PURCHASE AND SALE AGREEMENT AMONG EVEREST BROADBAND, INC., THE EQUITY HOLDERS OF EVEREST BROADBAND, INC., AND SUREWEST COMMUNICATIONS DECEMBER 6, 2007
EXECUTION
COPY
AMONG
EVEREST
BROADBAND, INC.,
THE
EQUITY HOLDERS OF
EVEREST
BROADBAND, INC.,
AND
DECEMBER
6, 2007
TABLE
OF CONTENTS
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Page
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ARTICLE
I
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DEFINED
TERMS; RULES OF CONSTRUCTION
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1
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1.1
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Defined
Terms
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1
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1.2
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Rules
of Construction
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11
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ARTICLE
II
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PURCHASE
AND SALE OF SHARES; PURCHASE PRICE AND ADJUSTMENTS
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12
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2.1
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Sale
of Shares
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12
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2.2
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Purchase
Price
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12
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2.3
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Payments
at Closing; Treatment of Options and Warrants
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12
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2.4
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Delivery
of Estimated Closing Statement and Proposed Closing
Statement
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13
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2.5
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Payment
of Purchase Price Adjustments
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15
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2.6
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Escrow
Amount
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17
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2.7
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The
Closing
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18
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2.8
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Deliveries
at Closing
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18
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ARTICLE
III
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REPRESENTATIONS
AND WARRANTIES REGARDING SELLERS
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19
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3.1
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Ownership
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19
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3.2
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Organization,
Good Standing, Qualification and Power
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19
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3.3
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Authority;
Execution and Delivery; Enforceability
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20
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3.4
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No
Conflicts; Consents
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20
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3.5
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Relationship
with Related Persons
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20
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ARTICLE
IV
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REPRESENTATIONS
AND WARRANTIES REGARDING HOLDINGS AND ITS SUBSIDIARIES
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21
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4.1
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Organization,
Good Standing, Qualification and Power
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21
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4.2
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Authority;
Execution and Delivery; Enforceability
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21
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4.3
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No
Conflicts; Consents
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22
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4.4
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Capitalization;
Subsidiaries
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22
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4.5
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Financial
Statements
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23
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4.6
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Personal
Property
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23
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4.7
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Real
Property
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23
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4.8
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Intellectual
Property
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24
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4.9
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Material
Contracts
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24
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4.10
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Permits
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25
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-i-
TABLE
OF CONTENTS
(continued)
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Page
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4.11
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Taxes
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25
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4.12
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Proceedings
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27
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4.13
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Benefit
Plans
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27
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4.14
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Employee
and Labor Matters
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29
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4.15
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Absence
of Changes or Events
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29
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4.16
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Compliance
with Applicable Laws
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29
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4.17
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Environmental
Matters
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30
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4.18
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Brokers
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31
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4.19
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Insurance
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31
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4.20
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Inventory
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31
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4.21
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Accounts
Receivable
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31
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4.22
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Customers
and Suppliers
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31
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4.23
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Cable
System and Subscriber Information
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32
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4.24
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Disclosure
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32
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4.25
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No
Additional Representations
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32
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ARTICLE
V
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REPRESENTATIONS
AND WARRANTIES OF PURCHASER
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33
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5.1
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Organization,
Standing, Qualification and Power
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33
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5.2
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Authority;
Execution and Delivery; and Enforceability
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33
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5.3
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No
Conflicts; Consent
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33
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5.4
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Litigation
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33
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5.5
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Purchaser's
Qualifications
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34
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5.6
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Purchaser's
Business Investigation
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34
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5.7
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Investment
Intent
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34
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5.8
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Availability
of Funds
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34
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ARTICLE
VI
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COVENANTS
AND AGREEMENTS
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35
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6.1
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Conduct
of Business
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35
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6.2
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Access
to Information; Delivery of Financial Statements
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38
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6.3
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Confidentiality
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38
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6.4
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Efforts
to Consummate Generally
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38
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6.5
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Regulatory
Matters and Approvals
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39
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-ii-
TABLE
OF CONTENTS
(continued)
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Page
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6.6
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Expenses;
Transfer Taxes
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40
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6.7
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Publicity
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40
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6.8
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Indemnification,
Exculpation
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40
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6.9
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Exclusivity
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41
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6.10
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Disclosure
Schedules
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41
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6.11
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Termination
of 401(k) Plans
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41
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6.12
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Cooperation
upon Inquiries as to Rates
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42
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6.13
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Subscriber
Reports
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42
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ARTICLE
VII
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CONDITIONS
PRECEDENT
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42
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7.1
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Conditions
to Each Party's Obligations
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42
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7.2
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Conditions
to Obligations of Purchaser
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43
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7.3
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Conditions
to the Obligations of Each Seller
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44
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7.4
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Frustration
of Closing Conditions
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44
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ARTICLE
VIII
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TERMINATION
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45
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8.1
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Termination
of Agreement
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45
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8.2
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Effect
of Termination
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45
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ARTICLE
IX
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INDEMNIFICATION
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46
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9.1
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Survival
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46
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9.2
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Indemnification
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46
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9.3
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Third
Party Claims
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47
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9.4
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Limitations
on Indemnification
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48
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9.5
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Right
to Indemnification Not Affected by Knowledge
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50
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9.6
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No
Contribution
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50
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9.7
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Remedies
Exclusive
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50
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ARTICLE
X
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TAX
MATTERS
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50
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10.1
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Purchaser
Tax Covenants
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50
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10.2
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Tax
Returns, Cooperation
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51
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10.3
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Contests
Related to Taxes
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52
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10.4
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Indemnity
Payments Hereunder Based on Tax Cost
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53
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ARTICLE
XI
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GENERAL
PROVISIONS
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53
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11.1
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Assignment
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53
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11.2
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Appointment
of Sellers' Representative; Contribution Obligations
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54
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-iii-
TABLE
OF CONTENTS
(continued)
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Page
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11.3
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No
Third-Party Beneficiaries
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55
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11.4
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Notices
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55
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11.5
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Headings
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57
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11.6
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Counterparts
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57
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11.7
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Entire
Agreement
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57
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11.8
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Amendments
and Waivers
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57
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11.9
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Severability
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57
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11.10
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Governing
Law
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57
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11.11
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Consent
to Jurisdiction
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58
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11.12
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Attorneys'
Fees and Costs
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58
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-iv-
LIST
OF SCHEDULES AND EXHIBITS
Schedules
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I
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Common
Stock, Preferred Stock, Options and Warrants
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1.1
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FCC
Licenses
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2.4(c)
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Accounting
Policies
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3.4
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Sellers'
Consents
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3.5
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Relationship
with Related Persons
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4.3
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Holdings
Consents
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4.4(c)
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Capitalization
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4.4(d)
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Subsidiaries
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4.5(a)
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Financial
Statements
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4.5(b)
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Exceptions
to GAAP
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4.5(c)
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Exceptions
to Financial Statements
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4.5(d)
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Undisclosed
Liabilities
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4.6
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Permitted
Liens
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4.7(a)
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Owned
Real Property
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4.7(b)
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Leased
Real Property
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4.9
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Material
Contracts
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4.11
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Taxes
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4.13(a)
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Employee
Benefit Plans
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4.14(c)
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Employees
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4.16
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Compliance
with Applicable Laws
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4.19
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Insurance
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4.22
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Customers
and Suppliers
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4.23(a)
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Systems
Owned
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4.23(b)
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Aggregate
Number of Subscribers
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4.23(c)
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Policy
on Calculation of Subscribers
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4.23(d)
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Average
Monthly Revenue Per Subscriber
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4.23(e)
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Subscriber
Monthly Churn Rate
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5.3
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Purchaser's
Consents
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6.1(a)(iv)
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Permitted
Material Contracts
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7.2(d)
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Material
Third Party Consents
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7.2(g)
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Jurisdictions
for Good Standings
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Exhibits
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A
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Revenue/Customer
Adjustment Amount
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2.6(a)
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Escrow
Agreement
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2.8(iv)
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Form
of Legal Opinion of O'Melveny & Xxxxx LLP
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7.2(f)
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Form
of FIRPTA Certificate
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-v-
PURCHASE
AND SALE AGREEMENT dated
as
of December 6, 2007 (this "Agreement"),
among
Everest Broadband, Inc., a Delaware corporation ("Holdings"),
the
Persons identified on Schedule
I
(collectively, "Sellers")
and
SureWest Communications, a California corporation ("Purchaser").
WHEREAS,
each Seller owns (a) that number of shares of common stock, $0.001 per share,
of
Holdings (the "Common
Stock")
set
forth opposite such Seller's name under the heading "Shares of Common Stock
Owned" on Schedule
I,
(b)
that number of shares of preferred stock, $0.001 per share, of Holdings (the
"Preferred
Stock"
and
together with the Common Stock, the "Shares")
set
forth opposite such Seller's name under the heading "Shares of Preferred Stock
Owned" on Schedule
I,
(c)
that number of warrants to acquire shares of Common Stock ("Warrants")
set
forth opposite such Seller's name under the heading "Warrants Owned" on
Schedule
I,
and (d)
that number of options to acquire shares of Common Stock ("Options")
set
forth opposite such Seller's name under the heading "Options Owned" on
Schedule
I;
WHEREAS,
the Shares constitute all of the issued and outstanding capital stock of
Holdings and the Warrants and Options constitute all other issued and
outstanding Equity Securities of Holdings;
WHEREAS,
Holdings owns 100% of the issued and outstanding capital stock of Everest
Connections Holdings, Inc., a Delaware corporation (the "Company");
WHEREAS,
the Company, through its Subsidiaries, is engaged in the cable television,
broadband services and telephony businesses (the "Business");
and
WHEREAS,
(a) Sellers desire to sell to Purchaser, and Purchaser desires to purchase
from
Sellers, the Shares, and (b) using a portion of the funding provided by
Purchaser hereunder, Purchaser desires Holdings to, and Sellers desire to cause
Holdings or its Subsidiaries to (i) pay the Indebtedness, (ii) cancel the
Warrants, and (iii) cancel the Options, in each case on the terms and
subject to the conditions set forth in this Agreement.
NOW,
THEREFORE, in consideration of the benefits to be derived from this Agreement
and the representations, warranties, covenants, agreements and conditions
contained herein, the parties agree as follows:
ARTICLE
I
DEFINED
TERMS; RULES OF CONSTRUCTION
1.1 Defined
Terms.
Capitalized
terms used herein but not defined have the respective meanings given to such
terms below.
"Accounting
Firm"
has the
meaning set forth in Section 2.4(f).
"Accounting
Policies"
has the
meaning set forth in Section 2.4(c).
-1-
"Actual
Cash"
has the
meaning set forth in Section 2.5(b).
"Actual
Indebtedness"
has the
meaning set forth in Section 2.5(c).
"Actual
Revenue/Customer Adjustment Amount"
has the
meaning set forth in Section 2.4(a).
"Actual
Transaction Expenses"
has the
meaning set forth in Section 2.5(d).
"Actual
Working Capital"
has the
meaning set forth in Section 2.5(a).
"Affiliate"
of any
Person means another Person that directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common control with,
such first Person. The term "control" (including, with correlative meanings,
the
terms "controlled by" and "under common control with") includes the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, by ownership of securities, contract,
credit arrangement or otherwise.
"Agreement"
has the
meaning set forth in the Caption.
"Audited
Balance Sheet"
has the
meaning set forth in Section 4.5.
"Audited
Financial Statements"
has the
meaning set forth in Section 4.5.
"Business"
has the
meaning set forth in the Recitals.
"Business
Day"
means
any day that is not a Saturday, Sunday or other day on which banking
institutions in New York, New York and in San Francisco, California are not
required to be open.
"Cable
Act"
means
Title VI of the Communications Act.
"Cable
System"
has the
meaning set forth in the Communications Act.
"Cash"
means
all cash and cash equivalents (in accordance with GAAP) of Holdings and its
Subsidiaries.
"Closing"
has the
meaning set forth in Section 2.7.
"Closing
Date"
has the
meaning set forth in Section 2.7.
"Code"
means
the Internal Revenue Code of 1986, as amended and the rules and regulations
promulgated thereunder.
"Common
Equityholder"
means
each Common Stockholder, Optionholder and Warrantholder.
"Common
Stock"
has the
meaning set forth in the Recitals.
-2-
"Common
Stockholder"
means a
holder of Common Stock.
"Communications
Act"
means
the Communications Act of 1934, as amended.
"Communications
Licenses"
means
all permits from each Governmental Entity that regulates telecommunications
in
each applicable jurisdiction, including (a) the FCC Licenses; (b) the Missouri
Public Service Commission or the Kansas Corporation Commission (each a
"State
PUC")
(together with any renewals, extensions, or modifications thereof and any
additions thereto made as of the Closing Date); and (c) the appropriate
municipal Governmental Entities (together with any renewals, extensions, or
modifications thereof and any additions thereto made as of the Closing Date)
(the "Local
Authorizations").
"Company
Benefit Plans"
has the
meaning set forth in Section 4.13(a).
"Company"
has the
meaning set forth in the Recitals.
"Confidentiality
Agreement"
has the
meaning set forth in Section 6.3.
"Contract"
means
any contract, agreement, loan or credit agreement, note, bond, guaranty,
mortgage, indenture, instrument, lease, sublease, purchase order or other
contract agreement, commitment or license, whether written or oral, to which
Holdings or any of its Subsidiaries is a party or by which Holdings or any
of
its Subsidiaries or any of its assets or property are bound.
"Dispute
Resolution Procedure"
has the
meaning set forth in Section 2.4(f).
"Enterprise
Value"
has the
meaning set forth in Section 2.2.
"Environmental
Law"
means
any law enacted and in effect on or prior to the Closing Date relating to
pollution or protection of the environment, or to Hazardous
Substances.
"Equity
Securities"
means
any capital stock or other equity interest or any securities convertible into
or
exchangeable for capital stock or any other rights, warrants or options to
acquire any of the foregoing securities.
"ERISA"
means
the Employee Retirement Income Security Act of 1974, as amended.
"ERISA
Affiliate"
means
any Subsidiary of Holdings and any entity (whether or not incorporated) other
than Holdings that, together with Holdings, is required to be treated as a
single employer under Section 414(b), (c), (m) or (o) of the Code.
"Escrow
Agent"
has the
meaning set forth in Section 2.6(a).
"Escrow
Agreement"
has the
meaning set forth in Section 2.6(a).
"Escrow
Amount"
has the
meaning set forth in Section 2.6(a).
"Escrow
Consideration"
has the
meaning set forth in Section 2.6(b).
-3-
"Escrow
Fund"
has the
meaning set forth in Section 2.6(a).
"Escrow
Refunds"
has the
meaning set forth in Section
2.6(b).
"Estimated
Cash"
has the
meaning set forth in Section 2.4(a).
"Estimated
Closing Statement"
has the
meaning set forth in Section 2.4(a).
"Estimated
Indebtedness"
has the
meaning set forth in Section 2.4(a).
"Estimated
Revenue/Customer Adjustment Amount"
has the
meaning set forth in Section 2.4(a).
"Estimated
Transaction Expenses"
has the
meaning set forth in Section 2.4(a).
"Estimated
Working Capital"
has the
meaning set forth in Section 2.4(a).
"Expiration
Date"
has the
meaning set forth in Section 8.1(b).
"Everest
Long Term Incentive Plan"
means
the Everest Long Term Incentive Plan and each Everest Long Term Incentive
Agreement.
"FCC"
means
the United States Federal Communications Commission.
"FCC
Licenses"
means
each FCC license and authorization issued to the Company or any of its
Subsidiaries, including those set forth in Schedule
1.1,
and any
renewals, extensions or modifications thereof and any additions thereto made
on
or prior to the Closing Date.
"Federal
Income Tax"
means
any Tax imposed under Subtitle A of the Code.
"Final
Closing Statement"
has the
meaning set forth in Section 2.4(g).
"Final
Determination Date"
has the
meaning set forth in Section 2.4(g).
"Final
Purchase Price"
has the
meaning set forth in Section
2.2(b).
"Final
Release Date"
has the
meaning set forth in Section
2.6(b).
"Financial
Statements"
has the
meaning set forth in Section 4.5.
"FIRPTA
Certificate"
has the
meaning set forth in Section 7.2(f).
"401(k)
Plans"
has the
meaning set forth in Section
6.11.
"Fundamental
Representations"
has the
meaning set forth in Section 9.1(b).
"Fundamental
Purchaser Representations"
has the
meaning set forth in Section 9.1(b).
-4-
"Fundamental
Seller Representations"
has the
meaning set forth in Section 9.1(a).
"GAAP"
means
United States generally accepted accounting principles.
"GAAP
Liabilities"
means
liabilities or obligations required under GAAP to be accrued, reserved for
or
disclosed in financial statements.
"Governmental
Entity"
means
any federal, state, local or foreign government or any court of competent
jurisdiction, administrative agency or commission or other governmental
authority or instrumentality, domestic or foreign.
"Hazardous
Substance"
means
any material defined as a toxic or hazardous substance pursuant to 42 U.S.C.
§
9601(14) and crude oil, natural gas liquids and any derivative, byproduct or
waste derived therefrom.
"Holdings"
has the
meaning set forth in the Caption.
"Holdings
Certificate of Incorporation"
means
the Restated Certificate of Incorporation of Holdings and all amendments
thereto, as in effect on the date hereof and as of the Closing
Date.
"HSR
Act"
means
the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended.
"Indebtedness"
means,
without duplication, the aggregate amount (including the current portions
thereof) of all indebtedness (including all accrued interest) of Holdings and
any of its Subsidiaries for (a) money borrowed (which, for the avoidance of
doubt, shall not include any (i) obligations of Holdings and any of its
Subsidiaries in respect of the Preferred Stock or (ii) money borrowed by
Holdings or any of its Subsidiaries from Holdings or any of its Subsidiaries),
including all prepayment or similar fees, expenses or penalties on or relating
to the repayment of any of such indebtedness and termination or closing out
of
any related hedging arrangements, and (b) all obligations payable at Closing
under the Everest Long Term Incentive Plan for employees of Holdings and its
Subsidiaries.
"Indemnifiable
Tax"
has the
meaning set forth in Section
10.3(a).
"Indemnified
Party"
means,
in the case of an indemnification claim pursuant to Section 9.2(a),
Purchaser and its successors and assigns, and in the case of an indemnification
claim pursuant to Section 9.2(b),
Sellers
and their estates, heirs, personal representatives and successors.
"Indemnifying
Party"
means,
in the case of an indemnification claim pursuant to Section 9.2(a),
Sellers
and their estates, heirs, personal representatives and successors, and in the
case of an indemnification claim pursuant to Section 9.2(b),
Purchaser and its successors and assigns.
"Indemnity
Cap"
has the
meaning set forth in Section 9.4(b).
-5-
"Indemnity
Pro Rata Share"
means
with respect to any Seller, the quotient obtained by dividing
(a) the
aggregate net transaction consideration received pursuant to this Agreement
by
such Seller, by
(b) the
aggregate transaction consideration received pursuant to this Agreement by
all
Sellers. For purposes of both such clauses (a) and (b), "transaction
consideration" shall include any payment received at Closing and shall include
any net payments after giving effect to the adjustments made pursuant to
Section
2.5,
but
shall not include the effects of any indemnity payments made by a Seller
pursuant to ARTICLE
IX
(other
than to the extent such indemnity payments relate to Section
2.5).
"Indemnity
Threshold"
has the
meaning set forth in Section 9.4(a).
"Individual
Seller Breach"
has the
meaning set forth in Section 9.4(c).
"Initial
Payment Amount"
has the
meaning set forth in Section 2.2(b).
"Initial
Release Date"
has the
meaning set forth in Section
2.6(b).
"Intellectual
Property"
means
all of the following in any jurisdiction throughout the world: (a) all
inventions (whether patentable or unpatentable and whether or not reduced to
practice), all improvements thereto, and all patents, patent applications,
and
patent disclosures, together with all reissuances, continuations,
continuations-in-part, revisions, extensions, and reexaminations thereof, (b)
all trademarks, service marks, trade dress, logos, slogans, trade names,
corporate names, Internet domain names and including all goodwill associated
therewith, and all applications, registrations, and renewals in connection
therewith, (c) all copyrightable works, all copyrights, and all applications,
registrations, and renewals in connection therewith, (d) all trade secrets
and
confidential business information (including ideas, research and development,
know-how, formulas, compositions, manufacturing and production processes and
techniques, technical data, designs, drawings, specifications, customer and
supplier lists, pricing and cost information, and business and marketing plans
and proposals), (e) all advertising and promotional materials, (f) all computer
software (including source code, executable code, data, databases, and related
documentation), (g) all other proprietary rights, and (h) all copies and
tangible embodiments thereof (in whatever form or medium).
"Knowledge
of Sellers"
or
other words of similar import, means the actual knowledge of Xxxxxxx Xxxxxxx,
Xxx Xxxxxxx, Xxxxxxx Xxxxxxx, Xxxxx Xxxxxx, Xxxxxx Xxxxxx and Xxxxxx XxXxx,
after reasonable investigation.
"Latest
Balance Sheet"
has the
meaning set forth in Section 4.5.
