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EXHIBIT 10.8(a)
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this "Agreement") is made and entered into as
of this 28th day of June, 1996, by and between Digital Television Services of
New York I, LP, a Georgia limited partnership ("Purchaser") and Northeast Cable
Services, Inc., a New York corporation ("Seller").
RECITALS
A. Seller owns and operates an exclusive distributorship of the
National Rural Telecommunications Cooperative's DBS Services and of DirecTv,
Inc., the successor rights holder to Xxxxxx Communications Galaxy, Inc. (the
"Business") in the "Locations" (hereinafter defined).
B. Seller desires to transfer and assign to Purchaser, and Purchaser
desires to acquire and accept from Seller, all of Seller's rights under the
NRTC/Member Agreement and the NRTC/Retail Agreement relating to the Locations
and other "Assets" (hereinafter defined), upon the terms, and subject to the
conditions, set forth in this Agreement.
AGREEMENTS
NOW, THEREFORE, in consideration of the mutual promises set forth
herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Seller and Purchaser hereby agree
as follows:
SECTION 1. DEFINITIONS. As used herein, the following terms shall have
the following meanings:
"Cable Programming" shall have the meaning ascribed to such
term in the NRTC/Member Agreement.
"Closing" and "Closing Date" shall have the meanings set forth
in Section 2.3 herein.
"Commercial Establishment" shall have the meaning ascribed to
such term in the NRTC/Member Agreement.
"Committed Member Residence" shall have the meaning ascribed
to such term in the NRTC/Member Agreement.
"Customer" shall mean any customer of the Business (including
a Subscriber).
"DBS Services" shall have the meaning ascribed to such term in
the NRTC/Member Agreement.
"DirecTv" means DirecTv, Inc., a California corporation.
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"HCG DirecTv" shall have the meaning ascribed to such term in
the NRTC/Member Agreement.
"Xxxxxx" shall mean Xxxxxx Communications Galaxy, Inc.
"Lien" shall mean with respect to any property or asset, any
mortgage, lien, pledge, charge, security interest, encumbrance or other adverse
claim or restriction of any kind in respect of such property or asset. For
purposes of this Agreement, any restriction or limitation with respect to a
security or other ownership interest (including any restriction on the right to
vote, sell or otherwise dispose of such security or ownership interest) shall
constitute a "Lien" thereon. For the purposes of this Agreement, a Person shall
be deemed to own subject to a Lien any property or asset which it has acquired
or holds subject to the interest of a vendor or lessor under any conditional
sale relating to such property or asset.
"Locations" shall have the meaning set forth in Paragraph S.1
of Schedule 1.
"Non-Select Services" shall have the meaning ascribed to such
term in the NRTC/Member Agreement.
"NRTC" shall mean the National Rural Telecommunications
Cooperative, a District of Columbia corporation.
"NRTC Agreements" shall mean the NRTC/Member Agreement, the
NRTC/Retail Agreement, and any Other Assumed Agreements identified as NRTC
Agreements in Paragraph S.4 of Schedule 1.
"NRTC/Member Agreement" shall mean the NRTC/Member Agreement
for Marketing and Distribution of DBS Services between the NRTC and Seller
identified in Paragraph S.2 of Schedule 1.
"NRTC/Retail Agreement" shall mean the NRTC/Member DBS Retail
product Agreement identified in Paragraph S.3 of Schedule 1.
"Other Assumed Agreements" shall mean the contracts and
agreements, if any, set forth in Paragraph S.4 of Schedule 1.
"Person" shall mean an individual, corporation, partnership,
limited liability company, association, trust or other entity or organization
including a government or political subdivision or agency or instrumentality
thereof.
"Programming" shall mean Cable Programming and HCG DirecTv.
"Subscriber" as of any date shall mean a Customer who, at a
minimum, is subscribing to a package of basic services and: (1) on the last day
of the calendar month prior to such date, whose account is not more than sixty
(60) days past due from the date payment is due; (2) who is not an employee or
agent of the service provider or charged a fee that is nominal
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(e.g., demonstration unit) or substantially below the service provider's
published rates; and (3) who has not given notice of intent to discontinue
service.
SECTION 2. PURCHASE AND SALE; CLOSING.
2.1 PURCHASE AND SALE OF ASSETS; ASSUMPTION OF CERTAIN
LIABILITIES.
(a) Subject to the provisions of this Agreement, Seller
agrees to transfer and assign to Purchaser, and Purchaser agrees to acquire and
accept from Seller, as of the "Closing Date" (hereinafter defined), free and
clear of any and all Liens, all: (i) NRTC Agreements, (ii) relationships,
contracts, and accounts with Customers, (iii) other tangible assets used or
useful in the provision of DBS Services, including, without limitation, any MTE
terminals and demonstration units; (iv) files, books and records relating to
the provision of DBS Services by Seller, including, without limitation,
Customer and prospective customer lists, computer programs, tapes and
electronic data processing software, accounting journals and ledgers, accounts
receivable records, copies of NRTC reports and correspondence and other
documents relating to the NRTC Agreements and compliance therewith
(collectively, "Records"); (v) exclusive rights to the telephone numbers used
in the Business; and (vi) cash in Seller's account at Huntington Bank, accounts
receivable from Customers, maintenance and security deposits, prepaid expenses,
supplies and other current assets (excluding inventory) (collectively, the
"Assets").
