EXHIBIT 10.4
ASSET PURCHASE AGREEMENT
BETWEEN
NORTHLAND CABLE TELEVISION, INC.
AND
CEQUEL III COMMUNICATIONS I, LLC
DATED
FEBRUARY 2, 2005
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT is dated February 2, 2005 by and
between and NORTHLAND CABLE TELEVISION, INC., a Washington corporation ("SELLER"
or "NCTV"), and CEQUEL III COMMUNICATIONS I, LLC, a Delaware limited liability
company ("BUYER").
RECITALS:
A. Seller owns and operates cable television system serving
certain communities in Texas (as set forth more particularly in Schedule 1.28)
and,
B. Seller desires to sell, and Buyer wishes to buy,
substantially all of Seller's assets used in the operation of the System, as
such term is defined in Section 1.28, and the business related thereto
(collectively the "BROADBAND BUSINESS") for the price and on the terms and
conditions set forth in this Agreement.
AGREEMENTS:
In consideration of the above recitals and the covenants and
agreements contained herein, Buyer and Seller agree as follows:
1. DEFINED TERMS
The following terms shall have the following meanings in this
Agreement:
1.1. "ACCOUNTS RECEIVABLE" means the rights of Seller to payment for
services rendered by Seller (including, without limitation, those billed to
subscribers of the System and those for services and advertising time provided
by Seller) which have been unpaid as of the Closing Date.
1.2. "AGREEMENT" means this Asset Purchase Agreement.
1.3. "ASSETS" means all the tangible and intangible assets owned by Seller
and used in connection with the conduct of the business or operations of the
Systems, but excluding those specified in Section 2.2.
1.4 "CABLE ACT" means Title VI of the Communications Act of 1934, as
amended, 47 U.S.C. Section 151 et -- seq., and all other provisions of the Cable
Communications Policy Act of 1984, Pub. L. No. 98-549, and the Cable Television
Consumer Protection and Competition Act of 1992, Pub. L. No. 102-385, and the
Telecommunications Act of 1996, Pub. L. No. 104-104, as such statutes may be
amended from time to time, and the rules and regulations promulgated thereunder,
as in effect from time to time.
1.5. "CLOSING" means the consummation of the transactions contemplated by
this Agreement in accordance with the provisions of Section 7.
1.6. "CLOSING DATE" means the date of the Closing specified in Section 7.
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1.7. "CODE" means the Internal Revenue Code of 1986, as amended, and the
regulations thereunder, or any subsequent legislative enactment thereof, as in
effect from time to time.
1.8. "COMPENSATION ARRANGEMENT" means any written plan or compensation
arrangement other than an Employee Plan or a Multi-employer Plan that provides
to employees of Seller employed at the System any compensation or other
benefits, whether deferred or not, in excess of base salary or wages and
excluding overtime pay, including, but not limited to, any bonus or incentive
plan, deferred compensation arrangement, stock purchase plan, severance pay plan
and any other perquisites and employee fringe benefit plan.
1.9. "CONSENTS" means the consents, permits or approvals of governmental
authorities and other third parties (including Seller's lenders) listed in
Schedule 3.8.
1.10. "CONTRACTS" means the agreements listed in Schedule 3.7,
subscription agreements with customers for the cable services provided by the
System, miscellaneous service agreements terminable by Seller at will without
penalty, agreements involving liabilities less than or equal to $10,000 (in the
aggregate), agreements involving material non-monetary obligations, and
agreements entered into by Seller in the ordinary course of business of the
System between the date hereof and the Closing Date in accordance with the
provisions hereof.
1.11. "EMPLOYEE PLAN" means any written pension, retirement,
profit-sharing, deferred compensation, vacation, severance, bonus, incentive,
medical, vision, dental, disability, life insurance or any other employee
benefit plan as defined in Section 3(3) of ERISA (other than a Multi-employer
Plan) to which Seller contributes or which Seller sponsors or maintains or by
which Seller otherwise is bound, that provides benefits to employees of Seller
employed at the System.
1.12. "ENVIRONMENTAL LAWS" shall mean the following: (a) Clean Air Act (42
U.S.C. Section 7401, et seq.); (b) Clean Water Act (33 U.S.C. Section 1251 et
seq.); (c) Resource Conservation and Recovery Act (42 U.S.C. Section 6901, et
seq.); (d) Comprehensive Environmental Response, Compensation and Liability Act
of 1980 (42 U.S.C. Section 9601, et seq.; (e) Safe Drinking Water Act (42 U.S.C.
Section 300f et seq.); (f) Toxic Substances Control Act (15 U.S.C. Section 2601,
et seq.); (g) Rivers and Harbors Act of 1899 (33 U.S.C. Section 401, et seq.);
(h) Endangered Species Act of 1973 (16 U.S.C. Section 1531, et seq.); (i)
Occupational Safety and Health Act of 1970 (29 U.S.C. Section 651, et seq.);and
(j) other federal, state or local laws related to the environment; all as
amended.
1.13. "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended, and the regulations thereunder, as in effect from time to time.
1.14. "FAA" means the Federal Aviation Administration.
1.15. "FCC" means the Federal Communications Commission.
1.16. "FRANCHISES" means all franchises, and franchise applications (if
any), granted to Seller by any Franchising Authorities, including all amendments
thereto and modifications thereof.
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1.17. "FRANCHISING AUTHORITIES" means all governmental authorities which
have issued franchises relating to the operation of the System or before which
are pending any franchise applications filed by Seller relating to the operation
of the System.
1.18 RESERVED.
1.19 "KNOWLEDGE OF SELLER" means the actual knowledge of a particular
matter of certain of Seller's executive officers or on-site general manager of
the System, each of whom is named on Schedule 1.19.
1.20. "MATERIAL ADVERSE EFFECT" means a material adverse effect on the
operations, assets or financial condition of any of the System, other than (a)
matters affecting the cable television industry generally (including, without
limitation, legislative, regulatory or litigation matters), (b) matters relating
to or arising from local or national economic conditions (including, without
limitation, financial and capital markets) and (c) any changes resulting from or
relating to the taking of any action contemplated by this Agreement.
1.21. "MULTI-EMPLOYER PLAN" means a plan, as defined in ERISA Section
3(37) or Section 4001(a)(3), to which Seller or any trade or business which
would be considered a single employer with Seller under Section 4001(b)(1) of
ERISA contributed, contributes or is required to contribute that provides
benefits to employees of Seller employed at the System.
1.22. "PERMITTED ENCUMBRANCES" means any of the following liens or
encumbrances: (a) landlord's liens and liens for current taxes, assessments and
governmental charges not yet due or being contested in good faith by appropriate
proceedings; (b) statutory liens or other encumbrances that are minor or
technical defects in title that do not individually or in the aggregate
materially affect the value, marketability or utility of the Assets as presently
utilized; (c) such liens, liabilities or encumbrances as are Assumed
Liabilities; (d) leased interests in property leased to others and disclosed on
Schedule 3.5; (e) restrictions set forth in, or rights granted to Franchising
Authorities as set forth in, the Franchises or applicable laws relating thereto;
(f) zoning, building or similar restrictions, easements, rights-of-way,
reservations of rights, conditions or other restrictions relating to or
affecting the Real Property, that do not materially interfere with the use of
such Real Property in the operation of the Systems as presently conducted; (g)
as to Real Property, all matters disclosed in Schedule 3.5 other than liens and
encumbrances referred to in clause (h) of this Section 1.22; and (h) any other
liens or encumbrances that are identified in Section 3.5 that relate to
liabilities and obligations that are to be discharged in full at Closing or that
will be removed prior to or at Closing.
1.23. "PERSONAL PROPERTY" means all of the machinery, equipment, tools,
vehicles, furniture, leasehold improvements, office equipment, plant, inventory,
spare parts, supplies and other tangible and intangible personal property,
including, without limitation, the Franchises, the Contracts and the Accounts
Receivable, that are owned or leased by Seller and used, useful or held for use
as of the date hereof in the conduct of the business or operations of the
System, plus such additions thereto and deletions therefrom arising in the
ordinary course of business and permitted by this Agreement between the date
hereof and the Closing Date.
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1.24. "REAL PROPERTY" means all of the real property interests of Seller,
including, without limitation, fee interests in real estate (together with the
buildings and other improvements located thereon), leasehold interests in real
estate, easements, licenses, rights to access, rights-of-way and other real
property interests that are (a) leased by Seller and used as of the date hereof
in the business or operations of the System, or (b) owned by Seller and used as
of the date hereof in the business or operations of the System, plus such
additions thereto and deletions therefrom arising in the ordinary course of
business and permitted by this Agreement between the date hereof and the Closing
Date.
1.25. "RELATED AGREEMENT" means the Asset Purchase Agreement entered into
on the date of this Agreement between Buyer and Northland Cable Properties Seven
Limited Partnership for the purchase of cable system in Texas serving Brenham.
1.26. "SUBSCRIBER" means an active customer (as hereinafter defined) of
the System who subscribes for basic cable service in a single household
(excluding "second connections" and any account duplication), commercial
establishment or multiple dwelling unit ("MDU") (including motels and hotels)
and has paid the applicable full non-discounted rate for at least one (1)
month's basic cable service (including any applicable deposit and installation
charges); provided, that the number of customers in an MDU or commercial
establishment that obtains service on a "bulk-rate" basis shall be determined by
dividing the gross bulk-rate revenue for basic cable service or expanded basic
service (but not revenues from tier or premium services, installation or
converter rental) attributable to such MDU or commercial establishment in the
System by Seller's standard rate for that level of basic service or expanded
basic, as applicable, in the System. For purposes hereof, an "active customer"
means a customer whose account does not have an outstanding balance (other than
an amount of $5.00 or less) more than sixty (60) days past due (with an account
being past due one day after the first day of the period to which the applicable
billing relates), does not have a disconnect pending, has not been obtained
during the twelve months proceeding any relevant date of computation of the
number of subscribers by offers or promotions, other than offers or promotions
listed in Schedule 5.1(d) ,or does not come within the definition of
"Subscriber" because such account (or any part thereof) has been compromised or
written off other than in the ordinary course consistent with past practices.
1.27 RESERVED.
1.28. "SYSTEM" means that cable television system owned and operated by
Seller and listed by headend and community on Schedule 1.28.