"Leased
Property"
has the
meaning set forth in Section 4.7.
"Legal
Opinion"
has the
meaning set forth in Section
2.8(iv).
"Liens"
means
mortgages, liens, security interests, pledges, easements, rights of first
refusal, options, restrictions, defects of title or encumbrances of any
kind.
"Local
Authorizations"
has the
meaning set forth in the definition of Communications Licenses.
-6-
"Loss"
or
"Losses"
has the
meaning set forth in Section 9.2(a).
"Material
Adverse Effect"
means
any fact, event, series of events, change, effect or circumstance that has
or is
reasonably likely to have a material adverse effect on the business, assets,
properties, condition (financial or otherwise) or results of operations of
Holdings and its Subsidiaries, taken as a whole; provided,
however,
that in
no event shall any of the following constitute a Material Adverse Effect: (a)
any fact, event, series of events, change, effect or circumstance resulting
from
or relating to changes in economic or financial conditions generally (except
to
the extent that such change has had, or is reasonably likely to have, a
disproportionate negative
effect
on Holdings and its Subsidiaries, taken as a whole, relative to other Persons
in
their industry); (b) any fact, event, series of events, change, effect or
circumstance that affects their industry generally (except to the extent that
such fact, event, series of events, change, effect or circumstance has had,
or
is reasonably likely to have, a disproportionate negative effect on Holdings
and
its Subsidiaries, taken as a whole, relative to other Persons in their
industry); (c) any fact, event, series of events, change, effect or circumstance
resulting from or relating to the public announcement of the Transactions;
and
(d) the engagement by the United States in hostilities or the escalation
thereof, whether or not pursuant to the declaration of a national emergency
or
war, or the occurrence or the escalation of any military or terrorist attack
upon the United States, or any of its territories, possessions, or diplomatic
or
consular offices or upon any military installation, equipment or personnel
of
the United States (except to the extent that such event or condition has had,
or
is reasonably likely to have, a disproportionate negative effect on Holdings
and
its Subsidiaries, taken as a whole, relative to other Persons in their
industry).
"Material
Contracts"
has the
meaning set forth in Section 4.9(a).
"Material
Customers"
has the
meaning set forth in Section
4.22.
"Notice
of Disagreement"
has the
meaning set forth in Section 2.4(d).
"Option
Exercise Amount"
means
the aggregate exercise price of all Options outstanding immediately prior to
their cancellation pursuant to Section 2.3(d).
"Optionholder"
means a
holder of one or more Options.
"Options"
has the
meaning set forth in the Recitals.
"Option
Plan"
means
Holdings' 2006 Stock Option Plan, as may be amended, supplemented and/or
restated from time to time.
"Owned
Property"
has the
meaning set forth in Section 4.7.
"Permits"
has the
meaning set forth in Section 4.10.
"Permitted
Liens"
means:
(a) those Liens set forth on Schedule
4.6;
(b)
mechanics', carriers', workmen's, repairmen's or other like Liens arising or
incurred in the ordinary course of business evidencing amounts that are not
yet
due, and liens for Taxes that are not due and payable; (c) easements, covenants,
rights-of-way, other similar restrictions of record and other imperfections
of
title or encumbrances, if any, that do not, individually or in the aggregate,
materially impair the continued use or operation of the Company's or any of
its
Subsidiaries' assets in the conduct of its business as presently conducted;
and
(d) (i) zoning, building and other similar restrictions, (ii) Liens that have
been placed by any developer, landlord or other third party on property over
which the Company has easement rights and (iii) unrecorded easements, covenants,
rights-of-way and other similar restrictions, none of which items set forth
in
this clause (d), individually or in the aggregate, materially impair the
continued use or operation of the Owned Property in the conduct of the business
of the Company as presently conducted.
-7-
"Person"
means
and includes an individual, a partnership, a corporation, a limited liability
company, an association, a joint stock company, a trust, a joint venture, an
unincorporated organization or a Governmental Entity (or any department, agency
or political subdivision thereof).
"Pre-Closing
Tax Period"
means
any tax period (or portion thereof) ending on or before the Closing
Date.
"Preferred
Liquidation Amount"
means
the Preference Amount (as defined in the Holdings Certificate of
Incorporation).
"Preferred
Stock"
has the
meaning set forth in the Recitals.
"Preferred
Stockholder"
means a
holder of Preferred Stock.
"Proceeding"
means
any action, suit, litigation, investigation or proceeding by or before any
Governmental Entity or arbitrator.
"Proposed
Closing Statement"
has the
meaning set forth in Section 2.4(b).
"Pro
Rata Share"
means,
(a) with respect to any Common Equityholder, the quotient obtained by
dividing
(i) the
aggregate number of outstanding shares of Common Stock held by such Common
Equityholders assuming the exercise of all outstanding Options and Warrants
held
by such Common Stockholder, Optionholder or Warrantholder, as the case may
be
by
(ii) the
aggregate number of outstanding shares of Common Stock assuming the exercise
of
all outstanding Options and Warrants, as set forth on Schedule
I,
and (b)
with respect to any Preferred Stockholder, the quotient obtained by dividing
(i) the
aggregate number of outstanding shares of Preferred Stock held by such Preferred
Stockholder by
(ii) the
aggregate number of outstanding shares of Preferred Stock, as set forth on
Schedule
I.
For
purposes of Section 2.3(c),
a
Common Stockholder's Pro Rata Share will be calculated assuming that such Common
Stockholder does not own any Options or Warrants. For purposes of Section 2.3(d),
an
Optionholder's Pro Rata Share will be calculated assuming that such Equityholder
does not own any shares of Common Stock (other than those issuable upon exercise
of Options held by such Optionholder). For purposes of Section 2.3(e),
a
Warrantholder's Pro Rata Share will be calculated assuming that such Stockholder
does not own any shares of Common Stock (other than those issuable upon exercise
of Warrants held by such Warrantholder).
"Purchaser"
has the
meaning set forth in the Caption.
-8-
"Rate
Regulatory Matter"
means
any Proceeding with respect to a Cable System arising our of or related to
the
Cable Act (other than those affecting the cable television industry generally)
dealing with, limiting or affecting the rates which can be charged by such
Cable
System for programming, equipment, installation, service or
otherwise.
"Related
Person"
means,
(a) with respect to a particular individual: (i) a member of such individual's
family; and (ii) any Person in which such individual or members of such
individual's family hold (individually or in the aggregate) a Material Interest;
and (b) with respect to a specified Person (other than an individual): (i)
any
Person that is an Affiliate of such specified Person; (ii) any Person that
holds
a Material Interest in such specified Person; and (iii) each Person that serves
as a partner, executor, or trustee of such specified Person (or in a similar
capacity). For purposes of this definition, "Material
Interest"
means
direct or indirect beneficial ownership (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934, as amended) of voting securities or other
voting interests representing at least five percent (5%) of the outstanding
voting power of a Person or Equity Securities or other equity interests
representing at least five percent (5%) of the outstanding Equity Securities
or
equity interests in a Person.
"Returns"
means,
collectively, returns, declarations of estimated Tax, Tax reports, information
returns and statements relating to any Taxes with respect to any income, assets
or operations of Holdings or any of its Subsidiaries.
"Revenue/Customer
Adjustment Amount"
has the
meaning set forth in Exhibit
A.
"Schedule"
has the
meaning set forth in Section 6.10.
"Securities
Act"
means
the Securities Act of 1933, as amended, or any successor statute, and the rules
and regulations promulgated thereunder.
"Seller's
Purchase Price Indemnity Cap"
has the
meaning set forth in Section 9.4(b).
"Sellers'
Representative"
has the
meaning set forth in Section 11.2(a).
"Sellers"
has the
meaning set forth in the Caption.
"Shares"
has the
meaning set forth in the Recitals.
"State
PUC"
has the
meaning set forth in the definition of Communications Licenses.
"Stockholder"
means a
holder of Common Stock or Preferred Stock.
"Stock
Subscription Warrant"
means
that certain Stock Subscription Warrant dated as of June 30, 2006, issued by
Holdings to National Union Fire Insurance Company of Pittsburgh,
PA.
"Straddle
Tax Period"
means
any Tax period that includes but does not end on the Closing Date.
-9-
"Subsidiary"
of any
Person means another Person, an amount of the voting securities, other voting
ownership or voting partnership interests of which is sufficient to elect at
least a majority of its board of directors or other governing body (or, if
there
are no such voting interests, 50% or more of the equity interests of which)
is
owned directly or indirectly by such first Person.
"Survival
Period"
has the
meaning set forth in Section
9.1.
"Systems"
means
Cable Systems, plus any additional network deployment required to provide
telecommunications to serve commercial subscribers.
"Tax"
or
"Taxes"
means
(a) any and all taxes, assessments, levies and imposts, including, unemployment
and employment insurance contributions, xxxxxxx'x compensation contributions,
gross receipts, income, profits, sales capital, paid-up capital, use or
occupation, sales, services, goods, value added, ad valorem, transfer,
franchise, withholding, payroll, excise, property and telephone user's or
telecommunication's excise taxes, together with any and all interest, penalties,
fines and additions to tax imposed with respect thereto whether or not disputed,
with respect to such amounts, and (b) any transferee liability or obligations
with respect to any items described in clause (a) above, whether by contract,
as
a successor or otherwise.
"Tax
Benefit"
with
respect to any event or adjustment for any Person means the positive excess,
if
any, of the Tax liability of such Person without regard to such event or
adjustment over the Tax liability of such Person taking into account such event
or adjustment, with all other circumstances remaining unchanged.
"Tax
Claim"
has the
meaning set forth in Section
10.3(a).
"Tax
Cost"
with
respect to any event or adjustment for any Person means the positive excess,
if
any, of the Tax liability of such Person taking such event or adjustment into
account over the Tax liability of such Person without regard to such event
or
adjustment, with all other circumstances remaining unchanged.
"Tax
Indemnified Party"
has the
meaning set forth in Section
10.3(a).
"Tax
Indemnitor"
has the
meaning set forth in Section
10.3(a).
"Tax
Losses"
means
any and all Losses attributable to (a) Taxes imposed on Holdings or any of
its
Subsidiaries with respect to a Pre-Closing Tax Period, (b) Taxes imposed on
Holdings or any of its Subsidiaries with respect to a Straddle Tax Period which
are allocable, pursuant to Section 10.2(e),
to the
portion of such period ending on the Closing Date, (c) Taxes of any member
of an
affiliated, consolidated, combined or unitary group of which Holdings or any
of
its Subsidiaries is or was a member on or prior to the Closing Date by reason
of
Treasury Regulation Section 1.1502-6 or comparable provision of foreign,
state or local law, (d) Sellers portion of the Transfer Taxes pursuant to
Section
6.6(b)
and (e)
any Taxes or other payments required to be made by Holdings or any of its
Subsidiaries as a result of any Tax sharing agreement entered into on or prior
to the Closing Date, or by reason of being a transferee or successor of another
entity.
-10-
"Third
Party Claim"
has the
meaning set forth in Section 9.3.
"Third
Party Intellectual Property"
means
Intellectual Property owned by any Person, other than Holdings or its
Subsidiaries, without regard as to whether Holdings or its Subsidiaries has
any
rights therein, used in the conduct of the Business.
"Transaction
Expenses"
means
any and all investment banking (i.e., the fees owed to Xxxxxx Capital Partners,
LLC in connection with the Transactions), legal, accounting, employee bonuses
(to the extent not included within Indebtedness) and other expenses incurred
by
Holdings or any Subsidiary thereof (which will be deemed to include any legal
expenses incurred by Seaport Capital Partners III AIV, L.P., its Affiliates
and
the Preferred Stockholder in connection with the Transactions), in each case,
in
connection with the Transactions.
"Transaction
Proposal"
has the
meaning set forth in Section
6.9(a).
"Transactions"
means
the transactions contemplated by this Agreement and the Escrow
Agreement.
"Transfer
Taxes"
has the
meaning set forth in Section 6.6(b).
"Type
1
Fundamental Representations"
means,
as applicable, the Fundamental Purchaser Representations or those
representations and warranties contained in Section 3.1
(Ownership), Section 3.3
(Authority; Execution and Delivery; Enforceability), Section 4.1
(Organization, Good Standing, Qualification and Power), Section 4.2
(Authority; Execution and Delivery; Enforceability), and Section
4.4
(Capitalization; Subsidiaries).
"Warrant
Exercise Amount"
means
the aggregate exercise price of all Warrants outstanding immediately prior
to
their cancellation pursuant to Section 2.3(e).
"Warrantholder"
means a
holder of one or more Warrant.
"Warrants"
has the
meaning set forth in the Recitals.
"Working
Capital"
means
with respect to Holdings and its Subsidiaries: (a) the sum of the following
line
items: (i) accounts receivable, net of allowance for doubtful accounts; (ii)
prepaids and other current assets (excluding Tax assets); and (iii) materials
and supplies inventory; and (iv) net investments in capital leases - current;
minus
(b) the
sum of the following line items (excluding the current portion of any
Indebtedness or the Preferred Liquidation Amount): (i) accounts payable; (ii)
current accrued liabilities; and (iii) current deferred revenue, in each case
as
of the Closing Date and calculated in accordance with Section 2.4(c).
1.2 Rules
of Construction.
Unless
otherwise indicated, any reference in this Agreement to any Article, Section,
clause, Schedule or Exhibit shall be to the Articles, Sections and clauses
of,
and Schedules and Exhibits to, this Agreement. The words "include," "includes"
and "including" are deemed to be followed by the phrase "without limitation."
Any reference to the masculine, feminine or neuter gender shall include each
other gender and any reference to the singular or plural shall include the
other, in each case unless the context otherwise requires. All Exhibits and
Schedules annexed hereto or referred to herein are incorporated in and made
a
part of this Agreement as if set forth in full herein.
-11-
ARTICLE
II
PURCHASE
AND SALE OF SHARES; PURCHASE PRICE AND
ADJUSTMENTS
2.1 Sale
of Shares.
In
accordance with, and subject to, the provisions of this Agreement, at the
Closing Purchaser shall purchase from each Seller, and each Seller shall
transfer, convey, assign and deliver to Purchaser, all of such Seller's right,
title and interest in and to the Shares owned by such Seller as set forth on
Schedule
I.
2.2 Purchase
Price.
(a) Subject
to the other terms and provisions of this ARTICLE
II,
the
purchase price to be paid by Purchaser to Sellers for the Shares (and the
cancellation of the Options and the Warrants) shall be based on an enterprise
value for Holdings and its Subsidiaries of One Hundred Seventy-Three Million
Dollars ($173,000,000) (the "Enterprise
Value").
(b) The
aggregate amount to be paid by Purchaser to Sellers on the Closing Date shall
equal (i) the Enterprise Value, plus
(ii) the
amount, if any, by which the Estimated Working Capital is a positive number,
less
(iii)
the amount, if any, by which the Estimated Working Capital is a negative number,
less
(iv) the
Estimated Indebtedness amount, plus (v) the Estimated Cash amount, less
(vi) the
Escrow Amount, less
(vii)
the Estimated Transaction Expenses,
less
(viii) the Estimated Revenue/Customer Adjustment Amount (with such resulting
amount referred to herein as the "Initial
Payment Amount").
The
final aggregate amount paid by Purchaser shall equal the Initial Payment Amount
plus
or
minus
the
aggregate of any net payments to or by Sellers pursuant to Section 2.5 plus
the
Escrow Consideration and shall be referred to herein as the "Final
Purchase Price".
2.3 Payments
at Closing; Treatment of Options and Warrants.
(a) Prior
to
the Closing, Holdings or its Subsidiaries, as applicable, shall obtain from
the
holders of such Indebtedness payoff letters in respect of the satisfaction
thereof pursuant to the following sentence. At the Closing, Purchaser shall
deliver to each holder of Indebtedness that has delivered a payoff letter the
amount set forth in such payoff letter necessary to satisfy such Indebtedness.
(b) At
the
Closing, Purchaser shall pay to each Preferred Stockholder, by wire transfer
of
immediately available United States funds to one or more bank accounts
designated by the respective Preferred Stockholders, an amount equal to such
Preferred Stockholder's Pro Rata Share of the Preferred Liquidation
Amount.
-12-
(c) At
the
Closing, Purchaser shall pay to each Common Stockholder, by wire transfer of
immediately available United States funds to one or more bank accounts
designated by the respective Common Stockholders, an amount equal to such Common
Stockholder's Pro Rata Share of the sum of (i) the Initial Payment Amount less
the Preferred Liquidation Amount, (ii) the Option Exercise Amount and (iii)
the
Warrant Exercise Amount.
(d) Immediately
prior to the Closing, all Options, whether or not then exercisable, shall be
(or, if not previously exercisable, shall become) exercisable (provided,
however, that no unvested Option shall become exercisable to the extent that
the
Code Section 280G limitation described in Section 6.3.4 of the Option Plan
applies and any such Option that so fails to become exercisable will be
cancelled by Holdings at Closing without payment of any consideration therefor)
and such Options shall be cancelled by Holdings at the Closing, and each
Optionholder shall only be entitled to receive from Purchaser, by wire transfer
of immediately available United States funds to one or more bank accounts
designated by the respective Optionholder, in consideration for the cancellation
of such Options, an amount equal to the excess, if any, of (i) such
Optionholder's Pro Rata Share of the sum of (x) the Initial Payment Amount
less
the Preferred Liquidation Amount, (y) the Option Exercise Amount and (z) the
Warrant Exercise Amount over (ii) the aggregate exercise price of such
Options, reduced by applicable withholding tax or other amounts required to
be
withheld by law.
(e) Immediately
prior to the Closing, all Warrants, whether or not then exercisable, shall
be
(or, if not previously exercisable, shall become) exercisable and such Warrants
shall be cancelled by Holdings at the Closing, and each Warrantholder shall
be
entitled to receive from Purchaser, by wire transfer of immediately available
United States funds to one or more bank accounts designated by the respective
Warrantholders, in consideration for the cancellation of such Warrants, an
amount equal to the excess, if any, of (i) such Warrantholder's Pro Rata Share
of the sum of (x) the Initial Payment Amount less the Preferred Liquidation
Amount, (y) the Warrant Exercise Amount and (z) the Option Exercise Amount
over
(ii) the aggregate exercise price of such Warrants, reduced by applicable
withholding tax or other amounts required to be withheld by law.
(f) In
order
to assure that proper income and employment taxes and other amounts
required to be withheld by law have been withheld and paid with respect to
payments to Optionholders under this Agreement, Purchaser may pay amounts that
are otherwise due to the Optionholders under this Agreement to the Company
(or
appropriate entity) which shall promptly pay such amounts to the applicable
Optionholders less applicable withholding taxes or other amounts
required to be withheld by law. For the avoidance of doubt, the
employer's portion of income and employment taxes due as a result of
payments to be made to the Optionholders under this Agreement at Closing
shall be reflected as an accrued liability on the Estimated Closing
Statement and the Final Closing Statement.
2.4 Delivery
of Estimated Closing Statement and Proposed Closing
Statement.
(a) No
more
than ten (10) Business Days and no less than five (5) Business Days prior to
the
Closing Date, the Sellers' Representative shall, or shall cause Holdings to,
deliver to Purchaser a statement (the "Estimated
Closing Statement")
setting forth a good faith estimate (each, without duplication) of (i) the
Working Capital as of the Closing Date (the "Estimated
Working Capital"),
(ii)
Cash as of close of business on the Closing Date (the "Estimated
Cash"),
(iii)
Indebtedness as of close of business on the Closing Date (the "Estimated
Indebtedness"),
(iv)
all unpaid Transaction Expenses as of close of business on the Closing Date
(the
"Estimated
Transaction Expenses")
and
(v) the Revenue/Customer Adjustment Amount (the "Estimated
Revenue/Customer Adjustment Amount").
-13-
(b) As
promptly as practicable, but no later than sixty (60) days after the Closing,
Purchaser shall deliver to the Sellers' Representative, on behalf of the Common
Equityholders, a statement setting forth a good faith determination (each
without duplication) of the Working Capital as of the Closing Date, Cash as
of
the Closing Date, Indebtedness as of the Closing Date, unpaid Transaction
Expenses as of the Closing Date, and the Revenue/Customer Adjustment Amount
(the
"Proposed
Closing Statement").
Purchaser shall and shall cause Holdings and its Subsidiaries and its and their
respective employees and agents to assist the Sellers' Representative and its
agents in their review of the Proposed Closing Statement and shall provide
the
Sellers' Representatives and its agents access upon reasonable notice and at
all
reasonable times to the personnel, properties, books and records of Holdings
and
its Subsidiaries for such purpose and for the other purposes set forth in this
Section 2.4,
in each
case, without cost to Sellers.
(c) Unless
otherwise agreed upon by Purchaser and the Sellers' Representative (or as set
forth in this Section
2.4(c)
or
Exhibit
A),
the
Estimated Closing Statement, the Proposed Closing Statement and the Final
Closing Statement shall be prepared in accordance with GAAP applied in a manner
consistent with the same accounting principles, policies, methodologies or
procedures as set forth on Schedule
2.4(c) (the
"Accounting
Policies"),
except that in calculating the component line items of Working Capital,
no
effect
shall be given to (i) the Transactions, or the financing thereof, (ii) any
purchase accounting or other similar adjustments resulting from the consummation
of the Transactions
or (iii)
any accrual with respect to Transaction Expenses.
