are entitled to one vote for each share
of HSA Common Stock into which their Series D Preferred Stock may be converted)
and (ii) at least two-thirds (2/3) of the votes entitled to be cast by holders
of outstanding shares of Series D Preferred Stock, voting separately as a single
class are, respectively, the only votes of the holders of any of Seller's
capital stock necessary in connection with the approval of this Agreement and
the transactions contemplated hereby. The stockholder approvals set forth in
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clauses (i) and (ii) above are collectively referred to herein as the "Seller
Requisite Vote".
(d) The sale of the Acquired Assets to Holdco and the
consummation of the transactions contemplated hereby are not subject to the
limitations or requirements of the provisions of Section 203 of the Delaware
General Corporation Law, as amended (the "DGCL"), and no further action is
necessary to ensure that the restrictions contained in Section 203 of the DGCL
will not apply to Holdco in connection with or following such transactions. To
Seller's knowledge, no other state takeover statute is applicable to the
transactions contemplated by this Agreement.
Section 5.03. Non-Contravention. The execution and delivery
by Seller of this Agreement and the other Transaction Documents do not, and the
consummation by Seller of the Transactions and the compliance by Seller with the
provisions hereof and thereof will not, conflict with, or result in any
violation of or default (with or without notice or lapse of time, or both)
under, any provision of (i) the certificate of incorporation and by-laws of
Seller, assuming receipt of the Seller Requisite Vote, (ii) except as set forth
on Schedule 5.03, any contract, agreement, indenture, mortgage, lease,
commitment or obligation of Seller or by which Seller or its properties or
assets are bound, or (iii) subject to the governmental filings and other matters
referred to in Section 5.04, any Legal Requirement applicable to Seller's
operation of the Cable Modem Business or use of the Acquired Assets, other than
in the case of clause (ii) above, any such conflicts, violations, or defaults
that, individually or in the aggregate, would not reasonably be expected to have
a Material Adverse Effect.
Section 5.04. Governmental Filings; Consents. Except as set
forth on Schedule 5.04, no material consent, approval, license, permit, order or
authorization of, or registration, declaration or filing with, any Governmental
Authority or any third party is required to be obtained or made by or with
respect to Seller, the Acquired Assets or the Assumed Liabilities in connection
with the execution and delivery by Seller of this Agreement or the other
Transaction Documents to which Seller is a party or the consummation of the
Transactions or compliance by Seller with the provisions hereof or thereof,
except for (i) compliance with and filings under the HSR Act and (ii) those that
may be required solely by reason of Holdco's (as opposed to any other Person's)
participation in the Transactions.
Section 5.05. Acquired Assets. Except as set forth on
Schedule 5.05, the Acquired Assets are all of the material assets used in the
operation of the Cable Modem Business as it is conducted as of the date hereof.
Section 5.06. Absence of Certain Changes or Events. Except
as set forth on Schedule 5.06, or as specifically contemplated by this
Agreement, since June 30, 2001 there has not been (i) any transaction,
commitment, dispute or other event or condition (financial or otherwise) of any
character (whether or not in the ordinary course of business), that individually
or in the aggregate, has had or would reasonably be expected to have a Material
Adverse Effect or (ii) any sale, assignment or transfer of any asset or
property, or any damage, destruction or loss, whether or not covered by
insurance, which, individually or in the aggregate, would reasonably be expected
to have a Material Adverse Effect.
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Section 5.07. Proxy Statement. The proxy statement of
Seller (the "Proxy Statement") to be filed with the SEC in connection with this
Agreement and any amendments and supplements thereto, will, when filed, comply
as to form in all material respects with the requirements of the Exchange Act.
None of the Proxy Statement or any amendment or supplement thereto will, at the
date the Proxy Statement or any such amendment or supplement is first mailed to
stockholders of Seller or at the time such stockholders vote on the approval of
this Agreement, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading. No representation or warranty is made by Seller in this
Section 5.07 with respect to statements made or incorporated by reference
therein based on information supplied by Holdco for inclusion or incorporation
by reference in the Proxy Statement or any amendment or supplement thereto.
Section 5.08. Compliance with Applicable Laws. Except as
set forth on Schedule 5.08, Seller complies in all material respects with all
Legal Requirements which apply to Seller's operation of the Cable Modem Business
and ownership or use of the Acquired Assets. This Section 5.08 does not apply to
Environmental Laws which are instead the subject of Section 5.14.
Section 5.09. Litigation; Decrees. Except as set forth on
Schedule 5.09 and except for any lawsuit, action or proceeding brought after the
date of this Agreement by a Person seeking to delay or prevent, or otherwise
challenging, this Agreement or the transactions contemplated hereby, there is no
lawsuit, action or proceeding pending, or, to Seller's knowledge, threatened,
against Seller relating to the Cable Modem Business, the Acquired Assets or the
Transactions.
Section 5.10. Security Deposits. The Assigned Security
Deposits are the only Security Deposits of Seller in relation to the Assumed
Real Estate Leases and the Assumed Capital Leases.
Section 5.11. Contracts.
(a) Each Material Contract is set forth on Schedule
5.11(a)(i). Each Contract limiting the right of Seller to compete is set forth
on Schedule 5.11(a)(ii). A true, complete and correct copy of each Material
Contract together with each Assumed Capital Lease and each Assumed Operating
Lease (and all amendments, side letters, guarantees, agreements and addenda
thereto) has been delivered to Holdco.
(b) Each Material Contract, Assumed Capital Lease and
Assumed Operating Lease (i) has been duly authorized, executed and delivered by
Seller and, to Seller's knowledge, the other parties thereto, (ii) except as set
forth on Schedule 5.11(b), remains in full force and effect to the extent of its
terms without any waiver not reflected therein, and (iii) is the valid and
binding obligation of Seller, enforceable against Seller in accordance with its
terms. Seller has not received any written notice threatening or declaring
termination of a Material Contract, Assumed Capital Lease or Assumed Operating
Lease as a result of any alleged uncured breach or default. Seller has performed
all material obligations required to be performed by it to date under each
Material Contract, Assumed Capital Lease and Assumed Operating Lease, and Seller
25
is not in material breach or default under any Material Contract, Assumed
Capital Lease or Assumed Operating Lease. Neither Seller nor, to the knowledge
of Seller, any other party thereto, is in breach or default under (including any
circumstances that would result in a breach or default with notice or lapse of
time or both) any Material Contract, Assumed Capital Lease or Assumed Operating
Lease in any material respect. Neither Seller nor any other party thereto has
waived any material provision of any such Material Contract, Assumed Capital
Lease or Assumed Operating Lease or agreed to do so. Seller has not received any
written notice of breach or default or termination under any Material Contract,
Assumed Capital Lease or Assumed Operating Lease.
(c) Subject to Seller receiving the consent of any third
parties required to assign the Material Contracts, Assumed Capital Leases and
Assumed Operating Leases to Holdco and subject to the terms and conditions of
any such consent, except as otherwise expressly agreed by Seller and Holdco at
the Closing, Holdco will, by virtue of the assignment and assumption of such
Material Contracts, Assumed Capital Leases and Assumed Operating Leases
contemplated by this Agreement, succeed to the rights of Seller under (but
subject to all of the terms, conditions and limitations contained in) the
Material Contracts, Assumed Capital Leases and Assumed Operating Leases upon the
Closing.
Section 5.12. Real Property.
(a) Seller does not own any real property that forms part
of the Acquired Assets. Seller has valid and enforceable leasehold interests in
the Assumed Real Estate Leases free and clear of all Liens, other than Permitted
Liens, and such Assumed Real Estate Leases are in full force and effect. Neither
Seller nor, to Seller's knowledge, any other party thereto is in breach or
default, and no event has occurred that, with the giving of notice or passage of
time, would constitute a default thereunder in any material respect. Seller has
not received any notice of default by the landlord under any Assumed Real Estate
Lease.
(b) Seller has provided Holdco with access to true and
complete copies of each of the Assumed Real Estate Leases, including all
amendments, side letters, guarantees, agreements and addenda thereto. To
Seller's knowledge, each CMB Site and any improvements constructed thereon and
their current use, conforms in all material respects to (i) all applicable Legal
Requirements, and (ii) all restrictive covenants, if any, or other Liens
affecting all or part of such premises.
(c) There are no pending, or to Seller's knowledge,
threatened condemnation actions or special assessments or proceedings for
changes in the zoning with respect to the CMB Sites. Seller has complied in all
material respects with all notices or orders to correct violations of Legal
Requirements issued by any Governmental Authority to Seller in relation to the
CMB Sites.
Section 5.13. Title to and Condition of the Acquired
Assets.
(a) Except as set forth on Schedule 5.13, Seller has good
and valid title to, or holds by valid and subsisting lease or license, the
26
Acquired Assets free and clear of all Liens other than Permitted Liens. This
Section 5.13(a) does not apply to the CMB Intellectual Property or Technology
and Know-How which are instead the subject of Section 5.15.
(b) The tangible Acquired Assets having an original
purchase price, or if leased under a Capital Lease or an Operating Lease, having
aggregate lease payments of, at least $10,000 are in good repair and operating
condition (subject to normal wear and tear).
Section 5.14. Compliance with Environmental Laws.
(a) Seller's operation of the Cable Modem Business and use
of the Acquired Assets complies in all material respects with applicable
Environmental Laws, and Seller is not aware of any Hazardous Substances,
contamination condition or pollution existing or resulting from Seller's
operation of the Cable Modem Business or use of the Acquired Assets that have
given rise or could give rise to any unsatisfied on-site or off-site response,
removal, abatement, closure or remedial obligations of Seller under applicable
Environmental Laws.
(b) Without limiting clause (a) above, Seller's operation
of the Cable Modem Business and use of the Acquired Assets, (i) is not subject
to any pending action, suit or proceeding by or before any Governmental
Authority under applicable Environmental Laws and, to the knowledge of Seller,
no such proceeding has been threatened and (ii) to the knowledge of Seller,
Seller is not subject to any pending investigation or inquiry by any
Governmental Authority under applicable Environmental Laws or subject to any
listing or the threat of listing under Federal Superfund or state hazardous
waste site criteria.
(c) All material permits, licenses or similar
authorizations, if any, required to be obtained, retained or renewed by Seller
under applicable Environmental Laws in connection with the operation of the
Cable Modem Business and use of the Acquired Assets, including, without
limitation, those relating to the treatment, storage, disposal or release of
Hazardous Substances have been duly obtained, and, if applicable, retained or
renewed, and Seller has complied in all material respects with the terms and
conditions of all such permits, licenses and similar authorizations.
(d) To Seller's knowledge it has no material liability to
any person or entity as a result of any release of any Hazardous Substances in
connection with Seller's operation of the Cable Modem Business or use of the
Acquired Assets.
Section 5.15. Intellectual Property Rights.
(a) Seller owns, licenses or has other valid rights, title
and interest, free and clear of all Liens, other than Permitted Liens, to use
the CMB Intellectual Property and the Technology and Know-How, without
infringing upon or otherwise acting adversely to the right of any third party,
except where the failure to so own, license or have such rights would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect. Schedule 5.15 sets forth all of the CMB Intellectual Property
consisting of any domestic or foreign Patents, Trademarks, Copyrights, Maskworks
or licenses. All of the CMB Intellectual Property and Technology and Know-How
are valid and enforceable rights of Seller and, subject to Section 5.15(e)
below, will not cease to be valid and in full force and effect by reason of the
execution and delivery of this Agreement or the consummation of the
Transactions.
27
(b) Except as set forth on Schedule 5.15, at the Closing,
Seller will not be obligated or under any liability whatsoever to make any
payments by way of royalties, fees or otherwise to any owner or licensee of, or
other claimant to, any Intellectual Property on account of Seller's prior use or
licensing of the CMB Intellectual Property; provided, that Holdco, by virtue of
the assignment and assumption of CMB Intellectual Property and Technology and
Know-How contemplated hereby will be obligated in the ordinary course to pay
renewal license fees for Software licenses and related support/maintenance
agreements that Holdco elects to renew. Upon consummation of the Transactions,
except as set forth on Schedule 5.15, and disregarding any facts or
circumstances that are particular to Holdco and are not known by Seller or any
change in applicable law after the Closing Date, Holdco will be entitled to
operate the Cable Modem Business and use the Acquired Assets as the same are now
and have been operated and used respectively by Seller prior to the Closing Date
without such operation or use infringing upon, misappropriating, violating or
otherwise acting adversely to the Intellectual Property or other rights of any
Person (including rights to privacy or publicity), violating any export control
law or regulation, or constituting unfair competition or trade practices under
any applicable laws.