1.29 RESERVED.
1.30. LIST OF ADDITIONAL DEFINITIONS. The following is a list of some
additional terms used in this Agreement and a reference to the Section hereof in
which such term is defined:
Term Section
- ------------------- ---------
Assumed Liabilities 2.6
Broadband Business Recital B
Buyer's 401(k) Plan 5.10.5
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Claimant 9.4.1
Copyright Act 3.18.2
Deductible 9.5.1
Deposit 2.3
Escrow Agent 2.3
Escrow Agreement 2.3
Excluded Assets 2.2
Final Report 2.5.7
Floor 6.2.4
Force Majeure Event 2.5.5
Holdback 2.4.2
Indemnifying Party 9.4.1
MDU 1.26
Monthly Reporting Date 5.17
Preliminary Report 2.5.6
Purchase Price 2.4
Seller's 401(k) Plan 5.10.5
Seller's Financial Statements 3.10
Taxes 3.13
Transaction Document 10.16.1
Transferred Employees 5.10.1
2. SALE AND PURCHASE OF ASSETS
2.1. AGREEMENT TO SELL AND PURCHASE. Subject to the terms and conditions
set forth in this Agreement, Seller hereby agrees to sell, transfer and deliver
to Buyer on the Closing Date, and Buyer agrees to purchase from Seller on the
Closing Date, all of the Assets, free and clear of any claims, liabilities,
mortgages, liens, pledges, conditions, charges or encumbrances of any nature
whatsoever except for Permitted Encumbrances, which Assets include the
following:
2.1.1. the Personal Property;
2.1.2. the Real Property;
2.1.3. the Franchises;
2.1.4. the Contracts;
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2.1.5. the Accounts Receivable;
2.1.6. all of Seller's technical information and data, machinery and
equipment warranties, maps, computer discs and tapes, plans, diagrams,
blueprints and schematics, including filings with the Franchising Authorities
and the FCC relating to the System (other than the materials described in
Section 2.2 hereof);
2.1.7 all payments and sums deposited or advanced by Seller to a
landlord, utility, governmental agency or any other party as a security deposit
or in exchange for initiation of a service, other than performance bonds or
payments received related to programming;
2.1.8 subject to Section 2.2, all books and records relating to the
business or operations of the Systems, customer records and all records required
by the Franchising Authorities to be kept, subject to the right of Seller to
have such books and records made available to Seller for a period of three years
from the Closing Date; and
2.1.9. the going concern value and, subject to Section 2.2.5, any of
Seller's other intangible assets, if any, with respect to the System.
2.2. EXCLUDED ASSETS. The Assets shall exclude the following assets (the
"Excluded Assets"):
2.2.1. Seller's cash on hand, (other than petty cash for which an
adjustment shall be made under Section 2.5), as of the Closing Date and all
other cash in any of Seller's bank or savings accounts, including, without
limitation, customer advance payments and deposits; any and all bonds, surety
instruments, insurance policies and all rights and claims thereunder, letters of
credit or other similar items and any cash surrender value in regard thereto,
and any stocks, bonds, certificates of deposit and similar investments;
2.2.2. Any books and records that Seller is required by law to
retain and any correspondence, memoranda, books of account, tax reports and
returns and the like related to the System other than those described in Section
2.1.8, subject to the right of Buyer to have access to and to copy for a
reasonable period, not to exceed three years from the Closing Date, and Seller's
corporate books and records and other books and records related to internal
corporate matters and financial relationships with Seller's lenders and
affiliates;
2.2.3. Any claims, rights and interest in and to any refunds of
federal, state or local franchise, income or other taxes or fees of any nature
whatsoever for periods prior to the Closing Date including, without limitation,
fees paid to the U.S. Copyright Office or any causes of action relating to such
refunds;
2.2.4. All programming agreements and retransmission consent
agreements of Seller, including those relating to or benefiting the System.
2.2.5. All trademarks, trade names, service marks, service names,
logos and similar proprietary rights of Seller or its affiliates, whether or not
used in the business of the System;
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2.2.6. Except as specifically set forth herein, any Employee Plan,
Compensation Arrangement or Multi-employer Plan;
2.2.7. All rights to receive fees or services from any affiliate of
Seller other than fees for services, if any, rendered by Buyer after Closing;
2.2.8 Any and all assets and rights of Seller unrelated to the
System;
2.2.9. All equipment, software, licenses and agreements related to
Seller's customer billing system;
2.2.10. Any contracts, agreements or other arrangements between
Seller and any affiliate of Seller;
2.2.11 Those choses in action of Seller whether or not related to
the System of the type set forth on Schedule 2.2.11, which shall exclude such
choses in action that relate solely to the System and which accrue after
Closing; and
2.2.12. The assets listed on Schedule 2.2.12.
2.3. EARNEST MONEY DEPOSIT. Upon execution and delivery of this Agreement
by Seller and Buyer, Buyer shall deliver to U.S. Bank National Association (the
"ESCROW AGENT") the amount of TWENTY-FIVE THOUSAND DOLLARS AND 00/100
($25,000.00) (the "DEPOSIT"), to secure the obligations of Buyer to close under
this Agreement. The Deposit shall be held in an account and applied pursuant to
the terms of that certain Escrow Agreement, substantially in the form attached
hereto as Exhibit A ("ESCROW AGREEMENT"), to be executed concurrently herewith
by Buyer, Seller and Escrow Agent. Upon the Closing, the amount of the Deposit,
together with interest thereon, shall be delivered to Seller and credited
against the Purchase Price. In the event of a termination of this Agreement, the
Deposit together with interest therein shall be paid in accordance with Section
8.2 hereof.
2.4. PURCHASE PRICE. The purchase price for the Assets shall be ONE
MILLION THREE HUNDRED SIXTEEN THOUSAND ONE HUNDRED DOLLARS AND 00/100
($1,316,100.00) (the "PURCHASE PRICE"), and shall be paid by Buyer to Seller at
the Closing as follows:
2.4.1. Release to Seller of the Deposit together with the interest
therein in accordance with the provisions of the Escrow Agreement; and
2.4.2 Buyer shall deliver to the Escrow Agent for deposit into an
escrow account an amount equal to ONE HUNDRED AND THIRTY ONE THOUSAND SIX
HUNDRED AND TEN DOLLARS AND 00/100 ($131,610.00) (the "HOLDBACK") to secure
Seller's obligations under Section 9.2. The Holdback shall be held in an escrow
account and applied pursuant to the terms of the Escrow Agreement. On the
eighteen month anniversary of Closing, the Holdback, together with interest
thereon, then remaining in the escrow account less any payments due to Buyer or
pending claims made by Buyer pursuant to Section 9.4 together with interest
attributable thereto, shall be delivered to Seller.
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2.4.3. Subject to credits for the Deposit and the Holdback, together
with interest thereon, and subject to adjustments and prorations set forth in
Section 2.5 below, by wire transfer of the balance of the Purchase Price in
immediately available funds to Seller.
2.5. ADJUSTMENTS AND PRORATIONS.
2.5.1. All revenues, expenses and other liabilities arising from the
System up until midnight on the day prior to the Closing Date, including
subscriber and advertising revenues, franchise fees, pole and other rental
charges payable with respect to cable television service, utility charges, real
and personal property taxes and assessments levied against the Assets,
salesperson advances, property and equipment rentals, applicable copyright or
other fees, sales and service charges, taxes (except for taxes arising from the
transfer of the Assets hereunder), and similar prepaid and deferred items, shall
be prorated between Buyer and Seller in accordance with the principle that
Seller shall be responsible for all expenses, costs and liabilities and entitled
to all revenues allocable to the conduct of the business or operations of the
System for the period prior to the Closing Date, and Buyer shall be responsible
for all expenses, costs and obligations and entitled to all revenues allocable
to the conduct of the business or operations of the System on the Closing Date
and for the period thereafter.
2.5.2. The Purchase Price shall be increased by an amount equal to
(a) 98% of the face amount of all cable service customer Accounts Receivable
that are outstanding 30 days or less from the first day of the period to which
any outstanding bill relates, and (b) 90% of the face amount of all cable
service customer Accounts Receivable that are outstanding more than 30 but fewer
than 61 days from the first day of the period to which any outstanding bill
relates.
2.5.3. RESERVED.
2.5.4. The Purchase Price shall be increased by an amount equal to
100% of the face amount of all payments and sums deposited or advanced by Seller
to a landlord, utility, governmental agency or any other party as a security
deposit or in exchange for initiation of a service and which will inure to the
benefit of Buyer.
2.5.5. The Purchase Price shall be reduced by an amount equal to (a)
any customer advance payments (i.e., customer payments received by Seller prior
to the Closing but relating to service to be provided by Buyer after the
Closing) and deposits (including any interest owing thereon), (b) except as set
forth in Section 2.5.4, above, any other advance payments (e.g., advertising
payments received by Seller prior to the Closing but relating to service to be
provided by Buyer after the Closing), and (c) the product of $1,070 and the
number, if any, by which 1,230 exceeds the actual number of Subscribers in
Systems. Notwithstanding, if the System loses fifty (50) or more subscribers in
the thirty (30) days prior to Closing due to a Force Majeure Event, Seller may
delay Closing up to thirty (30) days to engage in attempts to remediate the
event(s) or circumstance(s) that resulted in the loss. For purposes of this
Section 2.5.5, "FORCE MAJEURE EVENT" shall be defined to mean fire, earthquake,
flood, labor disputes, utility curtailments, power failures, explosions, civil
disturbances, hurricanes, tropical storms, tornadoes, and other similar events
that are outside of the control of Seller.
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2.5.6. At least ten (10) business days prior to the Closing, Seller
will deliver to Buyer a report with respect to the System (the "PRELIMINARY
REPORT"), showing in detail the preliminary determination of the adjustments
referred to in this Section 2.5, calculated in accordance with such Section as
of the Closing Date (or as of any other date(s) agreed to by the parties)
together with any documents substantiating the determination of the adjustments
to the Purchase Price proposed in the Preliminary Report. The Preliminary Report
will include a schedule setting forth advance payments and deposits made to or
by Seller, as well as Accounts Receivable information relating to the System
(showing sums due and their respective aging as of the Closing Date). The
parties shall negotiate in good faith to resolve any dispute and to reach an
agreement prior to the Closing Date on such estimated adjustments as of the
Closing Date or thereafter in accordance with Section 2.5.7 below. The
adjustment shown in the Preliminary Report, as adjusted by agreement of the
parties, will be reflected as an adjustment to the Purchase Price payable at the
Closing.
2.5.7. Within ninety (90) days after the Closing Date, Buyer shall
deliver to Seller a report with respect to the Systems (the "FINAL REPORT"),
showing in detail the final determination of any adjustments which were not
calculated as of the Closing Date and containing any corrections to the
Preliminary Report, together with any documents substantiating the final
calculation of the adjustments proposed in the Final Report. If Seller shall
conclude that the Final Report does not accurately reflect the adjustments and
prorations to be made to the Purchase Price in accordance with this Section 2.5,
Seller shall, within thirty (30) days after its receipt of the Final Report,
provide to Buyer its written statement of any discrepancies believed to exist.
Buyer and Seller shall use good faith efforts to jointly resolve the
discrepancies within fifteen (15) days of Buyer's receipt of Seller's written
statement of discrepancies, which resolution, if achieved, shall be binding upon
all parties to this Agreement and not subject to dispute or judicial review. If
Buyer and Seller cannot resolve the discrepancies to their mutual satisfaction
within such 15-day period, Buyer and Seller shall, within the following ten (10)
days, jointly designate Deloitte & Touche LLP's Seattle office ("Deloitte") to
review the Final Report together with Seller's discrepancy statement and any
other relevant documents. Deloitte shall report its conclusions as to
adjustments pursuant to this Section 2.5 which shall be conclusive on all
parties to this Agreement and not subject to dispute or judicial review. If,
after adjustment as appropriate with respect to the amount of the aforesaid
adjustments paid or credited at the Closing, Buyer or Seller is determined to
owe an amount to the other, the appropriate party shall pay such amount thereof
to the other, within three days after receipt of such determination. The cost of
retaining such independent public accounting firm shall be split equally between
Buyer and Seller.