(d) In
the
event the Sellers' Representative disputes the correctness of the Proposed
Closing Statement, the Sellers' Representative shall notify Purchaser in writing
of its objections within thirty (30) days after receipt of the Proposed Closing
Statement and shall set forth, in writing and in reasonable detail, the reasons
for the Sellers' Representative's objections (a "Notice
of Disagreement").
(e) During
the fifteen (15) days immediately following the delivery of any Notice of
Disagreement, Purchaser and the Sellers' Representative shall seek in good
faith
to resolve any differences that they may have with respect to any matter
specified in such Notice of Disagreement. During such period, Purchaser and
the
Sellers' Representative and their respective agents shall each have access
to
the other party's working papers, trial balances and similar materials prepared
in connection with the other party's preparation of the Proposed Closing
Statement and the Notice of Disagreement, as the case may be. The matters set
forth in any such written resolution executed by Purchaser and the Sellers'
Representative shall be final and binding on the parties on the date of such
written resolution.
-14-
(f) If,
at
the end of such fifteen (15) day period specified in Section 2.4(e),
Purchaser and the Sellers' Representative have not been able to resolve, in
writing, all differences that they may have with respect to any matter specified
in such Notice of Disagreement, Purchaser and the Sellers' Representative shall
submit to BDO Xxxxxxx, LLP (the "Accounting
Firm")
for
review and resolution of any and all matters that remain in dispute (and as
to
no other matter), and the Accounting Firm shall reach a final, binding
resolution of all matters that remain in dispute, which final resolution shall
not be subject to collateral attack for any reason (other than fraud) and shall
be (i) in writing and signed by the Accounting Firm, (ii) within the range
of the amount contested by the Sellers' Representative and Purchaser,
(iii) furnished to Purchaser and the Sellers' Representative as soon as
practicable after the items in dispute have been referred to the Accounting
Firm, which shall not be more than sixty (60) days after such referral,
(iv) made in accordance with this Agreement and the Accounting Policies, and
(v)
conclusive and binding upon the parties on the date of delivery of such written
resolution. Purchaser and the Sellers' Representative agree to execute, if
requested by the Accounting Firm, a reasonable engagement letter in customary
form and shall cooperate fully with the Accounting Firm and promptly provide
all
documents and information requested by the Accounting Firm so as to enable
it to
make such determination as quickly and as accurately as practicable. The
procedure outlined in this Section 2.4(f)
is
referred to as the "Dispute
Resolution Procedure".
(g) The
Proposed Closing Statement shall become the "Final
Closing Statement"
(i) on
the thirty-first (31st)
day
following the delivery of the Proposed Closing Statement if a Notice of
Disagreement has not been delivered to Purchaser by the Sellers' Representative,
(ii) with such changes as are necessary to reflect matters resolved pursuant
to
any written resolution executed pursuant to Section 2.4(e),
on the
date such resolution is executed, if all outstanding matters are resolved
through such resolution and (iii) with such changes as are necessary to reflect
the Accounting Firm's resolution of matters in dispute, on the date the
Accounting Firm delivers its final, binding resolution pursuant to Section 2.4(f).
The
date on which the Proposed Closing Statement shall become the Final Closing
Statement pursuant to the immediately foregoing sentence is referred to as
the
"Final
Determination Date".
(h) Purchaser
and the Sellers' Representative shall each pay their own costs and expenses
incurred in connection with such Dispute Resolution Procedure; provided,
that
the fees and expenses of the Accounting Firm shall be borne in the same
proportion that the Sellers' Representative's position, on the one hand, and
Purchaser's position, on the other hand, initially presented to the Accounting
Firm (based on the aggregate of all differences taken as a whole) bear to the
final resolution as determined by the Accounting Firm.
(i) Purchaser
agrees, solely with respect to the calculations required pursuant to this
Section 2.4,
and
without restricting in any manner whatsoever Purchaser's right to take any
such
action that would not affect such calculation, that following the Closing until
the Final Determination Date, Purchaser will not take any actions with respect
to the Accounting Policies and Holdings' and its Subsidiaries' books and
records.
2.5 Payment
of Purchase Price Adjustments.
(a) Working
Capital.
If the
Working Capital set forth in the Final Closing Statement (the "Actual
Working Capital")
is
greater than the Estimated
Working Capital,
Purchaser shall pay to the
Common Equityholders,
pro
rata in accordance with each such Common Equityholder's Pro Rata Share, the
amount of such excess, within five (5) Business Days of the Final Determination
Date, by wire transfer of immediately available United States funds. If the
Estimated Working Capital is greater than the Actual Working Capital set forth
in the Final Closing Statement, the Common Equityholders shall be severally
liable for, and shall pay to Purchaser, within five (5) Business Days of the
Final Determination Date, by wire transfer of immediately available United
States funds, such Common Equityholder's Pro Rata Share of the amount of such
excess.
-15-
(b) Cash.
If the
Cash set forth in the Final Closing Statement (the "Actual
Cash")
is
greater than the Estimated Cash, Purchaser shall pay to the Common
Equityholders, pro rata in accordance with each such Common Equityholder's
Pro
Rata Share, the amount by which the Actual Cash is greater than the Estimated
Cash, within five (5) Business Days of the Final Determination Date, by wire
transfer of immediately available United States funds. If the Estimated Cash
is
greater than the Actual Cash, the Common Equityholders shall be severally liable
for, and shall pay to Purchaser, within five (5) Business Days of the Final
Determination Date, by wire transfer of immediately available United States
funds, such Common Equityholder's Pro Rata Share of the amount by which the
Estimated Cash is greater than the Actual Cash.
(c) Indebtedness.
If the
Indebtedness set forth in the Final Closing Statement (the "Actual
Indebtedness")
is
less than the Estimated Indebtedness, Purchaser shall pay to the Common
Equityholders, pro rata in accordance with each such the Common Equityholder's
Pro Rata Share, such difference, within five (5) Business Days of the Final
Determination Date, by wire transfer of immediately available United States
funds. If the Estimated Indebtedness is less than the Actual Indebtedness,
the
Common Equityholders shall be severally liable for, and shall pay to Purchaser,
within five (5) Business Days of the Final Determination Date, by wire transfer
of immediately available United States funds, such Common Equityholder's Pro
Rata Share of the amount of such difference.
(d) Transaction
Expenses.
If the
Transaction Expenses set forth in the Final Closing Statement (the "Actual
Transaction Expenses")
are
less than the Estimated Transaction Expenses, Purchaser shall pay the Common
Equityholders, pro rata in accordance with each such Common Equityholder's
Pro
Rata Share, the amount of such difference, within five (5) Business Days of
the
Final Determination Date, by wire transfer of immediately available United
States funds. If the Actual Transaction Expenses are greater than the Estimated
Transaction Expenses, the Common Equityholders shall be severally liable for,
and shall pay to Purchaser, within five (5) Business Days of the Final
Determination Date, by wire transfer of immediately available United States
funds, such Common Equityholder's Pro Rata Share of the amount of such
excess.
(e) Revenue/Customer
Adjustment Amount.
If the
Revenue/Customer Adjustment Amount set forth in the Final Closing Statement
(the
"Actual
Revenue/Customer Adjustment Amount")
is
less than the Estimated Revenue/Customer Adjustment Amount, Purchaser shall
pay
to the Common Equityholders, pro rata in accordance with each such the Common
Equityholder's Pro Rata Share, such difference, within five (5) Business Days
of
the Final Determination Date, by wire transfer of immediately available United
States funds. If the Estimated Revenue/Customer Adjustment Amount is less than
the Actual Revenue/Customer Adjustment Amount, the Common Equityholders shall
be
severally liable for, and shall pay to Purchaser, within five (5) Business
Days
of the Final Determination Date, by wire transfer of immediately available
United States funds, such Common Equityholder's Pro Rata Share of the amount
of
such difference.
-16-
(f) Set-off.
Any
amounts owing and payable between Purchaser and a Seller pursuant to any of
the
above Sections
2.5(a)
through
(e)
shall be
set-off against any other amount or amounts owing and payable between such
parties pursuant to such sections, such that only a net amount shall be
paid,
which
set-off amounts shall be set forth on the Final Closing Statement.
2.6 Escrow
Amount.
(a) At
the
Closing, Purchaser shall deposit with JPMorgan Chase, N.A. (the "Escrow
Agent"),
by
wire transfer of immediately available funds, an amount equal to ten percent
(10%) of the Enterprise Value (i.e., $17,300,000) (the "Escrow
Amount"),
such
amount to constitute an escrow fund (the "Escrow
Fund")
to be
governed in accordance with the terms of this Agreement and the escrow agreement
in substantially the form attached hereto as Exhibit
2.6(a)
(the
"Escrow
Agreement"),
among
Purchaser, the Escrow Agent and the Sellers' Representative.
(b) The
Escrow Fund shall be used to satisfy any amounts owed to Purchaser from Sellers
pursuant to this Agreement, including indemnification amounts owed under
ARTICLE
IX.
In the
event the net amount determined pursuant to Section
2.5(f)
is owing
to Purchaser, and such full amount is not received by Purchaser within the
five
(5) Business Day period provided in Section 2.5,
Purchaser and the Sellers' Representative shall jointly instruct the Escrow
Agent to distribute such deficit amount to Purchaser from the Escrow Fund.
Such
deficit amount shall be promptly refunded into the Escrow Fund by any Common
Equityholder who failed to make payment thereof directly to Purchaser in each
such Common Equityholders' Pro Rata Share, and the Sellers' Representative
shall
take commercially reasonable measures to ensure the payment of such refund
("Escrow
Refunds").
One-half (1/2) of the amount remaining in the Escrow Fund as of the six month
anniversary of the Closing Date (the "Initial
Release Date"),
less,
if applicable, the amount of any Escrow Refunds not made as of the Initial
Release Date, shall be released to
the
Sellers' Representative
no later
than three (3) Business Days following the Initial Release Date and the amount
remaining in the Escrow Fund as of the day following the expiration of the
Survival Period (the "Final
Release Date")
shall
be released to the Sellers' Representative no later than three (3) Business
Days
following the Final Release Date; provided
that if
there are any claims under ARTICLE
IX
that are
pending on the Initial Release Date or the Final Release Date, as applicable,
the applicable portion (and only the applicable portion) of the Escrow Fund
that
is subject to any such claims shall not be released to the Sellers'
Representative until such applicable claims are finally resolved and satisfied
or, in the case of claims pending as of the Initial Release Date, the Final
Release Date, if later. Upon the final release of all the Escrow Fund, the
Escrow Agreement shall terminate. All funds so released from the Escrow Fund
to
the Sellers' Representative (such amount(s), if any, the "Escrow
Consideration")
shall
be distributed by the Sellers' Representative to all holders of the Shares
outstanding on the Closing Date who are entitled to receive a portion of the
consideration in accordance with the provisions of this Agreement.
Any fees
owed to the Escrow Agent and indemnification obligations under Section 8 of
the
Escrow Agreement shall be borne equally between Purchaser on the one hand and
the Common Equityholders on the other hand.
-17-
(c) In
order
to assure that proper income and employment taxes and other amounts
required to be withheld by law have been withheld and paid with respect to
payments to Optionholders, Purchaser and Sellers' Representative shall jointly
instruct the Escrow Agent to pay amounts that are otherwise due to the
Optionholders under the Escrow Agreement to the Company (or appropriate
entity) which shall promptly pay such amounts to the applicable Optionholders
less applicable withholding taxes or other amounts required to be withheld
by law.
(d) The
Escrow Fund shall be held as a trust fund and shall not be subject to any
encumbrance, attachment, trustee process or any other judicial process of any
creditor of any party, and shall be held and disbursed solely for the purposes
and in accordance with the terms of this Agreement and the Escrow
Agreement.
2.7 The
Closing.
The
closing of the Transactions (the "Closing")
shall
take place at the offices of O'Melveny & Xxxxx LLP, 0 Xxxxx Xxxxxx, Xxx
Xxxx, Xxx Xxxx 00000, or such other place as Purchaser and the Sellers'
Representative may mutually agree, on a date (the "Closing
Date")
to be
mutually agreed upon by Purchaser and the Sellers' Representative, which date
shall be no later than the third Business Day after all of the conditions set
forth in ARTICLE
VII
have
been satisfied or waived (other than those conditions that by their terms are
intended to be satisfied at the Closing).
2.8 Deliveries
at Closing.
(a) At
the
Closing, Sellers shall deliver or cause to be delivered to
Purchaser:
(i) certificates
evidencing all the Shares duly endorsed in blank, or accompanied by stock powers
duly executed in blank;
(ii) written
instruments in a form reasonably satisfactory to Purchaser canceling each
outstanding Option and Warrant;
(iii) the
Escrow Agreement duly executed by the Sellers' Representative and the Escrow
Agent;
(iv) the
legal
opinion of counsel, substantially in the form attached hereto as Exhibit
2.8(iv)
("Legal
Opinion"),
duly
executed by such counsel;
(v) resignations,
effective as of the Closing of all officers and members of the board of
directors (or similar governing body, if applicable) of Holdings and its
Subsidiaries that have been requested to resign by Purchaser; and
(vi) payoff
letters from holders of Indebtedness in a form reasonably acceptable to
Purchaser providing for, upon the payment of all outstanding amounts owed by
Holdings and Subsidiaries to each of such lenders at Closing, (A) the
termination of all security interests held by such lenders in the assets of
Holdings and its Subsidiaries (including the agreement to file, or if agreed
to
by any such lender, the authorization to file, all necessary UCC-3 termination
statements and other necessary documentation in connection with the termination
of each of such lender's financing statements filed against any of such assets
and any other security interests in respect thereof) and terminating all other
Liens on or with respect to any of such assets, (B) the delivery to
Purchaser of any possessory collateral that held by such lenders, and
(C) the termination of any account control agreements executed by such
lenders;
-18-
(vii) the
closing certificates, good standing certificate(s) and the FIRPTA Certificate
required pursuant to Sections
7.2(c),
7.2(g)
and
7.2(f),
respectively.
(b) At
the
Closing, Purchaser shall deliver or cause to be delivered:
(i) to
each
Seller, the payments described in Sections
2.2
and
2.3;
(ii) to
the
Sellers' Representative, the Escrow Agreement duly executed by Purchaser;
(iii) to
the
Sellers' Representative, the closing certificate required pursuant to
Section 7.3(c);
and
(iv) to
the
Escrow Agent, the Escrow Amount.
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES
REGARDING
SELLERS
Except
as
otherwise indicated on the Schedules, each Seller represents and warrants to
Purchaser, solely with respect to such Seller, as follows:
3.1 Ownership.
Such
Seller is the lawful record and beneficial owner of the Equity Securities set
forth opposite such Seller's name on Schedule
I,
has
good title to such Equity Securities, free and clear of any Liens (other than
for Taxes not yet due and payable) and with no restriction on the voting rights
and other incidents of record and beneficial ownership pertaining thereto,
and
such Equity Securities are such Seller's only voting, equity or other financial
interest in Holdings (including any right to receive distributions or profits
from Holdings or any of its Subsidiaries, but excluding any rights relating
to
such Seller's capacity as an employee of Holdings or any of its Subsidiaries).
Such Seller is not the subject of any bankruptcy, reorganization or similar
proceeding.
3.2 Organization,
Good Standing, Qualification and Power.
Such
Seller, to the extent not an individual, is duly organized, validly existing
and
in good standing under the laws of the state of its formation and has all
requisite entity power and authority to own, lease and operate its properties
and to carry on its business as presently conducted and to own the Equity
Securities set forth opposite such Seller's name on Schedule
I.
-19-
3.3 Authority;
Execution and Delivery; Enforceability.
Such
Seller, to the extent not an individual, has all requisite entity power and
authority to execute this Agreement, to perform such Seller's obligations under
this Agreement and to consummate the Transactions. The execution and delivery
by
such Seller of this Agreement and the consummation of the Transactions have
been
duly authorized by all necessary action on the part of such Seller. Such Seller
has duly executed and delivered this Agreement and this Agreement constitutes
its legal, valid and binding obligation, enforceable against it in accordance
with its terms, except as may be limited by bankruptcy, insolvency,
reorganization, fraudulent conveyance or other similar laws affecting the
enforcement of creditors' rights generally and general equitable
principles.
3.4 No
Conflicts; Consents.
No
consent, approval, license, permit, order,
qualification
or
authorization of, or registration, declaration,
notice
or
filing with, any Governmental Entity or
any
other Person
is
required for or in connection with the execution, delivery and
performance by such Seller of
this
Agreement,
and the
consummation by such Seller of the Transactions, other than (a) compliance
with and filings under the HSR Act, (b) filings with and obtaining consent
for the Transactions from the FCC, (c) as set forth on Schedule
3.4,
(d)
others the failure of which to obtain or make, individually or in the aggregate,
would not (i) have a Material Adverse Effect or (ii) materially impair or delay
the ability of such Seller to perform its obligations under this Agreement,
and
(e) those
that may be required solely by reason of Purchaser's (as opposed to any other
third party's) participation in the Transactions.
3.5 Relationship
with Related Persons.
Neither
such Seller nor any Related Person of such Seller has had any interest in any
property (whether real, personal, or mixed and whether tangible or intangible)
used in the Business. No such Seller or any Related Person of such Seller owns
or has owned (of record or as a beneficial owner) an equity interest or any
other financial
or
profit interest in, a Person that has since the date of the Latest Balance
Sheet
(a) had business dealings or a material financial interest in any
transaction with Holdings or any of its Subsidiaries other than business
dealings or transactions conducted in the ordinary course of business with
Holdings or any of its Subsidiaries at substantially prevailing market prices
and on substantially prevailing market terms, or (b) engaged in competition
with Holdings or any of its Subsidiaries with respect to any line of the
products or services of Holdings or any of its Subsidiaries in any market
presently served by Holdings or any of its Subsidiaries. Except as set forth
in
Schedule
3.5,
neither
such Seller nor any Related Person of such Seller, other than related to its
status as a shareholder, director, officer or as an employee of Holdings or
any
of its Subsidiaries, (a) is a party to any Contract with, or has any claim
or
right against, Holdings or any of its Subsidiaries, or (b) has or may acquire
any rights under, or has or may become subject to any obligation or liability
under, any Contract that relates to the Business of, or any of the assets owned
or used by, Holdings or any of its Subsidiaries.
-20-
ARTICLE
IV
REPREENTATIONS
AND WARRANTIES REGARDING
HOLDINGS
AND ITS SUBSIDIARIES
Except
as
otherwise indicated on the Schedules, Holdings represents and warrants to
Purchaser as follows:
4.1 Organization,
Good Standing, Qualification and Power.
Holdings
is a corporation duly organized, validly existing and in good standing under
the
laws of the State of Delaware and has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as presently conducted. Each Subsidiary of Holdings is a corporation or limited
liability company duly organized, validly existing and in good standing under
the laws of its formation and has all requisite corporate or limited liability
company power and authority to own, lease and operate its properties and to
carry on the Business as presently conducted. Each of Holdings and each of
its
Subsidiaries is duly qualified and in good standing to do business in each
jurisdiction in which such qualification is necessary because of the nature
of
the business conducted by it, except where the failure to be so qualified has
not had and is not reasonably likely to have a Material Adverse Effect.
4.2 Authority;
Execution and Delivery; Enforceability.
(a) Holdings
has all requisite corporate power and authority to execute, deliver and perform
this Agreement and to consummate the Transactions contemplated hereby. The
execution, delivery and performance by Holdings of this Agreement and the
consummation of the Transactions have been duly authorized by all necessary
action on the part of Holdings. Holdings has duly executed and delivered this
Agreement and this Agreement constitutes its legal, valid and binding
obligation, enforceable against it in accordance with its terms, except as
may
be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance
or
other similar laws affecting the enforcement of creditors' rights generally
and
general equitable principles.
(b) Neither
the execution and delivery of the Agreement by Holdings nor the consummation
of
the transactions contemplated hereby, nor compliance by Holdings with any of
the
terms or provisions hereof, will (i) violate any provision of the charter
documents, bylaws, operating agreement or other governing documents of Holdings
or any of its Subsidiaries, or (ii) assuming that the consents, approvals and
filings referred to in Section 4.3
are duly
obtained or made, (A) violate any statute, code, ordinance, rule, regulation,
judgment, order, writ, decree or injunction applicable to Holdings, its
Subsidiaries or any of their properties or assets, or (B) violate, conflict
with, result in a breach of any provision of, or require redemption or
repurchase or otherwise require the purchase or sale of any securities,
constitute a default (or an event which, with notice or lapse of time, or both,
would constitute a default) under, result in the termination of or a right
of
termination or cancellation under, accelerate the performance required by,
or
result in the creation of any Lien upon any of the properties or assets of
Holdings or its Subsidiaries under, any of the terms, conditions or provisions
of any Contract to which Holdings or its Subsidiaries is a party, or by which
they or any of their properties or assets is bound or affected, except, in
the
case of clause (ii) above, for such violations, conflicts, breaches, defaults
or
other events which, either individually or in the aggregate, would not
reasonably be expected to result in a Material Adverse Effect.
