EXHIBIT 10.3
"***" - Confidential portions of this Agreement have been omitted and
filed separately with the Securities and Exchange Commission under a
Confidential Treatment Request, pursuant to Rule 24b-2 of the
Securities Exchange Act of 1934, as amended
ASSET PURCHASE AGREEMENT
BETWEEN
TIME WARNER ENTERTAINMENT-ADVANCE/XXXXXXXX PARTNERSHIP
AS BUYER
AND
NUCENTRIX BROADBAND NETWORKS, INC.
AS SELLER
FEBRUARY 28, 2002
TABLE OF CONTENTS
Page
----
Article 1 Certain Definitions.................................................................................1
1.1 Defined Terms........................................................................................1
1.2 Additional Definitions...............................................................................5
1.3 Rules of Construction................................................................................5
Article 2 Purchase and Sale...................................................................................6
2.1. Excluded Service Agreements.........................................................................6
2.2. Covenant of Purchase and Sale; Assets...............................................................6
2.3. Excluded Assets.....................................................................................7
2.4. Assumed Obligations and Liabilities.................................................................7
2.5. Purchase Price......................................................................................7
2.6. Current Items Amount...............................................................................10
2.7. Current Items Amount Calculated....................................................................11
2.8. Accounts Receivable, Deposits and Advance Payments.................................................11
Article 3 Seller's Representations And Warranties............................................................12
3.1. Organization of Seller.............................................................................12
3.2. Authority..........................................................................................12
3.3. No Conflict; Required Consents.....................................................................12
3.4. Service Agreement and MDU Property Information.....................................................12
3.5. Title and Condition of On-Premises Equipment.......................................................13
3.6. Service Agreements; Eligible Subscribers...........................................................13
3.7. Litigation.........................................................................................14
3.8. Taxes..............................................................................................14
3.9. Compliance with Legal Requirements.................................................................14
3.10. Environmental Laws and Regulations................................................................14
3.11. Bonds.............................................................................................15
3.12. No Rights of First Refusal........................................................................15
3.13. Other Programmers; Programming Resale.............................................................15
3.14. No Prior Sales....................................................................................15
3.15. ITFS Programming..................................................................................15
3.16. Finders and Brokers...............................................................................15
3.17. No Misrepresentation..............................................................................15
3.18. Taxpayer Identification Number....................................................................15
Article 4 Buyer's Representations And Warranties.............................................................16
4.1. Organization and Qualification of Buyer............................................................16
4.2. Authority..........................................................................................16
4.3. No Conflict; Required Consents.....................................................................16
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4.4. Litigation.........................................................................................16
4.5. Taxpayer Identification Number.....................................................................16
Article 5 Covenants..........................................................................................16
5.1. Subscriber and Service Agreement Information.......................................................16
5.2. Certain Affirmative Covenants of Sellers...........................................................17
5.3. Certain Negative Covenants of Sellers..............................................................17
5.4. Bulk Sales.........................................................................................17
5.5. Transfer Taxes.....................................................................................18
5.6. Consents...........................................................................................18
5.7. Employees of Seller................................................................................18
5.8. Transitional Matters...............................................................................18
5.9. Notification of Certain Matters....................................................................18
5.10. Commercially Reasonable Efforts...................................................................18
5.11. Confidentiality and Publicity.....................................................................19
5.12. Removal of Excluded Tangible Assets...............................................................20
5.13. Certain Programming Matters.......................................................................20
5.14. MDU Agreements....................................................................................20