2.6. ASSUMPTION OF LIABILITIES AND OBLIGATIONS. As of the Closing Date,
Buyer shall assume and pay, discharge and perform the following (collectively,
the "ASSUMED LIABILITIES"): (a) all obligations and liabilities of Seller under
the Franchises and the Contracts related to the period after the Closing; (b)
all obligations and liabilities of Seller to all customers and advertisers of
the System for any advance payments or deposits for which Buyer shall have
received a credit pursuant to the adjustments under Section 2.5; (c) all
obligations and liabilities arising out of events occurring on or after the
Closing Date related to the Assets or Buyer's conduct of the business or
operations of the System; and (d) the obligations and liabilities listed on
Schedule 2.6. All other obligations and liabilities of Seller shall remain and
be the obligations and liabilities solely of Seller.
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3. REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer , as follows:
3.1. ORGANIZATION, STANDING AND AUTHORITY. Seller is a corporation duly
organized and validly existing under the laws of the State of Washington, and is
qualified to conduct business in each jurisdiction in which the property owned,
leased or operated by it requires it to be so qualified, except where the
failure to so qualify would not have a Material Adverse Effect. Seller has the
requisite corporate power and authority (a) to own, lease and use the Assets as
presently owned, leased and used by it, and (b) to conduct the business and
operations of the Systems as presently conducted by it.
3.2. AUTHORIZATION AND BINDING OBLIGATION. Seller has the corporate power
and authority to execute and deliver this Agreement and to carry out and perform
all of its other obligations under the terms of this Agreement. All corporate
action by Seller necessary for the authorization, execution, delivery and
performance by it of this Agreement has been taken. This Agreement has been duly
executed and delivered by Seller and this Agreement constitutes the valid and
legally binding obligation of Seller, enforceable against it in accordance with
its terms, except (a) as rights to indemnity, if any, thereunder may be limited
by federal or state securities laws or the public policies embodied therein, (b)
as enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws from time to time in effect affecting the enforcement
of creditors' rights generally, and (c) as the remedy of specific performance
and injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought.
3.3. ABSENCE OF CONFLICTING AGREEMENTS. Subject to obtaining the Consents
listed on Schedule 3.8, other than as identified on Schedule 3.3, the execution,
delivery and performance of this Agreement by Seller will not: (a) violate the
articles of incorporation and by-laws, as amended, of Seller; (b) violate any
law, judgment, order, ordinance, injunction, decree, rule or regulation of any
court or governmental instrumentality applicable to Seller with respect to the
Assets; or (c) conflict with, constitute grounds for termination of, result in a
breach of, constitute a default under, accelerate or permit the acceleration of
any performance required by the terms of, any Contract.
3.4. FRANCHISES. Schedule 3.4 lists all Franchises that are held for use
in connection with the operations of the System, and includes the parties
thereto, the execution date thereof, and the expiration date thereof, and the
franchise fee expressed as a percentage, as further described in the respective
Franchise. True and complete copies of such Franchises (together with any and
all amendments thereto) have been delivered to Buyer. Each of the Franchises
listed on Schedule 3.4 is valid and in full force and effect in accordance with
its terms. No proceedings are pending or, to the Knowledge of Seller,
threatened, to revoke, terminate or cancel any of the Franchises. Except as
listed on Schedule 3.4, or as otherwise disclosed in writing to Buyer, the
Seller and the operations of the System by Seller are in compliance with the
terms and conditions of the Franchises.
3.5. REAL PROPERTY. Schedule 3.5 lists all Real Property related to the
System and owned by Seller and all leases of Real Property related to the System
and to which Seller is a
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party (but excluding easements, rights of way and similar interests in real
property) and for each lease provides the parties thereto, the execution date
thereof, the expiration date thereof, and the current rent payable thereunder.
As to the Real Property which is designated in Schedule 3.5 as being owned by
Seller, except as set forth in Schedule 3.5, Seller has good and marketable
title in fee simple to such premises and all buildings, improvements and
fixtures thereon, free and clear of all claims, liabilities, mortgages, liens,
pledges, conditions, charges or encumbrances of any nature whatsoever, except
for Permitted Encumbrances. Seller has delivered to Buyer true and correct
copies of each lease and deed pursuant to which Seller acquired any parcel of
owned Real Property included in the Sale Assets, and any title opinions, surveys
and appraisals relating to such Real Property included in the sale that are in
Seller's possession or under its control and of all title insurance policies
currently in effect with respect to any such parcel of Real Property. Seller has
provided to Buyer true and complete copies of, and Schedule 3.5 sets forth a
list of, all (a) assessments, studies, reports and surveys relating to the
environmental condition of any of the Real Property included in the Assets that
are in each Seller's possession or under its control and (b) notices and other
correspondence received by Seller from any governmental authority or other
person relating to any violations of Environmental Laws in connection with such
Real Property, the Assets or the operation of the System.
3.6. PERSONAL PROPERTY. Except as set forth in Schedule 3.6, as to the
System, Seller has, or will have on the Closing Date, good title to all Personal
Property owned by Seller, and as of the Closing Date none of the Personal
Property will be subject to any claims, liabilities, mortgages, liens, pledges,
conditions, charges or encumbrances of any nature whatsoever, except for
Permitted Encumbrances. Schedule 3.6 sets forth all material Personal Property
including, but not limited to, vehicles (listing make, model and vehicle
identification number), test equipment, and current inventory. Except as set
forth in Schedule 3.6, the Personal Property is in reasonable operating
condition and repair.
3.7. AGREEMENTS. Schedule 3.7 lists all pole attachment and conduit
agreements, railway crossing agreements, easements, rights of way and similar
interests in Real Property, licenses, permits, governmental authorizations
(other than franchises set forth on Schedule 3.4), and other agreements, written
or oral (including any amendments and other modifications thereto), to which
Seller is a party and that relate to the Assets or the business or operations of
the Systems (other than the Franchises, programming agreements and any contracts
that are Excluded Assets) in existence as of the date hereof except for: (a)
subscription agreements with individual residential customers for the cable
services provided by the Systems; (b) oral employment contracts and
miscellaneous service contracts terminable by Seller at will without penalty;
and (c) any contracts involving liabilities less than or equal to $5,000 and
which are not material to the operation of the Broadband Business. Schedule 3.7
includes, for each agreement listed, the parties thereto, the execution date and
the expiration date thereof. Seller has delivered to Buyer true and complete
copies of all written agreements disclosed in Schedule 3.7. All of the
agreements listed on Schedule 3.7 are valid and binding and are in full force
and effect and legally enforceable in accordance with their terms upon the other
parties thereto. There is no material breach or default by Seller under any of
the agreements listed on Schedule 3.7, or, to the Knowledge of Seller, any other
party thereto.
3.8. CONSENTS. Except for the Consents described in Schedule 3.8, no
consent, approval, permit or authorization of, or declaration to or filing with
any governmental or
11
regulatory authority, or any other third party is required to consummate this
Agreement and the transactions contemplated hereby.
3.9. INFORMATION ON SYSTEM.
3.9.1. Schedule 3.9.1 lists as of June 30, 2004 (unless a later date
is specified on Schedule 3.9): (a) the approximate number of miles of energized
cable plant (aerial and underground, in each case stated as a number which such
miles shall not exceed), and the approximate number of dwellings passed; (b) the
total number of Subscribers in the System; (c) the bandwidth capacity of the
System specified in MHz, and (d) the number of channels activated throughout the
System.
3.9.2. Schedule 3.9.2 sets forth as of June 30, 2004: (a) the rates
charged as of the date of this Agreement to customers for each class of service;
(b) all discounts, regardless of whether standard or offered in the ordinary
course, from the standard rates and charges offered by the Broadband Business;
(c) the dollar amounts of all rate changes within the Broadband Business since
December 31, 2003, and (d) all marketing, advertising and promotional programs
currently in effect and any such programs conducted since December 31, 2003.
3.9.3. The System duly and properly carries and delivers the
respective channels indicated in Schedule 3.9.3. Seller has obtained all
required FCC clearances for the operation of the Systems in all necessary
aeronautical frequency bands.
3.9.4 Seller has attached hereto as Schedules 3.9.4 (a), (b) and (c)
respectively: (a) true and complete copies of the most recent proof of
performance tests and cumulative leakage index reports for the System, (b) true
and complete copies of Seller's channel line-ups for the System, including a
designation of which stations are carried under retransmission consent
agreements and pursuant to must-carry elections, and (c) a true and complete
list of each "courtesy" and discount account.
3.10. FINANCIAL STATEMENTS. Schedule 3.10 contains true and complete
copies of unaudited statements of operations of the Seller with respect to the
System for Fiscal Year 2002, 2003 and 2004 (each ending December 31)
(collectively, the "SELLER'S FINANCIAL STATEMENTS"). The Seller's Financial
Statements have been prepared in accordance with generally accepted accounting
principles consistently applied, except for the absence of balance sheets,
footnotes and statements of cash flows and subject to normal year-end
adjustments. The Seller's Financial Statements are in accordance with the books
and records of Seller and present fairly in all material respects the results of
operations for the periods then ended.
3.11. EMPLOYEE BENEFIT PLANS.
3.11.1. All of Seller's Employee Plans and Compensation Arrangements
providing benefits to employees of the Seller who work at the System as of the
date of this Agreement are listed in Schedule 3.11, and copies of any such
Employee Plans and Compensation Arrangements (or related insurance policies) and
any amendments thereto have been delivered to Buyer, along with copies of any
currently available employee handbooks or similar documents describing such
Employee Plans and Compensation Arrangements. Except as disclosed in Schedule
3.11, there is not now in effect or to become effective after the date of this
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Agreement and until the Closing Date, any new Employee Plan or Compensation
Arrangement or any amendment to an existing Employee Plan or Compensation
Arrangement which will affect the benefits of employees or former employees of
the Seller who work at the System.
3.11.2. Each of Seller's Employee Plans and Compensation
Arrangements has been administered without material exception in compliance with
its own terms and, where applicable, with ERISA, the Code, the Age
Discrimination in Employment Act and any other applicable federal or state laws.
None of Seller or any trade or business which would be considered a single
employer with Seller under Section 4001(b)(1) of ERISA has incurred or could
reasonably be expected to incur material liability under Title IV of ERISA or
the minimum funding requirements under Section 302 of ERISA.
3.11.3. Except as disclosed in Schedule 3.11, Seller does not
contribute to and is not required to contribute to any Multi-employer Plan with
respect to any employees of the System.
3.12. LABOR RELATIONS. Schedule 3.12 contains a true and complete list of
(a) the names and dates of hire of all persons employed by Seller in connection
with the operation of the System and (b) all employment, consulting,
non-competition, benefit, severance and other arrangements with any current
employee with respect to the System. Seller is not a party to or subject to any
collective bargaining agreements with respect to any employees of the System.