(c) To Seller's knowledge, no Person has any right to, or
is infringing or misappropriating, any rights with respect to the CMB
Intellectual Property or the Technology and Know-How or engaging in other
conduct that may diminish or undermine the CMB Intellectual Property, such as
the disclosure of Seller's confidential information.
(d) Seller has taken reasonable steps to protect Seller's
rights in the Technology and Know-How and confidential information provided by
any other Person to Seller subject to a duty of confidentiality. Without
limiting the foregoing, (i) Seller has, and enforces, a policy requiring each of
its executive officers and research and development personnel to execute
non-competition, confidentiality and non-solicitation agreements, and all such
individuals have executed such an agreement, and (ii) as between Seller and any
of Seller's employees and other Persons who, either alone or in concert with
others, developed, invented, discovered, derived, programmed or designed any of
the Technology and Know-How, or who has knowledge of or access to information
about any of the Technology and Know-How, such Technology and Know-How and other
information may not be divulged or used without the written consent of Seller.
(e) Subject to Seller receiving the consent of any third
parties required to assign the CMB Intellectual Property and the Technology and
Know-How to Holdco as contemplated by this Agreement and subject to the terms
and conditions of any such consent, except as otherwise expressly agreed by
Seller and Holdco at the Closing, Holdco will, by virtue of the assignment and
assumption of the CMB Intellectual Property and Technology and Know-How
contemplated by this Agreement, succeed to the rights of Seller under (but
subject to all of the terms, conditions and limitations contained in) all
agreements relating to the CMB Intellectual Property and Technology and Know-How
upon the Closing; provided that Holdco's ability to enforce the provisions of
any of such agreements, or to realize the benefits thereunder, may be affected
by facts or circumstances relating to the business or affairs of Holdco or its
Affiliates, including, without limitation, legal or regulatory requirements or
restrictions applicable to Holdco or its Affiliates, and Seller makes no
28
representation or warranty regarding such matters or the effects such matters
may have on the ability of Holdco to realize the benefits of the CMB
Intellectual Property and Technology and Know-How.
Section 5.16. Taxes.
(a) Except as disclosed on Schedule 5.16, Seller has timely
prepared and filed in accordance with applicable law all federal and state
income Tax returns and all material other Tax returns required to be filed by it
or with respect to its operations and assets with respect to Taxes which could
result in a Lien on any of the Acquired Assets (other than a Lien for current
Taxes not yet due and payable) or for which Holdco or its Affiliates (other than
Seller and any Affiliate of Holdco that is a stockholder of Seller) could be
liable, and all Taxes shown as due on such Tax returns, or for which a notice
of, or assessment or demand for payment has been received or are otherwise due
and payable, have been timely paid, except for Taxes that are being contested in
good faith by appropriate proceedings. Such Tax returns were materially complete
and correct as of the date on which they were filed or as subsequently amended
and no facts have later become known by Seller to the contrary. Except as
disclosed on Schedule 5.16, Seller has received no revenue agent's reports or
other written or formal assertions of deficiencies or other liabilities for such
Taxes (including any reports, statements, summaries and other communications of
assertions or claims of deficiencies or other liabilities) with respect to
Seller for past periods for which the applicable statute of limitations has not
expired.
(b) Except for waivers and extensions disclosed on Schedule
5.16, there are no waivers or extensions of any applicable statute of
limitations for the assessment or collection of Taxes with respect to any Tax
return that relates to Seller which could result in a Lien upon any of the
Acquired Assets, and no request for any such waiver or extension is currently
pending.
(c) There are no Liens for Taxes (other than Permitted
Liens and other than for Taxes not yet due and payable) upon the Acquired
Assets. Except as disclosed on Schedule 5.16, no Lien, action, suit, proceeding,
investigation, audit, examination, request for information, claim or assessment
is presently pending or, to the knowledge of Seller, proposed with regard to any
Taxes that relate to Seller for which Holdco or its Affiliates would or could be
liable or which could result in a Lien on the Acquired Assets.
(d) Seller is not a "foreign person" within the meaning of
Code Section 1445(f)(3) and Treasury Regulation Section 1.1445-2(b)(2)(i).
(e) The Acquired Assets are not subject to any joint
venture, partnership or other arrangement or contract that is treated as a
partnership for United States Federal income tax purposes.
Section 5.17. Employees, Labor Matters, Etc.
(a) Seller is not a party to or bound by any collective
bargaining agreement relating to any of its employees and independent
contractors (including directors) and to the knowledge of Seller, there are no
labor unions or other organizations representing, purporting to represent or
attempting to represent any of its employees and independent contractors
(including directors). To the knowledge of Seller, there are no labor disputes
currently subject to any grievance procedure, arbitration or litigation other
than any dispute or disputes that, individually or in the aggregate, would not
29
reasonably be expected to have a Material Adverse Effect and there is no
representation petition pending or, after due inquiry, threatened with respect
to any of its employees and independent contractors (including directors).
(b) Seller and the employees of Seller listed on Schedule
8.09(k) are parties to employment agreements which prohibit each such employee
from hiring directly or through another entity any person who was an employee of
Seller at any time during the period of such employee's employment (the
"Post-Employment Hiring Prohibition").
Section 5.18. Employee Benefit Plans. Except as set forth
on Schedule 5.18 or as would not, either individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect, (i) each of the
Benefit Plans and its related trust intended to qualify under Sections 401, and
501(a) of the Code, respectively, so qualify, (ii) each of the Benefit Plans
complies and has been administered and operated in compliance in all material
respects with its terms and all Legal Requirements, including ERISA and the
Code, and (iii) no Benefit Plan is subject to Title IV of ERISA, is a
"multiemployer plan" within the meaning of Section 3(37) of ERISA.
Section 5.19. Brokers. Except for ▇▇▇▇▇▇ Brothers Inc.
("▇▇▇▇▇▇") and ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, whose fees will be paid by Seller, no investment
banker, broker, finder, other intermediary or other Person is entitled to any
fee or commission from Seller or any of its Subsidiaries upon consummation of
the transactions contemplated by this Agreement.
Section 5.20. Solvency of Seller. Immediately after the
Closing, the fair market value of Seller's assets will exceed all of Seller's
Liabilities.
Section 5.21. Opinion of Financial Advisors. Seller has
delivered to Holdco a true and correct copy of (i) the ▇▇▇▇▇▇ Opinion, and (ii)
the ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Opinion. As of the date of the ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Opinion, (i)
the data, material and other information, with respect to Seller, furnished to
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ by or on behalf of Seller and its agents, counsel, employees and
representatives (the "Information"), is true, complete and correct in all
material respects, (ii) the Information does not contain any untrue statement of
a material fact or omit to state any material fact necessary to make the
statements therein, in light of the circumstances in which they were made, not
false or misleading, (iii) the financial forecasts and projections provided to
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ by Seller were reasonably prepared and reflect the best currently
available estimates of the future financial results and condition of Seller, and
(iv) there have been no material changes in the assets, financial condition,
business or prospects of Seller since the date of the most recent financial
statements of Seller made available to ▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF Holdco
Holdco hereby represents and warrants to Seller as follows:
Section 6.01. Organization, Standing and Power. Holdco has
been duly formed and is validly existing as a limited liability company in good
standing under the laws of the state of Delaware and has the power and authority
to own, lease and otherwise hold and operate its assets and to carry on its
business as now being conducted.
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Section 6.02. Corporate Authorization. Holdco has the power
and authority to execute and deliver this Agreement and the Transaction
Documents to which Holdco is a party and to perform its obligations hereunder
and thereunder. The execution and delivery of this Agreement and the Transaction
Documents and the consummation of the Transactions have been duly authorized by
all necessary action on the part of Holdco. This Agreement has been duly
executed and delivered by Holdco and constitutes, and each Transaction Document
to which Holdco is a party will be duly executed and delivered by Holdco at or
prior to the Closing and when so executed and delivered will constitute, a
legal, valid and binding obligation of Holdco enforceable against it in
accordance with its terms, subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar laws affecting or
relating to enforcement of creditor's rights and remedies generally and subject,
as to enforceability, to general principles of equity.
Section 6.03. Non-Contravention. The execution and delivery
by Holdco of this Agreement and the Transaction Documents to which Holdco is a
party do not, and the consummation by Holdco of the Transactions and the
compliance by Holdco with the provisions hereof and thereof will not, conflict
with, or result in any violation of or default (with or without notice or lapse
of time, or both) under, any provision of (i) the Delaware Limited Liability
Company Act, (ii) the certificate of formation of Holdco, (iii) any contract,
agreement, indenture, mortgage, lease, commitment or obligation to which Holdco
is a party or by which Holdco or its properties or assets are bound, or (iv) any
Legal Requirement applicable to Holdco, other than, in the case of clauses (iii)
and (iv) above, any such conflicts, violations or defaults that, individually or
in the aggregate, would not materially impair the ability of Holdco to perform
its obligations under this Agreement or any of the Transaction Documents to
which Holdco is a party.
Section 6.04. Governmental Filings; Consents. No consent,
approval, license, permit, order or authorization of, or registration,
declaration or filing with, any Governmental Authority or any third party is
required to be obtained or made by or with respect to Holdco, the Acquired
Assets or the Assumed Liabilities in connection with the execution and delivery
by Holdco of this Agreement or the other Transaction Documents to which Holdco
is a party or the consummation of the Transactions or compliance by Holdco with
the provisions hereof or thereof, except for (i) compliance with and filings
under the HSR Act and (ii) those the failure of which to be obtained or made,
individually or in the aggregate, would not materially impair the ability of
Holdco to perform its obligations under this Agreement or any of the Transaction
Documents to which Holdco is a party.
Section 6.05. Information Supplied; Schedule 13E-3. The
Rule 13E-3 Transaction Statement on Schedule 13E-3 ("Schedule 13E-3") of Holdco
to be filed with the SEC in connection with this Agreement and any amendments
and supplements thereto, will, when filed, comply as to form in all material
respects with the requirements of the Exchange Act. None of the information
supplied or to be supplied by Holdco for inclusion or incorporation by reference
in the Proxy Statement or any amendment or supplement thereto will, at the date
the Proxy Statement or any amendment or supplement thereto is first mailed to
stockholders of Seller or at the time such stockholders vote on the approval of
this Agreement, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading.
31
Section 6.06. Brokers. Except for ▇▇▇▇▇▇▇ Lynch, Pierce,
▇▇▇▇▇▇ & ▇▇▇▇▇ Incorporated ("▇▇▇▇▇▇▇ ▇▇▇▇▇"), whose fees will be paid by
Holdco, no investment banker, broker, finder, other intermediary or other Person
is entitled to any fee or commission from Holdco or any of its subsidiaries upon
consummation of the Transactions.
Section 6.07. Assignment of Agreements. All of CCI's rights
under the Full Turnkey Agreement, Second NSA Agreement and Charter Warrants have
been validly assigned to, and all of CCI's obligations thereunder have been
validly assumed by, Holdco.
Section 6.08. Interested Stockholder. Holdco was not an
interested stockholder, as such term is defined in Section 203 of the DGCL, of
Seller prior to November 25, 1998, on which date it became an interested
stockholder in connection with the sale and issuance of 8,000,000 shares of
Series B Preferred Stock by Seller to Vulcan, which issuance Holdco understands
was approved in advance by Seller's Board in a manner sufficient to approve
Holdco as an interested stockholder pursuant to Section 203 of the DGCL.