5.15. Signal Leakage....................................................................................20
5.16. Legal Proceedings.................................................................................20
5.17. Marketing to Eligible Subscribers.................................................................21
5.18. Cessation of Marketing and Sales Activities.......................................................22
5.19. No Solicitation; Eligible Subscriber Information..................................................22
Article 6 Conditions Precedent...............................................................................23
6.1. Conditions to Buyer's Obligations..................................................................23
6.2. Conditions to Sellers' Obligations.................................................................24
Article 7 Closing............................................................................................25
7.1. Closings; Time and Place...........................................................................25
7.2. Guarantee..........................................................................................25
7.3. Seller's Obligations...............................................................................26
7.4. Buyer's Obligations................................................................................26
Article 8 Termination And Default............................................................................27
8.1. Termination Events.................................................................................27
8.2. Effect of Termination..............................................................................27
Article 9 Indemnification....................................................................................28
9.1. Indemnification by Seller..........................................................................28
9.2. Indemnification by Buyer...........................................................................29
9.3. Claims for Indemnity; Third Party Claims...........................................................29
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9.4. Survival of Representations and Warranties and Covenants...........................................30
9.5. Threshold; Limitation on Indemnification...........................................................30
9.6. Exclusive Remedy...................................................................................30
Article 10 Miscellaneous Provisions..........................................................................31
10.1. Expenses..........................................................................................31
10.2. Waivers...........................................................................................31
10.3. Notices...........................................................................................31
10.4. Risk of Loss......................................................................................32
10.5. Binding Effect; Benefits..........................................................................32
10.6. Entire Agreement; Amendments......................................................................32
10.7. Governing Law.....................................................................................32
10.8. Counterparts......................................................................................32
10.9. Further Assurances................................................................................32
10.10. Schedules and Exhibits; Headings.................................................................33
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LIST OF EXHIBITS AND SCHEDULES
Exhibits
Exhibits X-0, X-0 & X-0 Forms of Service Agreements
Exhibit B Form of Consent
Exhibit C Form of Estoppel Letter
Exhibit D Form of Non-Competition Covenant
Exhibit E Form of Assignment and Xxxx of Sale
Exhibit F Form of Assumption Agreement
Schedules
Schedule 1.0 Zip Codes
Schedule 2.3 Excluded Assets
Schedule 2.5 Certain MDU Properties
Schedule 3.3 Conflicts; Consents
Schedule 3.4 Service Agreements
Schedule 3.6 Service Agreement Defaults
Schedule 3.7 Litigation
Schedule 3.15 ITFS Programming
Schedule 5.2 Maps
Schedule 5.3 Service Agreements Pending Renewal
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ASSET PURCHASE AGREEMENT
This
Asset Purchase Agreement, including the Exhibits and Schedules
attached hereto (together, this "Agreement"), is entered into as of February 28,
2002, by and between Time Warner Entertainment-Advance/Xxxxxxxx Partnership, a
New York general partnership ("Buyer"), whose U.S. Taxpayer Identification
Number is 00-0000000, and Nucentrix Broadband Networks, Inc., a Delaware
corporation, whose U.S. Taxpayer Identification Number is 00-0000000 ("Seller").
RECITAL
Seller desires to sell to Buyer, and Buyer desires to purchase from
Seller, certain assets owned by Seller and used by Seller in providing video
entertainment services through multichannel multipoint distribution systems (the
"MMDS Systems") to customers located in the postal zip codes identified in
Schedule 1.0, and any replacement or successor code thereto (as limited by the
footnotes on Schedule 1.0, the "Zip Codes") or otherwise as identified on
Schedule 3.4, in and around Austin, Wichita Falls, Waco and Temple, Texas, on
the terms set forth, and as more particularly described, in this Agreement.
AGREEMENTS
In consideration of the mutual covenants and promises set forth herein,
Buyer and Seller agree as follows:
ARTICLE 1
CERTAIN DEFINITIONS
1.1. Defined Terms. As used in this Agreement, the following terms,
whether in singular or plural form, shall have the following meanings:
"Closing Date" means, with respect to each Closing, the date on which
such Closing occurs.
"Consent" means any consent, permit or approval of any Person (other
than the parties) necessary to transfer the Assets to Buyer, to consummate
lawfully the transactions contemplated hereby or as otherwise required by this
Agreement.