-21-
4.3 No
Conflicts; Consents.
No
consent, approval, license, permit, order, qualification or authorization of,
or
registration, declaration, notice or filing with, any Governmental Entity or
any
other Person (solely with respect to the Material Contracts) is required for
or
in connection with the execution and delivery by Holdings of this Agreement,
and
the consummation by Holdings of the Transactions, other than (a) compliance
with and filings under the HSR Act, (b) filings with and obtaining consent
for the Transactions from the FCC, (c) as set forth on Schedule
4.3,
and
(d) those that may be required solely by reason of Purchaser's (as opposed
to any other third party's) participation in the Transactions.
4.4 Capitalization;
Subsidiaries.
(a) The
authorized capital stock of Holdings consists of 2,901,000 authorized shares,
(i) 2,887,000 of which have been designated as Common Stock, $0.001 par value
per share, of which 2,179,500 shares are issued and outstanding, as set forth
in
Schedule
I,
and
(ii) 14,000 of which have been designated as Preferred Stock, $0.001 par
value per share, of which all 14,000 shares are issued and outstanding, as
set
forth in Schedule
I.
The
Shares have been duly authorized and validly issued and are fully paid and
nonassessable and have been issued in compliance with applicable federal and
stated securities laws.
Other
than the Shares, there are no other issued or outstanding shares of capital
stock of Holdings.
(b) Except
for this Agreement and any of the following issued in accordance with
Section 6.1(a),
the
Preferred Stock, the Options (which options shall, in accordance with the terms
of the Option Plan, be exercised prior to, or automatically cancelled as of,
the
Closing) and the Warrants (which warrants shall, in accordance with the terms
of
the Stock Subscription Warrant, be exercised prior to, or automatically
cancelled as of, the Closing), there are no outstanding options, warrants,
rights, calls, agreements, whether written or oral, convertible securities
or
other commitments or rights to purchase or acquire any unissued Common Stock,
Preferred Stock or any other securities from Holdings (including securities
held
in treasury).
(c) Except
as
set forth on Schedule
4.4(c),
there
are (i) no rights, agreements, arrangements or commitments of any kind or
character, whether written or oral, relating to the Shares to which Holdings
is
a party, or by which Holdings is bound, obligating it to repurchase, redeem
or
otherwise acquire any issued and outstanding Shares, (ii) no outstanding or
authorized stock appreciation, phantom stock, profit participation, or other
similar rights with respect to Holdings or any of its Subsidiaries, and (iii)
no
voting trusts, stockholder agreements, proxies or other agreements or
understandings in effect to which Holdings is a party, or by which it is bound,
with respect to the governance of Holdings or the voting or transfer of any
Shares.
(d) Holdings
(i) owns 100% of the issued and outstanding shares of capital stock of the
Company, and (ii) indirectly owns 100% of the issued and outstanding shares
of
capital stock and other equity interests of each of its other Subsidiaries.
Except for the Company, Holdings has no direct Subsidiary and holds Equity
Securities of no other Person. Schedule
4.4(d)
sets
forth a list of each of the Company's Subsidiaries, its jurisdiction of
organization and the ownership of its capital stock.
-22-
4.5 Financial
Statements.
Schedule
4.5(a)
contains
(a) the audited consolidated balance sheets of each of (i) Holdings and its
Subsidiaries as of December 31, 2006 and (ii) the Company and its Subsidiaries
as of December 31, 2006 (the "Audited
Balance Sheets"),
and
in each instance the related audited statements of operations, stockholders'
equity and cash flows for the fiscal year then ended (together with the Audited
Balance Sheet, the "Audited
Financial Statements"),
and
(b) the unaudited consolidated balance sheet of Holdings and its Subsidiaries
as
of September 30, 2007 (the "Latest
Balance Sheet")
and
the related unaudited statement of operations, stockholders' equity and cash
flows for the period then ended (together with the Audited Financial Statements,
the Latest Balance Sheet and all financial statements delivered to Purchaser
in
accordance with Section
6.2,
the
"Financial
Statements").
The
Financial Statements have been prepared from the books and records of Holdings,
the Company and its Subsidiaries in accordance with GAAP consistently applied
(except (x) as may be indicated in the footnotes thereto and/or (y) in the
case
of unaudited Financial Statements, for the absence of footnotes and for normal
year-end adjustments and (z) as set forth on Schedule
4.5(b)).
Except
as set forth on Schedule
4.5(c),
the
Financial Statements fairly present in all material respects the financial
condition, results of operations, and cash flows of Holdings and its
Subsidiaries as of the dates and for the periods indicated.
Neither
Holdings nor any of its Subsidiaries has any GAAP Liabilities that are not
fully
reflected or reserved against in the Latest Balance Sheet, except those
(a) that were incurred after the date of the Latest Balance Sheet in the
ordinary course of business consistent with past practice, or (b) disclosed
in Schedule 4.5(d),
but
excluding the Transaction Expenses.
4.6 Personal
Property.
Holdings
and/or its Subsidiaries have good and valid title to all of the material assets
and properties reflected on the Latest Balance Sheet or acquired subsequent
thereto (except for assets and properties sold, consumed or otherwise disposed
of in the ordinary course of business since the date of the Latest Balance
Sheet), free and clear of all Liens, except Permitted Liens. All tangible
personal property used by Holdings or any of its Subsidiaries in the operation
of the Business is in good condition and repair, subject to reasonable wear
and
tear considering the age and reasonable ordinary course use of such property.
4.7 Real
Property.
Schedule
4.7(a)
contains
a list of all real property and interests in real property owned in fee by
Holdings or its Subsidiaries and used, or held for use, in the operation or
conduct of the Business as presently conducted (each, an "Owned
Property").
Holdings or its Subsidiaries have good and marketable title to all Owned
Property, in each case, free and clear of all Liens, except Permitted Liens.
Schedule
4.7(b)
contains
a list of all real property and interests in real property leased by Holdings
or
its Subsidiaries requiring payments, in each case, in excess of $25,000 per
annum, and used, or held for use, in the operation or conduct of the Business
as
presently conducted (each, a "Leased
Property").
True
copies of each lease or other Contract related to a Leased Property, including
all amendments or modifications thereto, have been made available to Purchaser.
Holdings or its Subsidiaries is the lessee of each Leased Property, and each
such lease is valid without any material default thereunder by Holdings or
its
Subsidiaries or, to the Knowledge of Sellers, the other parties thereto.
-23-
4.8 Intellectual
Property.
To
the
Knowledge of Sellers, all material Intellectual Property currently used by
Holdings or its Subsidiaries consists solely of items and rights that are (a)
owned, directly or indirectly, by Holdings or its Subsidiaries, (b) in the
public domain, or (c) Third Party Intellectual Property validly used by Holdings
or its Subsidiaries pursuant to a license or other right. With respect to
Intellectual Property owned, directly or indirectly, by Holdings or its
Subsidiaries, Holdings or any of its Subsidiaries owns, directly or indirectly
(subject to previously granted rights and licenses, including joint ownership
rights, if any), the right, title and interest in and to such Intellectual
Property free and clear of any Liens other than Permitted Liens. To the
Knowledge of Sellers, neither Holdings nor any of its Subsidiaries has infringed
upon any Third Party Intellectual Property in the conduct of the Business as
currently conducted. This Section
4.8
and,
with respect to licenses of Intellectual Property, Section
4.9,
contain
the sole and exclusive representations and warranties of Holdings with respect
to matters relating to the Intellectual Property of Holdings and its
Subsidiaries.
4.9 Material
Contracts.
(a) Schedule
4.9
contains
a list of each Contract (each, a "Material
Contract")
to
which, as of the date hereof, Holdings or any of its Subsidiaries is a party
that:
(i) expressly
limits or restricts the ability of Holdings or its Subsidiaries to compete
or
otherwise to conduct the Business as presently conducted in any material manner
or place, in any geographic area or with any Person, or which requires exclusive
referrals of business or requires Holdings or its Subsidiaries to offer
specified products or services to its customers on a priority or exclusive
basis,
(ii) involves
an obligation for borrowed money in excess of $100,000, or provides for a
guaranty for borrowed money, letter of credit, capital leases, comfort letter,
surety or other bond in an amount in excess of $100,000 by Holdings or any
of
its Subsidiaries in respect of any Person;
(iii) creates
a
joint venture, limited liability company or partnership;
(iv) relates
to the license of any Intellectual Property by Holdings or any of its
Subsidiaries that is material in the conduct of their business;
(v) obligates
Holdings or its Subsidiaries to pay an amount in excess of $100,000 during
any
twelve (12) month period after the date hereof;
-24-
(vi) relates
to the sale of goods and/or the provision of services pursuant to which Holdings
or its Subsidiaries expects to accrue revenue in excess of $100,000 during
the
fiscal year ending December 31, 2007;
(vii) with
or
to a labor union or guild (including any collective bargaining agreement);
and
(viii) which
grants any Person a right of first refusal, right of first offer or similar
right with respect to any material properties, assets or the
Business.
Material
Contracts shall not include any of the following: (x) real property leases
described in Section 4.7,
or (y)
Contracts relating to commercial "off the shelf" software.
(b) True
copies of the Material Contracts, including all amendments and modifications
thereto, have been made available to Purchaser. Neither Holdings nor any of
its
Subsidiaries and, to the Knowledge of Sellers, no third party, is in default
or
breach under any such Material Contract and no event or condition exists which,
after notice or lapse of time or both, would constitute a default under any
such
Material Contract, except where such default or breach has not had and
is
not reasonably likely to have a
Material Adverse Effect. Each Material Contract is enforceable in accordance
with its terms against Holdings or its Subsidiaries and, to the Knowledge of
Sellers, the other parties thereto, except to the extent that (i) the failure
to
be so enforceable has not had and
is
not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect or (ii) such
enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium
and other similar laws affecting creditors' rights generally and by general
principles of equity (regardless of whether enforceability is considered in
a
proceeding at law or in equity).
4.10 Permits.
Each
of
Holdings and its Subsidiaries holds and is in compliance with all material
certificates, licenses, permits, authorizations and approvals ("Permits")
required under applicable law for the conduct of the Business, and during the
eighteen (18) month period prior to the date of this Agreement, neither Holdings
nor any of its Subsidiaries has received written notice of any, nor are there
any pending or, to the Knowledge of Sellers, threatened, Proceedings relating
to
the revocation, non-renewal or modification of any such Permits or
non-compliance by Holdings or any of its Subsidiaries with respect to any such
Permit. This Section 4.10
contains
the sole and exclusive representations and warranties of Holdings with respect
to Permits, except for Permits required by (i) the FCC, which are exclusively
governed by Section 4.16,
and
(ii) any Environmental Law, which are exclusively governed by Section 4.17.
4.11 Taxes.
Except
as
set forth on Schedule
4.11:
(a) Tax
Returns and Audits.
-25-
(i) Each
of
Holdings and its Subsidiaries, (A) has properly completed and timely filed
all income Tax Returns and all other material Returns required to be filed
by it
or on its behalf, (B) has timely paid all Taxes required to be paid by it for
which payment was due, (C) as required by GAAP has established an adequate
accrual or reserve for the payment of all material Taxes payable in respect
of
the periods or portions thereof prior to the date of the Latest Balance Sheet
(which accrual or reserve as of the date of the Latest Balance Sheet is fully
reflected on the Latest Balance Sheet), and (D) has made (or will make on a
timely basis) all material estimated Tax payments required to be made. All
such
Returns are true, correct and complete in all material respects.
(ii) To
the
Knowledge of Sellers, neither Holdings nor any of its Subsidiaries is delinquent
in the payment of any Tax or in the filing of any Returns, and no deficiencies
for any Tax have been threatened, claimed, proposed or assessed against
Holdings, any of its Subsidiaries or any of its officers, employees or agents
in
their capacity as such.
(iii) Neither
Holdings nor any of its Subsidiaries has received any written notification
from
the Internal Revenue Service (the "IRS")
or any
other taxing authority regarding any material issues that (A) are currently
pending before the IRS or any other taxing authority (including any sales or
use
taxes) regarding Holdings or any of its Subsidiaries, or (B) have been
raised by the IRS or other taxing authority and not yet finally resolved. No
material Return of Holdings or any of its Subsidiaries is under audit by the
IRS
or any other taxing authority and any such past audits (if any) have been
completed and fully resolved to the satisfaction of the applicable taxing
authority conducting such audit and all Taxes determined by such audit to be
due
from Holdings or its Subsidiaries have been paid in full to the applicable
taxing authorities or adequate reserves therefore have been established and
are
reflected in the Latest Balance Sheet.
(iv) No
Tax
liens are currently in effect against any of the assets of Holdings or any
of
its Subsidiaries other than liens that arise by operation of law for Taxes
not
yet due and payable. There is not in effect any waiver by Holdings or any of
its
Subsidiaries of any statute of limitations with respect to any Taxes nor has
Holdings or any of its Subsidiaries agreed to any extension of time for filing
any Return that has not been filed. Neither Holdings nor any of its Subsidiaries
has consented to extend the period in which any Tax may be assessed or collected
by any taxing authority.
(v) Other
than adjustments caused by events occurring or elections made after the Closing,
neither Holdings nor any of its Subsidiaries has been or will be required to
include any material adjustment in taxable income for any Tax period (or portion
thereof) ending after the Closing Date pursuant to Sections 481 or 263A of
the
Code or any comparable provision under state or foreign Tax laws as a result
of
transactions, events or accounting methods employed prior to the
Closing.
(b) Withholding.
Each of
Holdings and its Subsidiaries has complied (and until the Closing Date will
comply) with all applicable law relating to the payment and withholding of
Taxes
(including withholding of taxes pursuant to Sections 1441, 1442, 1445 and 1446
of the Code or similar provisions under any foreign law), and has, within the
time and in the manner prescribed by applicable law, withheld from employee
wages and paid over to the proper taxing authorities all amounts required to
be
so withheld and paid over under all applicable law (including the Federal
Insurance Contribution Act, Medicare, Federal Unemployment Tax Act and relevant
state income and employment tax withholding laws), including U.S. federal and
state income Taxes, and has timely filed all material withholding tax Returns.
-26-
(c) Special
Tax Status and Indemnification Obligations.
(i) Neither
Holdings nor any of its Subsidiaries is a party to or bound by any tax sharing,
tax indemnity, or tax allocation agreement nor does Holdings or any of its
Subsidiaries have any liability or potential liability to another party under
any such agreement.
(ii) No
withholding will be required under Section 1445 of the Code with respect to
payments made to the Sellers, Optionholders and Warrantholders pursuant to
this
Agreement.
(iii) Neither
Holdings or any of its Subsidiaries has ever constituted either a "distributing
corporation" or a "controlled corporation" in a distribution of stock qualifying
for tax-free treatment under Section 355 of the Code.
(d) No
Tax
Shelters.
Since
June 30, 2006, neither Holdings or any of its Subsidiaries has ever filed any
disclosures under Section 6662 of the Code or comparable provisions of
state, local or foreign law to prevent the imposition of penalties with respect
to any Tax reporting position taken on any Return. Neither Holdings or any
of
its Subsidiaries has ever consummated, participated in, and is not currently
participating in, any transaction which was or is a "tax shelter" transaction
as
defined in Sections 6662, 6011, 6012 or 6111 of the Code or the Treasury
Regulations promulgated thereunder.
4.12 Proceedings.
There
is
no Proceeding pending or, to the Knowledge of Sellers, threatened against
Holdings or any of its Subsidiaries that (a) involves a claim or potential
claim of liability in excess of $50,000, (b) challenges the validity of the
Transaction, or (c) enjoins or seeks to enjoin any significant activity by
Holdings or its Subsidiaries. Neither Holdings nor any of its Subsidiaries
is
subject to the provisions of any judgment, order, injunction or decree
applicable to the Business, except for any such judgments, orders, injunctions
or decrees that individually or in the aggregate have not had and are
not
reasonably likely to have a
Material Adverse Effect.
4.13 Benefit
Plans.
(a) Schedule
4.13(a)
contains
a list of all material "employee benefit plans" as defined in Section 3(3)
of ERISA and any other material plan, agreement, or arrangement providing
compensation or benefits to any current or former director, officer, employee
or
consultant (or dependent or beneficiary thereof) of Holdings or any of its
Subsidiaries or Affiliates maintained, sponsored or contributed to by Holdings
or any ERISA Affiliate, or under which Holdings or any ERISA Affiliate has
or
may have any obligation or liability, including, without limitation, all
stock-based compensation arrangements, all employment, consulting, severance
and
change in control agreements, and all material bonus, deferred and incentive
compensation plans and programs (all of the foregoing collectively, the
"Company
Benefit Plans").
-27-
(b) (i)
Each
Company Benefit Plan has been operated and administered pursuant to its terms
in
all material respects and in compliance with ERISA, the Code, and all applicable
laws; (ii) no "reportable event" (within the meaning of Section 4043 of
ERISA) for which the 30-day reporting requirement has not been waived or
extended has occurred with respect to any Company Benefit Plan and, to the
Knowledge of Sellers, no reportable event for which such reporting requirement
has been waived or extended has occurred with respect to any Company Benefit
Plan; and (iii) as of the date hereof, no event has occurred, and to the
Knowledge of Sellers there exists no condition or set of circumstances, in
connection with which Holdings or any ERISA Affiliate could be subject to any
material liability (other than for routine benefit liabilities) with respect
to
any Company Benefit Plan.
(c) True
and
correct copies of the following documents, as they have been amended to the
date
hereof, relating to the Company Benefit Plans, have been made available to
Purchaser: (i) all Company Benefit Plan documents; (ii) all summaries and
summary plan descriptions, if applicable; (iii) the most recently completed
actuarial valuation for each Plan (if any); (iv) the annual report (Form 5500
series) for each Company Benefit Plan for the two most recent plan years (if
any); and (v) the most recent determination or opinion letter, if any, issued
by
the IRS with respect to any Company Benefit Plan.
(d) Each
Company Benefit Plan which is intended to qualify under Section 401(a) or
Section 401(k) of the Code (and its related trust) has either (i) received
a favorable determination letter from the IRS as to its qualified status or
(ii)
may rely upon a favorable prototype opinion letter from the IRS, and, to the
Knowledge of Sellers, no fact or event has occurred that could adversely affect
the qualified status of any such Company Benefit Plan or the exempt status
of
any such trust.
(e) No
Company Benefit Plan is, and neither Holdings nor any ERISA Affiliate has ever
sponsored, maintained, participated in, contributed to, or has been required
to
participate in or contribute to, a "multiemployer plan" (as defined in
Section 3(37) of ERISA) ("Multiemployer
Plan")
or
other pension plan subject to Title IV or Part 3 of Title I of ERISA or
Section 412 of the Code.
(f) Except
as
contemplated in this Agreement, neither the execution of this Agreement nor
the
consummation of the transactions contemplated hereby will result in any payment,
acceleration or creation of any rights of any person under any Company Benefit
Plan. No amount that could be received (whether in cash, property, the vesting
of property or otherwise) as a result of or in connection with the consummation
of such transactions by any person who is a "disqualified individual" (as such
term is defined in Treasury Regulation Section 1.280G-1) could be
characterized as an "excess parachute payment" (as defined in
Section 280G(b)(1) of the Code).
(g) Except
as
required by applicable law, no Company Benefit Plan provides any of the
following retiree or post-employment benefits to any person: medical, disability
or life insurance benefits.
-28-
(h) Each
Company Benefit Plan that is subject to Section 409A of the Code has been
operated and administered in good faith compliance with Section 409A of the
Code. The exercise price of each Option is not less than the fair market value
(within the meaning of Section 409A of the Code ) of the underlying stock
on the date the Option was granted.
4.14 Employee
and Labor Matters.
(a) Neither
Holdings nor any of its Subsidiaries is a party to any collective bargaining
agreement or similar agreement and no labor union has requested or, to the
Knowledge of Sellers, has sought to represent any of the employees,
representatives or agents of Holdings or any of its Subsidiaries, (b) there
are
no unfair labor practice complaints or disputes or controversies with employees,
consultants or independent contractors pending against Holdings or any of its
Subsidiaries, or to the Knowledge of Sellers, threatened against Holdings or
any
of its Subsidiaries, or (c) no strike, labor dispute, slowdown or stoppage
is
pending, or to the Knowledge of Sellers threatened, against Holdings or any
of
its Subsidiaries except with respect to any matter specified above, which,
in
the case of clause (b), individually or in the aggregate, would not have a
Material Adverse Effect.
(b) Holdings
and its ERISA Affiliates have withheld and paid all amounts required by law
or
by agreement to be withheld from the wages, salaries, and other payments to
employees, independent contractors and other service providers, and are not
liable for any arrears of wages or any taxes or any penalty for failure to
withhold or pay such amounts. Holdings and its ERISA Affiliates have properly
classified all individuals providing services to Holdings or any of its ERISA
Affiliates as employees or non-employees for all relevant purposes.