Seller has no written or oral contracts of employment with any employee of the
System, other than oral employment agreements terminable by Seller at will
without penalty. Seller has delivered to Buyer true and complete copies of all
written agreements set forth on Schedule 3.12. Neither Seller nor the Broadband
Business is the subject of any legal proceeding relating to employment
discrimination or unfair labor practices, and no factual basis exists therefore.
Seller has fewer than fifty (50) employees, and compliance with the federal
Worker Adjustment and Retraining Notification Act (or any comparable state law)
is not required in connection with the transactions contemplated hereby after
taking into account other sales transactions by Seller or its affiliates. Except
as set forth on Schedule 3.12, no affiliate of Seller or of any officer,
director, shareholder or employee of Seller or any of its affiliates is a party,
directly or indirectly, to any transaction with Seller with respect to the
Broadband Business, other than (i) as an employee of Seller or any of its
affiliates as set forth on Schedule 3.12 or (ii) pursuant to a management
agreement which will terminate as of Closing. Seller has delivered to Buyer a
separate list of compensation payable to employees.
3.13. TAXES, RETURNS AND REPORTS. All federal, state and local tax returns
required to be filed by Seller through the date hereof in connection with the
operation of the System with respect to any federal, state or local taxes (the
"TAXES") have been filed. Except as set forth in Schedule 3.13, all Taxes which
are due and payable or disputed in good faith have been properly accrued or paid
or are being contested in good faith by appropriate proceedings.
3.14. CLAIMS AND LEGAL ACTIONS. Except as set forth in Schedule 3.14, and
except for any investigations and rule-making proceedings affecting the cable
industry generally, there is (a) no legal action, counterclaim, suit,
arbitration or (b) no claim or governmental investigation, pending or to the
Knowledge of Seller, threatened against or relating to the Assets or the
business or operations of the System.
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3.15. ENVIRONMENTAL MATTERS.
3.15.1. Except as disclosed in Schedule 3.15, to the Knowledge of
Seller, Seller's operations with respect to the Systems and the Real Property
comply with all applicable Environmental Laws. Except as described in Schedule
3.15, no underground storage tanks are located on the Real Property owned by
Seller and, to the Knowledge of Seller, no underground storage tanks are located
on Real Property leased by Seller.
3.15.2. To the Knowledge of Seller, no hazardous substances,
pollutants, contaminants or petroleum products, as such terms are defined in
Environmental Laws, are present on the Real Property, whether inside or outside
of any building, in such a manner as may require material remediation under any
applicable Environmental Laws.
3.15.3. Seller has not received written notice from any governmental
authority of any violation by Seller with respect to the System of any
Environmental Laws which violation has not been remedied or cured on or prior to
the date hereof.
3.16. COMPLIANCE WITH LAWS. Seller has complied and is in compliance
with all federal, state and local laws, rules, regulations and ordinances
applicable to the System, except for such noncompliance which would not have a
Material Adverse Effect.
3.17. CONDUCT OF BUSINESS IN ORDINARY COURSE. Since December 31,
2004, Seller has conducted the business and operations of the System only in the
ordinary course and has not suffered any changes, events or conditions that,
individually or in the aggregate, have had a Material Adverse Effect. The
name(s) "Northland Cable Television, Inc.", "Northland Cable Television",
"Northland Cable" and "Northland" are the only name(s) that have been used in
the conduct of the Broadband Business during the six (6) years preceding the
date hereof.
3.18. FCC AND COPYRIGHT COMPLIANCE.
3.18.1. Seller is permitted under all applicable FCC rules,
regulations and orders to distribute the transmissions of video programming or
other information that the Seller makes available to customers of the System
presently being carried to the customers of and by the System and to utilize all
carrier frequencies generated by the operations of the System, and is licensed
to operate all the facilities required by law to be licensed, including, without
limitation, any business radio and any cable television relay service system,
being operated as part of the System. Except as provided in Schedule 3.18,
Seller's operation of the System and of any FCC-licensed or registered facility
used in conjunction with Seller's operation of the System is in compliance with
the FCC's rules and regulations and the provisions of the Cable Act, and all
required reports to the FCC related to the System are materially true and
correct and have been timely filed, except where such noncompliance would not
have, individually or in the aggregate, a Material Adverse Effect.
3.18.2. Seller has deposited with the U.S. Copyright Office all
statements of account and other documents and instruments, and paid all
royalties, supplemental royalties, fees and other sums to the U.S. Copyright
Office under the Copyright Act of 1976, as amended (the "COPYRIGHT ACT"), with
respect to the business and operations of the System as are required to obtain,
hold and maintain the compulsory license for cable television systems prescribed
in
14
Section 111 of the Copyright Act. The System are in compliance with the
Copyright Act and the rules and regulations of the U.S. Copyright Office, except
for such noncompliance that would not, individually or in the aggregate, have a
Material Adverse Effect and except as to potential copyright liability arising
from the performance, exhibition or carriage of any music on the System. Except
as provided in Schedule 3.18, to the Knowledge of Seller there is no inquiry,
claim, action or demand pending before the U.S. Copyright Office or from any
other party which questions the copyright filings or payments made by Seller
with respect to the System. All music royalty fees payable with respect to the
System have been timely paid, and, except as disclosed in Schedule 3.18, Seller
has not participated in any industry-wide settlement with BMI, ASCAP, SESAC (or
any other music licensing organization) relating to liability for music
royalties.
3.18.3. All necessary FAA approvals have been obtained with respect
to the height and location of towers used in connection with the operation of
the System and are listed in Schedule 3.7. The towers are being operated in
compliance with applicable FCC and FAA rules, except for such noncompliance that
would not, individually or in the aggregate, have a Material Adverse Effect.
3.18.4. The System meets the requirements under Section 11.11(a) of
the FCC's Rules with respect to broadcast of the Emergency Alert System.
3.19. BONDS, INSURANCE AND LETTERS OF CREDIT. Each insurance policy,
performance bond, letter of credit, deposits and similar guarantee maintained or
required to be maintained in connection with the System is set forth on Schedule
3.19, together with the amount thereof. Seller has delivered to Buyer true and
complete copies of all such bonds and letters of credit.
3.20 ACCOUNTS RECEIVABLE. All accounts receivable included in the Assets
are bona fide and are attributable to transactions in the ordinary course.
3.21 OVERBUILDS. To Seller's Knowledge, within the communities set forth
on Schedule 1.28: (a) no franchise has been issued, and no application therefor
is pending, that relates to the operation of a cable television system by a
person other than Seller; (b) no person other than Seller is providing cable
television service under a franchise granted by any local franchising authority;
and (c) no person is providing cable television service who has not obtained a
franchise permitting the construction, operation and maintenance of a cable
television system.
3.22. COMPLETE REPRESENTATIONS. No representation or warranty by Seller in
this Agreement or any Schedule hereto or any other agreement or certificate to
be delivered pursuant hereto contains or shall contain any untrue statement of
material fact, or omits to state any material fact required to make the
statements herein or therein not misleading.
4. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller, as follows:
4.1. ORGANIZATION, STANDING AND AUTHORITY. Buyer is a limited liability
company, duly organized, validly existing and in good standing under the laws of
the State of Delaware and is qualified to conduct business as a foreign limited
liability company in each jurisdiction in
15
which the property owned, leased or operated by it requires it to be so
qualified, except where the failure to so qualify would not have a Material
Adverse Effect. Buyer has the requisite power and authority to execute and
deliver this Agreement and to perform and comply with all of the terms,
covenants and conditions to be performed and complied with by Buyer hereunder.
4.2. AUTHORIZATION AND BINDING OBLIGATION. Buyer has the corporate power
and authority to execute and deliver this Agreement and to carry out and perform
all of its other obligations under the terms of this Agreement. All corporate
action by Buyer necessary for the authorization, execution, delivery and
performance by Buyer of this Agreement has been taken. This Agreement has been
duly executed and delivered by Buyer and this Agreement constitutes the valid
and legally binding obligation of Buyer, enforceable against it in accordance
with its terms, except (a) as rights to indemnity, if any, thereunder may be
limited by federal or state securities laws or the public policies embodied
therein, (b) as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws from time to time in effect affecting
the enforcement of creditors' rights generally, and (c) as the remedy of
specific performance and injunctive and other forms of equitable relief may be
subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought.
4.3. ABSENCE OF CONFLICTING AGREEMENTS. Subject to obtaining the Consents
listed on Schedule 3.8, the execution, delivery and performance of this
Agreement by Buyer will not: (a) require the consent, approval, permit or
authorization of, or declaration to or filing with any governmental or
regulatory authority, or any other third party; (b) violate the governing
documents of Buyer; (c) violate any material law, judgment, order, ordinance,
injunction, decree, rule or regulation of any court or governmental
instrumentality; or (d) conflict with, constitute grounds for termination of,
result in a breach of, constitute a default under, or accelerate or permit the
acceleration of any performance required by the terms of, any material
agreement, instrument, license or permit to which Buyer is a party or by which
Buyer may be bound, such that Buyer could not perform hereunder and acquire or
operate the Assets.
4.4. BUYER QUALIFICATION. Buyer knows of no reason why it cannot become
the franchisee pursuant to the Franchises, and to its knowledge has the
requisite qualifications to own and operate the System.
4.5. AVAILABILITY OF FUNDS. Buyer will have available on the Closing Date
sufficient unrestricted funds to enable it to consummate the transactions
contemplated hereby.
5. COVENANTS OF THE PARTIES
5.1. CONDUCT OF THE BUSINESS OF THE SYSTEMS. Except as contemplated by
this Agreement, disclosed on Schedule 5.1 or with the prior written consent of
Buyer (which consent shall not be unreasonably withheld or delayed), between the
date hereof and the Closing Date, Seller shall operate the System in the
ordinary course of business in accordance with past practices and shall as to
the System:
(a) not enter into any contract or commitment, which is either
not terminable at any time without penalty to Buyer or which involves the
payment of more than $10,000, and requires Buyer to assume obligations under
such contract or commitment;
16
(b) not sell, assign, lease or otherwise dispose of any of the
Assets, except for assets consumed or disposed of in the ordinary course of
business, where no longer used or useful in the business or operations of the
System or in conjunction with the acquisition of replacement property of
equivalent kind and value;
(c) not create, assume or permit to exist any claim,
liability, mortgage, lien, pledge, condition, charge or encumbrance upon the
Assets, except for Permitted Encumbrances;
(d) Except as set forth on Schedule 5.1(d), not change
customer rates for any level of service or charges for remotes or installation,
or change billing, disconnect or marketing practices; and.
(e) not engage in any marketing or promotion other than set
forth on Schedule 5.1(d).
5.2. ACCESS TO INFORMATION. Seller shall allow Buyer and its authorized
representatives reasonable access upon reasonable advance notice and at Buyer's
expense during normal business hours to the Assets and to all other properties,
equipment, books, records, Contracts and documents relating to the System for
the purpose of inspection, and furnish or cause to be furnished to Buyer or its
authorized representatives all information ordinarily prepared by Seller and
available with respect to the affairs and business of the System as Buyer may
reasonably request, it being understood that the rights of Buyer hereunder shall
not be exercised in such a manner as to interfere with the operations of
Seller's business. Buyer shall promptly disclose to Seller, in writing, any and
all facts that a Responsible Officer has reason to believe may give rise to a
material claim under this Agreement. A Responsible Officer of Buyer shall mean
any of the following individuals: Heather Wood, Craig Rosenthal, and Jake
Sturdy..