ARTICLE VII
COVENANTS RELATED TO CONDUCT OF THE CABLE MODEM BUSINESS
Section 7.01. Conduct of Cable Modem Business in the
Ordinary Course. During the period from the date of this Agreement to the
Closing Date, except as consented to in writing by Holdco or as specifically
contemplated by this Agreement, Seller shall conduct the Cable Modem Business in
the ordinary course consistent with past practice and will, to the extent
consistent therewith, use commercially reasonable efforts to preserve the
Acquired Assets and the Cable Modem Business, including relationships with
customers, suppliers and others having significant business dealings with the
Cable Modem Business. Without limiting the generality of the foregoing, during
the period from the date of this Agreement to the Closing Date, except as
consented to in writing by Holdco (such consent not to be unreasonably withheld
or delayed) or as specifically contemplated by this Agreement or as disclosed on
Schedule 7.01:
(a) Seller will:
(i) use commercially reasonable efforts to keep available
the services of the employees listed on the Offer Schedule and Review Schedule
(including by enforcing any restrictions on Seller's employees with respect to
soliciting or hiring employees listed on those schedules), and use commercially
reasonable efforts to replace all such employees whose employment terminates
before the Closing Date, in accordance with past hiring practices; provided,
that Holdco must consent to the hiring of any replacement employee with an
annual compensation of $50,000 or more;
(ii) maintain the tangible Acquired Assets in good repair,
order and condition (ordinary wear and tear excepted);
(iii) make the Modem Inventory available to Holdco for
deployment, pursuant to the Management Agreement;
(iv) maintain in full force and effect, policies of
insurance with respect to the Cable Modem Business consistent with past
practices;
32
(v) maintain its books, records and accounts related to the
Cable Modem Business in the ordinary course of business consistent with past
practices;
(vi) report and write off accounts receivable related to
the Cable Modem Business only in accordance with past practices;
(vii) withhold and pay when due all Taxes relating to Hired
Employees, the Acquired Assets and the Cable Modem Business;
(viii) comply in all material respects with all Legal
Requirements with respect to the Cable Modem Business;
(ix) provide Holdco with copies of any revenue agent's
reports or written assertions of deficiencies or other liabilities for Taxes
received after the date hereof up to and including the Closing Date within ten
(10) days of receipt thereof (but in no event later than the Closing Date); and
(x) provide Holdco with copies of material reports, audits,
studies, or analyses of any kind whatsoever in the possession of Seller, or
under its control, relating to environmental matters affecting the Acquired
Assets.
(b) Seller will not:
(i) sell, transfer or assign any portion of the Acquired
Assets other than sales in the ordinary course of business;
(ii) modify, terminate, renew (other than in the ordinary
course or as required by this Agreement), suspend or abrogate any Material
Contract or Real Estate Lease (other than those constituting Excluded Assets);
(iii) enter into any Material Contract with respect to the
Cable Modem Business;
(iv) make or approve any material change, modification or
alteration in or to any network operational or business systems, including CDB,
WebDT, ▇▇▇▇, Remedy (other than modifications in the normal development
process), and the Charter E-mail complex;
(v) modify its procedures for disconnection and
discontinuation of service to subscribers whose accounts are delinquent;
(vi) terminate the employment of any employees listed on
the Offer Schedule or the Review Schedule except for cause in the ordinary
course;
(vii) increase the compensation or materially change any
benefits available to any employee listed on the Offer Schedule or the Review
Schedule, except as required pursuant to existing written agreements, or in the
ordinary course of business consistent with past practice;
33
(viii) create or permit to exist any Lien on any of the
Acquired Assets, other than any Lien which will be released at or prior to the
Closing or Permitted Liens;
(ix) enter into any collective bargaining agreement
covering any employee listed on the Offer Schedule or the Review Schedule or
enter into any new bonus, stock option, profit sharing, compensation, pension,
welfare, retirement, employment or similar agreement, except where required by
any Legal Requirement;
(x) adopt, amend, modify, spin-off, transfer or assume any
of the assets or liabilities of, terminate or partially terminate any benefit
plan;
(xi) decrease the rate charged for any level of services to
customers of Seller, except to the extent required by Holdco or any Legal
Requirement; or
(xii) engage in any marketing, subscriber installation,
collection or disconnection practices outside the ordinary course of business or
inconsistent with past practice, or change any billing arrangements (except as
contemplated by the Billing Letter Agreement).
(c) The provisions of Sections 7.01(a) and (b) shall not
apply with respect to any actions taken by CCI under the Management Agreement.
Section 7.02. Arapahoe Facility. Notwithstanding anything
to the contrary in Section 7.01 above, Seller shall be entitled to close its
call center on Arapahoe Road, Denver (the "Arapahoe Facility") and all
operations directly related thereto at any time on or after October 31, 2001,
and may take any action which Seller deems, in its sole discretion, to be
reasonably necessary or appropriate in connection with the closure of the
Arapahoe Facility without seeking the prior consent of Holdco. Notwithstanding
the foregoing, Seller shall retain certain of its personnel employed at the
Arapahoe Facility in accordance with the transitional procedures set forth on
Schedule 7.02.
Section 7.03. Access to Information. To the extent
permitted by any applicable Legal Requirement, during the period from the date
of this Agreement to the Closing Date, Seller will furnish to Holdco and its
authorized representatives (including counsel, financial advisors and auditors)
such financial and operating data and other information relating to the Cable
Modem Business as such persons may reasonably request, and will instruct its
officers, employees, auditors, counsel and financial advisors to cooperate with
Holdco in its investigation of the Cable Modem Business and the Acquired Assets
to be purchased and Assumed Liabilities to be assumed hereunder; provided,
however, that nothing in this Agreement shall require Seller to provide Holdco
with the passwords to any of Seller's servers or software/enterprise
applications, including the e-mail server complex in Washington, D.C. prior to
the Closing. Notwithstanding the foregoing, Seller shall continue to provide to
Holdco temporary passwords as reasonably requested by Holdco to access equipment
in headends covered by the Full Turnkey Agreement. Holdco acknowledges that any
information provided to Holdco or any Holdco's representatives by Seller or any
of Seller's representatives pursuant to or in connection with this Agreement is
subject to the terms of the Confidentiality Agreement entered into between
Seller and CCI dated as of May 24, 2001 (the "Confidentiality Agreement").
34
ARTICLE VIII
ADDITIONAL AGREEMENTS
Section 8.01. Seller Stockholder Meeting. Seller shall
cause a meeting of its stockholders to be duly called and held as soon as
reasonably practicable after the date of this Agreement (the "Seller Stockholder
Meeting") for the purpose of obtaining stockholder approval of this Agreement.
Except as provided in the next sentence, Seller's Board shall recommend to
Seller's stockholders that they vote in favor of the approval of this Agreement.
Subject to Section 10.03, Seller's Board shall be permitted to (i) not recommend
to Seller's stockholders that they vote in favor of the approval of this
Agreement or (ii) withdraw or modify in a manner adverse to Holdco its
recommendation to Seller's stockholders that they vote in favor of the approval
of this Agreement, only if and to the extent that Seller's Board, after
consultation with independent legal counsel, by a majority vote determines in
its good faith judgment that such action is necessary for Seller's Board to
comply with its fiduciary duties to Seller's stockholders under any applicable
Legal Requirement.
Section 8.02. Proxy Statement; Schedule 13E-3.
(a) In connection with the Seller Stockholder Meeting,
Seller will (i) promptly prepare and file with the SEC, use its reasonable best
efforts to have cleared by the SEC and thereafter mail to its stockholders as
promptly as practicable, the Proxy Statement and all other proxy materials for
such meeting, (ii) use its reasonable best efforts, subject to Section 8.01
hereof, to obtain stockholder approval of this Agreement and (iii) otherwise
comply with all Legal Requirements applicable to such meeting.
(b) As soon as practicable after the date of this
Agreement, Holdco shall file with the SEC a Schedule 13E-3 with respect to this
Agreement and the Transactions. Holdco and Seller agree to use their respective
reasonable best efforts to cooperate and to provide each other with such
information that either of them may reasonably request in connection with the
preparation of the Schedule 13E-3. The information provided by each of Holdco
and Seller for use in the Schedule 13E-3 shall not, at the time the Schedule
13E-3 is filed with the SEC, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. Each of Holdco and Seller agrees to promptly
supplement, update and correct any information provided by it for use in the
Schedule 13E-3 if and to the extent that it is or shall have become incomplete,
false or misleading.
Section 8.03. Governmental Approvals.
(a) Each of Holdco and Seller shall as promptly as
practicable, but in no event later than ten (10) days following the execution
and delivery of this Agreement, file with the United States Federal Trade
Commission and the United States Department of Justice, the notification and
report form under the HSR Act required for the Transactions and any supplemental
information requested in connection therewith pursuant to the HSR Act. Each of
Holdco and Seller shall as promptly as practicable comply with any other Legal
Requirements of any country which are applicable to any of the Transactions and
pursuant to which any consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Authority or any
35
other Person in connection with such Transactions is necessary. Each of Holdco
and Seller shall furnish to the other such necessary information and reasonable
assistance as the other may request in connection with its preparation of any
filing, registration or declaration which is necessary under the HSR Act or any
other such Legal Requirements. Holdco and Seller shall keep each other apprised
of the status of any communications with, and any inquiries or requests for
additional information from, any Governmental Authority, and shall comply
promptly with any such inquiry or request.
(b) Subject to the terms and conditions of this Agreement,
each party shall use commercially reasonable efforts to cause the Closing to
occur as promptly as practicable, including, without limitation, (i) in the case
of Holdco, assisting Seller and vigorously defending against any lawsuits,
actions or proceedings, judicial or administrative, challenging this Agreement
or the consummation of the Transactions on antitrust grounds, including seeking
to have vacated or reversed any preliminary injunction, temporary restraining
order, stay or other legal restraint or prohibition entered or imposed by any
court or other Governmental Authority that is not yet final and non-appealable
and (ii) in the case of Seller, assisting Holdco and cooperating fully with
Holdco in defending any lawsuits, actions or proceedings of the nature described
in clause (i) above, including, but not limited to, providing information within
Seller's possession and making Seller's personnel available to Holdco's counsel
in a timely manner as necessary, instructing Seller's counsel to vigorously
defend depositions of Seller's personnel and to work closely with Holdco's
counsel to develop common litigation strategies.
Section 8.04. Third Party Consents. Subject to Section
8.06, as and from the date of this Agreement, Holdco and Seller will cooperate
and use their respective commercially reasonable efforts to obtain as promptly
as practicable all consents, approvals and waivers required by third Persons to
transfer, assign or novate any Acquired Asset (including the Assumed Real Estate
Leases, Assumed Capital Leases, Assumed Operating Leases, Assumed Contracts, CMB
Intellectual Property, Technology and Know-How), to Holdco in a manner that will
avoid any default, conflict, or termination of rights under the Assumed Real
Estate Leases, Assumed Capital Leases, Assumed Operating Leases, Assumed
Contracts, CMB Intellectual Property and Technology and Know-How or any
violation of any Legal Requirement. Seller shall also take such action
reasonably requested by Holdco in connection with Holdco's application to become
an "Approved Company" for purposes of succeeding to the rights of Seller under
the Service and Technology Agreement dated August 31, 2000 among Seller, the
Kentucky Economic Finance Authority and ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇/▇▇▇▇▇▇ I, LLC, and the
assignment of such agreement to Holdco. Subject to Section 8.12 below, Seller
shall pay all reasonable out-of-pocket costs and expenses incurred by any third
Person in connection with obtaining any required consent, approval or waiver
from any third Person with respect to the transfer, assignment or novation of
Acquired Assets, if and to the extent that a third Person seeks reimbursement
for such costs. Notwithstanding anything to the contrary in this Agreement,
nothing in this Section 8.04 shall require Seller or Holdco to expend any
material sum, make a material financial commitment or grant or agree to any
material concession to any third Person to obtain any such consent, approval or
waiver.
36
Section 8.05. Notification of Certain Matters.
(a) Seller will promptly notify Holdco of any fact, event,
circumstance or action occurring from the date hereof through the Closing Date
(i) which, if known on the date of this Agreement, would have been required to
be disclosed to Holdco pursuant to this Agreement, (ii) the existence or
occurrence of which would cause any of Seller's representations or warranties
under this Agreement not to be true and correct as of the Closing Date, or (iii)
which would reasonably be expected to have a Material Adverse Effect; provided,
however, that Seller shall have no liability for breach of this Section 8.05
except to the extent that Holdco has been actually prejudiced by such breach.
(b) Seller and Holdco shall promptly notify each other of
(i) any notice or other communication from any Person alleging that the consent
of such Person is or may be required in connection with the consummation of the
Transactions, and (ii) any lawsuit, action or proceeding pending, or, to
Seller's and Holdco's knowledge, threatened, against Seller or Holdco,
respectively, relating to the Cable Modem Business, the Acquired Assets or the
Transactions.
Section 8.06. Bulk Transfer Laws. The parties agree to
waive the requirements, if any, of any so-called "bulk transfer law" of any
jurisdiction in connection with the sale of the Acquired Assets to Holdco.