(b) Upon the assignment of the Assets, Purchaser shall
assume (i) Seller's obligations to be performed after 12:01 A.M. on the date
following the Closing Date under and as set forth in the NRTC Agreements (but
not obligations required to have been performed by Seller prior to such time)
to the extent that such obligations arise out of the provision of DBS Services
to Customers on or after such time, (ii) accounts payable to the NRTC, and
(iii) Seller's liabilities associated with unearned revenue, advance payments
and Customer credit balances to the extent such liabilities are taken into
account in the price adjustments described in Section 2.4 herein. Except as
expressly set forth in this Section 2.1(b), Purchaser shall not assume or be
deemed to have assumed under this Agreement, by reason of the transactions
contemplated by this Agreement, or otherwise, any debts, liabilities,
obligations or commitments of Seller of any nature whatsoever, known or
unknown, and the execution, delivery and performance of this Agreement shall
not render Purchaser liable for any such debt, liability, obligation or
commitment.
(c) For three (3) years following the Closing, Seller
shall have access to the Records relating to the periods prior to the Closing
Date upon written notice to Purchaser.
2.2 PURCHASE PRICE. The Purchase Price for the Assets pursuant
to this Agreement (the "Purchase Price") shall be Three Million Four Hundred
Thousand and No/100 Dollars ($3,400,000.00), plus the assumption of liabilities
described in Section 2.1(b) herein, subject to adjustment as provided in Section
2.4 herein, to be paid as follows:
(a) The sum of One Million Two Hundred Thousand and No/100
Dollars ($1,200,000.00), subject to adjustment as described in Section 2.4(a)
herein, on the
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Closing Date by certified or cashier's check, or by wire transfer of
immediately available funds to an account or accounts designated in writing by
Seller (the "Closing Payment").
(b) The sum of Two Million Two Hundred Thousand and No/100
Dollars ($2,200,000.00) on the Closing Date by the delivery of a promissory
note substantially in the form attached hereto as SCHEDULE 2.2(b) (the "Note"),
less any adjustments and reductions as provided in Section 2.4 herein and the
Right of Setoff as provided in Section 5.5 hereof.
(c) Purchaser shall use its best efforts to obtain a
collateral assignment of the NRTC Agreements, in the form attached hereto as
SCHEDULE 2.2(c), as security for the Note (the "Collateral Assignment").
2.3 THE CLOSING. Subject to the satisfaction of the conditions
set forth herein, the closing of the assignments and transfers provided for in
this Agreement (the "Closing") shall be held at the offices of the Purchaser at
10:00 A.M. (i) at Purchaser's election, on (a) the last business day of the
month in which all of the conditions precedent set forth in Section 4 herein
have been satisfied or waived, or (b) on the calendar day of such month on which
NRTC's accounting period closes, or (ii) such other place, time or date as the
parties may agree upon in writing (the "Closing Date"). Either party may
terminate this Agreement by written notice to the other party if the Closing has
not occurred by the Termination Date set forth in Paragraph S.5 of Schedule 1;
provided, however, the Termination Date shall be automatically extended for an
additional ninety (90) days if the consent of the NRTC to the transfer of the
NRTC Agreements to Purchaser has not been obtained.
2.4 PRORATIONS AND CONSIDERATION ADJUSTMENTS; ALLOCATION OF
PURCHASE PRICE.
(a) The Closing Payment shall be increased by the parties'
good faith estimate of the current assets of Seller relating to DBS Services
and decreased by the current liabilities of Seller relating to DBS Services,
each as determined in accordance with Paragraph (c) below (the "Closing
Adjustment"), which adjustment shall be subject to final adjustment as provided
in Paragraph (e) below.
(b) All prepaid expenses and unearned revenue in
connection with the NRTC Agreements shall be prorated among Seller and
Purchaser as of 12:01 A.M. on the day following the Closing Date. Such
prorations shall include, without limitation, all Customer programming
prepayments. Expenses, costs and liabilities incurred shall be allocated to the
time of occurrence of such programs without regard to the date of payment
therefor.
(c) (i) Promptly after the Closing, Seller shall prepare a
Schedule of current assets and current liabilities of Seller relating to the
DBS Services as of the Closing Date (the "Closing Date Accounting"). The
Closing Date Accounting shall be prepared on a basis consistent with the "Pro
Forma Accounting" attached hereto as SCHEDULE 2.4(c).