5.3. CONFIDENTIALITY. Each party shall keep secret and hold in confidence
for a period of three years following the date hereof, any and all information
relating to the other party that is proprietary to such other party, other than
the following: (a) information that has become generally available to the public
other than as a result of a disclosure by such party; (b) information that
becomes available to such party or an agent of such party on a non-confidential
basis from a third party having no obligation of confidentiality to a party to
this Agreement; (c) information that is required to be disclosed by applicable
law, judicial order or pursuant to any listing agreement with, or the rules or
regulations of, any securities exchange on which securities of such party or any
such affiliate are listed or traded; and (d) disclosures made by any party as
shall be reasonably necessary in connection with obtaining the Consents. In
connection with disclosure of confidential information under (c) and (d) above,
the disclosing party shall give the other party hereto timely prior notice of
the anticipated disclosure and the parties shall cooperate in designing
reasonable procedural and other safeguards to preserve, to the maximum extent
possible, the confidentiality of such material. Upon Closing, Buyer shall have
the unilateral right, as Buyer so chooses, to disclose information pertaining to
the Assets and/or System, and such disclosure right shall in no way be limited
or governed by any other portion of this Section 5.3.
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5.4. PUBLICITY. Prior to Closing, neither party hereto will issue any
press release or otherwise make any public statement with respect to this
Agreement and the transactions contemplated hereby without the prior written
consent of the other, except (a) either party may, without the other party's
prior written consent, disclose information to its financing sources and
professional advisors, including accountants, attorneys, investors, financial
advisors, bankers and other experts, and (b) either party may make public
statements or disclosures as may be required by applicable laws, including SEC
requirements, in which event the party required to make the release or
announcement shall, if possible, allow the other party reasonable time to
comment on such release or announcement in advance of such issuance.
5.5. CONSENTS. Following the execution hereof, Seller shall make such
applications to the Franchising Authorities and other third parties for the
Consents, and shall otherwise use its commercially reasonable efforts to obtain
the Consents as expeditiously as possible. In no event shall Seller be required,
as a condition of obtaining such Consents, to expend any monies on, before or
after the Closing Date (other than expenses typically incurred in connection
with the efforts to obtain such Consents), or to offer or grant any
accommodations or concessions adverse to Seller or to engage in litigation or
other adversarial proceedings. Buyer shall use its commercially reasonable
efforts to promptly assist Seller and shall take such prompt and affirmative
actions as may reasonably be necessary in obtaining such Consents and shall
cooperate with Seller in the preparation, filing and prosecution of such
applications as may reasonably be necessary, including, without limitation,
making management and other personnel of Buyer available to assist in obtaining
such Consents. The parties agree to use commercially reasonable efforts to
obtain consents to (i) the transfer of the Franchises in substantially the form
attached hereto as Exhibit B-1, and (ii) the transfer of the leases and other
Contracts in substantially the form attached hereto as Exhibit B-2. Seller shall
not agree to any adverse change in any Franchise or Contract as a condition to
obtaining any authorization, consent, order or approval necessary for the
transfer of such Franchise or Contract unless Buyer shall otherwise consent.
Buyer agrees that it shall not, without the prior written consent of Seller
(which may be withheld at Seller's sole discretion), seek amendments or
modifications to Franchises or Contracts. To the extent reasonably practicable,
Seller shall notify Buyer in advance of all meetings, conference calls and other
similar events relating to any of the Consents such that Buyer will have the
opportunity to attend and/or participate therein. If providing such notice is
not reasonably practicable or if Buyer is unable to attend or participate in
such meeting, conference call or other similar event, Seller shall, within a
reasonable time period thereafter, provide Buyer with an update with respect to
the matters discussed therein. Buyer shall be entitled to review the form(s) of
consent and all notices and filings being submitted prior to the submission
thereof. Seller shall promptly deliver to Buyer a true and correct copy of each
Consent as each such Consent is obtained. Seller expressly acknowledge that
nothing contained in this Agreement shall prevent Buyer, its officers,
employees, Affiliates, representatives or other agents from making statements or
inquiries to, making presentations to or responding to requests initiated by any
person from which any Consent is sought. Buyer shall not be required to accept
any consent or approval the terms of which contain any change in the underlying
instrument that would be adverse to Buyer. Buyer shall, at Seller's request,
promptly furnish Seller with copies of such documents and information with
respect to Buyer, including financial information and information relating to
the cable and other operations of Buyer and any of its affiliated or related
companies, as Seller may reasonably request in connection with the obtaining of
any of the Consents or as may be reasonably requested by any person in
connection with any Consent.
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Notwithstanding anything to the contrary contained in this Section 5.6, Seller's
obligations hereunder with respect to pursuing any Consent shall be fully
satisfied with respect to: (x) the transfer of pole attachment or conduit
contracts, if Buyer, solely on its own behalf, has executed a new contract with
the respective pole company or if such pole company has indicated in writing to
Buyer that it is willing to execute a new contract with Buyer on terms that are
substantially the same as the terms of the existing agreement and that Buyer may
remain on the poles of the respective pole company while such contract is being
negotiated, in either case on or before Closing; and (y) the transfer of
railroad crossing permits or contracts, if Buyer, solely on its own behalf, has
executed a new permit or contract with the respective railroad company or if
such railroad company has indicated in writing to Buyer that it is willing to
execute a new permit or contract with Buyer on terms that are substantially the
same as the terms of the existing agreement, in either case on or before
Closing.
5.6. TAXES, FEES AND EXPENSES. Buyer and Seller shall equally split all
sales, use, transfer, purchase taxes and fees, filing fees, recordation fees and
application fees, if any, arising out of the transactions contemplated herein;
provided however, that in the event a Franchising Authority seeks compensation
for the cost and expense associated with reviewing Buyer's qualifications,
Seller shall independently bear all such costs and expenses other than
additional costs which result from Buyer's failure to reasonably cooperate with
information requests from such Franchising Authority, in which event Buyer shall
bear such additional costs. Each party shall pay its own expenses incurred in
connection with the authorization, preparation, execution and performance of
this Agreement, including all fees and expenses of counsel, accountants, agents
and other representatives.
5.7. BROKERS. Each of Buyer and Seller represents and warrants that
neither it nor any person or entity acting on its behalf has incurred any
liability for any finders' or brokers' fees or commissions in connection with
the transaction contemplated by this Agreement, except that Seller has retained
Daniels & Associates, L.P., whose fees shall be paid by Seller. Buyer agrees to
defend, indemnify and hold harmless Seller against any fee, commission, loss or
expense arising out of any claim by any broker or finder employed or alleged to
have been employed by Buyer, and Seller agrees to defend, indemnify and hold
harmless Buyer against any fee, commission, loss or expense arising out of any
claim by Daniels & Associates, L.P., or any other broker or finder employed or
alleged to have been employed by Seller.
5.8. RISK OF LOSS. The risk of loss, damage or destruction to the Systems
from fire, theft or other casualty or cause shall be borne by Seller at all
times up to the Closing Date. It is expressly understood and agreed that in the
event of any material loss or damage to any portion of the Assets from fire,
casualty or other cause prior to the Closing Date, Seller shall promptly notify
Buyer of same in writing. Such notice shall report the loss or damage incurred,
the cause thereof, if known, and any insurance coverage related thereto.
5.9. TRANSITIONAL MATTERS. For a period of one hundred and twenty (120)
days following the Closing, Buyer may continue to operate the System using the
tradename Northland Cable Television and related names and marks used in the
System on the Closing Date, to the extent reasonably necessary, but in any event
in accordance with the trademark usage guidelines attached hereto as Exhibit G;
provided, however, that Buyer shall have no obligation at any time to remove or
discontinue using any such name or mark that is affixed to converters or other
items
19
in or to be used in customer homes or properties or as are used in similar
fashion, making such removal or discontinuation impracticable. Pursuant to the
terms of a transitional billing services agreement, substantially in the form
attached hereto as Exhibit H, for a period of up to one hundred and twenty (120)
days after the Closing, Seller shall provide Buyer with access to a support
regarding the use of Seller's customer billing system, all at Buyer's sole cost
and expense. Seller shall cooperate with Buyer, prior to and after Closing, at
Buyer's sole cost and expense, including reasonable compensation for any time
and assistance in excess of ten hours of transition support, to transition
billing services from Seller's billing systems to Buyer's billing systems. With
respect to the System, Seller shall maintain inventory including, but not
limited to, spare parts, equipment, fiber, cable and supplies in amount, type
and quality substantially the same as set forth on Schedule 3.6.
5.10. EMPLOYEE BENEFIT MATTERS.
5.10.1. It is clearly understood that Buyer has no obligation to
employ any of Seller's employees employed at the System and that Seller shall be
responsible for and shall cause to be discharged and satisfied in full all
amounts owed to any employee, including, without limitation, wages, salaries,
accrued vacation, any employment, incentive, compensation or bonus agreements or
other benefits or payments on account of termination. Buyer agrees that it will
provide Seller with notice of which, if any, employees of the System Buyer
intends to hire (the "TRANSFERRED EMPLOYEES") at least twenty (20) days before
the estimated Closing Date.
5.10.2. As of the Closing Date, Seller shall terminate employment of
all Transferred Employees.
5.10.3. Buyer shall offer health plan coverage to all of the
full-time Transferred Employees, on terms and conditions generally applicable to
all of Buyer's similarly-situated full-time employees. For purposes of providing
such coverage, Buyer shall waive all preexisting condition limitations for all
such employees of the System covered by the Seller's health care plan as of the
Closing Date (other than preexisting conditions which were excluded by Seller's
health care plan) and shall provide such health care coverage effective as of
the Closing Date without the application of any eligibility period for coverage.
In addition, Buyer shall credit all employee payments toward deductible and
co-payment obligation limits under Seller's health care plans for the plan year
which includes the Closing Date as if such payments had been made for similar
purposes under Buyer's health care plans during the plan year which includes the
Closing Date, with respect to Transferred Employees.
5.10.4. For each Transferred Employee, Buyer shall give past service
credit for all crediting purposes under each of its employee benefit plans that,
on or after the Closing Date, provides coverage to Transferred Employees to the
same extent such employment service was credited for similar purposes under
Seller's employee benefit plans prior to the Closing Date.