"Converted Subscriber" means, as of the relevant Closing Date, any
Eligible Subscriber that (i) became a subscriber of Buyer's cable television
service during the term of this Agreement, including after receipt of Buyer's
written solicitation to such Eligible Subscriber (as contemplated by Section
5.17), (ii) has paid in full for and received at least one month of Buyer's
cable television service at Buyer's standard rates, (iii) has no outstanding
past due amount owing to Buyer for any services provided by
Buyer to such subscriber (whether before or after the date of this Agreement)
and (iv) is not pending disconnection for any reason.
"DBS" means direct broadcast satellite.
"Eligible Subscriber" means any individual residential account (whether
a resident of a MDU Property or a single-family dwelling unit) and any
commercial account (i.e., any non-residential account that receives service on
terms similar to an individual residential account) that (i) is located within
one of the Zip Codes or is identified on Schedule 3.4, and (ii) is receiving
from Seller, as of the date of this Agreement and as of the date of Buyer's
written solicitation to such account (as contemplated by Section 5.17), any
level of video entertainment services through the MMDS Systems, but shall not
include any such account that: (a) is not located in an area for which Buyer has
been granted a franchise to provide cable television services by the applicable
Governmental Authority; (b) cannot be served from Buyer's existing cable plant
with a subscriber drop of 150 feet or less; (c) at the time of solicitation by
Buyer, receives broadcast basic programming only from Seller and DBS video
programming from a DBS provider; (d) is a resident of a MDU Property with
respect to which Seller does not have a written Service Agreement that is in
full force and effect; (e) is a commercial account that cannot be served from
Buyer's existing cable plant without trenching through concrete or asphalt
surfaces; (f) has not received and paid in full for at least one full month of
service at the MMDS System's standard rates; (g) is more than 60 days delinquent
in payment for any service provided by the MMDS System; (h) has any outstanding
past due amount owing to Buyer for any services previously provided by Buyer to
such subscriber; (f) is pending disconnection by Seller for any reason; or (i)
was solicited by Seller during the 60-day period preceding the date of this
Agreement by extraordinary promotions or offers of discounts.
"Equivalent Basic Subscriber" means, with respect to each bulk billed
Service Agreement, the lower of (i) the number of Equivalent Basic Subscribers
set forth on Schedule 3.4 for such Service Agreement and (ii) the number
obtained by dividing (a) the aggregate monthly xxxxxxxx under such Service
Agreement for all tiers of basic television service provided by the MMDS System
(excluding any charges for premium service, pay-per-view programming, internet
access, franchise fees, taxes, second connects, additional outlets, installation
fees, deposits and other non-recurring items and any charges for rental
converters, remote control devices and other like charges for equipment), by (b)
"***"; provided, however, that with respect to any bulk billed Seasonal Service
Agreement, the number of Equivalent Basic Subscribers shall be determined
instead by taking the lower of (I) the number of Equivalent Basic Subscribers
set forth on Schedule 3.4 for such Seasonal Service Agreement and (II) the
number obtained by dividing (A) one-twelfth of the prior 12 months' xxxxxxxx
under such Service Agreement for all tiers of basic television service provided
by the MMDS System (excluding any charges for premium service, pay-per-view
programming, internet access, franchise fees, taxes, second connects, additional
outlets, installation fees, deposits and other non-recurring items and any
charges for rental converters, remote control devices and other like charges for
equipment), by (B) "***".
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"Exclusive Service Agreement" means a written agreement between Seller
and an owner of a MDU Property, pursuant to which Seller is granted the
exclusive right to provide any form of video entertainment services to the
residents of the MDU Property, either on a bulk billed or individual subscriber
basis.
"Governmental Authority" means the United States of America, any state,
commonwealth, territory, or possession thereof and any political subdivision or
quasi-governmental authority of any of the same.
"Hazardous Substances" means (i) any "hazardous waste" as defined by
the Resources Conservation and Recovery Act of 1976 ("RCRA") (42 U.S.C. Section
6901 et seq.); (ii) any "hazardous substance" as defined by the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 (42 U.S.C.