(ii) The accounting data in the Closing Date
Accounting shall be derived from NRTC Central Billing System Reports,
including, but not limited to, Report 18A (Subscriber Accounts Receivable),
Report 19A (Accounts Receivable Summary), Report
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17 (Unearned Revenue Report), and the NRTC Wholesale Invoice. The Closing Date
Accounting shall include: (A) cash in the Seller's account at Huntington Bank,
(B) accounts receivable from Customers, (C) accounts payable to Customers, (D)
accounts payable to NRTC, and (E) any unearned revenue, advance payments and
credit balances associated with Customer accounts. Except as set forth in this
Paragraph (c)(ii), no other assets or liabilities shall be included in the
Closing Date Accounting. Accounts receivable shall be included at the full face
amount, less an allowance for uncollectible accounts based upon an aging
analysis and consistent with past practices and experience.
(d) No later than thirty (30) days after the Closing Date,
Seller shall deliver to Purchaser a copy of the Closing Date Accounting
together with the Seller's determination of the Closing Adjustment pursuant to
the Closing Date Accounting. The Closing Date Accounting and the determination
of the Closing Adjustment shall be subject to review by Purchaser and its
auditors at Purchaser's expense. Such review by Purchaser shall be completed
within fifteen (15) business days after delivery of the Closing Date Accounting
to Purchaser. In the event of any disagreement between Seller and Purchaser
concerning the amount of the Closing Adjustment which has not been resolved
within sixty (60) days after the Closing Date, unless such date shall have been
extended by mutual written agreement of the parties, either party may submit
such disputed claims to the determination in Charlotte, North Carolina, by the
certified public accounting firm of Deloitte & Touche LLP, whose final
determination shall be made within thirty (30) days of such referral, and shall
be final and binding upon the parties. The fees and expenses of such
independent accountant shall be borne by Seller and Purchaser equally. The
determination of the Closing Adjustment pursuant to this Paragraph (d) shall be
referred to as the "Final Closing Adjustment".
(e) If, after the Final Closing Adjustment, Seller owes
any amount to Purchaser, then the Seller, at the Seller's option, shall (i) pay
the difference to the Purchaser in cash, within five (5) days after the
determination of the Final Closing Adjustment, or (ii) permit Purchaser to
reduce the next following payment(s) due under the Note by such amount on a
dollar-for-dollar basis. If, after the Final Closing Adjustment, Purchaser owes
any amount to Seller, then Purchaser shall pay the difference to Seller by
increasing the next following payment(s) due under the Note by such amount.
(f) If, following any final payment of a consideration
adjustment pursuant to this Section 2.4, an error (in billing or reporting by
NRTC or otherwise) is thereafter discovered which would have affected such
final payment, the parties shall agree in good faith on the amount of such
adjustment, and the next payment made pursuant to the Note shall be increased
or decreased accordingly.
(g) The Purchase Price shall be allocated by the
Purchaser and Seller as set forth on Schedule 2.4(g) to be delivered at
Closing, and the parties shall make all federal, state and local tax filings
consistent therewith.
2.5 CONSENT OF NRTC AND OTHERS. Within five (5) business days
after the date of this Agreement, Seller shall cause its counsel to prepare a
request for the consent of the NRTC to the transfer of the NRTC Agreements, the
Collateral Assignment and such other requests for consent that Purchaser or
Seller determines may be necessary or appropriate to
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consummate the transactions contemplated hereby, and deliver drafts of same to
Purchaser's counsel. After review by Purchaser's counsel, but in any event
within ten (10) business days after submission to Purchaser's counsel, Seller
and Purchaser shall join in the delivery of the consents, and they will each
diligently take all steps necessary or desirable to obtain the consents. The
failure of either party to timely file or diligently seek the consents, or to
cooperate fully with the other party with respect thereto, shall be deemed a
material breach of this Agreement.
2.6 FURTHER ASSURANCES. From and after the Closing, Purchaser
and Seller shall do, execute, acknowledge and deliver or cause to be done,
executed, acknowledged and delivered, all such further acts, deeds, assignments,
documents, instruments, transfers, conveyances, discharges, releases, assurances
and consents as Purchaser or Seller may, from time to time, reasonably request
to confirm, perfect and evidence the transfers, assignments and transactions
contemplated by this Agreement.
2.7 NONCOMPETITION AGREEMENTS. Xxxxx X. Xxxxxxx and Xxxx
Xxxxxxx (the "Principals") shall each enter into a Noncompetition Agreement with
Purchaser on the Closing Date, substantially in the form attached hereto as
SCHEDULE 2.7, whereby each of the Principals will agree not to engage in the
Business in the Locations and in Madison and Oneida Counties, New York for a
period of three (3) years (the "Noncompetition Agreements").
SECTION 3. REPRESENTATIONS AND WARRANTIES.
3.1 REPRESENTATIONS AND WARRANTIES OF SELLER. To induce the
Purchaser to enter into this Agreement and to consummate the transactions
contemplated hereby, the Seller hereby represents and warrants to the Purchaser
as follows:
(a) DUE AUTHORIZATION; BINDING EFFECT; NO CONFLICTS.