5.10.5. Within a reasonable period of time after the Closing, Seller
shall cause the trustee for the Northland Telecommunications Corporation 401(k)
Plan (the "Seller's 401(k) Plan") to effect "direct rollovers" of the account
balances under the Seller's 401(k) Plan (the "Buyer's 401(k) Plan") of all
Transferred Employees who request such a rollover to Buyer's 401(k) Plan. The
direct rollovers contemplated by this Section 5.10.5 shall be in cash or a
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combination of cash and in kind, as may be mutually agreeable to Seller and
Buyer; provided, that the Buyer's 401(k) Plan shall be obligated to accept as a
part of such rollovers, as applicable, any promissory notes with respect to
Transferred Employees that have taken participant loans from the Seller's 401(k)
Plan and that are outstanding as of the Closing Date. Prior to the date of such
rollovers, and as a precondition thereto, Buyer shall deliver to Seller a copy
of the most recently issued IRS determination letter (or other proof reasonably
satisfactory to counsel for the Seller) that the Buyer's 401(k) Plan is
qualified under the Code. Subsequent to the above-described rollovers to the
Buyer's 401(k) Plan, neither Seller nor the Seller's 401(k) Plan shall retain
any liability with respect to such Transferred Employees to provide them with
benefits in accordance with the terms of the Seller's 401(k) Plan. On or prior
to the Closing Date, Seller shall deliver to Buyer a list of all Transferred
Employees, indicating thereon the total amount deferred in pre-tax dollars to
the Seller's 401(k) Plan by each Transferred Employee under the terms of Section
402(g) of the Code with respect to the calendar year in which the Closing
occurs.
5.10.6. Seller shall be responsible, and Buyer shall have no
responsibility or liability, for providing health care continuation coverage and
notice of such coverage to any employee of Seller who may be terminated by
Seller before or after Closing or their eligible dependents, without regard to
whether the entitlement to such coverage (or notice of such coverage) arises in
connection with the transactions contemplated by this Agreement. Seller's
obligations with respect to continuation coverage shall continue for the full
continuation coverage period set forth in Section 602(2)(A) of ERISA and in
accordance with the applicable Treasury regulations under Section 4980B of the
Code. Buyer shall notify Seller as soon as Transferred Employees become eligible
and elect to participate under Buyer's health care plan following the Closing.
5.11. BONDS, LETTERS OF CREDIT, ETC. Buyer shall take all reasonably
necessary steps, and execute and deliver all reasonably necessary documents, to
insure that within 15 days after the Closing Buyer has delivered each such
bonds, letters of credit, indemnity agreements and similar instruments currently
maintained and in effect as set forth in Schedule 3.19 in such amounts and in
favor of such Franchising Authorities and other third parties requiring the same
in connection with the Franchises and the Contracts. Buyer shall not be
obligated under this Section 5.11 to deliver any instrument not set forth in
Schedule 3.19.
5.12. NON-COMPETITION. Seller covenants and agrees that, unless Buyer
shall otherwise give its prior written consent, for a period of twenty four (24)
months from Closing it will not directly or indirectly (i) own, manage, operate,
control or engage, directly or indirectly, in the business of operating a
wireline video cable television system within the franchise area currently
serviced by the System or (ii) solicit any person who was employed by Seller at
the System, and accepts a position of employment by Buyer. Notwithstanding the
foregoing, nothing herein shall be construed to prohibit or restrict the
ownership of a company's securities listed on a national securities exchange or
the National Association of Securities Dealers Automated Quotations System,
which (x) constitutes less than 5% of the outstanding voting stock of such
company, (y) does not constitute control over such company and (z) is held
solely for investment purposes. Notwithstanding anything to the contrary herein,
no provision of clause (i) of the foregoing non-competition covenant shall
restrict any of Seller's affiliates activities outside of the franchise area
served by the System.
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5.13. TITLE INSURANCE. Seller shall cooperate with Buyer if Buyer elects
to obtain title insurance policies or surveys (including any environmental
impact statements) on any Real Property owned in fee or leased. Buyer shall have
the sole responsibility for obtaining and paying for such policies and surveys.
The parties agree that the obtaining of title insurance and surveys on any Real
Property shall not be a condition to the obligation of Buyer to consummate the
transactions contemplated hereby.
5.14. LIEN SEARCHES. As soon as practicable, Seller shall obtain and
deliver to Buyer copies of the results of complete lien, tax and judgment
searches conducted with respect to the entire System (including states and
counties, and including federal tax and judgment searches) and with respect to
all corporate, fictitious and assumed names used by Seller in connection with
the Broadband Business during the six (6) years preceding the date hereof. Buyer
and Seller shall share equally all fees and costs arising out of any lien, tax
and judgment searches.
5.15. NOTICE. To the extent of Knowledge of Seller, Seller shall promptly
notify Buyer of any material adverse change relating to Seller, the Broadband
Business, or the Assets and of any fact, event or condition that, if existing as
of the date hereof, would have been required to be disclosed in any of the
Schedules hereto.
5.16. RESERVED.
5.17. MONTHLY REPORTS. Seller shall provide Buyer, following the date
hereof and until Closing, on a monthly basis and promptly upon preparation but
no later than within thirty (30) days after the Monthly Reporting Date (as
defined hereafter): (a) the number of Subscribers in the System as of the
Monthly Reporting Date; (b) billing reports for the Systems for the one (1)
month period ending on the Monthly Reporting Date; and (c) income statements for
the Systems for the one (1) month period ending on the Monthly Reporting Date.
For purposes of this Agreement the "MONTHLY REPORTING DATE" shall be the last
day of each calendar month.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER AND SELLER TO CLOSE
6.1. CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER TO CLOSE. The
obligations of Buyer to consummate the transactions contemplated by this
Agreement to occur at the Closing shall be subject to the satisfaction, on or
before the Closing Date, of each and every one of the following conditions, all
or any of which may be waived in writing, in whole or in part, by Buyer for
purposes of consummating such transactions:
6.1.1. Representations and Warranties. All representations and
warranties of Seller contained in this Agreement shall be true and complete in
all material respects (provided that to the extent any representation or
warranty has a "materiality", "Material Adverse Effect", or similar
qualification, it shall not be further qualified by the use of the word
"material" in this Section 6.1.1) at and as of the Closing Date as though such
representations and warranties were made at and as of such time except to the
extent changes are contemplated pursuant to this Agreement.
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6.1.2. Covenants and Conditions. Seller shall have in all material
respects performed and complied with all covenants, agreements and conditions
required by this Agreement to be performed or complied with by it prior to or on
the Closing Date.
6.1.3. No Injunction, Etc. No action, suit or other proceeding shall
have been instituted, threatened or proposed before any court, governmental
agency or legislative body to enjoin, restrain, prohibit or obtain substantial
damages in respect of, or which is related to, or arising out of, this Agreement
or the consummation of the transactions contemplated hereby.
6.1.4. Consents. Each of the following Consents shall have been duly
obtained and delivered to or waived by Buyer: (a) the Consents of the
Franchising Authorities and other third parties listed on Schedule 3.8; and (b)
the Consents of the FCC, except for any FCC consent to any business radio
license that Buyer reasonably expects can be obtained within 120 days after the
Closing and so long as a temporary authorization is available to Buyer under FCC
rules with respect thereto.
6.1.5. Deliveries. Seller shall have made or stand willing and able
to make all the deliveries to Buyer set forth in Section 7.2.
6.1.6. Material Adverse Change. Between the date of this Agreement
and the Closing Date, there shall have been no material adverse change in the
financial condition of the System, taken as a whole, other than matters
affecting the cable television industry generally (including, without
limitation, legislative, regulatory or litigation matters) and matters relating
to or arising from local or national economic conditions (including financial
and capital markets). For clarification purposes, a change in the number of
Subscribers that does not fall below the Minimum Subscriber number set forth in
Section 6.17 and that is subject to price adjustment as set forth in Section
2.5, shall not constitute a Material Adverse Change.
6.1.7. Minimum Subscribers. As of the Closing Date, the Broadband
Business shall have no fewer than 890 Subscribers.
6.1.8. Discharge. Seller shall have discharged in full or removed
Permitted Encumbrances as set forth in Section 1.22(h).
6.1.9. Inventory. The inventory of spare parts, equipment, fiber and
cable on hand as of the Closing included in the Assets shall be in amount, type
and quality substantially the same as set forth on Schedule 3.6.
6.1.10. Additional Systems. The Closing under the Related Agreement
shall have occurred prior to or concurrent with the Closing of this Agreement.
6.1.11. RESERVED.
6.1.12. Transitional Billing Services Agreement. Seller shall have
executed a subscriber billing transition services agreement substantially in the
form attached hereto as Exhibit H.
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6.2. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER TO CLOSE. The
obligations of Seller to consummate the transactions contemplated by this
Agreement to occur at the Closing shall be subject to the satisfaction, on or
before the Closing Date, of each and every one of the following conditions, all
or any of which may be waived in writing, in whole or in part, by Seller for
purposes of consummating such transactions:
6.2.1. Representations and Warranties. All representations and
warranties of Buyer contained in this Agreement shall be true and complete in
all material respects (provided that to the extent any representation or
warranty has a "materiality", "Material Adverse Effect", or similar
qualification, it shall not be further qualified by the use of the word
"material" in this Section 6.2.1) at and as of the Closing Date as though such
representations and warranties were made at and as of such time except to the
extent changes are contemplated pursuant to this Agreement.
6.2.2. Covenants and Conditions. Buyer shall have in all material
respects performed and complied with all covenants, agreements and conditions
required by this Agreement to be performed or complied with by it prior to or on
the Closing Date.
6.2.3. No Injunction, Etc. No action, suit or other proceeding shall
have been instituted, threatened or proposed before any court, governmental
agency or legislative body to enjoin, restrain, prohibit or obtain substantial
damages in respect of, or which is related to, or arising out of, this Agreement
or the consummation of the transactions contemplated hereby.
6.2.4. Purchase Price Floor. Notwithstanding anything to the
contrary set forth in Section 2.5.5(c), except as provided in clause (b), the
Purchase Price shall in no event be reduced below ONE MILLION FIFTY THOUSAND
DOLLARS AND 00/100 ($1,050,000) (the "Floor"). If the Purchase Price adjustment
set forth in Section 2.5.5 (c) would result in a Purchase Price below the Floor
then either (a) Buyer may elect to set the Purchase Price at the Floor or, (b)
if Buyer does not elect under Section 6.2.4(a) Seller may elect to close subject
to the full Purchase Price adjustment irrespective of the amount of reduction
below the Floor, or (c) if neither Buyer nor Seller make an election under
Section 6.2.4(a) or (b), then this Agreement shall be terminated.
6.2.5. Deliveries. Buyer shall have made or stand willing and able
to make all the deliveries set forth in Section 7.3.
6.2.6. Transitional Billing Services Agreement. Buyer shall have
executed a subscriber billing transition services agreement substantially in the
form attached hereto as Exhibit H.
7. CLOSING AND CLOSING DELIVERIES
7.1. CLOSING. Subject to Sections 2.5.5 and 6.2.4, if practicable, the
Closing will be held on the last business day of the calendar month during which
the conditions set forth in Sections 6.1.4 hereof shall have been satisfied;
provided, however, that if the Closing is not held on the last business day of
the calendar month during which such conditions shall have been satisfied, the
Closing shall be held on the last business day of the next succeeding calendar
month, or on such other date as Buyer and Seller may mutually agree. The Closing
shall be held
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at 10:00 am. local time at the Seller's offices at 101 Steward Street, Suite
700, Seattle, WA 98101, or will be conducted by mail or at such other place and
time as the parties may agree. Notwithstanding the foregoing, the parties agree
that the Closing shall be deemed effective as of 12:01 a.m. on the Closing Date,
and all references herein that relate to the date and time of the Closing,
including provisions dealing with adjustments to the Purchase Price, shall refer
to such effective date and time.