(c) Schedule
4.14(c)
sets
forth a complete and accurate list giving name, job title, start date, current
base salary and bonus opportunity of each employee of Holdings and its
Subsidiaries as of October 31, 2007. Holdings and its Subsidiaries are and,
during eighteen (18) months prior to the date hereof, have been in compliance
in
all material respects with all applicable laws respecting labor, employment,
immigration, fair employment practices, terms and conditions of employment,
workers' compensation, occupational safety, plant closings, wages and hours.
4.15 Absence
of Changes or Events.
Since
December 31, 2006, (a) there has not been any Material Adverse Effect, (b)
other
than the payment of any dividends, Holdings and its Subsidiaries have conducted
the Business in the ordinary course consistent with past practices, and (c)
neither Holdings nor any of Subsidiaries has taken any action or proposed to
take any action that if taken after the date hereof would require the prior
written consent of Purchaser pursuant to Section
6.1(a).
4.16 Compliance
with Applicable Laws.
(a) Except
as
set forth in Schedule
4.16,
Holdings and its Subsidiaries are in compliance with all applicable laws, except
for instances of noncompliance that, individually or in the aggregate, have
not
had and are not reasonably likely to have a Material Adverse Effect.
-29-
(b) Except
as
set forth in Schedule
4.16,
(i) the
Communications Licenses and regulatory tariffs applicable to Holdings or any
of
its Subsidiaries stand in full force and effect in accordance with their terms,
and there is no outstanding notice of cancellation or termination or, to the
Knowledge of Sellers, any threatened cancellation, termination or non-renewal
in
connection therewith; (ii) neither Holdings nor any of its Subsidiaries is
subject to any restrictions or conditions applicable to its Communications
Licenses or regulatory tariffs that materially limit the operations of Holdings
or any of its Subsidiaries (other than restrictions or conditions generally
applicable to Communications Licenses or tariffs of that type); and (iii)
neither Holdings nor any of its Subsidiaries is in material violation under
the
terms and conditions of any such Communications License or regulatory tariff
and, to the Knowledge of Sellers, there is no basis for any claim of violation
by Holdings or any of its Subsidiaries under any such Communications License
or
regulatory tariff. To the Knowledge of Sellers, there are no applications by
Holdings or any of its Subsidiaries, nor any complaints or petitions, or other
filings by others, or Proceedings pending or threatened, before the FCC relating
to Holdings or any of its Subsidiaries or its Communications Licenses,
operations or regulatory tariffs. A true and correct copy of each Communications
License and regulatory tariff applicable to Holdings or any of its Subsidiaries
has been made available to Purchaser.
(c) Except
as
disclosed on Schedule
4.16,
to the
Knowledge of Sellers, there is no
fact
that would reasonably be expected to lead to a condition to the consent of
the
FCC, the State PUCs or the Local Authorities that would cause the condition
set
forth in Section 7.1(a)
to not
be met. To
the
Knowledge of Sellers, there is
no
impediment to the ability of Holdings or a Subsidiary of Holdings that is a
provider of cable service in Kansas and/or Missouri to obtain a video service
authorization in Kansas pursuant to Kan.
Stat. Xxx. § 12-2023,
or in
Missouri pursuant to the Mo.
Rev.
Stat. § 67.2679. Holdings and its Subsidiaries are in compliance in all material
respects with all franchise agreements and have completed in all material
respects all build-outs as required under such franchise
agreements.
(d) This
Section 4.16
contains
the sole and exclusive representations and warranties with respect to Holdings'
or any of its Subsidiaries' regulatory tariffs and other regulatory matters
before the FCC, the State PUCs or with respect to the Local
Authorizations.
4.17 Environmental
Matters.
Except
for those matters that, individually or in the aggregate, have not had and
would
not reasonably be expected to have a Material Adverse Effect, (a) during the
past six (6) years, neither Holdings nor any of its Subsidiaries has received
any written communication from a Governmental Entity that alleges that Holdings
or any of its Subsidiaries is not in compliance in any material respect with
any
Environmental Law, (b) Holdings and its Subsidiaries hold, and are in compliance
with, all material Permits required under Environmental Laws to conduct the
Business, and are in material compliance with all Environmental Laws, (c) in
connection with the conduct of the Business, neither Holdings nor any of its
Subsidiaries has entered into or agreed to any court decree or order and is
subject to any judgment relating to compliance with any Environmental Law or
any
contract or agreement indemnifying any other person for violations of or
liabilities under Environmental Laws, and (d) neither Holdings nor any of its
Subsidiaries has received any notice or claim regarding, or is the subject
of
any Proceeding, regarding any investigation, cleanup or other response (as
defined under 42 U.S.C. § 9601(25)) of Hazardous Substances under any
Environmental Law. This Section 4.17
contains
the sole and exclusive representations and warranties with respect to any
environmental matters arising under Environmental Laws.
-30-
4.18 Brokers.
Except
for Xxxxxx Capital Partners, LLC, no agent, broker, investment banker or other
firm or Person engaged by or acting on behalf of Sellers or Holdings is or
will
be entitled to any broker's or finder's fee or any other commission or similar
fee in connection with any of the Transactions.
4.19 Insurance.
Holdings
and its Subsidiaries are insured with reputable insurers against such risks
and
in such amounts as Holdings reasonably has determined to be prudent in
accordance with industry practice (taking into account the cost and availability
of such insurance). As of the date hereof, all policies maintained by Holdings
and its Subsidiaries and the coverage provided by each are listed and described
on Schedule
4.19.
Each of
Holdings and its Subsidiaries is in compliance with such insurance policies
(and
any policy obtained in compliance with Section
6.1(a)(xv)),
and is
not in default under any of the terms thereof, except for any such
non-compliance or default that would not reasonably be expected to result in
a
Material Adverse Effect. Each such policy (and any policy obtained in compliance
with Section
6.1(a)(xv))
is
outstanding and in full force and effect (other than due to the ordinary
expiration of the term thereof). All premiums due and other payments due under
any such policy (and any policy obtained in compliance with Section
6.1(a)(xv))
have
been paid.
4.20 Inventory.
All
of
the inventories of Holdings and its Subsidiaries, whether reflected in the
Latest Balance Sheet or otherwise, consist of a quality and quantity usable
in
the ordinary and usual course of business.
4.21 Accounts
Receivable.
The
accounts receivable of Holdings and its Subsidiaries, reflected in the Latest
Balance Sheet and obtained after such date, represent sales actually made in
the
ordinary course of business and are, in the management of the Business' good
faith judgment, collectible net of any reserves shown on the Latest Balance
Sheet.
4.22 Customers
and Suppliers.
Set
forth
on Schedule
4.22
is a
list of Holdings' and its Subsidiaries' top twenty-five (25) customers based
upon gross revenues of Holdings and its Subsidiaries during the period from
January 1, 2007 to the Latest Balance Sheet ("Material
Customers").
Except as set forth on Schedule
4.22,
no
Material Customer or material supplier of Holdings or any of its Subsidiaries
has canceled or otherwise terminated, or to the Knowledge of Sellers',
threatened to cancel or otherwise terminate its relationship with Holdings
or
any of its Subsidiaries or has at any time on or after the date of the Latest
Balance Sheet, decreased materially its services or supplies to Holdings or
any
of its Subsidiaries in the case of any supplier, or its usage of the services
or
products of Holdings or any of its Subsidiaries in the case of such customer,
and, to the Knowledge of Sellers, no such supplier or customer has indicated
either orally or in writing that it intends to cancel or otherwise terminate
its
relationship with Holdings or any of its Subsidiaries or to decrease materially
its services or supplies to Holdings or any of its Subsidiaries or its usage
of
the services or products of Holdings or any of its Subsidiaries, as the case
may
be.
-31-
4.23 Cable
System and Subscriber Information.
(a) As
of the
date hereof, none of Holdings or any of its Subsidiaries, directly or
indirectly, owns any Systems other than the Cable Systems listed on Schedule
4.23(a).
None of
Holdings or any of its Subsidiaries, directly or indirectly, manages or operates
any Systems which it does not, directly or indirectly, wholly own. None of
Holdings or any of its Subsidiaries, directly or indirectly, owns any Systems
that it does not, directly or indirectly, manage and operate.
(b) Schedule
4.23(b)
sets
forth the aggregate number of residential subscribers and commercial subscribers
as the date of the Latest Balance Sheet. Each such aggregate number has been
determined in accordance with the subscriber Accounting Policy.
(c) Schedule
4.23(c)
sets
forth Holding' and its Subsidiaries' policy with respect to calculating
subscribers.
(d) Schedule
4.23(d)
sets
forth the average monthly revenue per residential subscriber and commercial
subscriber as of the date of the Latest Balance Sheet.
(e) Schedule
4.23(e)
sets
forth the residential subscriber and commercial subscriber monthly churn rate
as
of the date of the Latest Balance Sheet.
4.24 Disclosure.
None
of
this Agreement, nor any of the other documents to be delivered or executed
in
connection herewith, nor any Schedule or Exhibit attached hereto or thereto
contains any material, untrue statement of a fact. No
representation or warranty of Holdings or the Sellers in this Agreement and
no
statement in the Schedules (after giving effect to the provisions of
Section
6.10)
omits
to state a material fact necessary to make the statements herein or therein,
in
light of the circumstances in which they were made, not misleading, except
where
such omission would not reasonably be expected to result in a Material Adverse
Effect.
4.25 No
Additional Representations.
NONE
OF
SELLERS, NOR ANY OF THEIR AFFILIATES, IS MAKING ANY REPRESENTATION OR WARRANTY,
EXPRESS OR IMPLIED, OF ANY NATURE WHATSOEVER WITH RESPECT TO SELLERS, HOLDINGS
OR ANY OF ITS SUBSIDIARIES, INCLUDING ANY OF THE ASSETS OF HOLDINGS OR ANY
OF
ITS SUBSIDIARIES, EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES EXPRESSLY SET
FORTH IN ARTICLE
III
AND THIS
ARTICLE
IV
AND
EXCEPT AS SET FORTH EXPRESSLY HEREIN, THE CONDITION OF THE ASSETS OF HOLDINGS
AND ITS SUBSIDIARIES SHALL BE "AS IS" AND "WHERE IS".
-32-
ARTICLE
V
REPRESENTATIONS
AND WARRANTIES OF PURCHASER
Except
as
otherwise indicated on the Schedules, Purchaser represents and warrants to
Sellers, as of the date hereof and as of the Closing Date as
follows:
5.1 Organization,
Standing, Qualification and Power.
Purchaser
is a corporation duly organized, validly existing and in good standing under
the
laws of the jurisdiction in which it is organized and has all requisite
corporate power and authority to carry on its business as presently conducted.
5.2 Authority;
Execution and Delivery; and Enforceability.
Purchaser
has all corporate power and authority to execute this Agreement and the Escrow
Agreement and to consummate the Transactions. The execution and delivery by
Purchaser of this Agreement and the Escrow Agreement and the consummation of
the
Transactions have been or, prior to the Closing, will be duly authorized by
all
necessary corporate action on the part of Purchaser. Purchaser has duly executed
and delivered this Agreement and prior to the Closing will have duly executed
and delivered the Escrow Agreement, and this Agreement constitutes, and the
Escrow Agreement will after the Closing constitute, its legal, valid and binding
obligation, enforceable against it in accordance with its terms, except as
may
be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance
or
other similar laws affecting the enforcement of creditors' rights generally
and
general equitable principles.
5.3 No
Conflicts; Consent.
No
consent, approval, license, permit, order, qualification or authorization of,
or
registration, declaration, notice or filing with, any Governmental Entity or
any
other Person is required for or in connection with the execution and delivery
by
Purchaser of this Agreement and the Escrow Agreement to which it is a party,
and
the consummation by Purchaser of the Transactions, other than
(a) compliance with and filings under the HSR Act, (b) filings with
and obtaining consent for the Transactions from the FCC and (c) as set forth
on
Schedule
5.3,
and
(d) those that may be required solely by reason of Holdings and/or Sellers'
(as opposed to any other third party's) participation in the
Transactions.
5.4 Litigation.
There
are
no (a) outstanding judgments against Purchaser, or (b) Proceedings pending
or,
to the knowledge of Purchaser, threatened against Purchaser or (c)
investigations by any Governmental Entity that are pending or, to the knowledge
of Purchaser, threatened against Purchaser that are reasonably likely to
prohibit or delay Purchaser from consummating the Transactions.
-33-
5.5 Purchaser's
Qualifications.
Purchaser
is qualified under all applicable laws to be a transferee of the Communications
Licenses. Purchaser knows of no reason why the FCC, the State PUCs or the local
or municipal authorities will not grant their consent to the transfer of control
to Purchaser of the Communications Licenses. Purchaser knows of no fact that
would reasonably be expected to lead to a condition to the consent of the FCC,
the State PUCs or the Local Authorities that would cause the condition set
forth
in Section 7.1(a)
to not
be met. After due inquiry by Purchaser, to the knowledge of Purchaser, (a)
Purchaser does not have ten percent or greater foreign owners, including both
equity and voting owners, and (b) Purchaser is not controlled or managed by
any
foreign person or entity, such that with respect to either (a) or (b), the
FCC's
review would reasonably be expected to include review by the U.S. Executive
Branch agencies with national security responsibilities (Team Telecom).
5.6 Purchaser's
Business Investigation.
Purchaser
has conducted such investigation of Holdings, its Subsidiaries and the Business
as it has deemed necessary in order to make an informed decision concerning
the
Transactions. Purchaser acknowledges that it has been given access to and has
visited and examined the properties and assets of Holdings, its Subsidiaries
and
the Business. For the purpose of conducting these investigations, Purchaser
has
employed the services of its own agents, representatives, experts and
consultants. In all matters affecting the condition of the properties and assets
and the contents of the documents, records, reports or other materials in
connection with the Transactions, Purchaser is relying upon the provisions
of
this Agreement and the advice and opinion offered by its own agents,
representatives, experts, consultants, employees and officers.
5.7 Investment
Intent.
Purchaser
is aware that the Shares are not registered under the Securities Act. Purchaser
is an "accredited investor" as defined in the Securities Act and possesses
such
knowledge and experience in financial and business matters that it is capable
of
evaluating the merits and risks of its investment hereunder. Purchaser is
acquiring the Shares from Sellers for its own account, for investment purposes
only and not with a view to the distribution thereof. Purchaser agrees that
the
Shares will not be sold, transferred, offered for sale, pledged, hypothecated
or
otherwise disposed of without registration under the Securities Act, except
pursuant to a valid exemption from registration under the Securities Act.
5.8 Availability
of Funds.
Purchaser
has cash available and an underwritten commitment for a borrowing facility
that
together are sufficient to enable it to consummate the Transactions. True and
correct copies of the documents evidencing any such underwritten commitment
have
been provided to the Sellers' Representative.
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ARTICLE
VI
COVENANTS
AND AGREEMENTS
6.1 Conduct
of Business.
(a) Except
with the written consent of Purchaser (which consent shall not be unreasonably
withheld or delayed) or as otherwise expressly permitted by the terms of this
Agreement, from the date hereof to the Closing, Holdings shall and shall cause
its Subsidiaries to conduct the Business in the ordinary course in substantially
the same manner as presently conducted and make all commercially reasonable
efforts consistent with past practices to preserve the relationships of Holdings
and its Subsidiaries with material customers, suppliers and other Persons with
whom Holdings and its Subsidiaries transact the Business. Without limiting
the
generality of the foregoing, at all times from the date hereof until the earlier
of the date on which this Agreement is terminated or the Closing Date, unless
Purchaser shall otherwise consent in writing (which consent shall not be
unreasonably withheld or delayed), Holdings and its Subsidiaries shall not
take,
or caused to be taken, and the Sellers shall not permit Holdings and its
Subsidiaries to take, or cause to be taken, any of the following
actions:
(i) (a)
directly or indirectly redeem, purchase or otherwise acquire, any of its capital
stock or membership interests or any securities or obligations convertible
into
or exchangeable for any of its capital stock or membership interests, (b) pay
or
declare any dividends, or (c) grant any stock appreciation rights with respect
to, or grant any Person any right to acquire, any of its capital stock or
membership interests, or issue or commit to issue any additional capital stock
or membership interests or any securities convertible into or exercisable for,
or any rights, warrants or options to acquire, any additional capital stock
or
membership interests;
(ii) sell,
transfer, mortgage, encumber or otherwise dispose of any of its material assets
or properties to any Person, by merger, consolidation, asset sale or other
business combination (including formation of a joint venture) or cancel, release
or assign any indebtedness to any such Person or any claims held by any such
Person, in each case, except (i) sales of inventory and other assets in the
ordinary course of business consistent with past practices, (ii) dispositions
of
obsolete or worthless assets, and (iii) sales of immaterial assets not in excess
of $75,000 in the aggregate after the date hereof;
(iii) make
any
acquisition of a business, by purchase or other acquisition of stock or other
equity interests, by merger, consolidation, asset purchase or other business
combination, or by contributions to capital; or make any material purchases
of
any property or assets (other than inventory and other assets in the ordinary
course of business consistent with past practices), in or from any other Person,
except (a) as expressly required by the terms of any Material Contracts in
force
at the date of this Agreement as disclosed in Schedule
4.9,
(b) as
otherwise permitted by this Section 6.1(a),
and (c)
other acquisitions in the ordinary course of business consistent with past
practices and, in any case, involving consideration not in excess of $75,000
in
the aggregate after the date hereof;
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(iv) enter
into, renew, extend, amend or terminate any Contract that is or would be a
Material Contract, including any lease of Leased Property (other than with
respect to any Contract set forth on Schedule
6.1(a)(iv)
that has
not yet been formally executed by all parties, but the material terms of which
have been finally negotiated or proposed by the Business); provided,
however,
if
Purchaser fails to respond to a written request by Holdings to enter into,
renew, extend, amend or terminate any Contract that is or would be a Material
Contract within three (3) Business Days from Purchaser's receipt of such
request, the items set forth in such written request shall be deemed consented
to by Purchaser for purposes of this Section
6.1(a)(iv);
(v) other
than the acceleration of the Options contemplated by Section
2.3(d),
general
salary increases (including in connection with promotions) made in the ordinary
course of business, and non-discretionary annual incentive bonus payments for
2007 (provided they are made in the accordance with the Everest Connections
Annual Incentive Plan, the 2007 bonus metrics provided to Purchaser as of the
date hereof and otherwise consistent with past practice) for employees,
directors or independent contractors generally or as required by any agreement,
plan, or arrangement in effect on the date hereof, (a) increase, or commit
to
increase, in any material respect the compensation or severance payable to
any
of its employees, directors or independent contractors, (b) pay any material
severance, annual incentive payment or benefit in the form of a welfare benefit
or discretionary pension or retirement allowance contribution to any employees,
directors or independent contractors, (c) change the status, title or
responsibilities, including without limitation, termination or promotion, of
any
officer, or promote any employee (who is not an officer as of the date of this
Agreement) to an officer position, (d) enter into, modify or terminate any
Company Benefit Plan other than as required by applicable law, or (e) except
as
may be required, or advisable, to comply with applicable law, materially amend,
establish or enter into any material pension, retirement, profit-sharing,
severance, retention or welfare benefit plan or agreement or incentive or
employment, agreement with or for the benefit of any employee, director or
independent contractor or accelerate the vesting of any profit sharing
compensation;
(vi) amend
its
charter document, bylaws, operating agreement or other governing documents;
(vii) introduce
any material new products or services or any material new sales compensation
or
incentive programs or arrangements (except those the material terms of which
have been disclosed to Purchaser prior to the date hereof);
(viii) enter
into any new material line of business;
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(ix) make
or
change any material Tax election or settle or compromise any material Tax
liability of Holdings or any Subsidiary;
(x) make
any
material changes in its accounting methods or method of Tax accounting,
practices or policies, except as may be required under applicable law, rule,
regulation or GAAP;
(xi) take
any
action that is intended to result in any of the conditions set forth in
Sections 7.1
or
7.2
not
being satisfied;
(xii) take
any
action inconsistent with normal marketing, advertising and promotional
expenditures with respect to the Business;
(xiii) fail
to
make capital expenditures in the ordinary course of business consistent with
past practices;
(xiv) fail
to
maintain or cause to be maintained any material assets of Holdings and its
Subsidiaries in adequate condition and repair for their current use in the
ordinary course of business, ordinary wear and tear excepted;
(xv) fail
to
keep in full force and effect the insurance policies (or substantively similar
policies with the same amounts and scopes of coverage) with respect to the
Business and enforce in good faith the rights under such insurance
policies;
(xvi) fail
to
renew any material Permits which expire prior to the Closing Date;
(xvii) fail
to
maintain inventory sufficient for the operation of the Business in the ordinary
course of business consistent with past practices;
(xviii) engage
in
any marketing practices, subscriber installation practices or collection
practices other than in the ordinary course of business consistent with past
practices;
(xix) discount
or increase the rates charged by the Business other than in the ordinary course
of business consistent with past practices;
(xx) except
as
required by applicable law (including applicable must-carry laws) or in the
ordinary course of business in accordance with past practices, add or
voluntarily delete any channels from any Cable System, or change the channel
lineup in any Cable System or commit to do any of the foregoing in the future;
(xxi) fail
to
continue to conduct the Business in accordance with, and not make any change
to,
the Business' subscriber accounting policy, including as to disconnects;
or
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(xxii) agree
to,
or make any commitment to, take any of the actions prohibited by this
Section 6.1(a).