(i) Seller is a corporation, duly organized, validly existing and in good
standing under the laws of the State of New York and has the requisite power to
carry on the Business and to consummate the transactions contemplated hereby;
(ii) all actions necessary for the authorization, execution, delivery and
performance by Seller of this Agreement, and the transactions contemplated
hereby, have been taken; (iii) this Agreement is a legal, valid and binding
obligation of Seller, enforceable in accordance with its terms; and (iv)
neither the execution and delivery of this Agreement, nor the consummation by
the Seller of the transactions contemplated hereby, or the fulfillment by the
Seller of the terms hereof, will (A) conflict with or result in a breach of any
provision of the Seller's organizational documents or any agreement or
understanding to which Seller is a party, (B) require the consent of any third
party other than NRTC, Xxxxxx and the parties identified on SCHEDULE 3.1(a),
which consents shall be obtained prior to Closing, or (C) violate or conflict
with any judgment, order, writ, injunction, decree, statute, rule or regulation
applicable to the Seller.
(b) NRTC MEMBERSHIP; DBS DISTRIBUTION RIGHTS.
(i) Attached hereto as SCHEDULE 3.1(b)(i), is a true
and complete copy of the NRTC/Member Agreement together with all amendments,
schedules and exhibits thereto.
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(ii) Attached hereto as SCHEDULE 3.1(b)(ii) is a
true and complete copy of the NRTC/Retail Agreement, together with all
amendments, schedules and exhibits thereto.
(iii) Attached hereto as SCHEDULE 3.1(b)(iii) are
true and complete copies of the Other Assumed Agreements, if any, together with
all amendments, schedules and exhibits thereto.
(iv) The Seller has paid all sums to NRTC or Xxxxxx,
as appropriate, required under the NRTC/Member Agreement such that the Seller
is entitled to the Marketing Revenues. The Seller has the right to receive from
NRTC, on a pro rata basis, all other net revenues received by NRTC from Xxxxxx
in connection with the Programming which are directly attributable to the
Committed Member Residences or the Commercial Establishments in the Locations.
(v) The Seller is in full compliance in all material
respects with any and all membership, affiliation, licensing or other
requirements or arrangements as may have been established by NRTC, Xxxxxx or
DirecTv, if any, pursuant to the NRTC/Member Agreement, the DirecTv Agreement,
or otherwise.
(vi) The Seller is not in breach in any material
respect of the NRTC/Member Agreement, the NRTC/Retail Agreement or any of the
Other Assumed Agreements (if any), nor has the Seller failed to perform any
material obligation under the NRTC/Member Agreement, the NRTC/Retail Agreement
or any Other Assumed Agreement. The Seller has not received notice of any such
breach or non-performance at any time. To the best of Seller's knowledge, no
other party to the NRTC/Member Agreement, the NRTC/Retail Agreement or any
Other Assumed Agreement is in default thereunder or has failed to perform any
material obligation thereunder.
(vii) Except as disclosed on SCHEDULE 3.1(b)(vii),
none of the DBS Services distributed by the Seller has been suspended at any
time since inception.
(viii) SCHEDULE 3.1(b)(viii) (as supplemented by
applicable NRTC reports) sets forth all Customers, identified as Committed
Member Residence and Commercial Establishment, including the number of months
such Customer has been a Customer, whether such Customer's account is past due,
the amount of the receivable, and the aging of amounts due thereunder. SCHEDULE
3.1(b)(viii) will be updated not more than three (3) days prior to the Closing
Date. The accounts receivable will be fully and completely collectible by
Purchaser in the ordinary course of business within one hundred and twenty
(120) days of the Closing Date without resort to legal proceedings. As soon as
practicable after the Closing Date, Seller shall also provide to Purchaser a
list of Customers and programs in the form of NRTC's Report 30 (Average Service
Retail Report), dated as of the Closing Date.
(c) TRUE AT CLOSING. The representations and warranties of
Seller set forth in this Section 3.1 are and will be true both on the date of
this Agreement and on and as of the Closing.
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(d) DISCLOSURE BY SELLER. No representation or warranty
made by Seller in this Agreement and no statement made in any certificate,
Exhibit or Schedule or other document furnished or to be furnished in
connection with the transactions herein contemplated, contains or will contain
any untrue statement of a material fact or omits or will omit to state any
material fact necessary to make such representation or warranty or any such
statement not misleading to a prospective purchaser of assets of the Seller who
is seeking full information with respect to the Seller.
3.2 REPRESENTATIONS AND WARRANTIES OF PURCHASER. To induce
Seller to enter into this Agreement and consummate the transactions contemplated
hereby, the Purchaser hereby represents and warrants to the Seller as follows:
(a) DUE AUTHORIZATION; BINDING EFFECTS; NO CONFLICTS.
(i) Purchaser is a limited partnership duly organized, validly existing and in
good standing under the laws of the State of Georgia and has the requisite
power to carry on its business and to consummate the actions contemplated
hereby; (ii) all actions necessary for the authorization, execution, delivery
and performance by Purchaser of this Agreement and the actions contemplated
hereby, have been taken; (iii) this Agreement is a legal, valid and binding
obligation of Purchaser, enforceable in accordance with its terms; and (iv)
neither the execution and delivery of this Agreement, nor the consummation by
the Purchaser of the transactions contemplated hereby, or the fulfillment by
the Purchaser of the terms hereof, will (A) conflict with or result in a breach
of any provision of the Purchaser's organizational documents or any agreement
or understanding to which Purchaser is a party, (B) require the consent of any
third party unless such consent shall be obtained prior to Closing, or (C)
violate or conflict with any judgment, order, writ, injunction, decree,
statute, rule or regulation applicable to the Purchaser.