7.2. DELIVERIES BY SELLER. Prior to or on the Closing Date, Seller shall
deliver to Buyer the following, in form and substance reasonably satisfactory to
Buyer and its counsel:
7.2.1. Transfer Documents. A duly executed Bill of Sale,
substantially in the form attached hereto as Exhibit F, special warranty deeds
(subject to all matters of record), motor vehicle titles, assignments and other
transfer documents which shall be sufficient to vest good title to the Assets in
the name of Buyer or its permitted assignees, free and clear of any claims,
liabilities, mortgages, liens, pledges, conditions, charges or encumbrances of
any nature whatsoever except for Permitted Encumbrances;
7.2.2 Assumption Agreements. A duly executed Assignment and
Assumption Agreement, substantially in the form attached hereto as Exhibit E,
pursuant to which Seller shall assign the Assumed Liabilities;
7.2.3. Consents. The Consents required by Section 6.1.4;
7.2.4. Officer's Certificate. A certificate, dated as of the Closing
Date, executed by the President or a Vice President of the Seller, certifying to
his knowledge, without personal liability, that the conditions set forth in
Sections 6.1.1 and 6.1.2 are satisfied;
7.2.5. Secretary's Certificate. One or more certificates, dated as
of the Closing Date, executed by the Secretary of the Seller, without personal
liability: (a) certifying that the resolutions, as attached to such certificate,
were duly adopted by the Board of Directors of Seller, authorizing and approving
the execution of this Agreement on behalf of Seller and the consummation of the
transactions contemplated hereby and that such resolutions remain in full force
and effect; (b) certifying as to the incumbency of the person signing this
Agreement and any other documents on behalf of Seller; (c) the Certificate of
Incorporation of Seller (copies of which shall be attached to the Certificate),
certified by the Secretary of State of its state of formation; and (d) the
Articles of Incorporation and By-laws of Seller (copies of which shall be
attached to the Certificate).
7.2.6. Opinions of Counsel. Opinions of Seller's counsel dated as of
the Closing Date, substantially in the forms attached hereto as Exhibit C-1 and
Exhibit C-2; and
7.2.7. Subscriber List. A true and complete subscriber list as of
the date reasonably close to (and not more than ten (10) business days
preceding) the Closing Date, an updated list of subscriber deposits and
prepayments and a list of disconnected subscribers for each of the six (6)
months preceding the Closing.
7.2.8. Aging Report. A true and complete accounts receivable aging
report as of a date not more than ten (10) business days prior to the Closing
Date.
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7.2.9. Original Documents. The original instrument, or in the case
where two originals exist, one duplicate original, for each item listed in
Schedules 3.4, 3.5, 3.7, 3.8, 3.9.4, 3.12 and 3.18, that is evidenced in writing
and that relate solely to the System.
7.3. DELIVERIES BY BUYER. Prior to or on the Closing Date, Buyer shall
deliver to Seller the following, in form and substance reasonably satisfactory
to Seller and its counsel:
7.3.1. Purchase Price. The Purchase Price, in accordance with
Sections 2.4 and 2.5, including release of the Deposit to Seller;
7.3.2. Assumption Agreements. A duly executed Assignment and
Assumption Agreement, substantially in the form attached hereto as Exhibit E,
pursuant to which Buyer shall assume and undertake to perform the Assumed
Liabilities;
7.3.3. Officer's Certificate. A certificate, dated as of the Closing
Date, executed by an executive officer of Buyer, certifying to his knowledge,
without personal liability, that the conditions set forth in Sections 6.2.1 and
6.2.2 are satisfied;
7.3.4. Secretary's Certificate. A certificate, dated as of the
Closing Date, executed by Buyer's Secretary, without personal liability: (a)
certifying that the resolutions, as attached to such certificate, were duly
adopted by Buyer's Board of Directors, authorizing and approving the execution
of this Agreement and the consummation of the transactions contemplated hereby
and that such resolutions remain in full force and effect; and (b) certifying as
to the incumbency of the person signing this Agreement or any other documents on
behalf of Buyer.
7.3.5. Opinion of Counsel. An opinion of Buyer's counsel dated as of
the Closing Date, substantially in the form attached hereto as Exhibit D; and
7.3.6. Billing Transition Services Agreement. A duly executed
billing transition services agreement in the form attached hereto as Exhibit H.
8. TERMINATION
8.1. METHOD OF TERMINATION. This Agreement constitutes the binding and
irrevocable agreement of the parties to consummate the transactions contemplated
hereby, subject to and in accordance with the terms hereof, the consideration
for which is (a) the covenants, representations, warranties and agreements set
forth in this Agreement; and (b) the expenditures and obligations incurred and
to be incurred by Buyer on the one hand, and by Seller, on the other hand, in
respect of this Agreement, and this Agreement may be terminated or abandoned
only as follows:
8.1.1. By the mutual consent of Seller and Buyer, or by either
Seller or Buyer if any condition to the Closing set forth in Section 6.1.3 or
6.2.3 is not fulfilled and the failure of such condition is not a result of a
breach of warranty or nonfulfillment of any covenant or agreement by Buyer or
Seller contained in this Agreement;
8.1.2. RESERVED.
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8.1.3. Either Buyer or Seller may terminate this Agreement by giving
notice to the other if (a) such other party has materially breached any of its
representations, warranties or covenants herein such that it cannot comply with
its respective conditions set forth in Sections 6 and 7, and such breach has not
been cured in accordance with Section 10.15 and has not been waived by the
terminating party (provided that the terminating party is not concurrently in
material breach of any representation, warranty, covenant, or other agreement
contained herein) or (b) the conditions to Closing have not been satisfied or
waived by July 31, 2005 so long as the failure to close is not attributable to a
breach hereunder or any other action or inaction by the party seeking to
terminate.
8.2. Rights Upon Termination.
8.2.1. In the event of a termination of this Agreement pursuant to
Section 8.1.1 or Section 8.1.3(b) hereof: (a) the Buyer shall be entitled to the
return of the Deposit and all interest accrued thereon; (b) Sections 5.3, 5.4,
and 10 shall survive such termination; and (c) each party shall pay the costs
and expenses incurred by it in connection with this Agreement, and no party (or
any of its officers, directors, partners, employees, agents, representatives or
stockholders) shall be liable to any other party for any cost, expense, damage
or loss of anticipated profits hereunder.
8.2.2. In the event of a termination of this Agreement by Buyer
pursuant to Section 8.1.3(a) hereof: (a) Buyer shall be entitled to the return
of the Deposit and all interest accrued thereon; (b) Sections 5.3, 5.4, and 10
shall survive such termination; and (c) if Seller is in material breach of this
Agreement, Buyer shall have the right to seek all remedies available to it as
provided hereunder or at law or equity, including the remedy of specific
performance. In the event of any action to enforce this Agreement, Seller hereby
waives the defense that there is an adequate remedy at law.
8.2.3 RESERVED.
8.2.4. In the event of a termination of this Agreement by Seller
pursuant to Section 8.1.3(a), provided Buyer is in breach of warranty or
nonfulfillment of any covenant or agreement contained in this Agreement: (a)
Sections 5.3, 5.4, and 10 shall survive such termination; and (b) Seller shall
be entitled to receive the Deposit and all interest accrued thereon as full
liquidated damages suffered by Seller as a consequence of Buyer's breach (which
amount the parties agree is a reasonable estimate of the damages that will be
suffered by Seller).
9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND INDEMNIFICATION
9.1. REPRESENTATIONS AND WARRANTIES. All representations, warranties,
covenants and agreements contained in this Agreement or in documents or
instruments delivered pursuant hereto shall survive the Closing Date and
eighteen months thereafter; provided that 3.1, 3.2, 3.6 (solely with respect to
title) 3.11, 3.13, 3.15, and 4.2 shall survive for the duration of the
applicable statute of limitations with respects to the matters set forth
therein.
9.2. INDEMNIFICATION BY SELLER. Seller shall defend, indemnify and hold
Buyer harmless against and with respect to, and shall reimburse Buyer for:
27
9.2.1. Any and all losses, liabilities or damages resulting from any
untrue representation, breach of warranty or nonfulfillment of any covenant by
Seller contained herein;
9.2.2. Any and all obligations of Seller not assumed by Buyer
pursuant to the terms hereof;
9.2.3. Any and all losses, liabilities or damages resulting from
Seller's operation or ownership of the Systems or Assets prior to the Closing
Date; and
9.2.4. Any and all actions, suits, proceedings, claims, demands,
assessments, judgments, costs and expenses, including, without limitation,
reasonable legal fees and expenses, incident to any of the foregoing or incurred
in investigating or attempting to avoid the same or to oppose the imposition
thereof, or in enforcing this indemnity.
9.3. INDEMNIFICATION BY BUYER. Buyer shall defend, indemnify and hold
Seller harmless against and with respect to, and shall reimburse Seller for:
9.3.1. Any and all losses, liabilities or damages resulting from any
untrue representation, breach of warranty or nonfulfillment of any covenant by
Buyer contained herein;
9.3.2. Any and all of the Assumed Liabilities;
9.3.3. Any and all losses, liabilities or damages resulting from
Buyer's operation or ownership of the Systems or Assets on and after the Closing
Date; and
9.3.4. Any and all actions, suits, proceedings, claims, demands,
assessments, judgments, costs and expenses, including, without limitation,
reasonable legal fees and expenses, incident to any of the foregoing or incurred
in investigating or attempting to avoid the same or to oppose the imposition
thereof, or in enforcing this indemnity.
9.4. PROCEDURE FOR INDEMNIFICATION. The procedure for indemnification
shall be as follows:
9.4.1. The party claiming indemnification (the "CLAIMANT") shall
promptly give notice to the party from whom indemnification is claimed (the
"INDEMNIFYING PARTY") of any claim, whether between the parties or brought by a
third party, specifying (a) the factual basis for such claim and (b) the
estimated amount of the claim. If the claim relates to an action, suit or
proceeding filed by a third party against Claimant, such notice shall be given
by Claimant within ten business days after written notice of such action, suit
or proceeding was given to Claimant; provided that failure to give such notice
within such ten-day period shall not bar or otherwise prejudice Claimant's
rights to indemnification with respect to such third-party action, suit or
proceeding unless any defense, claim, counterclaim or cross-claim of the
Indemnifying Party is prejudiced thereby.
9.4.2. Following receipt of notice from the Claimant of a claim, the
Indemnifying Party shall have 30 days to make such investigation of the claim as
the Indemnifying Party deems necessary or desirable. For the purposes of such
investigation, the Claimant agrees to make available to the Indemnifying Party
and/or its authorized
28
representative(s) the information relied upon by the Claimant to substantiate
the claim. If the Claimant and the Indemnifying Party agree at or prior to the
expiration of said 30-day period (or any mutually agreed upon extension thereof)
to the validity and amount of such claim, the Indemnifying Party shall
immediately pay to the Claimant the full amount of the claim subject to the
terms and in accordance with the procedures set forth herein. If the Claimant
and the Indemnifying Party do not agree within said period (or any mutually
agreed upon extension thereof), the Claimant may seek appropriate legal remedy.