Section 9601 et seq.) ("CERCLA"); (iii) any substance regulated by the Toxic
Substances Act ("TSCA") (42 U.S.C. Section 2601 et seq.); (iv) asbestos; (v)
polychlorinated biphenyls; (vi) any substances regulated under the provisions of
Subtitle I of RCRA relating to underground storage tanks; (vii) any substance
the presence, use, treatment, storage, transmission or disposal of which on or
from the Real Property is prohibited by any Legal Requirements; and (viii) any
other substance which by any Legal Requirements require special handling,
reporting or notification to any Governmental Authority in its collection,
storage, use, treatment, transmission or disposal.
"Judgment" means any judgment, writ, order, injunction, award or decree
of any court, judge, justice or magistrate, including any bankruptcy court or
judge, or any arbitrator or arbitration panel, and any order of or by any
Governmental Authority.
"Knowledge" means, with respect to Seller, the actual awareness or
knowledge of each officer and manager of Seller.
"Legal Requirements" means applicable common law and any statute,
ordinance, code or other law, rule, regulation, order, technical or other
standard, requirement or procedure enacted, adopted, promulgated, applied or
followed by any Governmental Authority, including Judgments.
"Licenses" means all domestic satellite, business radio, CARS,
microwave and other licenses, and all authorizations and permits relating to the
MMDS Systems granted to Seller by any Governmental Authority.
"Lien" means any security agreement, financing statement filed with any
Governmental Authority, conditional sale or other title retention agreement, any
lease, consignment or bailment given for purposes of security, any lien,
mortgage, indenture, pledge, option, encumbrance, adverse interest, constructive
trust or other trust, claim, attachment, exception to or defect in title or
other ownership interest of any kind, which otherwise constitutes an interest in
or claim against property, whether arising pursuant to any Legal Requirement or
otherwise.
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"Litigation" means any claim, action, suit, proceeding, arbitration,
investigation, hearing or other judicial or administrative procedure that could
result in a Judgment, and notice of any of the foregoing.
"Losses" means any claims, losses, liabilities, damages, Liens,
penalties, costs, and expenses, including interest which may be imposed in
connection therewith, expenses of investigation, reasonable fees and
disbursements of counsel and other experts, and the reasonable cost to any
Person making a claim or seeking indemnification under this Agreement with
respect to funds expended by such Person by reason of the occurrence of any
event with respect to which indemnification is sought, but shall in no event
include incidental or consequential damages.
"MDU Property" means the multiple dwelling unit properties, including
motels, hotels and similar properties, identified on Schedule 3.4, the residents
or occupants of which are receiving video entertainment services from Seller
through one of its MMDS Systems.
"Non-Exclusive Service Agreement" means a written agreement between
Seller and an owner of a MDU Property, pursuant to which Seller is granted the
non-exclusive right to provide video entertainment services to the residents of
the MDU Property.
"On-Premises Equipment" means the distribution cable and inside wiring
located on the MDU Properties that are covered by a Service Agreement
transferred to Buyer pursuant to this Agreement and are (i) owned by Seller, and
(ii) used by Seller to provide video programming service as of the date of this
Agreement.
"Permitted Lien" means (i) any Lien securing Taxes, assessments and
governmental charges not yet due and payable or being contested in good faith
(and for which adequate accruals or reserves have been established), (ii) any
right or interest in the Assets, or right to acquire the Assets, held by a MDU
property owner pursuant to the terms of the applicable Service Agreement, as
well as any Lien granted by such property owner with respect to such owner's
right or interests in the Assets, (iii) any right, interest or claim in or to
any inside wiring included in the Assets granted to or obtained by a Person
pursuant to applicable Legal Requirements, and (iv) any claim by a mortgagee
with respect to a MDU Property that the tangible Assets located on such MDU
Property constitute a fixture.
"Person" means any natural person, Governmental Authority, corporation,
general or limited partnership, limited liability company, joint venture, trust,
association or unincorporated entity of any kind.
"Seasonal Service Agreement" means the Service Agreements serving the
University of Texas accounts and any other seasonal accounts, as designated on
Schedule 3.4.
4
"Service Agreement" means an Exclusive Service Agreement or a
Non-Exclusive Service Agreement, as the case may be, and includes any Seasonal
Service Agreement.