Section 8.07. Further Assurances. Without limiting any
other obligation of Holdco or Seller under this Agreement, each of Holdco and
Seller will use commercially reasonable efforts to facilitate and effect the
implementation of the transfer of the Acquired Assets to Holdco and the
assumption of the Assumed Liabilities by Holdco, including, in the case of
Seller, causing any of its Subsidiaries that own, license or lease any of the
Acquired Assets to transfer such assets to Holdco in accordance with the terms
hereof. Without limiting the generality of the foregoing, at and after the
Closing, Holdco and Seller will, at the request of the other party, promptly
execute and deliver or cause to be executed and delivered to the other party
such assignments, deeds, bills of sale, assumption agreements, consents and
other instruments of transfer or assumption as Holdco or its counsel or Seller
or its counsel may reasonably request as necessary or desirable for such purpose
(it being understood that any such assignment, deed, ▇▇▇▇ of sale, assumption
agreement, consent or other instrument of transfer or assumption shall not
provide for any representations or warranties or any obligations or liabilities
that are not otherwise expressly provided for in this Agreement).
Section 8.08. Acquisition Proposals.
(a) From the date hereof until the Closing Date and except
as expressly permitted by this Section 8.08, Seller will not, and will ensure
that its directors, officers, employees, investment bankers, financial
consultants and other agents do not, directly or indirectly, solicit, initiate,
knowingly encourage or facilitate the submission of any Acquisition Proposal or
any inquiry with respect thereto, engage in any discussions or negotiations with
any Person with respect thereto, or disclose any non-public information relating
to Seller or afford access to the properties, books or records of Seller to any
Person that has made any Acquisition Proposal; provided, however, that, subject
to Section 10.03 hereof, nothing contained in this Section 8.08 shall prevent
37
Seller from furnishing non-public information to, or entering into discussions
or negotiations with, any Person in connection with an unsolicited bona fide
Acquisition Proposal received from such Person after the date hereof that
Seller's Board determines in good faith could lead to a Superior Proposal;
provided, further, that nothing contained in this Agreement shall prevent
Seller's Board from complying with Rule 14e-2 or 14d-9 under the Exchange Act
with regard to an Acquisition Proposal. Upon the execution and delivery of this
Agreement, Seller will, and will ensure that the other Persons listed in the
first sentence of this Section 8.08(a), cease and cause to be terminated all
discussions and negotiations, if any, that have taken place prior to the date
hereof with any third parties with respect to any possible Acquisition Proposal.
(b) In the event that Seller receives an unsolicited
Acquisition Proposal, Seller will promptly notify Holdco, describe the material
terms and identify the parties making such Acquisition Proposal and keep Holdco
informed as to the status of any such Acquisition Proposal.
(c) For purposes of this Agreement, "Acquisition Proposal"
means any offer or proposal for, or any indication of interest in, a merger or
other business combination involving Seller or any of its Subsidiaries which
have any right, title or interest in or to any of the Acquired Assets or the
acquisition of any equity interest in, or a substantial portion of the assets
of, Seller or any of its Subsidiaries which have any right, title or interest in
or to any of the Acquired Assets, other than the transactions contemplated by
this Agreement and other than an offer for a bona fide de minimis equity
interest, or for an amount of assets not material to Seller and its subsidiaries
taken as a whole, that Seller has no reason to believe would lead to a change of
control of Seller (or to the acquisition of a substantial portion of the assets
of Seller and its Subsidiaries). For purposes of this Agreement, "Superior
Proposal" means any bona fide Acquisition Proposal on terms that Seller's Board,
following consultation with outside counsel, determines in its good faith
judgment (taking into account all the terms and conditions of the Acquisition
Proposal, including any break-up fees, expense reimbursement provisions and
conditions to consummation) is more favorable to Seller's stockholders than this
Agreement taken as a whole.
Section 8.09. Employee Matters.
(a) Seller has previously delivered to Holdco a schedule of
all employees employed in the Cable Modem Business by work location as of July
31, 2001 (the "CMB Employees"), that shows the original hire date and the
then-current positions and rates of compensation, rate type (hourly or salary)
and whether the employee is on a leave of absence (the "CMB Employee Schedule").
Holdco will maintain the CMB Employee Schedule in strict confidence.
(b) Schedule 8.09(b)(i) sets forth a list of the CMB
Employees that Holdco will offer to employ following the Closing (the "Offer
Schedule") on the terms described in Section 8.09(c). Holdco shall make written
offers of employment to the CMB Employees listed on the Offer Schedule not more
than fourteen (14) days after the date hereof. Schedule 8.09(b)(ii) sets forth a
list of the CMB Employees that Holdco may elect, in its sole discretion, to hire
subject to the pre-hire evaluations permitted by this Section 8.09(b) (the
"Review Schedule"). Subject to the provisions of this Section 8.09(b), Holdco
38
shall make written offers of employment to those CMB Employees listed on the
Review Schedule that it elects to hire not less than thirty (30) days after the
date hereof. Seller agrees, and will cause its appropriate Subsidiaries, to
cooperate in all reasonable respects with Holdco to allow Holdco to evaluate the
CMB Employees listed on the Review Schedule during such thirty (30) day period.
In this regard, Holdco will have the opportunity to make such appropriate
pre-hire investigation of the CMB Employees listed on the Review Schedule as
Holdco deems necessary, including the right to review personnel files and the
right to interview such employees during normal working hours, so long as such
interviews are conducted after notice to Seller and do not unreasonably
interfere with Seller's operations, and so long as such investigations and
interviews do not violate any Legal Requirement or any Contract. To the extent
consent is required by applicable law, Seller will use good faith efforts to
obtain the consent of each of the CMB Employees listed on the Review Schedule to
allow Holdco to review their personnel files in connection with the foregoing.
Holdco will bear the expense of any examination or test requested by Holdco of a
prospective employee but Seller will, upon reasonable notice, cooperate in the
scheduling of such examinations so long as the examinations do not unreasonably
interfere with Seller's operations. Holdco shall have sole and absolute
discretion to determine which, if any, CMB Employees listed on the Review
Schedule shall be offered employment by Holdco, based on the needs and criteria
established by Holdco, in its absolute discretion.
(c) With respect to (i) each CMB Employee listed on the
Offer Schedule and (ii) each CMB Employee listed on the Review Schedule to whom
Holdco in its sole discretion offers employment, Holdco will endeavor in good
faith to offer a position substantially comparable to that held by the employee
immediately prior to the Closing at a salary level or hourly wage equivalent to
that received by the employee immediately prior to the Closing (subject to
Section 8.09(j) and Section 8.22), and shall offer the employee benefits that
are no less favorable than the benefits provided to similarly situated employees
of Holdco. In addition, Holdco shall credit those CMB Employees that are listed
on the Offer Schedule or on the Review Schedule and that are hired by Holdco or
its Affiliates (the "Hired Employees") for such employee's past service with
Seller for purposes of (A) eligibility to participate in Holdco's employee
welfare benefit (including medical, dental, flexible spending accounts,
accident, life insurance plans and programs, disability plans, and other
employee welfare benefits) plans to the extent permitted by the terms of such
plans, (B) participation and vesting (but not benefit accrual) under Holdco's
employee 401(k) plan and any other pension plan, (C) for any waiting periods
under Holdco's Welfare Plans or (D) for any post-Closing severance purposes.
Seller acknowledges that nothing in this Agreement will restrict Holdco from
changing a Hired Employee's job description, responsibilities, location, salary
or benefits following the Closing. If Hired Employees are included in any
medical, dental or health plan other than the plan or plans they participated in
as of the Closing Date, any such plans shall not include pre-existing condition
exclusions, except to the extent such exclusions were applicable under the
similar plans of Seller or its Subsidiaries as of the Closing Date, and shall
provide credit for any deductibles and co-payments applied or made with respect
to each Hired Employee in the calendar year of the change. Holdco will credit
each Hired Employee with the vacation time and sick time such Hired Employee had
accrued with Seller as of the Closing Date, provided, that Holdco shall only
credit such Hired Employees for such accrued vacation time and sick time to the
extent that such accrued vacation time or sick time does not exceed the maximum
amount of vacation time and sick time that similarly situated employees
(including, without limitation, comparable seniority) of Holdco are allowed to
39
accrue (the "Maximum Vacation Accrual" or "Maximum Sick Time Accrual", as
applicable). Holdco shall receive an adjustment to the Purchase Price for the
economic value of such credited vacation time and sick time as contemplated in
Section 3.03(a) and Schedule 3.03. The economic value of such vacation time and
sick time is the amount equal to the cash compensation that would be payable to
each such Hired Employee at his or her level of compensation on the Closing Date
for a period equal to such credited accrued vacation or sick time. If such
accrued vacation time or sick time exceeds the Maximum Vacation Accrual or
Maximum Sick Time Accrual, Seller shall pay such Hired Employee cash in lieu of
such excess accrued vacation time or sick time. Seller shall accrue up to
$750,000 of bonuses for the Hired Employees as of the Closing Date and Holdco
shall pay at least an aggregate of $750,000 in bonuses to the Hired Employees in
respect of the 2001 calendar year no later than April 30, 2002; provided, that
Holdco shall receive a maximum Purchase Price adjustment of $750,000 with
respect to the payment of such bonuses. Notwithstanding anything set forth in
this Section 8.09, Holdco will have no obligation to CMB Employees who are on
Approved Leave of Absence until they become employees of Holdco pursuant to this
Section 8.09. For purposes of this Agreement, employees on "Approved Leave of
Absence" means employees absent from work on the Closing Date and unable to
perform their regular job duties by reason of illness or injury under approved
plans or policies of the employer (other than employee's absence for less than
five (5) days due to short term illness or injury not requiring written approval
by the employer) or otherwise absent from work under approved or unpaid leave
policies of the employer.
(d) As of the Closing Date, Holdco will have no obligation
under this Section 8.09 to Seller, its Affiliates or to any of Seller's
employees, other than with respect to Hired Employees who will hereafter be the
responsibility of Holdco. As of the Closing Date, Seller will, and will cause
its Subsidiaries to, terminate the employment of all Hired Employees. Seller
will pay all severance obligations and other costs associated with such
termination (if any). Seller shall grant a limited release to all Hired
Employees from any contractual or common law duties which said employees may owe
to Seller, so as to permit such employees to (i) compete with Seller by working
for Holdco and (ii) disclose to Holdco secret or proprietary information of
Seller solely in relation to the Cable Modem Business. Seller will timely
satisfy any legal obligation with respect to continuation of group health
coverage required pursuant to Section 4980B of the Code or Section 601, et seq.,
of ERISA with respect to all CMB Employees whose employment with Seller or any
of Seller's ERISA Affiliates terminates on or before the Closing Date.
(e) Except as otherwise expressly provided pursuant in this
Agreement, Holdco will not have or assume any obligation or liability under or
in connection with any of Seller's Benefit Plans. In relation to any CMB
Employee on an Approved Leave of Absence, responsibility for benefit coverage of
such CMB Employee, and liability for payment of benefits, will remain that of
Seller or the Subsidiaries of Seller until such employee becomes an employee of
Holdco after the Closing or is terminated by Seller or its Subsidiary. For
purposes of this Agreement, the following claims and liabilities will be deemed
to be incurred as follows: (i) medical, dental and/or prescription drug benefits
upon the rendering of the medical, dental, pharmacy or other services giving
rise to the obligation to pay such benefits except with respect to such benefits
provided in connection with a continuous period of hospitalization, which will
be deemed to be incurred at the time of admission to the hospital; (ii) life,
40
accidental death and dismemberment and business travel accident insurance
benefits and workers' compensation benefits, upon the occurrence of the event
giving rise to such benefits; and (iii) salary continuation or other short-term
disability benefits, or long-term disability, upon commencement of the
disability giving rise to such benefit.
(f) Seller shall continue to pay the group health insurance
premiums that are necessary to continue, for a period of three (3) months after
the Closing Date, Seller's current group health plan for Seller's continuing
employees. Seller covenants that it will not terminate any group health plan in
connection with the Transactions.