(b) Prior
to
the Closing, Sellers shall use their commercially reasonable efforts to cause
Holdings and its Subsidiaries to maintain the validity of the Communications
Licenses, comply in all material respects with all requirements of the
Communications Licenses, and the Communications Act and any applicable state
or
local laws, including those of the State PUCs. Prior to the Closing, Holdings
shall, and shall cause its Subsidiaries to, (i) refrain from taking any action
that would materially jeopardize the validity of any of the Communications
Licenses, (ii) prosecute with commercially reasonable diligence any pending
applications with respect to the Communications Licenses, including any renewals
thereof and (iii) with respect to Communications Licenses, file all material
registrations, reports, renewal applications, and other documents and pay all
material required fees and contributions, in each case, that are required by
the
Communications Act or any applicable state or local laws, including those of
the
State PUCs as and when such filings or reports are necessary or appropriate.
6.2 Access
to Information; Delivery of Financial Statements.
(a) Holdings
shall, and shall cause its Subsidiaries to, provide Purchaser and its
accountants, counsel and other representatives reasonable access during normal
business hours from the date hereof until the Closing to all the properties,
books, contracts, commitments, Returns and records of Holdings and its
Subsidiaries, and to its officers, employees, accountants, counsel and other
representatives and, during such period shall furnish promptly to Purchaser
any
information concerning Holdings and its Subsidiaries that Purchaser may
reasonably request, in each case, at Purchaser's sole expense; provided,
however,
that
(a) such access does not unreasonably disrupt the normal operations of Holdings
and its Subsidiaries, and (b) Holdings and its Subsidiaries are under no
obligation to disclose to Purchaser any information the disclosure of which
is
restricted by Contract or applicable law.
(b) Holdings
shall deliver to Purchaser within twenty one (21) days after the end of each
calendar month unaudited financial statements of Holdings and its Subsidiaries,
consisting of a balance sheet, a statement of income and a statement of cash
flows, as well as key operating statistics, including gross subscriber
figures.
6.3 Confidentiality.
Purchaser
acknowledges that the information being provided to it in connection with the
Transactions is being provided pursuant to the terms of a confidentiality
agreement dated as of September 7, 2007 between Purchaser (or its affiliate)
and
Holdings (the "Confidentiality
Agreement").
Purchaser acknowledges that it is and shall remain subject to the terms of
the
Confidentiality Agreement, which terms are incorporated herein by
reference.
6.4 Efforts
to Consummate Generally.
Subject
to the terms and conditions of this Agreement, each party shall use its
commercially reasonable efforts to cause the Closing to occur as soon as
possible after the date hereof, including satisfying the conditions precedent
set forth in ARTICLE
VII
within
the control of such party, defending against any Proceedings, judicial or
administrative, challenging this Agreement or the consummation of the
Transactions, and seeking to have any preliminary injunction, temporary
restraining order, stay or other legal restraint or prohibition entered or
imposed by any court or other Governmental Entity that is not yet final and
nonappealable vacated or reversed.
-38-
6.5 Regulatory
Matters and Approvals.
Each
of
the parties will (and Sellers will cause Holdings and each of its Subsidiaries
to) give any notices to, make any filings with, and use its commercially
reasonable efforts to obtain any authorizations, consents and approvals of
Governmental Entities relating to the Transactions. Without limiting the
generality of the foregoing:
(a) Xxxx
Xxxxx Xxxxxx.
Within
ten (10) Business Days of the date hereof, each of the parties will make all
filings with the Federal Trade Commission ("FTC")
and
the United States Department of Justice (the "DOJ"),
Antitrust Division of any notifications required to be filed under the HSR
Act
and the rules and regulations promulgated thereunder with respect to the
Transactions. Each of the Sellers' Representative and Purchaser shall furnish
to
the other such necessary information and reasonable assistance as the other
may
request in connection with its preparation of any filing or submission that
is
necessary under the HSR Act. Purchaser and Sellers shall use all commercially
reasonable efforts to comply as promptly as practicable with any requests made
for any additional information in connection with such filings or actions.
The
parties shall also file any post-transaction notices as may be required by
such
Governmental Entities within the time periods prescribed by applicable law.
The
Sellers' Representative and Purchaser shall keep each other apprised of the
status of any communications with, and any inquiries or requests for additional
information from, the FTC and the DOJ and use commercially reasonable efforts
to
comply promptly with any such inquiry or request.
(b) FCC
and State Public Utility Commissions and Municipalities.
Each of
the parties will make all filings required of it by the FCC within fifteen
(15)
Business Days of the date hereof and will make all filings required of it by
local municipalities and other state public utility commissions or similar
state
regulatory bodies within fifteen (15) Business Days of the date hereof, and
take
all commercially reasonable actions necessary to obtain all consents, permits
and orders required by any of the foregoing as conditions to the obligations
of
Purchaser and Sellers to consummate the Transactions. Each of the Sellers'
Representative and Purchaser shall furnish to the other such necessary
information and reasonable assistance as the other may request in connection
with its preparation of any such filings. Purchaser and Sellers shall use all
commercially reasonable efforts to comply as promptly as practicable with any
requests made for any additional information in connection with such filings
or
actions. The Sellers' Representative and Purchaser shall keep each other
apprised of the status of any communications with, and any inquiries or requests
for additional information from, the FCC, local municipalities and other state
public utility commissions or similar state regulatory bodies and use
commercially reasonable efforts to comply promptly with any such inquiry or
request. The parties shall also file any post-transaction notices as may be
required by such Governmental Entities within the time periods prescribed by
applicable law.
Purchaser
shall pay one-half of the filing fees incurred in connection with the filings
made by the parties to comply with this Section 6.5.
Sellers
shall cause the Company to pay one-half of the filing fees incurred in
connection with the filings made by the parties to comply with this Section 6.5
and such
portion of the filing fees shall be included in the Transaction Expenses (if
it
is not paid as of the Closing).
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6.6 Expenses;
Transfer Taxes.
(a) Except
as
otherwise specifically set forth in this Agreement, all costs and expenses
incurred in connection with this Agreement, the Escrow Agreement and the
Transactions shall be paid by the party incurring such expense.
(b) All
transfer, documentary, sales, use, registration, value-added and other similar
Taxes (including all applicable real estate transfer Taxes and real property
transfer gains Taxes and including any filing and recording fees) and related
amounts (including any penalties, interest and additions to Tax) incurred in
connection with this Agreement, the Escrow Agreement and the Transactions
("Transfer
Taxes")
shall
be paid one-half by the Sellers and one-half by Purchaser. Sellers' portion
of
Transfer Taxes shall be included in the Transaction Expenses (if it is not
paid
as of the Closing). Each party shall use commercially reasonable efforts to
avail itself of any available exemptions from any such Transfer Taxes, and
to
cooperate with the other parties in providing any information and documentation
that may be necessary to obtain such exemptions.
6.7 Publicity.
After
the
date hereof, no public release or announcement concerning the Transactions
shall
be issued by any Seller or Purchaser or their respective Affiliates without
the
prior written consent of Purchaser and the Sellers' Representative, as the
case
may be (which consent shall not be unreasonably conditioned, withheld or
delayed), except as such release or announcement may be required by applicable
law or the rules or regulations of any United States or foreign securities
exchange, in which case the party required to make the release or announcement
shall allow the other parties reasonable time to comment on or seek a protective
order with respect to such release or announcement in advance of such
issuance.
6.8 Indemnification,
Exculpation.
(a) Except
to
the extent provided in Section
9.6,
all
rights to indemnification and exculpation (including the advancement of
expenses) from liabilities for acts or omissions occurring at or prior to the
Closing (including with respect to the Transactions) existing as of the date
hereof in favor of the current or former directors, officers and employees
of
Holdings and/or any of its Subsidiaries, as provided in the certificate of
incorporation, the bylaws, other organizational documents, or any
indemnification agreements of any of Holdings or any of its Subsidiaries and
pursuant to applicable law shall survive the Transactions and shall continue
in
full force and effect without amendment, modification or repeal in accordance
with their terms for a period of not less than six (6) years after the Closing;
provided,
however,
that if
any claims are asserted or made within such period, all rights to
indemnification (and to advancement of expenses) hereunder in respect of any
such claims shall continue, without diminution, until disposition of any and
all
such claims.
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(b) The
provisions of this Section 6.8
are
intended to be for the benefit of, and enforceable by, each party indemnified
pursuant to this Section 6.8
(or as
otherwise referenced in this Section 6.8),
his or
her heirs and his or her representatives.
6.9 Exclusivity.
(a) During
the period from the date of this Agreement until the earlier of the termination
of this Agreement or the Closing, Holdings, its Subsidiaries and Sellers shall
not, directly or indirectly, through any officer, director, employee,
representative, Affiliate or agent, (i) take any action to solicit,
initiate, encourage or support any inquiries or proposals that constitute,
or
could reasonably be expected to lead to, a proposal or offer for a merger,
consolidation, business combination, sale of substantial assets, sale of shares
of capital stock (including without limitation by way of a tender offer) or
similar transactions involving Holdings or its Subsidiaries, other than the
transactions contemplated or expressly permitted by this Agreement (any of
the
foregoing inquiries or proposals being referred to in this Agreement as a
"Transaction
Proposal"),
(ii) engage in negotiations or discussions concerning, or provide any
non-public information to any Person relating to, any Transaction Proposal,
or
(iii) agree to approve or recommend any Transaction Proposal.
(b) Holdings,
its Subsidiaries or the Sellers' Representative shall notify Purchaser no later
than one (1) Business Day after receipt by Holdings, any of its Subsidiaries
or
the Sellers (or its advisors) of any Transaction Proposal or any request for
nonpublic information in connection with a Transaction Proposal or for access
to
the properties, books or records of Holdings, or any of its Subsidiaries by
any
Person that informs Holdings or the Sellers that it is considering making,
or
has made, a Transaction Proposal.
6.10 Disclosure
Schedules.
Each
disclosure schedule delivered pursuant to this Agreement (each a "Schedule,"
and
collectively, the "Schedules")
shall
be in writing and shall qualify this Agreement. The inclusion of an item in
a
Schedule as an exception to a representation or warranty shall not be deemed
an
admission by Sellers or Purchaser, as applicable, that such item represents
an
exception or material fact, event or circumstance or that such item constitutes
a Material Adverse Effect. Any fact or item that is disclosed in any Schedule
in
a way as to make its relevance or applicability to information called for by
any
other Schedule reasonably apparent shall be deemed to be disclosed in such
other
Schedule, notwithstanding the omission of a reference or cross-reference
thereto.
6.11 Termination
of 401(k) Plans.
Effective
no later than the date immediately preceding the Closing Date, Holdings and
its
Subsidiaries or Affiliates shall terminate each Code Section 401(k) plan
maintained by Holdings or any of its Subsidiaries or Affiliates (the
"401(k)
Plans")
and
Holdings shall provide Purchaser with evidence that the 401(k) Plans have been
so terminated pursuant to resolutions of the applicable board of directors
or
other governing body having authority to terminate the 401(k) Plans. The form
and substance of such resolutions shall be subject to the review and reasonable
and timely approval of Purchaser. Purchaser shall, to the extent permitted
by
applicable law, take such actions in furtherance of providing that the 401(k)
plan of Purchaser in which the employees of Holdings and its Subsidiaries or
Affiliates are eligible to participate, shall accept roll-over contributions
with respect to accounts of such employees that are properly distributed from
the 401(k) Plans. Holdings and its Subsidiaries or Affiliates, as applicable,
also shall take such other actions in furtherance of terminating the 401(k)
Plans as Purchaser may reasonably request.
-41-
6.12 Cooperation
upon Inquiries as to Rates.
If
at any
time prior to Closing, any Governmental Entity commences a Rate Regulatory
Matter with respect to a Cable System, Seller shall (a) promptly notify
Purchaser of such Rate Regulatory Matter, and (b) subject to applicable law,
keep Purchaser informed as to the progress of any such Proceeding. Without
the
prior consent of Purchaser, which consent shall not be unreasonably withheld,
Seller shall not, and shall cause Holdings or its Subsidiaries, not to, settle
any such Rate Regulatory Matter, either before or after Closing, if (i)
Purchaser or its Affiliates would have any liability under such settlement
other
than an obligation to pay money in an amount not greater than $25,000, or (ii)
such settlement would reduce the rates permitted to be charged by Purchaser
after the Closing below the rates in effect as of the date hereof or otherwise
then in effect.
6.13 Subscriber
Reports.
Within
twenty one (21) days following the end of each calendar month commencing the
first full month after the date hereof through the Closing, Sellers shall or
shall cause Holdings to provide Purchaser with (a) a written report setting
forth the number of residential and commercial subscribers served by the
Business, and (b) the average monthly revenue per residential subscriber and
commercial subscriber, each as of the end of such calendar month.
ARTICLE
VII
CONDITIONS
PRECEDENT
7.1 Conditions
to Each Party's Obligations.
The
respective obligation of each party to effect the Closing is subject to the
satisfaction or waiver on or prior to the Closing of the following
conditions:
(a) Governmental
Approvals.
All
applicable waiting periods (and any extensions thereof) under the HSR Act shall
have expired or otherwise been terminated and the parties shall have received
all FCC and other authorizations, consents and approvals of Governmental
Entities required in connection with the consummation of the Transactions,
which
authorizations, consents and approvals shall not contain any materially adverse
conditions or limitations, provided,
however,
that to
the extent such authorization, consent or approval of the FCC has been obtained,
each Party's obligation to close the Transactions shall not be conditioned
upon
the expiration of the time for filing a petition for reconsideration, an
application or motion for review or judicial appeal, or review the FCC on its
own motion.
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(b) No
Injunctions or Restraints.
There
shall not be any judgment, order, decree, stipulation, injunction or charge
from
any Governmental Entity in effect preventing consummation of any of the
Transactions, and no Proceeding shall be pending before any Governmental Entity
wherein an unfavorable injunction, judgment, order, decree, ruling, or charge
would (i) prevent consummation of any of the Transactions, or (ii) cause any
of
the Transactions to be rescinded following consummation.
7.2 Conditions
to Obligations of Purchaser.
The
obligation of Purchaser to effect the Closing is subject to the satisfaction
(or
waiver by Purchaser) on or prior to the Closing of the following
conditions:
(a) Representations
and Warranties.
The
representations and warranties of Sellers, Holdings and Sellers' Representative
contained herein and in the Escrow Agreement shall be true and correct on the
Closing Date as though made on the Closing Date, except to the extent such
representations and warranties by their terms speak as of an earlier date,
in
which case they shall be true and correct as of such earlier date, except in
each case to the extent that the failure of such representations and warranties
to be true and correct would not, individually or in the aggregate, have a
Material Adverse Effect.
(b) Performance
of Obligations.
Sellers
and Holdings shall have performed and complied (or shall have cured any
nonperformance or noncompliance) with the agreements and conditions required
by
this Agreement to have been performed or complied with by them in all material
respects prior to or at the Closing.
(c) Closing
Certificate.
Purchaser shall have received a certificate, dated as of the Closing Date,
signed by the Sellers' Representative, on behalf of Sellers, certifying that
the
conditions specified in Sections
7.2(a)
and
(b)
have
been fulfilled.
(d) Third
Party Consents.
Holdings and its Subsidiaries shall have procured all third party consents
and
provided all regulatory notices as set forth on Schedule
7.2(d).
(e) Lease
Assignments.
Sellers
shall use commercially reasonable efforts to obtain and deliver or caused to
be
obtained and delivered to Purchaser a landlords/sublandlord estoppel certificate
executed by each landlord/sublandlord under each of such leases, with each
such
certificate in form reasonably satisfactory to Purchaser.
(f) FIRPTA
Certificate.
Holdings shall have delivered to Purchaser a properly executed statement
satisfying the Treasury Regulation §1.1445-2(c)(3), substantially in the form
attached hereto as Exhibit
C
(the
"FIRPTA
Certificate").
(g) Good
Standing.
Sellers
shall have delivered to Purchaser certificates of officers and public officials
as shall be reasonably requested by Purchaser to establish the existence and
good standing of Holdings and its Subsidiaries in the jurisdictions listed
on
Schedule
7.2(g).
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(h) Resignations.
Purchaser shall have received resignations, effective as of the Closing, of
all
officers and members of the boards of directors of Holdings and its Subsidiaries
that have been requested to resign by Purchaser.
(i) Termination
of Agreements with Sellers.
Sellers
shall have caused the termination of (i) the Stockholders' Agreement dated
as of
June 30, 2006 among Sellers and Holdings, and (ii) the Registration Rights
Agreement dated as of June 30, 2006 among Sellers and Holdings, in each case
effective as of the Closing.
(j) No
Material Adverse Effect.
Between
the date hereof and the Closing, there shall not have been a Material Adverse
Effect.
(k) Escrow
Agreement.
Each of
the Sellers' Representative and the Escrow Agent shall have executed and
delivered the Escrow Agreement.
(l) Opinion
of Counsel.
Purchaser shall have received the Legal Opinion from O'Melveny & Xxxxx
LLP.
7.3 Conditions
to the Obligations of Each Seller.
The
obligations of Holdings and Sellers to effect the Closing is subject to the
satisfaction (or waiver by a majority in interest of the Sellers) on or prior
to
the Closing of the following conditions:
(a) Representations
and Warranties.
The
representations and warranties of Purchaser contained herein and in the Escrow
Agreement shall be true and correct in all material respects on the Closing
Date
as though made on the Closing Date, except to the extent such representations
and warranties by their terms speak as of an earlier date, in which case they
shall be true and correct as of such earlier date.
(b) Performance
of Obligations.
Purchaser shall have performed and complied in all material respects (or shall
have cured any material nonperformance or noncompliance) with the agreements
and
conditions required by this Agreement to have been performed or complied with
by
it prior to or at the Closing.
(c) Closing
Certificate.
The
Sellers' Representative, on behalf of Sellers, shall have received a certificate
from Purchaser, dated as of the Closing Date, signed by an officer of Purchaser,
certifying that the conditions specified in Sections
7.3(a)
and
(b)
have
been fulfilled.
7.4 Frustration
of Closing Conditions.
None
of
Sellers or Purchaser may rely on the failure of any condition set forth in
this
ARTICLE
VII
to be
satisfied if such failure was caused by such party's failure to act in good
faith or to use its commercially reasonable efforts to cause the Closing to
occur, as required by Sections
6.4
and
6.5.
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ARTICLE
VIII
TERMINATION
8.1 Termination
of Agreement.
This
Agreement may be terminated:
(a) at
any
time prior to the Closing Date by mutual written consent of the Sellers'
Representative and
Purchaser;
(b) by
either
the Sellers' Representative or Purchaser by written notice to the other parties,
if the Closing has not taken place on or before April 30, 2008 (the
"Expiration
Date"),
or
such later date as the Sellers' Representative and Purchaser may agree to in
writing
if the
Closing of the Transactions shall not have been consummated by the initial
Expiration Date; provided, however, that any party that has breached this
Agreement, which breach has resulted in the failure of a condition in
ARTICLE
VII,
shall
not be entitled to terminate this Agreement pursuant to this Section 8.1(b);
or
(c) by
either
the Sellers' Representative or Purchaser, by written notice to the other, if
any
event, fact or condition (including a breach of a material representation and
warranty by the non-terminating party) occurs or exists which otherwise makes
it
impossible to satisfy a condition precedent to the terminating party's
obligations to consummate the Transactions, and such event, fact or condition,
if of a type that can be cured, shall not have been cured or waived by the
non-terminating parties within forty-five (45) days of notice thereof from
the
terminating party, unless the occurrence or existence of such event, fact or
condition shall be due to the failure of the terminating party to perform or
comply with any of the agreements or covenants in this Agreement to be performed
or complied with by such party prior to the Closing.
Upon
such
termination Purchaser shall destroy or return to Sellers' Representative all
documents and other materials received from Sellers, Holdings or any of its
Subsidiaries, whether so obtained before or after the date hereof and all
confidential information received by Purchaser with respect to the Business
shall be kept confidential, which obligation of confidentiality shall remain
in
full force and effect for two (2) years thereafter notwithstanding the
termination of this Agreement; provided,
however,
Purchaser shall have the right to retain one copy of all such documents and
other materials in order to prosecute or defend any claim arising out of the
termination of this Agreement pursuant to this Section 8.1.
8.2 Effect
of Termination.
If
this
Agreement is terminated and the Transactions are abandoned as described in
Section 8.1,
this
Agreement shall become null and void and of no further force and effect, except
for the provisions of Sections
6.3,
6.6(a),
6.7,
this
ARTICLE
VIII
and
ARTICLE
XI.
Nothing
in this Section 8.2
shall be
deemed to release any party from any liability for any willful breach by such
party of the terms and provisions of this Agreement.