"Taxes" means all levies and assessments of any kind or nature imposed
by any Governmental Authority, together with any interest thereon and any
penalties, additions to tax or additional amounts applicable thereto.
"Transaction Documents" means all instruments and documents executed
and delivered by Buyer, Seller, or any officer, director or affiliate of either
of them, in connection with this Agreement or the transactions contemplated
hereby.
1.2. Additional Definitions. The following is a list of additional
terms used in this Agreement and a reference to the Section hereof in which such
term is defined:
Term Section
---- -------
Assets 2.2
Assumed Obligations and Liabilities 2.4
Buyer Preamble
Buyout Provision 2.5.1
Claims 2.5.1
Closing 7.1
Confidential Information 5.10.1
Current Items Amount 2.6
Cutover 5.7
Equipment Release 5.12
Estoppel Letter 5.5
Excluded Assets 2.2
Excluded Service Agreements 2.1
Final Closing Date 7.1
First Closing Date 7.1
GAAP 2.6
Holdback Amount 2.5.1
ITFS Programming 3.15
Indemnitee 9.3
Indemnitor 9.3
MMDS Systems Recitals
New Buyer Service Agreements 2.5.1
Non-Competition Covenant 6.1.6
Purchase Price 2.5
Qualified Auditor 2.7
Seller Preamble
Threshold Amount 9.5
Zip Codes Recital
1.3. Rules of Construction. Unless otherwise expressly provided in this
Agreement, (i) accounting terms used in this Agreement shall have the meaning
ascribed
5
to them under GAAP; (ii) words used in this Agreement, regardless of the gender
used, shall be deemed and construed to include any other gender, masculine,
feminine, or neuter, as the context requires; (iii) the word "including" is not
limiting; (iv) the capitalized term "Section" refers to sections of this
Agreement; (v) references to a particular Section include all subsections
thereof, (vi) references to a particular statute or regulation include all
amendments thereto, rules and regulations thereunder and any successor statute,
rule or regulation, or published clarifications or interpretations with respect
thereto, in each case as from time to time in effect; (vii) references to a
Person include such Person's successors and assigns to the extent not prohibited
by this Agreement; and (viii) references to a "day" or number of "days" (without
the explicit qualification "business") shall be interpreted as a reference to a
calendar day or number of calendar days.
ARTICLE 2
PURCHASE AND SALE
2.1. Excluded Service Agreements. Buyer shall have no obligation to
acquire any Service Agreement and pay for the subscribers served pursuant
thereto to the extent that (i) the Service Agreement is not in writing or has
expired as of the relevant Closing Date; (ii) the Service Agreement does not
grant the rights reasonably required by Buyer to install, maintain and operate
its cable television system on the premises of the MDU Property and/or provide
cable television services to the residents of the MDU Property; (iii) the
Service Agreement contains terms and conditions (financial or operational) that
are materially different than the terms and conditions of the forms of Service
Agreement attached as Exhibits X-0, X-0 and A-3 to this Agreement; (iv) either
Seller or the MDU Property owner which is party to the Service Agreement is in
material default of its obligations thereunder as of the relevant Closing Date;
(v) the MDU Property owner which is party to the Service Agreement is more than
60 days delinquent in payment for cable television services provided by Buyer;
or (vi) Buyer otherwise designates in writing to Seller before the First Closing
Date that it desires to exclude the Service Agreement from the transactions
contemplated by this Agreement; provided, that, Buyer shall have a period of at
least 30 days after it has received true and correct copies of the Service
Agreements in which to make such designation. Any Service Agreement that is
excluded by Buyer from the transactions contemplated by this Agreement pursuant
to this Section 2.1 is referred to in this Agreement as an "Excluded Service
Agreement."