(g) Any liability under the WARN Act with regard to any
employee of Seller terminated on or prior to the Closing Date, or not hired by
Holdco on or after the Closing Date, will, as a matter of contract between the
parties, be the responsibility of Seller. Holdco will cooperate with Seller and
Seller's Affiliates, if requested, in the giving of WARN Act notices on behalf
of the other party. Holdco shall not during the 60-day period beginning on the
Closing Date terminate the employment of full-time employees of the Cable Modem
Business whom it hires as contemplated in this Agreement so as to cause any
"plant closing" or "mass layoff" (as those terms are defined in the WARN Act)
such that Seller has any obligation under the WARN Act that Seller would not
otherwise have had absent such terminations. In the event of any breach by
Holdco of the foregoing covenant, Holdco shall indemnify Seller for any such
obligations arising under the WARN Act.
(h) Holdco and Seller hereby acknowledge and agree that,
pursuant to the authority of Revenue Ruling 2000-27, the Transactions will
result in a permissible distribution event under Section 401(k) of the Code from
any of Seller's Benefits Plans designed to satisfy the requirements of Section
401(k) of the Code.
(i) If, during the period from the date of this Agreement
to the Closing Date, Seller has, or acquires, a duty to bargain with any labor
organization with respect to any of the CMB Employees, then Seller will (i) give
prompt written notice of such development to Holdco, including notice of the
date and place of any negotiating sessions as they are planned or contemplated
and permit Holdco to have a representative present at all negotiating sessions
with such labor organization and at all meetings preparatory thereto (including
making Holdco's representative a representative of Seller's delegation if
required by the labor organization), and (ii) not, without Holdco's written
consent, enter into any contract with such labor organization that purports to
bind Holdco, including any successor clause or other clause that would have this
purpose or effect. Seller acknowledges and agrees that Holdco has not agreed to
be bound, and will not be bound, without an explicit assumption of such
liability or responsibility by Holdco, by any provision of any collective
bargaining agreement or similar contract with any labor organization to which
Seller or any its Affiliates is or may become bound. Seller will take no action
or engage in any inaction, which might obligate or require Holdco to recognize
or bargain with any labor organization on behalf of CMB Employees.
(j) If, during the period from the date of this Agreement
to the Closing Date, Seller hires new employees in order to comply with its
obligations under Section 7.01(a)(i) (the "New Hires"), Holdco shall include
each New Hire on the Offer Schedule; provided, that such New Hires will be
offered identical salary levels or hourly wages to those paid to them by Seller.
41
Holdco will make a written offer of employment to each New Hire not more than 14
days after they are employed by Seller and Seller shall provide Holdco with any
information necessary for Holdco to comply with its obligations under this
Section 8.09(j).
(k) Seller shall not, either before the Closing or after
the Closing during the period while the Post-Employment Hiring Prohibition is
scheduled to remain in effect with respect to any of the employees listed on
Schedule 8.09(k), amend or waive any of the Post-Employment Hiring Prohibitions
or breach the terms of any provisions of the employment agreements referred to
in Section 5.17(b). At the direction (and, after the Closing, at the expense) of
Holdco, Seller shall enforce the Post-Employment Hiring Prohibition against any
of those employees who are alleged by Holdco to have violated the terms of the
Post-Employment Hiring Prohibitions with respect to the Hired Employees. Seller
shall turn over to Holdco any damages received as a result of any such
enforcement.
(l) Notwithstanding anything to the contrary in this
Agreement, if the offers of employment that Holdco makes to employees listed on
the Offer Schedule and, in Holdco's sole discretion, employees listed on the
Review Schedule are not (i) at an identical salary level or hourly wage to that
received by such employees immediately prior to the Closing, and (ii) at a
position substantially comparable to that held by such employees immediately
prior to the Closing, Seller shall not be liable for any breach of the covenant
in Section 7.01(a)(i) with respect to any failure by Seller to retain such
employees until the Closing.
(m) Nothing in this Section 8.09 or elsewhere in this
Agreement will be deemed to make any employee of Seller a third party
beneficiary of this Agreement.
Section 8.10. CMB Business Records; Transitional
Arrangements.
(a) Seller shall deliver all CMB Business Records to Holdco
at or before the Closing. Holdco shall retain all material CMB Business Records
for a period of not less than three (3) years after the Closing Date. No CMB
Business Records will be destroyed during this 3 year period without at least
thirty (30) Business Days advance written notice to Seller, during which period
Seller may, at its sole expense, elect to take possession of the items to be
destroyed. After the Closing, Holdco shall grant Seller, its accountants,
counsel and other representatives access to the CMB Business Records as is
reasonably necessary with respect to Seller's review and verification of the
Closing Statement (or any corrected Closing Statement) as contemplated in
Section 3.04, Seller's continued operation and/or liquidation of all or part of
the Excluded Assets or for financial reporting and accounting matters, the
preparation and filing of any Tax returns, reports or forms, or for the defense
of, or response required under, or pursuant to, any lawsuit, action or
proceeding (including any proceeding involving Seller related to the Acquired
Assets).
(b) Not more than sixteen (16) employees of Seller shall be
entitled to continue to use their respective offices on the 4th floor of
Seller's call center and network operating center in Louisville, Kentucky until
March 31, 2002 for purposes of reviewing and verifying the Closing Statement and
for purposes of managing Seller's remaining business operations (other than the
Cable Modem Business). No rent or other amounts shall be payable to Holdco in
relation to the continued use of such offices by such employees. Seller shall
provide not more than twelve (12) representatives of Holdco or CCI access to and
42
reasonable workplace accommodations at Seller's locations (other than the CMB
Sites) as requested by Holdco, for no additional consideration, until thirty
(30) days after the Closing; provided, that Seller's obligation hereunder to
provide workplace accommodations shall terminate with respect to any location at
which Seller's occupancy rights have terminated at the time of such termination.
Seller shall provide Holdco with not less than thirty (30) days notice of
termination of any such occupancy rights.
Section 8.11. Publicity. During the period from the date of
this Agreement to the Closing Date, neither Seller, on the one hand, nor Holdco,
on the other hand, shall issue or cause the publication of any press release or
other public announcement with respect to the transactions contemplated by this
Agreement without the consent of the other party, except as such release or
announcement may be required by any Legal Requirement or the rules or
regulations of a national securities exchange in the United States, in which
case the party required to make the release or announcement shall allow the
other party reasonable time to comment on such release or announcement in
advance of its issuance.
Section 8.12. Fees and Expenses. Except as set forth in
this Agreement and irrespective of whether or not the Transactions are
consummated, all Expenses incurred in connection with this Agreement and the
Transactions shall be paid by the party incurring such Expenses, except (i)
filings fees in relation to the Schedule 13E-3 shall be paid by Holdco, (ii)
Expenses incurred in connection with the preparation, filing, printing and
mailing of the Proxy Statement shall be paid by Seller, (iii) filing fees in
relation to filings made under the HSR Act shall be shared equally by Seller and
Holdco, and (iv) Expenses incurred in connection with Holdco's application to
become an "Approved Company" for purposes of succeeding to the rights of Seller
under the Service and Technology Agreement dated August 31, 2000 among Seller,
the Kentucky Economic Finance Authority and ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇/▇▇▇▇▇▇ I, LLC, shall
be borne by Holdco. For purposes of this Agreement, "Expenses" includes all
out-of-pocket expenses (including all fees and expenses of counsel, accountants,
investment bankers, experts and consultants to a party hereto and its
Affiliates) incurred by a party or on its behalf in connection with or related
to the authorization, preparation, negotiation, execution and performance of
this Agreement and the transactions contemplated hereby.
Section 8.13. Cancellation of Charter Warrants. Holdco and
Seller hereby agree that, effective as of the Closing, the Charter Warrants
shall terminate without further action on the part of Holdco or Seller,
whereupon all rights, obligations and liabilities thereunder shall be
extinguished forthwith. Notwithstanding Holdco's rights under the Charter
Warrants, Holdco hereby undertakes and agrees not to transfer or assign its
right, title or interest in and to the Charter Warrants during the period from
the date of this Agreement to the Closing Date.
Section 8.14. Letter of Credit. As and from the date of
this Agreement, Seller and Holdco will cooperate and use their respective
commercially reasonable efforts to obtain as promptly as practicable the consent
of the third party beneficiary (the "Beneficiary") of the letter of credit
described on Schedule 1.01(b), to the cancellation of such letter of credit. If
required by the Beneficiary as a condition to the cancellation of Seller's
letter of credit, Holdco will use commercially reasonable efforts to replace
such letter of credit with a letter of credit for the account of Holdco on terms
no less favorable to such Beneficiary. The cost of obtaining any such
43
replacement letter of credit shall be borne by Holdco. If the Beneficiary does
not consent to the cancellation or replacement of the letter of credit then
Holdco hereby agrees, conditional upon the Closing, to indemnify Seller in
respect of any Losses suffered or incurred by Seller as a result of such
Beneficiary presenting, or drawing down any amount under, such letter of credit.
Section 8.15. Taxes.
(a) Holdco shall pay any Transfer Taxes arising from or
payable by reason of the transfer of the Acquired Assets contemplated by this
Agreement. Tax returns required to be filed in respect of Transfer Taxes
("Transfer Tax Returns") will be prepared and filed by the party that has the
primary responsibility under any applicable Legal Requirement for filing such
Transfer Tax Returns. If neither party has primary responsibility for filing a
Transfer Tax Return, then Holdco will be responsible for preparing and filing
any such Transfer Tax Return and, if required by any applicable Legal
Requirement, Holdco will join in the execution of any such Transfer Tax Returns
and other documentation. After the Closing Date, Seller and Holdco shall
reasonably cooperate with each other in connection with the preparation and
filing of Tax returns and in the conduct of any audit or other proceedings with
respect to any tax relating to the Acquired Assets. The party liable to pay
relevant Transfer Taxes pursuant to this Agreement shall have the opportunity to
review and approve, acting reasonably, any Transfer Tax Return related to such
liability.
(b) Each party hereto will cooperate in assuring that all
real property taxes, personal property taxes and similar ad valorem obligations
that are levied with respect to the Acquired Assets or the Cable Modem Business
for assessment periods in which the Closing Date occurs and are otherwise not
accounted for in the adjustment to Purchase Price set forth in Section 3.03 of
this Agreement or excluded pursuant to Section 2.04(e) (collectively, the
"Apportioned Obligations") and any refund or rebate thereof, will be apportioned
between the Seller and Holdco as of the Closing Date based on the number of days
in any such period falling on or before the Closing Date, on one hand, and after
the Closing Date, on the other hand (it being understood that the Seller is
responsible for the portion of each such Apportioned Obligation attributable to
the number of days from the most recent Lien date up to and including the
Closing Date and Holdco is responsible for the portion of each such Apportioned
Obligation attributable to the period after the Closing Date. An adjustment will
be made to the Purchase Price to reflect any payment of Apportioned Obligations
that have been made by Seller on or prior to the Closing Date that are
apportioned to Holdco hereunder. The parties hereto will cooperate, including
during times of audit by taxing governmental authorities, to avoid payment of
duplicate Taxes or other ad valorem obligations of any kind or description which
related to the Acquired Assets or the Cable Modem Business, and each party will
furnish, at the request of the other, proof of payment of any such Taxes or ad
valorem obligations or other documentation that is a prerequisite to avoiding
payment of a duplicate Tax or other ad valorem obligations.
(c) Seller will cooperate with Holdco's reasonable requests
to take such actions and execute such documents or instruments necessary or
appropriate, as determined by Holdco, at Seller's expense, to reduce Holdco's
Transfer Tax liability in connection with the Transactions.
44
(d) Holdco shall have the right to control the defense and
conduct of any audit or other examination by any taxing authority with respect
to transfer, sale or use Taxes that might be applicable to the transfer of the
Acquired Assets pursuant to this Agreement and for which Holdco is liable
hereunder.
Section 8.16. Use of Seller's Name. Seller will retain all
rights with respect to the names "HSA" and "High Speed Access" or any and all
derivations thereof after the Closing. Holdco will remove or delete such names
or any and all derivations thereof from the Cable Modem Business and Acquired
Assets as soon as reasonably practicable, but in any event by the 120th day
following the Closing. Seller will take no action to enforce its Intellectual
Property rights in such names against Holdco or its Affiliates during such
120-day period with respect to the Acquired Assets and Cable Modem Business.
Nothing in this Section 8.16 will require Holdco to remove or discontinue using
any such name or ▇▇▇▇ that is affixed to converters or other items in customer
homes or properties on the Closing Date, or as are used in a similar fashion
which makes such removal or discontinuation impracticable.