(b) DUE AUTHORIZATION. (i) Columbia DBS Management, LLC
("Columbia") is the sole general partner of the Purchaser; (ii) Columbia is a
limited liability company duly organized, validly existing and in good standing
under the laws of the State of Georgia and has the requisite power to carry on
its business and to consummate the actions contemplated hereby; and (iii) all
actions necessary for the authorization, execution, delivery and performance by
Columbia of this Agreement and the actions contemplated hereby, have been
taken.
(c) TRUE AT CLOSING. The representations and warranties of
Purchaser set forth in this Section 3.2 are and will be true both on the date
of this Agreement and on and as of the Closing.
(d) DISCLOSURE BY PURCHASER. No representation or warranty
made by Purchaser in this Agreement and no statement made in any certificate,
Exhibit or Schedule or other document furnished or to be furnished in
connection with the transactions herein contemplated, contains or will contain
any untrue statement of a material fact or omits or will omit to state any
material fact necessary to make such representation or warranty or any such
statement not misleading.
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SECTION 4. CONDITIONS TO CLOSING.
4.1 CONSENT. The obligations of Seller and Purchaser to
consummate the transactions contemplated by this Agreement are subject to
satisfaction at the time of Closing of the condition that NRTC and Xxxxxx shall
have issued all necessary authorizations, consents and approvals in connection
with the transactions contemplated by this Agreement, without conditions which
are materially adverse to either Purchaser or Seller.
4.2 CONDITIONS TO OBLIGATIONS OF PURCHASER. Purchaser's
obligation to consummate the transactions contemplated by this Agreement is
subject to:
(a) The satisfactory completion, in Purchaser's sole
discretion, of Purchaser's due diligence investigation concerning the Business
within thirty (30) days of Purchaser's receipt of, or access to, Seller's
Records.
(b) Satisfaction (or waiver by Purchaser) on or before the
Closing Date of each of the following conditions:
(1) Each of the representations and warranties of
Seller contained in this Agreement shall have been true and
correct in all material respects when made and as of the
Closing Date.
(2) Seller shall have performed and complied with, in
all material respects, all agreements, covenants, conditions
and obligations contained in this Agreement and required to be
performed or complied with by Seller on or before the Closing
Date.
(3) All authorizations and approvals of or consents
of, or filings with, any governmental authority or other
Person required to be obtained or made by Seller in connection
with the Closing (including, without limitation, any consents
required under any Other Assumed Agreements) shall have been
obtained or made and shall be in full force and effect.
(4) Seller shall have at least 2,945 Customers.
(c) Receipt by the Purchaser, at the Closing of
(1) Such bills of sale, assignments and other
instruments of transfer required to effectively transfer and
assign good and marketable title to the Assets to Purchaser in
accordance therewith.
(2) Certified copies of resolutions duly adopted by
the Board of Directors and stockholders of Seller approving
this Agreement and the transactions contemplated hereby.
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(3) All Records or copies of the Records pursuant to
Section 2.1(a) herein.
(4) Noncompetition Agreements executed and delivered
by the Principals.
(5) A certificate signed by the Seller's president,
dated the Closing Date, to the effect that the conditions set
forth in Paragraph (b) of this Section 4.2 have been
satisfied.
(6) Such other documents and instruments as may be
reasonably requested and satisfactory to Purchaser and its
counsel in connection with the Seller's satisfaction of each
of its obligations hereunder.
(7) Updated Schedule 3.1(b)(viii).
4.3 CONDITIONS TO OBLIGATIONS OF SELLER. Seller's obligation
to consummate the transaction contemplated by this Agreement is subject to:
(a) Satisfaction (or waiver by Seller) on or before the
Closing Date of each of the following conditions:
(1) Each of the representations and warranties of
Purchaser contained in this Agreement shall have been true and
correct when made and as of the Closing Date.
(2) Purchaser shall have performed and complied with,
in all material respects, all agreements, covenants,
conditions and obligations contained in this Agreement and
required to be performed or complied with by Purchaser on or
before the Closing Date.
(3) All authorizations and approvals of or consents
of, or filings with, any governmental authority or other
Person required to be obtained or made by Purchaser in
connection with the Closing shall have been obtained or made
and shall be in full force and effect.
(b) Receipt by the Seller, at the Closing, of
(1) The Closing Payment and the Note described in
Section 2.2 herein executed and delivered by the Purchaser.
(2) A certificate signed by Columbia, evidencing the
approval by Purchaser of this Agreement and the transactions
contemplated hereby.
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(3) Collateral Assignment executed and delivered by
Purchaser and consented to by the NRTC and DirecTv.
(4) Noncompetition Agreements executed and delivered
by the Purchaser.