2.2. Covenant of Purchase and Sale; Assets. Subject to and in
accordance with the terms and conditions set forth in this Agreement, Seller
shall transfer to Buyer, and Buyer shall purchase from Seller, free and clear of
all Liens (except for Permitted Liens), all of Seller's right, title and
interest in and to the following described assets and properties, tangible and
intangible, relating to the MMDS Systems (collectively, the "Assets"):
6
2.2.1. the Service Agreements, subject to the provisions of
Section 2.1;
2.2.2. the On-Premises Equipment directly related to each
Service Agreement transferred to Buyer; and
2.2.3. Seller's customer information files relating to
Seller's provision of video entertainment services at each MDU Property
that is covered by a Service Agreement transferred to Buyer.
2.3. Excluded Assets. Notwithstanding anything to the contrary in this
Agreement, the Assets shall not include the following, which shall be retained
by Seller (the "Excluded Assets"): (i) contracts or agreements, other than the
Service Agreements transferred to Buyer at a Closing, that are held or used by
Seller in connection with the MMDS Systems, including Excluded Service
Agreements, programming agreements, retransmission consent agreements, spectrum
leases, Franchises and pole attachment agreements; (ii) the Licenses, (iii)
insurance policies and rights and claims thereunder; (iv) bonds, letters of
credit, surety instruments, and other similar items; (v) cash and cash
equivalents, including deposits of subscribers of the MMDS Systems; (vi)
Seller's trademarks, trade names, service marks, service names, logos, and
similar proprietary rights; (vii) claims, rights and interests in and to any
refunds for Taxes or fees, including franchising and copyright fees, for periods
prior to the applicable Closing Date; (viii) rights of Seller under any contract
for subscriber billing services and any leased subscriber billing equipment;
(ix) employee benefit plans of any nature and their assets; (x) any interest in
owned or leased real estate (but not including any easement or property right
created under any MDU Agreement transferred to Buyer); (xi) vehicles; (xii)
antennas and set-top boxes used or usable in connection with Seller's video
entertainment services; (xiii) inventories of spare equipment or replacement
parts not located on-premise at an MDU Property that is subject to a MDU
Agreement transferred to Buyer; (xiv) antennas and towers comprising part of the
MMDS Systems, or used in connection with Seller's video entertainment services;
(xv) rights retained by Seller under Section 2.8(i); and (xvi) the rights,
assets and properties described on Schedule 2.3.
2.4. Assumed Obligations and Liabilities. From and after the relevant
Closing Date with respect to each Service Agreement transferred to Buyer, Buyer
shall assume, and shall thereafter pay, discharge, and perform, as and when due,
the following (the "Assumed Obligations and Liabilities"): (i) those obligations
and liabilities arising from and after the Closing Date under such Service
Agreement; and (ii) all obligations and liabilities arising out of Buyer's
ownership or operation of the Assets related to such Service Agreement. All
obligations and liabilities other than the Assumed Obligations and Liabilities
shall remain and be the obligations and liabilities solely of Seller.
2.5. Purchase Price. Subject to the adjustments contemplated by Section
2.6 and determined pursuant to Section 2.7, and in consideration for the Assets
and the Non-Competition Covenant contemplated by Section 6.1.6, Buyer shall pay
to Seller, by wire
7
transfer of immediately available funds, an amount in cash to be determined and
paid as follows (the "Purchase Price"):
2.5.1. With respect to each bulk billed Service Agreement
transferred to Buyer, the Purchase Price shall be equal to the lesser
of (i) "***" for each Equivalent Basic Subscriber multiplied by the
number of years (rounding down to the nearest whole year) remaining in
the then current term of the Service Agreement, not to exceed "***",
and (ii) the amount, if any, set forth in the Service Agreement which,
if paid by the owner of the MDU Property, would result in the
termination of the Service Agreement for such MDU Property prior to the
expiration of its then current term (a "Buyout Provision"). For
example, if Seller serves 100 Equivalent Basic Subscribers pursuant to
a Service Agreement with 9.5 years of remaining term, and there is no
Buyout Provision, then the Purchase Price for the Assets relating to
the Service Agreement, including the Service Agreement, would be "***".