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ARTICLE
IX
INDEMNIFICATION
9.1 Survival.
(a) Except
with respect to fraud, the representations and warranties of Holdings and
Sellers contained in or made pursuant to this Agreement shall survive until
the
first anniversary of the Closing (the "Survival
Period"),
other
than those representations and warranties contained in Section 3.1
(Ownership), Section 3.3
(Authority; Execution and Delivery; Enforceability), Section 4.1
(Organization, Good Standing, Qualification and Power), Section 4.2
(Authority; Execution and Delivery; Enforceability), Section
4.4
(Capitalization; Subsidiaries), Section 4.11
(Taxes),
Section
4.13
(Benefits) and Section
4.17
(Environmental) (collectively, the "Fundamental
Seller Representations"),
which
(other than Section
4.17
(Environmental) which shall survive until the fifth anniversary of the Closing)
shall survive indefinitely unless a statute of limitations applies to claims
of
third parties in which case, with respect to such claims, such representations
and warranties shall expire sixty (60) days following the expiry of the
applicable statute of limitations (including any extensions thereof).
(b) Except
with respect to fraud, the representations and warranties of Purchaser contained
in or made pursuant to this Agreement shall survive until the expiration of
the
Survival Period, other than those representations and warranties contained
in
Section 5.1
(Organization, Standing, Qualification and Power), Section 5.2
(Authority; Execution and Delivery; Enforceability) and Section
5.8
(Availability of Funds) (collectively, the "Fundamental
Purchaser Representations"
and,
together with the Fundamental Seller Representations, the "Fundamental
Representations"),
which
shall survive indefinitely unless a statute of limitations applies to claims
of
third parties in which case, with respect to such claims, such representations
and warranties shall expire sixty (60) days following the expiry of the
applicable statute of limitations (including any extensions thereof).
(c) This
ARTICLE
IX
shall
survive the Closing and shall remain in effect (i) with respect to Sections
9.2(a)(i)
and
9.2(b)(i),
so long
as the relevant representations and warranties survive, (ii) with respect to
Sections
9.2(a)(ii),
9.2(a)(iii),
9.2(a)(iv)
and
9.2(b)(ii),
to the
extent those Sections relate to the covenants requiring performance (A) prior
to
the Closing, until the expiration of the Survival Period, or (B) after the
Closing, indefinitely, unless a statute of limitations applies to claims of
third parties in which case, with respect to such claims, such representations
and warranties shall expire sixty (60) days following the expiry of the
applicable statute of limitations (including any extensions thereof); and (iii)
with respect to Section 9.2(b)(iii),
indefinitely, unless a statute of limitations applies to claims of third parties
in which case, with respect to such claims, such representations and warranties
shall expire sixty (60) days following the expiry of the applicable statute
of
limitations (including any extensions thereof).
9.2 Indemnification.
(a) Subject
to the limitations set forth in this ARTICLE
IX,
subsequent to the Closing Date, Sellers (severally, as hereinafter provided,
and
not jointly) shall indemnify Purchaser and hold it harmless against any
liability, loss, suit, action or cause of action (collectively, "Losses"
and
individually, a "Loss")
that
Purchaser suffers as a result of:
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(i) any
breach of the representations and warranties of Holdings or such Seller set
forth in this Agreement;
(ii) any
breach or nonperformance by such Seller of any of the covenants or agreements
of
such Seller set forth in this Agreement;
(iii) any
Tax
Losses; or
(iv) any
Losses arising from or related to the Company Benefit Plans that arise from
circumstances existing prior to the Closing.
(b) Subject
to the limitations set forth in this ARTICLE
IX,
subsequent to the Closing Date, Purchaser shall indemnify each Seller and his,
her or its estate, heirs, personal representatives or successors and hold him,
her or it harmless against any Loss that such Seller suffers as a result
of:
(i) any
breach of the representations and warranties of Purchaser set forth in this
Agreement;
(ii) any
breach or nonperformance by Purchaser of any of the covenants or agreements
set
forth this Agreement; or
(iii) the
conduct and operation of the Business on or after the Closing.
9.3 Third
Party Claims.
The
obligations and liabilities of an Indemnifying Party with respect to Losses
resulting from the assertion of liability by third parties (each, a
"Third
Party Claim")
shall
be subject to the following terms and conditions:
(a) The
Indemnified Parties shall promptly give written notice to the Indemnifying
Parties of any Third Party Claim that might give rise to any Loss by the
Indemnified Parties, stating the nature and basis of such Third Party Claim,
and
the amount thereof to the extent known. Such notice shall be accompanied by
copies of all relevant documentation with respect to such Third Party Claim,
including any summons, complaint or other pleading which may have been served,
any written demand or any other document or instrument.
(b) From
and
after receipt of notice of a Third Party Claim pursuant to Section 9.3(a),
the
Indemnifying Parties shall have the right to conduct, at their own expense,
the
defense against the Third Party Claim in their own names or in the names of
the
Indemnified Parties. Any Indemnified Parties shall have the right to employ
separate counsel in any such Third Party Claim and/or to participate in the
defense thereof, but the fees and expenses of such counsel shall not be included
as part of any Loss incurred by the Indemnified Party and shall not be payable
by the Indemnifying Parties. The party or parties conducting the defense of
any
Third Party Claim shall keep the other parties apprised of all significant
developments with respect thereto and shall not enter into any settlement,
compromise or consent to judgment that imposes non-monetary obligations on
the
Indemnified Parties with respect to such Third Party Claim without the prior
consent of the other parties hereto, such consent not to be unreasonably
withheld.
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(c) Notwithstanding
the foregoing, if Purchaser determines in good faith that there is a reasonable
probability that a Third Party Claim may have a material adverse effect on
it or
the Business, Purchaser may, by notice to the Indemnifying Parties, assume
the
exclusive right to defend, compromise or settle such Third Party Claim, but
the
Indemnifying Parties will not be bound by any compromise or settlement effected
without its consent. If Purchaser should elect to exercise such right, the
Indemnifying Parties shall have the right to participate in, but not control,
the defense or settlement of such Third Party Claim at their sole cost and
expense.
9.4 Limitations
on Indemnification.
(a) Threshold.
As to
any claim for indemnification pursuant to Section 9.2(a)(i)
or
9.2(b)(i)
(other
than with respect to Losses arising out of any breach of the Fundamental
Representations or any breach of any representation and warranty based on a
fraud, which shall not be subject to the Indemnity Threshold), the Indemnified
Party shall not be entitled to indemnification until all Losses to such
Indemnified Party exceed, in the aggregate, three quarters of one percent
(0.75%) of the Enterprise Value (the "Indemnity
Threshold"),
in
which case such Indemnified Party shall be entitled to indemnification only
to
the extent such Losses exceed the Indemnity Threshold;
provided,
however,
that
that any materiality or Material Adverse Effect qualifier will not be taken
into
account in determining the magnitude of the damages occasioned by the breach
of
any representation or warranty for purposes of calculating the Indemnity
Threshold (once a breach of any representation or warranty has occurred after
giving effect to the applicable materiality or Material Adverse Effect
qualifiers).
(b) Cap. In
no
event shall the Indemnifying Parties in the aggregate be liable for any Losses
as to any claim for indemnification pursuant to Section 9.2(a)
or
Section 9.2(b),
as
applicable, other than with respect to Losses arising out of any breach of
the
Type 1 Fundamental Representations or any breach of any representation and
warranty based on a fraud which shall not be subject to the Indemnity Cap,
in
excess of an amount equal to thirteen and three-fourths of one percent (13.75%)
of the Enterprise Value (the "Indemnity
Cap").
In no
event shall any Seller be liable for any Losses, as to all claims for
indemnification pursuant to Section
9.2(a),
other
than with respect to Losses arising out of any breach of any representation
and
warranty based on a fraud, in excess of such Seller's Indemnity Pro Rata Share
of the Final Purchase Price (with respect to each Seller, such Seller's
"Seller's
Purchase Price Indemnity Cap").
All
Losses relating to claims for indemnification pursuant to Section 9.2(a)
shall be
satisfied first out of the portion of the Escrow Funds, if any, then held in
escrow and not previously distributed pursuant to the terms of the Escrow
Agreement.
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(c) In
connection with any claim for indemnification pursuant to Section
9.2(a),
each
Seller shall only be severally liable for his, her or its Indemnity Pro Rata
Share of any Losses (individually or in the aggregate), and no Seller (other
than in the case of the Type 1 Fundamental Representations) shall be responsible
for aggregate Losses in excess of his, her or its Indemnity Pro Rata Share
of
the Indemnity Cap, or in the case of the Type 1 Fundamental Representations
(plus any liability incurred with respect to any other Loss indemnified by
the
Sellers), in excess of such Seller's Purchase Price Indemnity Cap; provided,
that
with respect to a breach of a representation or warranty contained in
ARTICLE
III
or a
covenant by any Seller hereunder (with each such individual Seller breach
referred to herein as an "Individual
Seller Breach"),
only
such particular Seller shall be liable for Losses arising in connection with
such Individual Seller Breach, and the parties agree that no other Seller shall
be liable hereunder for any such Individual Seller Breach.
(d) Mitigation.
The
parties shall cooperate with each other to resolve any claim or liability with
respect to which one party is obligated to indemnify the other party hereunder,
including by making commercially reasonable efforts to mitigate or resolve
any
such claim or liability. Each party shall use commercially reasonable efforts
to
address any claims or liabilities that may provide a basis for an indemnifiable
claim such that each party shall respond to any claims or liabilities in the
same manner it would respond to such claims or liabilities in the absence of
the
indemnification provisions of this Agreement. In the event that any party shall
willfully fail to make such commercially reasonable efforts to mitigate or
resolve any claim or liability, then notwithstanding anything else to the
contrary contained herein, the other party shall not be required to indemnify
any Person for any indemnifiable Loss that could reasonably be expected to
have
been avoided if such party, as the case may be, had made such efforts. Expect
as
provided in the foregoing sentence, no party shall have any liability or loss
of
its indemnification rights hereunder for a breach of its obligations under
this
Section
9.4(d).
(e) Any
indemnifiable claim with respect to any breach or nonperformance by either
party
of a representation, warranty, covenant or agreement shall be net of any (i)
insurance proceeds (net of any costs of collection, deductible, retroactive
premium adjustment, reimbursement obligation or other cost directly related
to
the insurance claim in respect of Losses), (ii) Tax Benefits actually realized
and (iii) recoveries from third parties pursuant to indemnification or
otherwise. If an inaccuracy in any of the representations and warranties made
by
any Seller or Holdings or a breach of any covenants of any Seller gives rise
to
an adjustment in the Purchase Price, or otherwise was the basis for an
adjustment to the Working Capital, then such inaccuracy or breach shall not
give
rise to an indemnification obligation under Section 9.2.
All
payments made pursuant to this ARTICLE IX
shall be
treated as adjustments to the Final Purchase Price.
Notwithstanding anything in this Agreement to the contrary, Purchaser shall
not
be indemnified or reimbursed for any Loss arising or resulting from any change
in Law enacted after the Closing Date. If the Indemnifying Party makes any
payment on any claim pursuant to Section 9.2,
the
Indemnifying Party shall be subrogated, to the extent of such payment, to all
rights and remedies of the Indemnified Party to any insurance benefits or other
claims of the Indemnified Party with respect to such claim.
(f) Notwithstanding
anything in this Agreement to the contrary, no party shall be liable for any
consequential damages, loss in value of assets or securities, punitive (other
than to the extent paid to a third party), speculative, treble, remote, special
or indirect damages, or loss of business reputation or opportunity relating
to a
breach of this Agreement.
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9.5 Right
to Indemnification Not Affected by Knowledge.
The
right
to indemnification and payment of Losses based on any breach of representations
and warranties will not be affected by any investigation conducted, or any
knowledge acquired (or capable of being acquired) at any time, whether before
or
after the execution and delivery of this Agreement or the Closing Date, with
respect to the accuracy or inaccuracy of or compliance with, any such
representation and/or warranty. The waiver of any condition based on the
accuracy of any representation or warranty, or on the performance of or
compliance with any covenant or obligation, will not affect the right to
indemnification, payment of Losses, or other remedy based on such
representations, warranties, covenants and obligations.
9.6 No
Contribution.
No
Indemnifying Party or any of its employees or agents shall have any right of
contribution, right of indemnity or other right or remedy against Holdings
or
its Subsidiaries in connection with any indemnification obligation or any other
liability to which she, he or it may become subject under or in connection
with
this Agreement.
9.7 Remedies
Exclusive.
From
and
after the Closing Date, the remedies provided for in this ARTICLE
IX
shall be
exclusive and shall preclude assertion by any Indemnified Party of any other
rights or the seeking of any and all other remedies against the Indemnifying
Party for claims based on this Agreement, other than for (a) actions for
specific performance or other equitable remedies and (b) Losses arising out
of
or relating to fraud. Each party hereby waives any provision of law to the
extent that it would limit or restrict the agreement contained in this
Section
9.7.
ARTICLE
X
TAX
MATTERS
10.1 Purchaser
Tax Covenants.
(a) In
the
event that Purchaser causes or permits Holdings, any Subsidiary of Holdings
or
any Affiliate of Purchaser, to make or change any material Tax election
(including making any election under Section 338 of the Code), amend any Return,
take any Tax position on any Return, or compromise or settle any Tax liability,
which increases the Tax liability of Holdings or any Subsidiary of Holdings
in
respect of any Pre-Closing Tax Period, in each case without the prior written
consent of the Sellers' Representative (unless such action is permitted to
be
taken under this Agreement without the consent of the Sellers' Representative),
which consent may not be unreasonably withheld or delayed, Sellers shall not
be
liable under this Agreement for any Taxes that are a direct or indirect result
of such action; provided, however, that no consent of the Sellers'
Representative shall be required when such action is otherwise required by
law.
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(b) The
representations set forth in Section
4.11
may only
be relied on for purposes of Pre-Closing Tax Period or any pre-closing portion
of the Straddle Tax Period, and are not a guarantee of any tax assets or
positions taken or to be taken after the Closing Date.
(c) After
the
Closing Date, Purchaser and its Affiliates (including Holdings or any Subsidiary
of Holdings) shall not, without the consent of the Sellers' Representative,
agree to the waiver or any extension of the statute of limitations relating
to
any Taxes of Holdings or any of its Subsidiaries for any Pre-Closing Tax Period
or any pre-closing portion of the Straddle Tax Period.
(d) Purchaser
shall promptly pay or cause prompt payment to be made to Common Equityholders
(on a Pro Rata Share basis) of all refunds of Taxes and interest thereon
received by, or credited against the Tax liability of Purchaser, any Affiliate
of Purchaser or Holdings or any of its Subsidiaries attributable to Taxes paid
by any Seller, Holdings, any of its Subsidiaries or any Affiliate of any Seller
with respect to any Pre-Closing Tax Period or pre-closing portion of the
Straddle Tax Period, net of (y) any Tax liability due as a result of such refund
of Taxes and (z) such tax refunds or tax asset forming the basis for a tax
refund that was reflected on the Final Closing Statement and taken into account
in calculating purchase price.
10.2 Tax
Returns, Cooperation.
(a) If
Sellers' Representative determines that Holdings or any of its Subsidiaries
is
entitled to file or make a formal or informal claim for refund or an amended
Return providing for a refund with respect to a Pre-Closing Tax Period or
Straddle Tax Period, Sellers' Representative shall be entitled to cause Holdings
to file or make such claim or amended Return on behalf of Holdings or any of
its
Subsidiaries, as applicable, and shall be entitled to control the prosecution
of
such refund claims, unless counsel for Purchaser determines that no reasonable
basis exists for such claim or amended Return or such claim for refund or
amended return would have an adverse tax consequence with respect to a tax
period other than the Pre-Closing Tax Period or pre-closing portion of the
Straddle Tax Period.
(b) Purchaser
shall timely file or cause to be filed when due (taking into account all
extensions properly obtained) all Returns with respect to a Pre-Closing Tax
Period and a Straddle Tax Period that are required to be filed by or with
respect to Holdings and each Subsidiary after the Closing Date. Such Returns
shall be prepared in a manner consistent with past practice (except to the
extent counsel for Purchaser determines that such positions more likely than
not
cannot be sustained or a Return cannot be so prepared and filed or an item
so
reported without being subject to penalties). Such portion of the Returns
relating to Holdings shall be submitted to the Sellers' Representative (together
with schedules, statements and, to the extent required by such other party,
supporting documentation) at least forty (40) days prior to the due date
(including extensions) of such Return. If the Sellers' Representative objects
to
any item on any such Return, it shall, within ten (10) days after delivery
of
such Return, notify Purchaser in writing that it so objects, specifying with
particularity any such item and stating the specific factual or legal basis
for
any such objection. If a notice of objection shall be duly delivered, Purchaser
and the Sellers' Representative shall negotiate in good faith and use their
best
efforts to resolve such items. If Purchaser and the Sellers' Representative
are
unable to reach such agreement within five (5) days after receipt by Purchaser
of such notice, the disputed items shall be resolved by a final determination
of
the Accounting Firm.
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(c) No
Seller
shall be liable for any damages incurred if such damages result from any Return
described in this Section
10.2
being
prepared in a manner not reasonably consistent with past practice (subject
to
the limitations discussed in Section
10.2(b)).
(d) To
the
extent Holdings has Knowledge of the commencement or scheduling of any Tax
audit, the assessment of any Tax, the issuance of any notice of Tax due or
any
xxxx for collection of any Tax due or the commencement or scheduling of any
other administrative or judicial proceeding with respect to the determination,
assessment or collection of any Tax of Holdings or any of its Subsidiaries,
Holdings shall provide prompt notice to Purchaser of such matter, setting forth
information (to the extent known) describing any asserted Tax liability in
reasonable detail and including copies of any notice or other documentation
received from the applicable tax authority with respect to such
matter.
(e) For
purposes of this Agreement, whenever it is necessary to determine the
responsibility for Taxes of Holdings or a Subsidiary for a Straddle Tax Period,
the determination of the Taxes of Holdings or such Subsidiary for the portion
of
the Straddle Tax Period ending on and including, and the portion of the Straddle
Tax Period beginning after, the Closing Date shall be determined by assuming
that the Straddle Tax Period consisted of two taxable years or periods, one
which ended at the close of the Closing Date and the other which began at the
beginning of the day following the Closing Date, and items of income, gain,
deduction, loss or credit of Holdings or such Subsidiary for the Straddle Tax
Period shall be allocated between such two taxable years or periods on a
"closing of the books basis" by assuming that the books of Holdings or such
Subsidiary were closed at the close of the Closing Date.
(f) Purchaser
and Sellers agree to furnish or cause to be furnished to each other, upon
request, in a timely manner, such information (including access to books and
records) and assistance relating to Holdings or any of its Subsidiaries as
is
reasonably necessary for the filing of any Return, for the preparation of any
audit, and for the prosecution or defense of any claim, suit or proceeding
relating to any proposed adjustment.
(g) Purchaser
and Sellers shall cooperate with each other in the conduct of any audit or
other
proceedings involving Holdings or any of its Subsidiaries for any Tax purposes
and each shall execute and deliver such powers of attorney and other documents
as are necessary to carry out the intent of this Section 10.2(g).
10.3 Contests
Related to Taxes.
(a) Notwithstanding
ARTICLE
IX
hereof,
each party entitled to an indemnity payment with respect to Taxes pursuant
to
ARTICLE
IX
(a
"Tax
Indemnified Party")
agrees
to give written notice to the indemnifying party (the "Tax
Indemnitor")
of the
receipt of any written notice by the Tax Indemnified Party or an Affiliate
of
such Tax Indemnified Party (including, in the case where Purchaser is the Tax
Indemnified Party, Holdings or any of its Subsidiaries) which involves the
assertion of any claim, or the commencement of any audit, suit, action or
proceeding (collectively, a "Tax
Claim")
in
respect of which indemnity may be sought (an "Indemnifiable
Tax")
within
thirty (30) days of such receipt. Failure to provide written notice does not
eliminate the obligation of the Tax Indemnitor except to the extent such failure
has prejudiced the Tax Indemnitor's ability to protest the claim. The Tax
Indemnified Party shall give the Tax Indemnitor such information with respect
to
the Tax Claim as the Tax Indemnitor may reasonably request.
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(b) The
Tax
Indemnitor may, at its own expense, participate in and, upon notice to the
Tax
Indemnified Party, assume control of the defense of any such Tax Claim. If
the
Tax Indemnitor so assumes control it shall have the power to contest or settle
the Tax Claim and determine the manner in which the contest or settlement
occurs, subject to the participation of the Tax Indemnified Party. Except as
provided in the following sentence, in no case shall a Tax Indemnitor or Tax
Indemnified Party settle or otherwise compromise a Tax Claim with respect to
an
Indemnifiable Tax without the prior written consent of the respective Tax
Indemnified Party or Tax Indemnitor, which consent may not be unreasonably
withheld or delayed. If the Tax Indemnitor does not assume control of the
defense of any such Tax Claim, the Tax Indemnified Party may assume control
of
the defense and defend the same in such manner as deems appropriate (including
settlement thereof without the Tax Indemnitor's consent) at the Tax Indemnitor's
expense.