(5) A certificate signed by Columbia, dated the
Closing Date, to the effect that the conditions set forth in
Paragraph (a) of this Section 4.3 have been satisfied.
(6) Such other documents and instruments as may be
reasonably requested and satisfactory to Seller and its
counsel in connection with the Purchaser's satisfaction of
each of its obligations hereunder.
SECTION 5. INDEMNIFICATION.
5.1 RIGHT TO INDEMNIFICATION.
(a) Seller shall indemnify, reimburse, and hold harmless
Purchaser from and against all claims, losses, damages, costs (including,
without limitation, court costs and reasonable attorneys' fees), expenses and
liabilities (collectively, the "Indemnifiable Damages") suffered, incurred, or
sustained by Purchaser on account of (i) any misrepresentation, breach of
warranty or nonfulfillment of any term, covenant or agreement on the part of
Seller under this Agreement, or in any certificate, Schedule or other document
delivered pursuant hereto, (ii) the failure of Seller to pay and perform
promptly when due all of its obligations, liabilities and debts as provided
under this Agreement, (iii) the operation of the Business prior to the Closing
Date, (iv) any breach or default prior to the Closing by Seller under the
NRTC/Member Agreement, the NRTC/Retail Agreement or any of the Other Assumed
Agreements, (v) any liability, obligation or claim with respect to the Business
arising prior to the Closing (other than liabilities specifically assumed by
Purchaser under this Agreement and the liabilities referred to in (vi) below),
and (vi) any state or local sales, use, excise, personal property or similar
tax liability (including penalties and interest) of the Seller.
(b) Purchaser shall indemnify, reimburse, and hold
harmless Seller from and against all Indemnifiable Damages suffered, incurred,
or sustained by Seller on account of (i) any misrepresentation, breach of
warranty or nonfulfillment of any term, covenant or agreement on the part of
Purchaser under this Agreement, or in any certificate, Schedule or other
document delivered pursuant hereto, (ii) the failure of Purchaser to pay and
perform promptly when due all of its obligations, liabilities, and debts as
provided under this Agreement, (iii) the operation of the Business after the
Closing Date, and (iv) any breach or default after the Closing by Purchaser
under the NRTC/Member Agreement, the NRTC/Retail Agreement or any Other Assumed
Agreement; provided, however, that Seller shall in no event be entitled to
indemnification hereunder with respect to matters arising under contracts,
commitments or agreements of Seller not specifically assumed by Purchaser under
this Agreement.
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5.2 RIGHT TO CONTEST. If the Seller or Purchaser, as the case
may be (the "Indemnified Party"), receives notice or has knowledge of any claim
for which it believes the other party hereto is obligated to provide
indemnification pursuant to Section 5.1 herein (the "Indemnifying Party"), the
Indemnified Party shall notify the Indemnifying Party in writing of such claim
within twenty (20) days of its receipt of same (the "Indemnification Claim").
The Indemnification Claim shall set forth a brief description of the facts
giving rise to such claim and the amount (or reasonable estimate) of the
Indemnifiable Damages suffered, or which may be suffered by the Indemnified
Party. The Indemnified Party shall, at the expense of the Indemnifying Party,
provide all information regarding the contest or defense of the claim and
cooperate fully with the Indemnifying Party in the conduct of any such contest
or defense. Before being required to make any payment pursuant to Section 5.1
herein, the Indemnifying Party may, at its own expense, elect to undertake and
control the defense of, and take all necessary steps properly to contest any
claim in respect thereof involving third parties or to prosecute such claim to
conclusion or settlement satisfactory to the Indemnified Party. If the
Indemnifying Party makes the foregoing election, then the Indemnified Party
shall have the right to participate, at its own expense, in all proceedings but
shall not admit any liability, settle, compromise, pay or discharge the claim
without the prior written consent of the Indemnifying Party. If the Indemnifying
Party does not make such election, it shall be obligated to pay the costs of
defending or prosecuting such claim and shall be bound by whatever result is
obtained by the Indemnified Party respecting such claim.
5.3 LIMITATION OF CLAIMS. The indemnification obligations of
the Seller under Section 5.1 (a)(i) through (v) above shall expire and terminate
on the third (3rd) anniversary of the Closing Date; and the indemnification
obligations of the Seller under Section 5(a)(vi) above shall expire and
terminate on the fifth (5th) anniversary of the Closing Date, unless in each
case, prior to such termination, the Purchaser shall have provided written
notice to the Seller of an Indemnification Claim as provided in Section 5.2
above. If the Purchaser provides such Indemnification Claim prior to the
expiration of the applicable periods, the obligations of the Seller with respect
to the asserted right to indemnification under Section 5.1(a) above shall
continue until the appropriate amount of indemnification, if any, is determined,
paid and satisfied in full. The indemnification obligations of Purchaser under
Section 5.1(b) shall expire and terminate on the third (3rd) anniversary of the
Closing Date; unless prior to such termination, the Seller shall have provided
written notice to the Purchaser of an Indemnification Claim as provided in
Section 5.2 above. If the Seller provides such Indemnification Claim prior to
the expiration of the applicable period, the obligations of the Purchaser with
respect to the asserted right to indemnification under Section 5.1(b) above
shall continue until the appropriate amount of indemnification, if any, is
determined, paid and satisfied in full.