9.4.3. With respect to any claim by a third party as to which the
Claimant is entitled to indemnification hereunder, the Indemnifying Party shall
have the right at its own expense, to participate in or assume control of the
defense of such claim, and the Claimant shall cooperate fully with the
Indemnifying Party. If the Indemnifying Party elects to assume control of the
defense of any third-party claim, the Claimant shall have the right to
participate in the defense of such claim at its own expense. If the Indemnifying
Party does not elect to assume control or otherwise participate in the defense
of any third party claim, it shall be bound by the results obtained by the
Claimant with respect to such claim, and the Indemnifying Party shall be
responsible and shall promptly reimburse Claimant for all associated costs, fees
and expenses.
9.4.4. If a claim, whether between the parties or by a third party,
requires immediate action, the parties will diligently seek to reach a decision
with respect thereto as expeditiously as practicable.
9.5. LIMITATION ON INDEMNIFICATION, EXCLUSIVE REMEDY.
9.5.1. Seller shall not be liable under Section 9.2 for breach of
representations and warranties for any losses or damages arising out of any
single claim or aggregate claims until the total amount of all such losses or
damages suffered or paid by Buyer exceeds FIVE THOUSAND DOLLARS AND 00/100
($5,000.00) ("SELLER'S BASKET") in which case Seller shall, subject to the
provisions of Section 9.5.2, be liable for the total amount of all such losses
or damages.
9.5.2. Subject to the provisions of Sections 9.5.4, Seller's
liability under Section 9.2 after Closing shall be limited in amount to the
Holdback.
9.5.3. The amount payable by Seller to Buyer with respect to Section
9.2 shall be reduced by the amount of any insurance proceeds received or
expected to be received by Buyer with respect to losses, liabilities or damages,
and each of the parties hereby agrees to use reasonable efforts to collect any
and all insurance proceeds to which it may be entitled in respect to any such
losses, liabilities or damages. To the extent that insurance proceeds are
received and/or a tax benefit is realized after payment has been made by Seller
to Buyer, Buyer shall promptly pay an amount equal to such proceeds or benefit
to Seller.
9.5.4. After the Closing Date, the sole and exclusive remedy of any
party for any misrepresentation or any breach of a warranty or covenant set
forth in or made pursuant to this Agreement shall be a claim for indemnification
under and pursuant to this Article 9; provided that nothing contained herein
shall limit Buyer's remedy of specific performance and other equitable relief
with respect to Seller's obligations under Section 10.7; provided further that
there
29
shall be no limitation on Buyer's indemnity rights hereunder with respect to any
and all breaches of any representations and warranties under Sections 3.1, 3.2,
3.6 (solely with respect to title) 3.11, 3.13, and 3.15
10. MISCELLANEOUS
10.1. NOTICES. All notices, demands and requests required or permitted to
be given under the provisions of this Agreement shall be (a) in writing, (b)
delivered by personal delivery, facsimile transmission (to be followed promptly
by written confirmation mailed by certified mail as provided below) or sent by
commercial delivery service or certified mail, return receipt requested, (c)
deemed to have been given on the date of personal delivery, the date of
transmission and receipt of facsimile transmissions, or the date set forth in
the records of the delivery service or on the return receipt, and (d) addressed
as follows:
If to Seller:
c/o Northland Communications Corporation
101 Stewart Street, Suite 700
Seattle, WA 98101
Attn: Gary Jones and Paul Milan
Facsimile No.: (206) 748-5061
With a copy to:
Perkins Coie LLP
1201 Third Avenue, Suite 4800
Seattle, WA 98101
Attn: Georges Yates, Esq.
Facsimile No.: (206) 359-4402
If to Buyer:
Cequel III Communications I, LLC
12444 Powerscourt Drive
St. Louis, Missouri 63131
Attn: Craig Rosenthal
Senior Counsel
Telephone: (314) 965-2020
Facsimile: (314) 965-0500
With a copy to:
Heather Wood,
Senior Vice President
Corporate Development
at the same address
With a copy to:
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Brown Raysman Millstein Felder & Steiner LLP
900 Third Avenue New York, New York 10022
Attn: Stanley E. Bloch
Telephone: (212) 895-2000
Facsimile: (212) 895-2900
or to any such other persons or addresses as the parties may from
time to time designate in a writing delivered in accordance with this Section
10.1.
10.2. BENEFIT AND BINDING EFFECT. Neither party hereto may assign this
Agreement without the prior written consent of the other party hereto, which
consent shall not be unreasonably withheld; provided, however, that Buyer may
assign this Agreement to one or more of the subsidiaries or affiliates of Buyer,
without the prior written consent of Seller, provided that such assignment does
not cause any consent or approval required to be obtained hereunder to be
withheld or materially delayed, and provided further, that such assignment shall
not relieve assignor of its purchase price and indemnity obligations or
liabilities hereunder. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns.
10.3. BULK TRANSFER. Buyer acknowledges that Seller has not and will not
file any transfer notice or otherwise complied with applicable bulk transfer
laws, and the parties agree to waive compliance with same.
10.4. GOVERNING LAW; VENUE. This Agreement shall be governed, construed
and enforced in accordance with the laws of the State of New York, without
regard to the conflicts of law principles of such state. The Buyer and Seller
hereby agree that any dispute arising out of or relating to this Agreement shall
be submitted to arbitration before a panel of three arbitrators in Denver,
Colorado in accordance with the commercial arbitration rules of the American
Arbitration Association. At any time that a dispute has arisen which the parties
are unable to resolve, any party to such dispute may send written notice to the
other that it intends to submit such dispute to arbitration. The parties agree
to cooperate to conclude any such arbitration promptly. The decision of such
arbitration panel shall be final and binding. However, the parties can seek
injunctive relief, but not monetary damages, in a court of law. The prevailing
party shall be entitled to the reimbursement from the other party of all costs
and expenses incurred, if any, including attorney's fees, to enforce its rights
and remedies hereunder. The parties agree that this Section 10.4 serves as a
material inducement for Seller to enter into this Agreement. THE PARTIES HEREBY
WAIVE THE RIGHT TO A TRIAL BY JURY IN ANY SUCH ACTION OR PROCEEDING.
10.5 GENDER AND NUMBER. Words used herein, regardless of the gender and
number specifically used, shall be deemed and construed to include any other
gender, masculine, feminine or neuter, and any other number, singular or plural,
as the context requires.
10.6. ENTIRE AGREEMENT. This Agreement, all schedules and exhibits hereto,
and all documents and certificates to be delivered by the parties pursuant
hereto collectively represent the entire understanding and agreement between
Buyer and Seller with respect to the subject matter hereof. All schedules and
exhibits attached to this Agreement shall be deemed part of this
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Agreement and incorporated herein, where applicable, as if fully set forth
herein. This Agreement supersedes all prior negotiations between Buyer and
Seller with respect to the transactions contemplated hereby, and all letters of
intent and other writings relating to such negotiations, and cannot be amended,
supplemented or modified except by an agreement in writing which makes specific
reference to this Agreement or an agreement delivered pursuant hereto, as the
case may be, and which is signed by the party against which enforcement of any
such amendment, supplement or modification is sought.
10.7. FURTHER ASSURANCES. Each party covenants that at any time, and from
time to time, after the Closing Date, it will execute such additional
instruments and take such actions as may be reasonably requested by the other
parties to confirm or perfect or otherwise to carry out the intent and purposes
of this Agreement.
10.8. WAIVER OF COMPLIANCE; CONSENTS. Except as otherwise provided in this
Agreement, any failure of any of the parties to comply with any obligation,
representation, warranty, covenant, agreement or condition herein may be waived
by the party entitled to the benefits thereof, but such waiver or failure to
insist upon strict compliance with such obligation, representation, warranty,
covenant, agreement or condition shall not operate as a waiver of, or estoppel
with respect to, any subsequent or other failure.
10.9. SEVERABILITY. If any provision of this Agreement or the application
thereof to any person or circumstance shall be invalid or unenforceable to any
extent, the remainder of this Agreement and the application of such provision to
other persons or circumstances shall not be affected thereby and shall be
enforced to the greatest extent permitted by law; provided, however, that the
economic and legal substance of the transactions contemplated by this Agreement
is not affected in any manner that is materially adverse to any party affected
by such invalidity or unenforceability.
10.10. COUNTERPARTS. This Agreement may be signed in any number of
counterparts with the same effect as if the signature on each such counterpart
were upon the same instrument, and a facsimile transmission shall be deemed to
be an original signature.
10.11. NO THIRD-PARTY BENEFICIARIES. This Agreement constitutes an
agreement solely among the parties hereto, and, except as otherwise provided
herein, is not intended to and will not confer any rights, remedies, obligations
or liabilities, legal or equitable on any person other than the parties hereto
and their respective successors or assigns, or otherwise constitute any person a
third party beneficiary under or by reason of this Agreement.
10.12. TAX CONSEQUENCES. Except as provided in Section 3.13 of this
Agreement, no party to this Agreement makes any representation or warranty,
express or implied, with respect to the tax implications of any aspect of this
Agreement on any other party to this Agreement, and all parties expressly
disclaim any such representation or warranty with respect to any tax
consequences arising under this Agreement. Each party has relied solely on its
own tax advisors with respect to the tax implications of this Agreement.
10.13. CONSTRUCTION. This Agreement has been negotiated by Buyer and
Seller and their respective legal counsel, and legal or equitable principles
that might require the construction of
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this Agreement or any provision of this Agreement against the party drafting
this Agreement shall not apply in any construction or interpretation of this
Agreement.
10.14. TIMING OF NOTICE AND PERFORMANCE. If the last day permitted for the
giving of any notice or the performance of any act required or permitted under
this Agreement falls on a day that is not a business day, the time for the
giving of such notice or the performance of such act will be extended to the
next succeeding business day.
10.15. CURE. For all purposes under this Agreement, the existence or
occurrence of any event or circumstance that constitutes a breach of a
representation or warranty or the nonfulfillment of any pre-Closing covenant or
agreement of Buyer or Seller contained in this Agreement (including, without
limitation, the schedules hereto) on the date such representation or warranty is
made or the fulfillment of such pre-Closing covenant or agreement is due, shall
not constitute a breach of such representation or warranty or the nonfulfillment
of such pre-Closing covenant or agreement if such event or circumstance is cured
within 15 days of the written notice thereof.
10.16. RESERVED.
10.17. HEADINGS. The headings herein are included for ease of reference
only and shall not control or affect the meaning or construction of the
provisions of this Agreement.
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WHEREAS, this Asset Purchase Agreement is executed as of the date first above
written, by
BUYER:
CEQUEL III COMMUNICATIONS I, LLC
By: /S/ HEATHER WOOD
----------------
Name: Heather Wood
Title: Senior Vice President
[ADDITIONAL SIGNATURES FOLLOW]
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WHEREAS, this Asset Purchase Agreement is executed as of the date first above
written, by
SELLER:
NORTHLAND CABLE TELEVISION, INC.
By: /S/ GARY S. JONES
-----------------
Name: Gary S. Jones
Title: President
2