(c) If
a Tax
Claim potentially involves Taxes for Pre-Closing Tax Periods for which Sellers
would be required to indemnify Purchaser pursuant to ARTICLE
IX
and
other Taxes for which Sellers would not be required to indemnify Purchaser,
then, for purposes of this Section
10.3
only,
Purchasers shall control the Tax Claim (including the power to settle subject
to
the consent of the Sellers' Representative, which consent shall not be
unreasonably withheld or delayed) and the Seller's Representative shall have
the
right to participate in such Tax Claim.
(d) The
Tax
Indemnitor may discharge, at any time, its indemnity obligations by paying
the
Tax Indemnified Party the amount of the applicable loss, calculated on the
date
of such payment.
10.4 Indemnity
Payments Hereunder Based on Tax Cost.
The
amount of any indemnity payment pursuant to ARTICLE
IX
shall be
increased to take into account any Tax Cost to the indemnified party resulting
from such indemnity payment and reduced by any Tax Benefit.
ARTICLE
XI
GENERAL
PROVISIONS
11.1 Assignment.
This
Agreement and the rights and obligations hereunder shall not be assignable
or
transferable by any party hereto (including by operation of law in connection
with a merger or consolidation) without the prior written consent of (a)
Purchaser, in the case of any attempted assignment by any Seller, or (b) the
Sellers' Representative, in the case of any attempted assignment by Purchaser;
provided,
however,
that
Purchaser may assign its rights and obligations under this Agreement to an
Affiliate of Purchaser, so long as Purchaser continues to remain fully liable
for all of its obligations hereunder; provided further,
Purchaser also may assign its rights and obligations upon (i) a sale, transfer
or other disposition of all or substantially all of Purchaser's assets, (ii)
a
merger or consolidation of Purchaser with or into any other entity, or (iii)
any
sale, issuance or transfer (whether in one transaction or in a series of
transactions) of more than 50% of the outstanding voting securities of Purchaser
to another Person, so long as Purchaser continues to remain fully liable for
all
obligations hereunder. All covenants or agreements made herein by Purchaser
that
contemplate performance after the Closing Date shall be binding upon and, as
a
condition precedent to such transaction(s), assumed in writing by the other
Person, so long as Purchaser continues to remain fully liable for all
obligations hereunder. Any attempted assignment in violation of this
Section 11.1
shall be
void.
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11.2 Appointment
of Sellers' Representative; Contribution Obligations.
(a) Each
Seller hereby irrevocably constitutes and appoints Seaport Capital Partners
III
AIV, L.P. (the "Sellers'
Representative")
as
its, his or her true and lawful attorney-in-fact, agent and representative,
with
full power of substitution and resubstitution, for it, him or her and in its,
his or her name, place and xxxxx, in any and all capacities, to negotiate and
sign all amendments to this Agreement, and all other documents in connection
with the Transactions, including those instruments called for by this Agreement
and all waivers, consents, instructions, authorizations and other actions called
for, contemplated or that may otherwise be necessary or appropriate in
connection with this Agreement or any of the foregoing agreements or
instruments, granting unto the Sellers' Representative, full power and authority
to do and perform each and every act and thing requisite and necessary to be
done, as fully to all intents and purposes as he, she or it might or could
do in
person, hereby ratifying and confirming all that the Sellers' Representative,
or
its substitute or substitutes, may lawfully do or cause to be done by virtue
hereof, including the power and authority to deliver and convey his, her or
its
Shares in accordance with the terms hereof, to receive and give receipt for
all
consideration due him, her or it pursuant to this Agreement, to agree to,
negotiate, enter into settlements and compromises of, and demand arbitration
and
comply with orders of courts and awards of arbitrators with respect to such
claims, to agree to, negotiate, enter into and provide amendments, supplements
and waivers, to receive all notices, requests and demands that may be made
under
and in respect of and pursuant to this Agreement. The Sellers' Representative
shall receive no compensation for its services. Notices or communications to
or
from the Sellers' Representative shall constitute notice to or from each Seller.
Should any of the Sellers' Representative be unable or unwilling to serve or
appoint his, her or its successor to serve in his, her or its stead, Sellers
may
appoint a successor to serve in his, her or its stead. The Sellers'
Representative shall be entitled to rely, and shall be fully protected in
relying, upon (i) any statements or other information furnished to it by any
Seller or Purchaser, (ii) any statements, other information or advice furnished
to it by any advisor (including accountants consulted by Purchaser) or counsel,
and (iii) any other evidence deemed by the Sellers' Representative, in its
sole
discretion, to be reliable. The Sellers' Representative shall be entitled to
retain counsel and other advisors (including accountants) and to incur such
expenses as the Sellers' Representative deems to be necessary or appropriate
in
connection with its performance of its obligations under this Agreement, and
all
such fees and expenses incurred by the Sellers' Representative shall be paid
by
Sellers pro rata based on each Seller's Indemnity Pro Rata Share. Each Seller
hereby agrees to indemnify the Sellers' Representative ratably (according to
such Seller's Indemnity Pro Rata Share) against, and to hold the Sellers'
Representative harmless from, any liability, loss, cost, damage, deficiency,
demand, claim, suit, action or cause of action, fine, cost or expense of any
and
all investigation or proceeding, settlement or compromise (including reasonable
attorneys' fees and expenses) that the Sellers' Representative may suffer,
sustain or become subject to by virtue of or that arise out of, or result from
any action taken or failure to act with respect to this Agreement; provided
that no
Seller shall be liable for any such indemnification claim to the extent such
indemnification claim arises from the gross negligence or willful misconduct
of
the Sellers' Representative. The provisions of this Section 11.2
shall
survive the termination of this Agreement.
-54-
(b) A
decision, act, consent or instruction of the Sellers' Representative shall
constitute a decision of all Sellers and shall be final, binding and conclusive
upon each and every Seller. Purchaser and, following the Closing, Holdings
may
rely upon any decision, act, consent or instruction of the Sellers'
Representative as being the decision, act, consent or instruction of each and
every Seller. Each of Purchaser and, following the Closing, Holdings is hereby
relieved from any liability to any Person for any acts done by them in
accordance with such decision, act, consent, instruction of the Sellers'
Representative.
(c) In
the
event the Indemnity Pro Rata Share with respect to any Seller changes after
such
time as an indemnity payment (other than with respect to an Individual Seller
Breach) has been made by Sellers pursuant to ARTICLE
IX,
each
Seller agrees that the relative obligation with respect to any such indemnity
payment will be recalculated using the new Indemnity Pro Rata Share, and each
"underpaying" Seller, as coordinated by the Sellers' Representative, agrees
to
pay promptly the "overpaying" Sellers such that the "net" payments by Sellers
with respect to such indemnity payments reflects the new relative Indemnity
Pro
Rata Share amounts.
(d) In
the
event any portion of the Escrow Fund is used to satisfy any obligation due
hereunder in respect of an Individual Seller Breach, Seller associated with
such
Individual Seller Breach shall immediately deposit the amount so paid into
the
Escrow Fund.
(e) In
the
event any portion of the Escrow Fund has been used to satisfy the obligation
of
the Common Equityholders pursuant to Section 2.5,
the
Sellers' Representative shall appropriately adjust the distribution to Sellers
(from the proceeds of the Escrow Funds) to insure that the payments to the
Preferred Stockholder payable pursuant to this Agreement are not
affected.
11.3 No
Third-Party Beneficiaries.
Except
as
set forth in Section 6.8,
this
Agreement is for the sole benefit of the parties hereto and their permitted
assigns and nothing herein expressed or implied shall give or be construed
to
give to any Person, other than the parties hereto and such assigns, any legal
or
equitable rights hereunder.
11.4 Notices.
All
notices or other communications required or permitted to be given hereunder
shall be in writing and shall be delivered by hand or sent by facsimile or
sent,
postage prepaid, by registered, certified or nationally recognized overnight
courier service and shall be deemed given when so delivered by hand or
facsimile, or if mailed, three days after mailing (one Business Day in the
case
of overnight courier service), as follows:
-55-
|
(i)
|
if
to Purchaser, to
|
|
000
Xxxxxx Xxxxxx
|
|
|
Xxxxxxxxx,
XX 00000
|
|
|
Attention:
Xxxxxx X. Xxxxxx
|
|
|
President and CEO
|
|
|
Telephone:
(000) 000-0000
|
|
|
Facsimile:
(000) 000-0000;
|
|
|
with
a copies to:
|
|
|
Xxxxxxx
Xxxxxxxx, Esq.
|
|
|
General
Counsel
|
|
|
000
Xxxxxx Xxxxxx
|
|
|
Xxxxxxxxx,
XX 00000
|
|
|
Telephone:
(000) 000-0000
|
|
|
Facsimile:
(000) 000-0000;
|
|
|
and
|
|
|
Xxxxxx,
Xxxxxxxxxx & Xxxxxxxxx LLP
|
|
|
000
Xxxxxx Xxxxxx
|
|
|
The
Xxxxxx Building
|
|
|
Xxx
Xxxxxxxxx, Xxxxxxxxxx 00000
|
|
|
Attention:
Xxxx Xxxx, Esq.
|
|
|
Telephone:
(000) 000-0000
|
|
|
Facsimile:
(000) 000-0000;
|
|
|
(ii)
|
if
to Holdings, to
|
|
Everest
Broadband, Inc.
|
|
|
x/x
Xxxxxxx Xxxxxxx, XXX
|
|
|
0
Xxxxxxx Xxxxx
|
|
|
000
Xxxxx Xxxxxx, 00xx
Xxxxx
|
|
|
Xxx
Xxxx, XX 00000
|
|
|
Attention:
Xxxxx XxXxxx
|
|
|
Telephone:
(000) 000-0000
|
|
|
Facsimile:
(000) 000-0000
|
-56-
(iii) if
to any
other Seller, to the address of such Seller set forth on Schedule
I.
11.5 Headings.
The
headings contained in this Agreement, in any Exhibit or Schedule hereto and
in
the table of contents to this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this
Agreement.
11.6 Counterparts.
This
Agreement may be executed in one or more counterparts, all of which shall be
considered one and the same agreement, and shall become effective when one
or
more such counterparts have been signed by each of the parties and delivered
to
the other party.
11.7 Entire
Agreement.
This
Agreement, the Escrow Agreement and the Confidentiality Agreement contain the
entire agreement and understanding between the parties hereto with respect
to
the subject matter hereof and supersede all prior agreements and understandings
relating to such subject matter. Neither party shall be liable or bound to
any
other party in any manner by any representations, warranties or covenants
relating to such subject matter except as specifically set forth herein or
in
the Escrow Agreement or the Confidentiality Agreement.
11.8 Amendments
and Waivers.
This
Agreement may not be amended except by a writing signed by Holdings, the
Sellers' Representative and Purchaser. By a writing the Sellers' Representative,
on the one hand, or Purchaser, on the other hand, may waive compliance by
Purchaser or Sellers, respectively, with any term or provision of this Agreement
that such other party was or is obligated to comply with or
perform.
11.9 Severability.
It
is the
desire and intent of the parties that the provisions of this Agreement be
enforced to the fullest extent permissible under the laws and public policies
applied in each jurisdiction in which enforcement is sought. Accordingly, if
any
particular provision of this Agreement shall be adjudicated by a court of
competent jurisdiction to be invalid, prohibited or unenforceable for any
reason, such provision, as to such jurisdiction, shall be ineffective, without
invalidating the remaining provisions of this Agreement or affecting the
validity or enforceability of this Agreement or affecting the validity or
enforceability of such provision in any other jurisdiction. Notwithstanding
the
foregoing, if such provision could be more narrowly drawn so as not to be
invalid, prohibited or unenforceable in such jurisdiction, it shall, as to
such
jurisdiction, be so narrowly drawn, without invalidating the remaining
provisions of this Agreement or affecting the validity or enforceability of
such
provision in any other jurisdiction.
-57-
11.10 Governing
Law.
This
Agreement shall be governed by and construed in accordance with the internal
laws of the State of Delaware applicable to agreements made and to be performed
entirely within such State, without regard to the conflicts of law principles
of
such State.
11.11 Consent
to Jurisdiction.
Each
of
the Parties hereto (a) consents to submit itself to the exclusive personal
jurisdiction of (i) any Federal court located in the State of Delaware, (ii)
any
Delaware state court and (iii) the Court of Chancery of the State of Delaware
in
connection with any dispute that arises out of this Agreement, the Escrow
Agreement or any of the Transactions, (b) agrees that it will not attempt to
deny or defeat such personal jurisdiction by motion or other request for leave
from any such court and (c) agrees that it will not bring any action relating
to
this Agreement or any Escrow Agreement or any of the Transactions or thereby
in
any court other than a Federal court sitting in the State of Delaware or a
Delaware state court unless venue would not be proper under rules applicable
in
such courts.
11.12 Attorneys'
Fees and Costs.
If
attorneys' fees or other costs are incurred to secure performance of any
obligations hereunder, or to establish damages for the breach thereof or to
obtain any other appropriate relief, whether by way of prosecution or defense,
the prevailing party will be entitled to recover reasonable attorneys' fees
and
costs incurred in connection therewith.
*
* * *
*
-58-
IN
WITNESS WHEREOF,
the
parties hereto have duly executed this Purchase and Sale Agreement as of the
date first written above.
| HOLDINGS | ||
|
EVEREST
BROADBAND, INC.
|
||
|
By:
|
/s/
Xxxxxxx XxXxxx
|
|
|
Name:
Xxxxxxx XxXxxx
|
||
|
Title:
Vice President
|
||
|
|
||
| SELLERS | ||
|
SEAPORT
CAPITAL PARTNERS III AIV, L.P.
|
||
|
By:
|
Seaport
Investment Partners III, L.P.
its
General Partner
|
|
|
By:
|
Seaport
Associates III, LLC
its
General Partner
|
|
|
By:
|
/s/
Xxxxxxx XxXxxx
|
|
|
Name:
Xxxxxxx XxXxxx
|
||
|
Title:
Member
|
||
|
|
||
| SEAPORT CAPITAL PARTNERS III/A AIV, L.P. | ||
|
By:
|
Seaport
Investment Partners III, L.P.
its
General Partner
|
|
|
By:
|
Seaport
Associates III, LLC
its
General Partner
|
|
|
By:
|
/s/
Xxxxxxx XxXxxx
|
|
|
Name: Xxxxxxx
XxXxxx
|
||
|
Title:
Member
|
||
[Signature
page to Everest PSA]
| SEAPORT CO-INVEST III, L.P. | ||
|
By:
|
Seaport
Investment Partners III, L.P.
its
General Partner
|
|
|
By:
|
Seaport
Associates III, LLC
its
General Partner
|
|
|
By:
|
/s/
Xxxxxxx XxXxxx
|
|
|
Name:
Xxxxxxx XxXxxx
|
||
|
Title:
Member
|
||
| SEAPORT SPLITTER PARTNERSHIP, L.P. | ||
|
By:
|
Seaport
Capital Partners III/A AIV, L.P.
its
General Partner
|
|
|
|
||
|
By:
|
Seaport
Investment Partners III, L.P.
its
General Partner
|
|
|
By:
|
Seaport
Associates III, LLC
its
General Partner
|
|
|
By:
|
/s/
Xxxxxxx XxXxxx
|
|
|
Name:
Xxxxxxx XxXxxx
|
||
|
Title:
Member
|
||
| NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA | ||
|
By:
|
AIG
Global Investment Corp.
its
Investment Advisor
|
|
|
By:
|
/s/
Xxxxx Xxxxxx
|
|
|
Name:
Xxxxx Xxxxxx
|
||
|
Title:
Vice President
|
||
[Signature
page to Everest PSA]
| /s/ Xxxxxxx Xxxxxxx | ||
| Xxxxxxx Xxxxxxx | ||
| /s/ Xxx Xxxxxxx | ||
| Xxx Xxxxxxx | ||
| /s/ Xxxxxxx Xxxxxxx | ||
| Xxxxxxx Xxxxxxx | ||
| /s/ Xxxxx Xxxxxx | ||
| Xxxxx Xxxxxx | ||
| /s/ Xx Xxxxxx | ||
| Xx Xxxxxx | ||
| PURCHASER | ||
| SUREWEST COMMUNICATIONS | ||
|
By:
|
/s/
Xxxxxx X. Xxxxxx
|
|
|
Name: Xxxxxx
X. Xxxxxx
|
||
|
Title:
President & Chief Executive
Officer
|
||
[Signature
page to Everest PSA]
EXHIBIT
A
Revenue/Customer
Adjustment Amount
The
"Revenue/Customer
Adjustment Amount"
will be
calculated as follows:
First
Component: Commercial Revenue Adjustment:
The
"Commercial
Revenue Adjustment"
will
equal (a) the Commercial Revenue (as defined below) (for the benchmarking period
set forth in the chart below that corresponds to the Closing Date) (the
"Actual
LTM Commercial Revenue")
less
the
target LTM Commercial Revenue (in the chart below that corresponds to the
Closing Date) (the "Target
LTM Commercial Revenue")
multiplied
by
(b)
2.97.
|
Transaction
Close Date
|
|||||||||||||
|
All
dates prior to
|
1/31/08
-
|
2/29/08
-
|
3/31/08
&
|
||||||||||
|
1/31/2008
|
2/28/2008
|
3/30/08
|
Thereafter
|
||||||||||
|
Target
LTM Commercial Revenue
|
$
|
11,736,419
|
$
|
11,958,315
|
$
|
12,190,661
|
$
|
12,396,408
|
|||||
|
Actual
LTM Commercial Revenue Benchmarking Period
|
1/1/07
- 2/31/07
|
2/1/07
- 1/31/08
|
3/1/07
- 2/29/08
|
4/1/07
- 3/31/08
|
|||||||||
Second
Component: Residential Customer Adjustment:
The
"Residential
Customer Adjustment"
will
equal (a) the Actual Residential Customers (as defined below) as of the Closing
Date less
the
target Residential Customers (in the chart below that corresponds to the Closing
Date) (the "Target
Residential Customers")
multiplied
by
(b)
$3,668.
|
Transaction
Close Date
|
|||||||||||||
|
All
dates prior to
|
1/31/08
-
|
2/29/08
-
|
3/31/08
&
|
||||||||||
|
1/31/2008
|
2/28/2008
|
3/30/08
|
Thereafter
|
||||||||||
|
Target
Residential Customers
|
37,046
|
37,194
|
37,341
|
37,489
|
|||||||||
|
Actual
Ending Customer Benchmark Month
|
12/31/07
|
1/31/08
|
2/29/08
|
3/31/08
|
|||||||||
Commercial
Revenue Adjustment and the Residential Customer Adjustment are Both
Positive:
If
both
the Commercial Revenue Adjustment and the Residential Customer Adjustment are
both positive numbers, the Revenue/Customer Adjustment Amount will equal
zero.
Commercial
Revenue Adjustment and the Residential Customer Adjustment are Both
Negative:
If
both
the Commercial Revenue Adjustment and the Residential Customer Adjustment are
both negative numbers, the Revenue/Customer Adjustment Amount will be the
absolute value of the sum of the Commercial Revenue Adjustment and the
Residential Customer Adjustment.
Target
Offset Mechanism:
If
either
of the Commercial Revenue Adjustment or the Residential Customer Adjustment
is a
negative number and the other is a positive number (or zero), the sum of the
Commercial Revenue Adjustment and the Residential Customer Adjustment will
be
calculated. If such sum amount is a negative number, the Revenue/Customer
Adjustment Amount will be the absolute value of such sum amount. If such sum
amount is zero or a positive number, the Revenue/Customer Adjustment Amount
will
equal zero. A sample calculation is shown below.
|
Assuming
a Closing Date of 3/31/08
|
||||||
|
Actual
Residential Customers
|
37,499
|
Actual
LTM Commercial Revenue
|
$12,296,408
|
|||
|
Target
Residential Customers
|
37,489
|
Target
LTM Commercial Revenue
|
$12,396,408
|
|||
|
Difference
between Actual and Target
|
10
|
Difference
between Actual and Target
|
($100,000)
|
|||
|
Multiplied
by Residential Customer Adjustment
|
$3,668
|
Multiplied
by Commercial Revenue Adjustment
|
2.97
|
|||
|
Residential
Customer Adjustment Amount
|
$36,680
|
Commercial
Revenue Adjustment Amount
|
($297,000)
|
|||
|
Residential
Customer Adjustment Amount
|
$36,680
|
|||||
|
Commercial
Revenue Adjustment Amount
|
($297,000)
|
|||||
|
Net
Adjustment
|
($260,320)
|
For
purposes of clarification, in no case will the Commercial Revenue Adjustment
or
the Residential Customer Adjustment result in an increase in the purchase price
paid to Sellers (as calculated on a net basis, after taking into account any
net
adjustment between the Estimated Revenue/Customer Adjustment Amount and the
Actual Revenue/Customer Adjustment Amount).
Certain
Definitions:
"Actual
Residential Customers"
means
the number of residential subscribers of the Business, as calculated using
the
same methodologies and procedures as used for residential subscribers in
Schedule
4.23(b).
"Commercial
Revenue"
means
the consolidated revenue of Holdings and its Subsidiaries generated from
commercial subscribers prepared using the same accounting methodologies and
procedures as used for commercial subscribers in Schedule
4.23(d)
plus the
advertising revenue of Holdings and its Subsidiaries.