Section 8.17. Non-solicitation. During the period from the
Closing Date until the first anniversary of the Closing Date, Seller shall not,
and shall cause its Subsidiaries not to, without the prior written consent of
Holdco, solicit for employment any of the Hired Employees or any employees of
Holdco with whom Seller has had any material business contact within one year of
the date hereof; provided, however, that the foregoing prohibition shall not
prevent Seller from hiring any such Hired Employee or employee of Holdco by
means of a general advertisement.
Section 8.18. Confidentiality. Except as permitted under
the terms of the License Agreement, as and from the Closing Date, Seller agrees
(i) to preserve and protect the confidentiality of any trade secrets or other
confidential information relating to the CMB Intellectual Property, Technology
and Know-How and CMB Business Records sold and delivered to Holdco hereunder as
part of the Acquired Assets (the "Confidential Information"), and (ii) not to
disclose or disseminate the Confidential Information to any third party except
as required by any Legal Requirement. For the avoidance of doubt, the foregoing
obligations shall not apply to (A) information which is generally known to the
industry or the general public other than as a result of Seller's breach of this
Agreement, or (B) information furnished to Seller by a third party on a
non-confidential basis after the date hereof who is not known by Seller after
due inquiry to be otherwise bound by a confidentiality agreement. Any material
breach of the Confidentiality Agreement, as amended, will be deemed a material
breach of this Agreement.
Section 8.19. Limitations on Seller's Representations and
Warranties. Except for the representations and warranties expressly contained in
this Agreement, Seller makes no other express or implied representation or
warranty, including, without limitation, representations or warranties as to the
condition of the Acquired Assets, their fitness for any particular purpose,
their contents, the income derived or potentially to be derived from the
Acquired Assets or the Cable Modem Business, or the expenses incurred or
potentially to be incurred in connection with the Acquired Assets or the Cable
Modem Business. Seller is not, and will not be, liable or bound in any manner by
express or implied warranties, guarantees, statements, promises, representations
or information pertaining to the Acquired Assets or the Cable Modem Business,
made or furnished by any broker, agent, employee, servant or other person
45
representing or purporting to represent Seller, unless and to the extent the
same is expressly set forth in this Agreement.
Section 8.20. Launch Fees. Notwithstanding the terms of the
Second NSA Agreement, Holdco hereby agrees that all unpaid Launch Fees as of the
date hereof, together with any Launch Fees that accrue during the period from
the date of this Agreement to the Closing Date, shall not be payable by Seller
to Holdco (except to the extent included in the Intercompany Payment set forth
on Schedule 4.02(a) and payable at Closing) unless this Agreement is terminated
or abandoned in accordance with its terms, at which time all such Launch Fees
shall be due and payable by Seller to Holdco in accordance with the terms of the
Second NSA Agreement.
Section 8.21. Termination of Charter Contracts. Holdco and
Seller agree that, effective as of the Closing, the Second NSA Agreement shall
terminate without further action on the part of Holdco or Seller, whereupon all
rights, obligations and liabilities thereunder shall be extinguished forthwith
(including any liability for breaches existing as of the Closing Date). Holdco
further agrees to use its best efforts to cause the Full Turnkey Agreement to be
terminated effective as of the Closing, without liability on the part of Seller,
Holdco or any other party thereto (including any liability for breaches existing
as of the Closing Date). Notwithstanding the foregoing, Purchase Price
adjustments with respect to payment obligations under the Second NSA Agreement
and the Full Turnkey Agreement shall be made in accordance with Sections 3.03
and 3.04. From the date of this Agreement to the Closing Date or termination
hereof, neither Holdco nor Seller will declare, claim or issue a notice of
default under the Full Turnkey Agreement or the Second NSA Agreement; provided,
that the foregoing shall not be deemed or construed as a waiver by either party
with respect to any claims or defaults under such agreements and any amendments
thereto.
Section 8.22. CSR Classes. Seller shall recruit, hire and
begin training classes at such time and for the number of full time equivalent
new customer service representative employees set forth on Schedule 8.22;
provided, that Holdco shall provide Seller with a written request to begin any
class scheduled to begin more than thirty (30) days after the date hereof and
Seller shall not be obligated to begin any such class until thirty (30) days
after delivery of such notice, notwithstanding the scheduled date of such class
on Schedule 8.22. Holdco shall include all of Seller's new employee
representatives attending such classes on the Offer Schedule and,
notwithstanding anything to the contrary in Section 8.09, shall offer employment
to such persons at identical salary levels or hourly wages to those paid to them
by Seller. Training classes shall be conducted in a manner consistent with past
practice. For purposes of determining whether Seller has complied with its
obligations under this Section 8.22, the number of full time equivalent customer
service representative employees shall include new employees of Seller that are
offered and accept employment under terms consistent with past practices and who
pass Seller's standard pre-hire tests (regardless of whether such employees
voluntarily terminate their employment before completion of such class or
classes). Subject to the foregoing, Seller shall pay Holdco $10,000 for each
full Business Day of delay (beginning on the sixth Business Day of such delay)
in the commencement of any class with the minimum number of participants
required pursuant to the terms of this Section 8.22 and each full Business Day
of any period during which classes have been early terminated (the "CSR
46
Charges"). The CSR Charges shall be payable at, and only at, the Closing as an
adjustment of the Purchase Price as contemplated in Section 3.03(a) and the
Closing Statement.
Section 8.23. Customer Care Matters. Effective as of the
Closing Date, Holdco shall assume responsibility for handling, managing and
resolving all open Customer Care Matters.
ARTICLE IX
CONDITIONS
Section 9.01. Conditions to Each Party's Obligation. The
respective obligations of Holdco, on the one hand, and Seller, on the other
hand, to effect the purchase and sale of the Acquired Assets and the assumption
of the Assumed Liabilities shall be subject to the satisfaction prior to the
Closing of the following conditions:
(a) Seller Stockholder Approval. This Agreement and the
transactions contemplated hereby shall have been approved by the stockholders of
Seller by (i) the Seller Requisite Vote and (ii) a majority of the votes
actually cast affirmatively or negatively by holders of outstanding shares of
HSA Common Stock other than Excluded Stockholders.
(b) HSR Waiting Period. Any waiting period applicable to
the Transactions under the HSR Act shall have terminated or expired.
(c) No Injunctions or Restraints. No temporary restraining
order, preliminary or permanent injunction or other legal restraint or
prohibition preventing the consummation of the transactions contemplated by this
Agreement shall be in effect.
Section 9.02. Conditions to Obligation of Holdco. The
obligation of Holdco to purchase the Acquired Assets is subject to the
satisfaction at and as of the Closing of each of the following conditions:
(a) Representations and Warranties. The representations and
warranties of Seller set forth in this Agreement shall be true and correct in
all respects without regard to any "materiality", "material" or "Material
Adverse Effect" qualifiers therein as of the date hereof and on and as of the
Closing Date with the same force and effect as if made on and as of the Closing
Date, except (i) to the extent that such representations and warranties describe
a condition on a specified time or date or are affected by the conclusion of the
transactions permitted or contemplated hereby, or (ii) where the failure of such
representations and warranties to be true and correct, individually or in the
aggregate, does not have, has not had and would not reasonably be expected to
have, a Material Adverse Effect. Holdco shall have received a certificate signed
by an authorized officer of Seller (but without personal liability thereto) to
such effect.
(b) Performance of Obligations of Seller. Subject to
Section 8.09(k), Seller shall have performed or complied in all material
respects with all obligations, conditions and covenants required to be performed
or complied with by it under this Agreement and the other Transaction Documents
to which it is a party at or prior to the Closing. Holdco shall have received a
certificate signed by an authorized officer of Seller (but without personal
47
liability thereto) to such effect and identifying (1) each executive officer or
director of Seller who is an Excluded Stockholder, (2) the number of shares of
HSA Common Stock with respect to which each such officer and director has Voting
Control (as such term is defined in the Voting Agreement) and (3) the number of
such shares that were voted in favor of the transactions contemplated by this
Agreement.
(c) Certificate of Incumbency and Resolutions. Holdco shall
have received a certificate of the President and Secretary of Seller (i) as to
the incumbency and signatures of the officers of Seller and (ii) as to the
adoption and continued effectiveness of resolutions of Seller authorizing the
transactions contemplated hereby.
(d) Required Consents. Each of the consents set forth on
Schedule 9.02(d) shall have been obtained and no such consent shall have been
revoked.
(e) No Material Adverse Effect. No damage, destruction or
loss of any of the Acquired Assets has occurred or come to exist since the date
of this Agreement, after giving effect to any insurance, which has had or would
reasonably be expected to have a Material Adverse Effect, nor, subject to
Section 8.09(k), has any event, occurrence, fact, condition, change or
development occurred or come to exist since the date of this Agreement, which
has had or would reasonably be expected to have a Material Adverse Effect.
(f) Legal Opinion. Holdco shall have received an opinion
from ▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, counsel to Seller, substantially in the form
attached as Exhibit E. In addition, the opinion from Seller's General Counsel
previously delivered to Holdco shall not have been modified or withdrawn since
the date thereof or in the alternative, Holdco shall have received an
alternative opinion from a source reasonably acceptable to Holdco.
(g) Opinions of Financial Advisors. Copies of the Lehman
Opinion and ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Opinion, together with a letter from ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
in form and substance reasonably acceptable to Holdco to the effect that Holdco
may rely on the ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Opinion, shall have been previously provided to
Holdco and neither of such opinions nor the letter from ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ regarding
reliance by Holdco on its opinion shall have been modified or withdrawn at or
before the Closing.
Section 9.03. Conditions to Obligation of Seller. The
obligation of Seller to sell, assign, transfer, convey and deliver the Acquired
Assets is subject to the satisfaction at and as of the Closing of each of the
following conditions:
(a) Representations and Warranties. The representations and
warranties of Holdco set forth in this Agreement that are qualified as to
materiality shall be true and correct and the representations and warranties of
Holdco set forth in this Agreement that are not so qualified shall be true and
correct in all material respects, in each case as of the date of this Agreement
and as of the Closing Date, with the same force and effect as made on and as of
the Closing Date. Seller shall have received a certificate signed by an
authorized officer of Holdco (but without personal liability thereto) to such
effect.
(b) Performance of Obligations of Holdco. Holdco shall have
performed or complied in all material respects with all obligations, conditions
and covenants required to be performed or complied with by it under this
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Agreement and the other Transaction Documents to which it is a party at or prior
to the Closing. Seller shall have received a certificate signed by an authorized
officer of Holdco (but without personal liability thereto) to such effect.
(c) Certificate of Incumbency and Resolutions. Seller shall
have received a certificate of the President and Secretary of Holdco (i) as to
the incumbency and signatures of the officers of Holdco and (ii) as to the
adoption and continued effectiveness of resolutions of Holdco authorizing the
transactions contemplated hereby.
(d) Legal Opinion. Seller shall have received an opinion
from Paul, Hastings, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, counsel to Holdco substantially in
the form attached as Exhibit F.
ARTICLE X
TERMINATION, AMENDMENT AND WAIVER
Section 10.01. Termination. Notwithstanding anything to the
contrary in this Agreement, this Agreement may be terminated and the
transactions contemplated hereby abandoned at any time prior to the Closing
Date, (whether before or after the approval of this Agreement by the Seller
Requisite Vote):
(a) by mutual written consent of Seller and Holdco;
(b) by Holdco or Seller if any of the conditions set forth
in Section 9.01 have become incapable of fulfillment; provided, that a party
seeking to terminate this Agreement as a result of a failure of the condition
set forth in Section 9.01(c) shall have complied in all material respects with
its obligation under Section 8.03(b);
(c) by Seller if any of the conditions set forth in Section
9.03 shall have become incapable of fulfillment, and shall not have been waived
by Seller;
(d) by Holdco if any of the conditions set forth in Section
9.02 shall have become incapable of fulfillment, and shall not have been waived
by Holdco; or
(e) by Seller or Holdco if (i) the Closing shall not have
occurred on or prior to March 31, 2002 or (ii) Seller shall have entered into a
definitive agreement providing for a Superior Proposal with a Person other than
Holdco or its subsidiaries.
Section 10.02. Notice of Termination. A party desiring to
terminate this Agreement pursuant to this Article X shall give written notice of
such termination to the other party in accordance with Section 12.01, specifying
the provision hereof pursuant to which such termination is effected.