If the remaining term of the Service Agreement were 6.5 years, the
Purchase Price would be "***". If the remaining term of the Service
Agreement were 6.5 years and there was a "***" Buyout Provision, then
the Purchase Price would be "***". Buyer shall pay to Seller the
aggregate Purchase Price determined pursuant to this Section 2.5.1 on
the relevant Closing Date, subject to a hold back equal to "***" of
such Purchase Price (the "Holdback Amount"), which together with
interest earned thereon, shall be held by Buyer solely as security for
any claims that may be made by Buyer against Sellers pursuant to
Article 9 of this Agreement (collectively, "Claims"). Buyer shall pay
to Seller the remainder of the Holdback Amount, together with accrued
interest, less any amount required to cover pending Claims, on the
first anniversary of the Final Closing Date. Sellers shall receive
interest on the Holdback Amount from and after the relevant Closing
Date, less any amount applied by Buyer to cover Claims, at the rate per
annum publicly announced from time to time by the Bank of
New York as
its prime rate. Within 10 days after final reconciliation of any Claim
that is pending as of the first anniversary of the Final Closing Date,
Buyer shall pay to Seller the remaining Holdback Amount related to such
Claim, less any amount applied by Buyer to cover such Claim, with
interest as provided in the preceding sentence. Notwithstanding the
foregoing, with respect to the bulk billed MDU Properties listed on
Schedule 2.5, Buyer shall use commercially reasonable (which shall take
into account the amount payable by Buyer to Seller pursuant to this
Agreement) efforts during the term of this Agreement to negotiate and
enter into a service agreement with respect to each such MDU Property
(each, a "New Buyer Service Agreement"), and on the Closing Date next
occurring after execution of any New Buyer Service Agreement, shall pay
to Seller an amount equal to "***" for each Equivalent Basic Subscriber
served by Seller at such MDU Property immediately prior to the
effective date of such New Buyer Service Agreement. Except as set forth
in the foregoing sentence, Buyer shall have no obligation to Seller
with respect to the MDU Properties listed on Schedule 2.5.
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2.5.2. With respect to each individually billed Exclusive
Service Agreement transferred to Buyer, the Purchase Price shall be
equal to "***" for each Converted Subscriber served under such Service
Agreement multiplied by the number of years (rounding down to the
nearest whole year) remaining in the then current term of such Service
Agreement, not to exceed eight years, but in no event exceeding, in the
aggregate, the amount of any Buyout Provision in such Service Agreement
(if such Service Agreement contains a Buyout Provision) and in no event
less than, individually, "***" for each Converted Subscriber served
pursuant to such Exclusive Service Agreement. Buyer shall pay to Seller
the Purchase Price determined pursuant to this Section 2.5.2 for each
Converted Subscriber on the first Closing Date occurring after the date
such subscriber becomes a Converted Subscriber (provided that such
subscriber remains a Converted Subscriber on such Closing Date).
Notwithstanding the foregoing, with respect to the individually billed
MDU Properties listed on Schedule 2.5, Buyer shall use commercially
reasonable (which shall take into account the amount payable by Buyer
to Seller pursuant to this Agreement) efforts during the term of this
Agreement to negotiate and enter into a New Buyer Service Agreement
with respect to each such MDU Property. Upon entering into any such New
Buyer Service Agreement, Buyer shall pay to Seller an amount equal to
"***" for each Converted Subscriber served by Buyer pursuant to such
New Buyer Service Agreement. Buyer shall pay such amount to Seller for
each Converted Subscriber on the first Closing Date occurring after the
date such subscriber becomes a Converted Subscriber (provided that such
subscriber remains a Converted Subscriber on such Closing Date). Except
as set forth in the foregoing sentence, Buyer shall have no obligation
to Seller with respect to the MDU Properties listed on Schedule 2.5.