5.4 THRESHOLD FOR INDEMNIFICATION; CEILING FOR
INDEMNIFICATION.
(a) THRESHOLD. The Seller shall not have any liability
under Section 5.1(a) hereof, unless and until, the aggregate amount of
Indemnifiable Damages attributable to the Seller exceeds Three Thousand Four
Hundred Dollars ($3,400), in which case the Seller shall be liable for
indemnification hereunder for the entire amount of the Indemnifiable Damages,
including the Three Thousand Four Hundred Dollars ($3,400).
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(b) CEILING. The Seller shall not have any liability under
Section 5.1(a)(i) through (v) hereof for Indemnifiable Damages in excess of
Three Million Four Hundred Thousand Dollars ($3,400,000).
5.5 RIGHT OF OFFSET; COLLECTION OF INDEMNIFIABLE DAMAGES.
Purchaser shall have the right to offset against the amounts owing to the Seller
pursuant to the Note for (i) any Indemnifiable Damages due Purchaser pursuant to
Section 5.1(a) hereof, and (ii) the adjustments provided in Section 2.4 hereof
(the "Right of Offset"). Before exercising its Right of Offset, Purchaser shall
provide written notice of its intent to exercise such right. Purchaser agrees
that any Indemnifiable Damages due Purchaser pursuant to Section 5.1(a) hereof
shall be satisfied (i) first, through a reduction of amounts payable to Seller
pursuant to the Note through the exercise of Purchaser's Right of Offset, and
(ii) thereafter, directly from the Seller.
SECTION 6. MISCELLANEOUS.
6.1 CONDUCT OF BUSINESS PRIOR TO CLOSING. Unless performance
of the following obligations is waived by Purchaser (in its sole discretion) in
advance and in writing, Seller shall:
(a) not modify, amend, alter or terminate the NRTC/Member
Agreement, the NRTC/Retail Agreement or any Other Assumed Agreement, or waive
any default or breach thereunder except as may be coordinated with Purchaser;
(b) comply in all material respects with the NRTC/Member
Agreement, the NRTC/Retail Agreement and any Other Assumed Agreements, use its
best efforts to cure any material default or breach thereunder, and promptly
notify Purchaser upon receipt of notice of any default or breach thereunder;
(c) maintain its books and records in accordance with
prior practice, maintain all of its property and assets in their present
condition, ordinary wear and tear excepted, maintain technical materials,
supplies, inventory and spare parts consistent with past practice, and
otherwise use its best efforts to operate the business in the ordinary course
in accordance with practices during the twelve (12) months preceding the date
of this Agreement;
(d) use its best efforts to keep its business organization
intact and maintain good relationships with its key employees, suppliers,
advertisers and others having business relations with it;
(e) operate the Business in all material respects in
accordance with the NRTC Agreements, comply in all material respects with all
laws, rules and regulations applicable to it, including the regulations and
policies of the NRTC, Xxxxxx and DirecTv;
(f) provide to Purchaser, concurrently with filing,
sending or receipt thereof, copies of all reports to and other filings and
correspondence with the NRTC, Xxxxxx and DirecTv;
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(g) provide to Purchaser, promptly upon receipt thereof by
Seller, a copy of (i) any notice of the revocation, suspension, or limitation
of the rights under, or of any proceeding for the revocation, suspension, or
limitation of the rights under any NRTC Agreements, and (ii) copies of all
protests, complaints, challenges or other documents submitted to or filed with
the NRTC, Xxxxxx or DirectTv by third parties concerning the business and,
promptly upon the filing or making thereof, copies of Seller's responses
thereto; and
(h) notify Purchaser in writing immediately upon
learning of the institution or threat of any action against Seller in any
court, or any action against Seller before any governmental agency, and notify
Purchaser in writing promptly upon receipt of any administrative or court order
relating to the Business.
6.2 LAW GOVERNING. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to the choice of law provisions thereof.
6.3 NOTICE. All notices, requests, demands, or other
communications under this Agreement shall be in writing. Notice shall be
sufficiently given for all purposes as follows:
(a) PERSONAL DELIVERY. When personally delivered to the
recipient, notice is effective on delivery.
(b) CERTIFIED MAIL. When mailed certified mail, postage
paid, return receipt requested, notice is effective on receipt, if delivery is
confirmed by a return receipt.
(c) OVERNIGHT DELIVERY. When delivered by Federal Express,
Airborne, United Parcel Service, or DHL WorldWide Express, charges prepaid or
charged to the sender's account, notice is effective on delivery, if delivery
is confirmed by the delivery service.
(d) TELEX OR FAX TRANSMISSION. When sent by telex or fax
to the last telex or fax number of the recipient known to the party giving
notice, notice is effective on receipt of a confirmed transmission; provided
that (a) a duplicate copy of the notice is promptly given by first-class or
certified mail or by overnight delivery, or (b) the receiving party delivers a
written confirmation of receipt. Any notice given by telex or fax shall be
deemed received on the next business day if it is received by 5:00 p.m.