Notwithstanding anything to the contrary in this Agreement, the right to
terminate this Agreement pursuant to Sections 10.01(c) through (e) shall not be
available to any party whose failure to fulfill its obligations or to comply
with its covenants under this Agreement in all material respects has been the
cause of, or resulted in, the failure to satisfy a condition set forth in
Sections 9.02 or 9.03 as the case may be.
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Section 10.03. Effect of Termination and Abandonment.
(a) If this Agreement is terminated or abandoned pursuant
to this Article X, this Agreement shall become void and of no further force or
effect with no liability on the part of any party hereto (or on the part of any
of its directors, officers, employees, agents, legal or financial advisors or
other representatives), except that (i) the agreements contained in this Article
X, Article XI, Article XII and in the Confidentiality Agreement, shall survive
the termination hereof and (ii) no such termination shall relieve any party of
any liability or damages resulting from any willful material breach by that
party of this Agreement.
(b) If this Agreement is terminated pursuant to (i) Section
10.01(d), (ii) Section 10.01(e)(i) (but only if termination pursuant to Section
10.01(e)(i) is a result of the negligent or willful failure of Seller to perform
any obligations required to be performed by it hereunder on or prior to the date
of termination) or (iii) Section 10.01(e)(ii), then Seller shall pay all of
Holdco's reasonable out-of-pocket expenses incurred in connection with this
Agreement, including, without limitation, all reasonable legal fees and expenses
and all fees and expenses of ▇▇▇▇▇▇▇ ▇▇▇▇▇ incurred by Holdco, together with all
fees and expenses chargeable to Seller pursuant to Section 8 of the Management
Agreement, by wire transfer or cashier's check within five (5) Business Days
after termination hereof.
(c) If this Agreement is terminated pursuant to (i) Section
10.01(c), or (ii) Section 10.01(e)(i) (but only if termination pursuant to
Section 10.01(e)(i) is a result of the negligent or willful failure of Holdco to
perform any obligations required to be performed by it hereunder on or prior to
the date of termination), then Holdco shall pay all of Seller's reasonable
out-of-pocket expenses incurred in connection with this Agreement, including all
reasonable legal fees and expenses and all fees and expenses of Lehman and
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ incurred by Seller, together with the Incremental Costs (as such
term is defined in the Management Agreement) chargeable to Holdco upon
termination of this Agreement by wire transfer or cashiers check within five (5)
Business Days after termination hereof.
Section 10.04. Amendments. This Agreement may be amended by
action taken by Seller and Holdco at any time before or after approval of this
Agreement by the Seller Requisite Vote but, after any such approval, no
amendment shall be made which requires the approval of Seller's stockholders
under applicable law without such approval. This Agreement may not be amended
except by an instrument in writing signed on behalf of the parties hereto.
Section 10.05. Extension; Waiver. At any time prior to the
Closing Date, each party hereto may (i) extend the time for the performance of
any of the obligations or other acts of the other party, (ii) waive any
inaccuracies in the representations and warranties of the other party contained
herein or in any document, certificate or writing delivered pursuant hereto or
(iii) waive compliance by the other party with any of the agreements or
conditions contained herein (in whole or in part). Any agreement on the part of
either party hereto to any such extension or waiver shall be valid only if set
forth in an instrument in writing signed on behalf of such party. The failure of
either party hereto to assert any of its rights hereunder shall not constitute a
waiver of such rights.
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ARTICLE XI
INDEMNIFICATION
Section 11.01. Indemnification by Seller. Subject to the
provisions of this Article XI, Seller shall indemnify, defend and hold harmless
Holdco, its Affiliates, and their respective officers, directors, employees,
stockholders, agents and representatives (collectively, "Holdco Indemnitees")
from and against all claims (including, without limitation, claims by third
parties) and compensatory damages (including, without limitation, settlement
costs and any expenses, including reasonable out-of-pocket legal and accounting
expenses incurred in connection with investigating or defending any actions or
threatened actions) (collectively, "Damages") arising out of or in connection
with (a) the breach of any representation or warranty made by Seller in this
Agreement or any other Transaction Document (without regard to any materiality
or similar qualifications contained therein), (b) any breach of any covenant,
agreement or obligation of Seller contained in this Agreement or any other
Transaction Document, (c) the Excluded Liabilities, or (d) the operation of the
Cable Modem Business prior to Closing. Notwithstanding the foregoing, Seller
shall have no obligation to indemnify, defend and hold harmless any Holdco
Indemnitee for any damages (including with respect to Taxes) which a Holdco
Indemnitee incurred in its capacity as a stockholder of Seller. The foregoing
obligation of Seller to indemnify the Holdco Indemnitees shall be subject to and
limited by the following qualifications:
(i) Each of the covenants of Seller contained in Sections
7.01, 7.02, 8.01, 8.02, 8.03, 8.05, 8.06, 8.08, 8.09(d), 8.11 and 8.22 and
representations and warranties made by Seller in this Agreement or in any of the
other Transaction Documents shall survive for a period of eighteen (18) months
after the Closing Date (unless a claim shall have been commenced prior to such
time in which case the applicable covenants, representations and warranties
shall survive with respect to such claim until such claim has been resolved, and
thereafter all such covenants, representations and warranties shall be
extinguished), except that (1) the representations and warranties contained in
Section 5.16 will survive until 90 days after the expiration of the applicable
statute of limitations, (2) the representations and warranties contained in
Sections 5.14 and 5.18 will survive for a period of twenty-four (24) months
after the Closing Date and (3) the representations and warranties contained in
Sections 5.13(a) and 5.15 (but only, in Section 5.15, with respect to title to
the CMB Intellectual Property and Technology and Know-How) will survive in
perpetuity. The extended survival periods referenced in the preceding sentence
shall hereinafter be referred to as the "extended survival periods". The
covenants (other than those described in the first sentence of this clause (i))
and agreements made by the Seller in this Agreement or in any of the other
Transaction Documents shall survive the Closing and will continue in full force
and effect without limitation.
(ii) Subject to Section 11.01(iii) below, Seller shall have
no liability to the Holdco Indemnitee on or account of any Damages provided in
Section 11.01(a) or (b) (to the extent the matters in Section 11.01(b) relate to
covenants described in the first sentence of Section 11.01(i)) unless and until
such damages in the aggregate exceed Two Hundred Fifty Thousand Dollars
($250,000) (the "Threshold Amount"), in which case the Holdco Indemnitees shall
be entitled to Damages from the first dollar of such damages. Subject to Section
11.01(iii), the total liability of Seller for its indemnity obligation under
Sections 11.01(a) and 11.01(b) insofar as it includes the covenants described in
the first sentence of Section 11.01(i), shall be limited in all respects to, and
51
shall be payable solely from, and to the extent of, the Indemnification Holdback
and upon the occurrence of an event to which Seller's indemnity obligations
under such sections applies, the Holdco Indemnitees' sole and exclusive remedy
shall be recourse to the Indemnification Holdback.
(iii) With respect to any indemnification sought for
Damages arising out of (1) a breach of any representation or warranty subject to
an extended survival period pursuant to Section 11.01(i); (2) any Excluded
Liability; (3) the operation of the Cable Modem Business prior to the Closing
Date, (4) a breach of any covenants, agreements or obligations of Seller other
than those described in the first sentence of Section 11.01(i); or (5) actual
common law fraud (collectively, the "Excluded Damages"), such indemnification
(x) shall not be subject to the Threshold Amount set forth in Section 11.01(ii)
above and (y) shall neither be paid from, nor subject to the limits of, the
Indemnification Holdback; provided, however that the Holdco Indemnitees may
elect in its discretion to proceed against the Indemnification Holdback for
indemnification of all or any portion of the Excluded Damages.
Section 11.02. Indemnification by Holdco. Subject to the
provisions of this Article XI, Holdco shall indemnify, defend and hold harmless
Seller, its Affiliates and their respective officers, directors, employees,
stockholders, agents and representatives (collectively, "Seller Indemnitees")
from and against any Damages arising out of or in connection with (a) the breach
of any representation or warranty made by Holdco in this Agreement or any other
Transaction Document (without regard to any materiality or similar
qualifications contained therein), (b) any breach of any covenant, agreement or
obligation of Holdco contained in this Agreement or any other Transaction
Document, (c) the Assumed Liabilities or (d) the operation of the Cable Modem
Business from and after the Closing. Each of the covenants of Holdco contained
in Sections 8.02, 8.03, 8.05, 8.06 and 8.11 and representations and warranties
made by Holdco in this Agreement or in any of the other Transaction Documents
shall survive for a period of eighteen (18) months after the Closing Date
(unless a claim shall have been commenced prior to such time in which case the
applicable covenants, representations and warranties shall survive with respect
to such claim until such claim has been resolved, and thereafter all such
covenants, representations and warranties shall be extinguished). The covenants
(other than those described in the preceding sentence) and agreements made by
Holdco in this Agreement or in any of the other Transaction Documents shall
survive the Closing and will continue in full force and effect without
limitation. Holdco shall have no liability to Seller on or account of any
Damages provided in Sections 11.02(a) or (b) (to the extent the matters in
Section 11.02(b) relate to covenants described in the second sentence of this
Section 11.02) unless and until such damages in the aggregate exceed the
Threshold Amount, in which case Seller shall be entitled to Damages from the
first dollar of such damages. The total liability of Holdco for its indemnity
obligation under Sections 11.02(a) and 11.02(b) insofar as it includes the
covenants contained described in the second sentence of this Section 11.02,
shall be limited in all respects to an amount equal to the original amount of
the Indemnification Holdback. Notwithstanding the foregoing, Holdco's
indemnification obligations shall not be subject to the Threshold Amount or the
limits on total liability set forth above with respect to any indemnification
sought for Damages arising out of (1) any Assumed Liability; (2) a breach of any
covenants, agreements or obligations of Holdco other than those described in the
second sentence of this Section 11.02, (3) actual common law fraud, (4) any
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Liability for Taxes arising under Section 8.15(a) or Taxes apportioned to Holdco
pursuant to Section 8.15(b), or (5) the operation of the Cable Modem Business
from and after the Closing Date.
Section 11.03. Exclusive Remedy; No Consequential Damages.
Seller and Holdco acknowledge and agree that, from and after the Closing, their
sole and exclusive remedy with respect to any and all claims relating to the
subject matter of this Agreement shall be pursuant to the indemnification
provisions set forth in this Article XI, except in the case of actual common law
fraud. Notwithstanding anything to the contrary in this Agreement, no
indemnification shall be provided for under this Article XI in respect of any
indirect or consequential damages. The maximum amount of any indemnification
payable hereunder by any indemnifying party shall be limited to an amount equal
to the Cash Amount.
Section 11.04. Characterization of Indemnification and
Other Payments. All indemnity and other payments made under this Agreement shall
be treated for all Tax purposes as adjustments to the Purchase Price.
Section 11.05. Damages Net of Insurance; Tax Benefits. The
amount of any Damages for which indemnification is payable under this Article
XI, shall be (i) net of any amounts recovered or recoverable by the Indemnitee
(as defined below) under insurance policies with respect to such Damages, (ii)
net of any amounts recovered by the Indemnitee from any third Person (by
contribution, indemnification or otherwise) with respect to such Damages, and
(iii) adjusted to take account of any net Tax effect realized by the Indemnitee
arising from the incurrence or payment of any such Damages and the entitlement
to or the receipt of any indemnification payment.
Section 11.06. Procedures Relating to Third Party Claims.
(a) Notice of Third Party Claims. A Person entitled to any
indemnification provided for under this Agreement in respect of, arising out of,
or involving a claim made by any third party (a "Third Party Claim") against
such Person (the "Indemnitee"), shall notify the Person from whom
indemnification is sought (the "Indemnitor") in writing, and in reasonable
detail, of the Third Party Claim promptly after receipt by such Indemnitee of
written notice of the Third Party Claim. The failure to give such notification
shall not affect the indemnification provided hereunder except to the extent the
Indemnitor shall have been materially prejudiced as a result of such failure.
(b) Assumption of Defense of Third Party Claims by
Indemnitor. If any indemnification obligation hereunder shall arise from a Third
Party Claim, the Indemnitor shall have the right and Indemnitee shall permit the
Indemnitor to participate in the defense thereof and, if it so chooses, to
assume the defense of any such claim or any litigation resulting from such claim
unless the Indemnitee provides a written release to Indemnitor of its
indemnification obligation. If the Indemnitor assumes the defense of such claim
or litigation, the Indemnitor shall actively pursue the defense thereof in good
faith. The Indemnitor shall not, in the defense of such claim or litigation,
unless the Indemnitee expressly consents in writing (which consent will not be
unreasonably withheld), consent to entry of any judgment or enter into any
settlement unless such judgment or settlement provides only for monetary damages
to be paid by the Indemnitor and includes as an unconditional term thereof the
53
giving by the claimant or the plaintiff to the Indemnitee of a release from all
liability in respect of such claim or litigation. In cases where the Indemnitor
has, by written instrument delivered to the Indemnitee, assumed the defense or a
settlement with respect to a claim for which indemnity is being sought, the
Indemnitor will not be liable to the Indemnitee for any legal fees subsequently
incurred by the Indemnitee in connection with the defense thereof and the
Indemnitor shall be entitled to assume the defense or settlement thereof with
counsel of its own choosing, which counsel shall be reasonably satisfactory to
the Indemnitee, provided that the Indemnitee (and its counsel) shall be entitled
to continue to participate at its own cost in any such action or proceeding or
in any negotiations or proceedings to settle or otherwise eliminate any claim
for which indemnification is being sought, it being understood that the
Indemnitor shall control such defense. If the Indemnitor chooses to defend or
prosecute a Third Party Claim, all the parties hereto shall reasonably cooperate
in the defense or prosecution thereof. Such cooperation shall include the
retention and (upon the Indemnitor's request) the provision to the Indemnitor of
records and information which are reasonably relevant to such Third Party Claim,
and making employees available on a mutually convenient basis to provide
additional information and explanation of any material provided hereunder.
(c) Assumption of Defense of Third Party Claims by
Indemnitee. Notwithstanding the foregoing, if (i) the Indemnitor does not
promptly assume the defense of any Third Party Claim as provided in this Section
11.06(b) above (other than during any period in which the Indemnitee shall have
failed to give notice of the Third Party Claim as provided above) or (ii) the
Indemnitee reasonably concludes that there may be legal defenses available to it
that are different from or in addition to those available to the Indemnitor, or
that another conflict of interest exists or is likely to occur in the defense of
such Third Party Claim, then in any of such cases, the Indemnitee may assume
primary responsibility for the defense or settlement of the Third Party Claim,
and may select legal counsel reasonably acceptable to the Indemnitor to conduct
the defense of such claims. If the Indemnitee assumes and undertakes a defense
or settlement of a Third Party Claim in accordance with the immediately
preceding sentence, the Indemnitor shall be liable to the Indemnitee for any
reasonable attorneys' fees and expenses incurred by the Indemnitee in connection
with such matter, after receiving notice from the Indemnitee to the effect that
it intends to take advantage of the provisions set forth in the immediately
preceding sentence; provided, however, that the Indemnitor shall continue to
have the right to participate in the defense of any such Third Party Claim and,
if it so chooses, to employ separate counsel in connection therewith, but the
fees, costs, and expenses related to such participation shall be at the expense
of and paid by the Indemnitor. In the event the Indemnitee assumes primary
responsibility for the defense of the Third Party Claim as provided in the first
sentence of this Section 11.06(c), the Indemnitor shall continue to pay the
legal fees and expenses of counsel for the Indemnitee and the Indemnitor shall
not have the right to direct the defense of such Third Party Claim on behalf of
the Indemnitee. The Indemnitee shall have the right, with the consent of the
Indemnitor (which consent shall not be unreasonably withheld), to settle or
compromise any such Third Party Claim on terms satisfactory to it.
54
Section 11.07. Indemnification Holdback.
(a) Establishment of the Indemnification Holdback. At the
Closing and without any act of Seller, cash equal to the Indemnification
Holdback will be held back from the Purchase Price by Holdco pursuant to Section
3.02(b), and not delivered to Seller, such amount to be governed by the terms
set forth herein.
(b) Recourse to the Indemnification Holdback. The
Indemnification Holdback shall be available to compensate Holdco Indemnitees for
any and all Damages to which they are entitled to indemnification under this
Article XI.
(c) Distribution of Indemnification Holdback.
(i) At 5:00 p.m., Eastern Time, on the twelve (12) month
anniversary of the Closing Date (the "First Release Date"), Holdco shall release
from the Indemnification Holdback and shall pay to Seller cash in an amount
equal to the First Release Amount minus the aggregate amount (determined in the
reasonable judgement of Holdco) of any pending claims for Damages made by Holdco
on or before the First Release Date. As claims for Damages made on or before the
First Release Date are resolved, Holdco shall pay to Seller the amount by which
(1) the remaining portion of the First Release Amount withheld pursuant to the
preceding sentence exceeds (2) the aggregate amount of any claims for Damages
made on or before the First Release Date which are pending at such time. The
term "First Release Amount" means Two Million Dollars ($2,000,000) minus the
aggregate amount of any reduction in the Indemnification Holdback made by Holdco
pursuant to Section 11.07(d) on or before the First Release Date.
(ii) At 5:00 p.m., Eastern Time, on the eighteen (18) month
anniversary of the Closing Date (the "Second Release Date"), any amount
remaining in the Indemnification Holdback (after reductions made by Holdco
pursuant to Sections 11.07(c)(i) and 11.07(d)) that is not subject to pending
claims for Damages made by Holdco, shall be released from the Indemnification
Holdback and paid to Seller in cash. As any such pending claims for Damages are
resolved, Holdco shall deliver to Seller the amount by which (1) the remaining
portion of the Indemnification Holdback, if any, exceeds (2) the aggregate
amount of any claims for Damages which are pending at such time.
(iii) When any amounts are paid to Seller pursuant to
Sections 11.07(c)(i) and (ii), Holdco shall also pay Seller interest on such
amounts from the Closing Date to the payment date at the prime rate as reported
in The Wall Street Journal from time to time during the period that Holdco has
held such amounts. Any such amounts payable to Seller under this Section 11.07
shall be paid by Holdco in immediately available funds by wire transfer or
cashiers check.
(d) Claims Upon Indemnification Holdback. Upon delivery by
Holdco to Seller of a certificate signed by any officer of Holdco (an "Officer's
Certificate"): (i) stating that a Holdco Indemnitee has paid Damages hereunder,
and (ii) specifying in reasonable detail the individual items of Damages
included in the amount so stated, the date each such item was paid and the basis
for payment of such Damages, Holdco shall, subject to the provisions of Section
55
11.07(c) hereof, be entitled to reduce the amount of the Indemnification
Holdback cash in an amount equal to such Damages.
(e) Objections to Claims. Holdco shall not reduce the
amount of the Indemnification Holdback pursuant to Section 11.07(d) hereof
unless (i) Holdco shall have received written authorization from Seller to make
such reduction, or (ii) thirty (30) days shall have elapsed from the date of
delivery of the Officer's Certificate to Seller. After such authorization or
expiration or such thirty (30) day period, Holdco shall be entitled to reduce
the amount of the Indemnification Holdback in accordance with Section 11.07(d)
hereof, unless Seller shall object in a written statement to the claim made in
the Officer's Certificate, and such statement shall have been delivered to
Holdco prior to the expiration of such thirty (30) day period (in which case
Holdco's right to reduce the amount of the Indemnification Holdback shall be
determined under Section 11.07(f) below).
(f) Resolution of Conflicts. In the event that Seller
objects in writing to any claim or claims made in any Officer's Certificate
within thirty (30) days of receipt thereof, Seller and Holdco shall attempt
promptly and in good faith to agree upon the rights of the respective parties
with respect to each of such claims. If Seller and Holdco should so agree, a
memorandum setting forth such agreement shall be prepared and signed by both
parties. Holdco shall be entitled to rely on any such memorandum to remove cash
from the Indemnification Holdback in accordance with the terms thereof. If no
such agreement can be reached after good faith negotiation, Holdco shall be
entitled to make such reduction; provided that Seller retains the right to
contest such reduction in a proceeding in any court having competent
jurisdiction and located in Delaware or New York.
ARTICLE XII
GENERAL PROVISIONS
Section 12.01. Notices. All notices, requests and other
communications to any party hereunder shall be in writing (including facsimile
or similar writing) and shall be given:
(a) if to Holdco, to:
Charter Communications Holding Company, LLC
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇. ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇
Senior Vice President,
General Counsel and Secretary
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Paul, Hastings, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
56
(b) if to Seller, to:
High Speed Access Corp.
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Chrysalis Ventures, LLC
1650 National City Tower, ▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
and to:
Weil, Gotshal & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
or such other address or facsimile number as such party may hereafter specify
for the purpose by written notice to the other parties hereto. Each such notice,
request or other communication shall be effective (i) if given by facsimile,
when such facsimile is transmitted to the fax number specified in this Section
12.01 and the appropriate fax confirmation is received or (ii) if given by any
other means, when delivered at the address specified in this Section 12.01.
Section 12.02. Entire Agreement. This Agreement and the
other Transaction Documents constitute the entire agreement among the parties
with respect to the subject matter hereof and thereof and supersede all prior
agreements and understandings, both written and oral, between the parties with
respect to such subject matter.
Section 12.03. Severability. If any provision of this
Agreement (or any portion thereof) or the application of any such provision (or
any portion thereof) to any Person or circumstance is held by a court of
competent jurisdiction to be invalid, illegal or unenforceable in any respect,
(i) such invalidity, illegality or unenforceability shall not affect any other
provision hereof (or the remaining portion thereof) or the application of such
provision to any other persons or circumstances, and (ii) the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner to
the end that the transactions contemplated hereby are fulfilled to the extent
possible.
Section 12.04. Third Party Beneficiaries. Neither this
Agreement, nor the Confidentiality Agreement nor any other agreement
57
contemplated hereby or thereby (or any provision hereof or thereof) is intended
to confer any rights or remedies on any Person other than the parties hereto or
thereto.
Section 12.05. Assignment. Neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any party
hereto without the prior written consent of the other party, except that Holdco
may assign to any Affiliates of Holdco the right to acquire part or all of the
Acquired Assets hereunder; provided, however, that any such assignment shall not
release Holdco from any obligation or liability hereunder (including any right
or obligation under Article XI). Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns.
Section 12.06. Specific Performance. The parties recognize
in the event that Seller should refuse to perform under the provisions of this
Agreement, monetary damages alone will not be adequate. Holdco shall therefore
each be entitled, in addition to any other remedies that may be available,
including monetary damages, to obtain specific performance of the terms of this
Agreement. In the event of any action to enforce this Agreement specifically,
Seller waives the defense that there is an adequate remedy at law.
Section 12.07. Governing Law. This Agreement shall be
governed by, and construed in accordance with, the laws of the State of New York
applicable to contracts made and to be performed entirely in the State of New
York, regardless of the Legal Requirement that might otherwise govern under
applicable principles of conflict of laws.
Section 12.08. Waiver of Jury Trial. Each of the parties
hereto hereby irrevocably waives any and all right to trial by jury in any
action or proceeding in connection with this Agreement or any transaction
contemplated hereby.
Section 12.09. Exhibits and Schedules. The Exhibits and
Schedules attached to and delivered with this Agreement are a part of this
Agreement the same as if fully set forth herein and all references herein to any
Section of this Agreement shall be deemed to include a reference to any Schedule
named therein.
Section 12.10. No Strict Construction. Holdco and Seller
hereby acknowledge that (i) Holdco and Seller jointly and equally participated
in the drafting of this Agreement and all other agreements contemplated hereby,
(ii) both Holdco and Seller have been adequately represented and advised by
legal counsel with respect to this Agreement and the transactions contemplated
hereby, and (iii) no presumption shall be made that any provision of this
Agreement shall be construed against either party by reason of any role in the
drafting of this Agreement or any other agreement contemplated hereby.
Section 12.11. Counterparts; Effectiveness. This Agreement
may be signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective when each party hereto shall
have received counterparts hereof signed by all of the other parties hereto.
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IN WITNESS WHEREOF, the parties have caused this Agreement
to be signed by their respective officers thereunto duly authorized, all as of
the date first written above.
HIGH SPEED ACCESS CORP.
By: /s/ ▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇
Title: President & CEO
CHARTER COMMUNICATIONS HOLDING COMPANY, LLC
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: Senior Vice President,
General Counsel & Secretary
59