(recipient's time) or on a non-business day.
Addresses for purpose of giving notice are:
Digital Television Services of Northeast Cable Services, Inc.
New York I, LP 0000 Xxxxxxx Xxxx
Xxxxxxxx 000, Xxxxx 000 Xxxxxxxx, Xxx Xxxx 00000
0000 Xxxxxxx Xxxxxx Xxxx Xxxx: Xxxxx X. Xxxxxxx
Xxxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxxxx, Xx.,
President
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with a copy to: with a copy to:
Xxxxxx Xxxxxxx Xxxxx & Xxxxxxxx Xxxxxxx Xxxxxxx &
Xxxxxxxxxxx Xxxxx, P.C.
NationsBank Corporate Center 0000 Xxxx Xxxxx Tower
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000 Buffalo, New York 14202
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000 Attn: Xxxxxx X. Xxxx, Xx., Esq.
Attn: C. Xxxx Xxxxx, Esq.
Any correctly addressed notice that is refused, unclaimed, or
undeliverable because of an act or omission of the party to be notified shall be
deemed effective as of the first day that said notice was refused, unclaimed, or
deemed undeliverable by the postal authorities, messenger, or overnight delivery
service.
Any party may change its address or telex or fax number by giving the
other party notice of the change in any manner permitted in this Agreement.
6.4 ASSIGNMENT; BINDING EFFECT. This Agreement may not be
assigned by Purchaser (except to a party which, directly or indirectly, is
controlled by, controls or is under common control with, Purchaser) or by Seller
prior to the Closing without the prior written consent of the other party. This
Agreement shall be binding upon, and shall inure to the benefit of the parties
hereto and their successors and permitted assigns, if any.
6.5 AMENDMENT; WAIVER. This Agreement may be amended only by a
written instrument signed by Purchaser and Seller. No provisions of this
Agreement may be waived except by an instrument in writing signed by the party
sought to be bound. No failure or delay by any party in exercising any right or
remedy hereunder shall operate as a waiver thereof, and a waiver of a particular
right or remedy on one occasion shall not be deemed a waiver of any other right
or remedy or a wavier on any subsequent occasion.
6.6 ENTIRE AGREEMENT. This Agreement, together with the
Schedules attached hereto, sets forth the entire understanding between the
parties relating to the subject matter hereof, any and all prior correspondence,
conversations and memoranda or other writings being merged herein and replaced.
No promises, covenants, or representations of any character or nature other than
those expressly stated herein have been made to induce either party to enter
into this Agreement.
6.7 CONFIDENTIALITY; INITIAL NOTICE TO PUBLIC. Seller and
Purchaser shall mutually agree in advance on the manner in which the public is
first informed of the execution of this Agreement. Each of the parties hereto
agree to maintain the confidentiality of this Agreement and the terms thereof
and any information exchanged by the parties in connection with the consummation
of the transactions contemplated hereby prior to Closing, and neither party
shall make any disclosure thereof to any third party without the prior consent
of the other party, except as may be required by law.
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6.8 EXECUTION IN COUNTERPARTS. This Agreement may be executed
in two or more counterparts, each of which will be deemed an original, and all
of which together shall constitute one and the same Agreement.
6.9 FACSIMILE SIGNATURES. Facsimile signatures shall be
considered original signatures for purposes of execution and enforcement of the
rights delineated in this Agreement.
6.10 SCHEDULES. The Schedules referred to in this Agreement
are attached hereto, made a part hereof and incorporated herein by this
reference.
6.11 SURVIVAL OF REPRESENTATIVES AND WARRANTIES. Subject to
the provisions of Section 5 hereof, each and every representation and warranty
contained in this Agreement, shall survive the Closing but shall expire, and be
terminated and extinguished on the third (3rd) anniversary of the Closing Date.
[SIGNATURES BEGIN ON NEXT PAGE]
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first set forth above.
PURCHASER:
Digital Television Services of New York I, LP
By: Columbia DBS Management, LLC
Its: General Partner
By:
--------------------------------
Title:
--------------------------------
SELLER:
Northeast Cable Services, Inc.
By:
--------------------------------
Its: President
By:
--------------------------------
Title:
--------------------------------
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LIST OF SCHEDULES
Schedule 1 Schedule of Information
Schedule 2.2(b) Promissory Note
Schedule 2.2(c) Collateral Assignment
Schedule 2.4(c) Pro Forma Accounting
Schedule 2.4(g) Purchase Price Allocation
Schedule 2.7 Noncompetition Agreements
Schedule 3.1(a) Consents
Schedule 3.1(b)(i) NRTC/Member Agreement
Schedule 3.1(b)(ii) NRTC/Retail Agreement
Schedule 3.1(b)(iii) Other Assumed Agreements
Schedule 3.1(b)(vii) DBS Service Interruptions
Schedule 3.1(b)(viii) Customers
[Schedules have been omitted and will be furnished upon request]