2.5.3. With respect to each individually billed Non-Exclusive
Service Agreement transferred to Buyer, the Purchase Price shall be
equal to the lesser of (i) "***" for each Converted Subscriber served
under such Service Agreement multiplied by the number of years
(rounding down to the nearest whole year) remaining in the then current
term of such Service Agreement, not to exceed eight years, and (ii)
"***", for each Converted Subscriber served under such Service
Agreement. Buyer shall pay to Seller the Purchase Price determined
pursuant to this Section 2.5.3 for each Converted Subscriber on the
first Closing Date occurring after the date such subscriber becomes a
Converted Subscriber (provided that such subscriber remains a Converted
Subscriber on such Closing Date). Notwithstanding the foregoing, in no
event shall the aggregate Purchase Price for Converted Subscribers
served pursuant to any Non-Exclusive Service Agreement exceed the
amount of any Buyout Provision in such Service Agreement (if such
Service Agreement contains a Buyout Provision) and in no event shall
the individual Purchase Price for a Converted Subscriber served
pursuant to any Non-Exclusive Service Agreement be less than "***".
Notwithstanding the foregoing, with respect to the individually billed,
non-exclusive MDU Properties listed on Schedule 2.5, Buyer shall use
commercially
9
reasonable (which shall take into account the amount payable by Buyer
to Seller pursuant to this Agreement) efforts during the term of this
Agreement to negotiate and enter into a New Buyer Service Agreement
with respect to each such MDU Property. Upon entering into any such New
Buyer Service Agreement, Buyer shall pay to Seller an amount equal to
"***" for each Converted Subscriber served by Buyer pursuant to such
New Buyer Service Agreement. Buyer shall pay such amount to Seller for
each Converted Subscriber on the first Closing Date occurring after the
date such subscriber becomes a Converted Subscriber (provided that such
subscriber remains a Converted Subscriber on such Closing Date). Except
as set forth in the foregoing sentence, Buyer shall have no obligation
to Seller with respect to the MDU Properties listed on Schedule 2.5.
2.5.4. With respect to each individually billed Eligible
Subscriber who is not served pursuant to a Service Agreement, Buyer
shall pay to Seller a Purchase Price of "***" on the first Closing Date
occurring after the date such Eligible Subscriber becomes a Converted
Subscriber (provided that such subscriber remains a Converted
Subscriber on such Closing Date); and provided, further, that Buyer
shall have no obligation to pay to Seller a Purchase Price for more
than an aggregate of "***" such Converted Subscribers. Buyer's only
payment obligation to Seller with respect to each individually billed
Eligible Subscriber who is not served pursuant to a Service Agreement
is as set forth in this Section 2.5.4, and Buyer shall have no
obligation to Seller with respect to any Eligible Subscriber who
becomes a customer of Buyer, but does not become and remain a Converted
Subscriber until the relevant Closing Date, or with respect to any
payments received by Buyer from Eligible Subscribers or Converted
Subscribers.
2.6. Current Items Amount. As soon as practicable after the Final
Closing Date, Buyer or Seller, as appropriate, shall pay to the other the net
amount of the prorations determined pursuant to this Section 2.6 with respect to
the Assets transferred by Seller to Buyer pursuant to this Agreement (the
"Current Items Amount"). As of the relevant Closing Date, the following expenses
shall be prorated, in accordance with generally accepted accounting principles
consistently applied in the United States ("GAAP") with respect to each Service
Agreement (and directly related Assets) transferred to Buyer at such Closing
Date, so that the following expenses for periods prior to and including the
relevant Closing Date shall be for the account of Seller, and the following
expenses for periods after the relevant Closing Date shall be for the account of
Buyer:
2.6.1. all payments and charges payable by Seller under the
Service Agreements;
2.6.2. general property Taxes, special assessments, and ad
valorem Taxes levied or assessed against any of the Assets;
10
2.6.3. sales and use Taxes, if any, payable with respect to
video entertainment service and related sales under the Service
Agreements transferred to Buyer;
2.6.4. copyright expenses; and
2.6.5. all other items of expense relating to the Assets
during the period prior to the relevant Closing Date;
provided, however, that Seller and Buyer shall not prorate any items of
expense payable under any Excluded Assets, all of which shall remain
and be solely for the account of Seller.
2.7. Current Items Amounts Calculated. Buyer and Seller shall use good
faith efforts to determine the Current Items Amount within 60 days after the
Final Closing Date. If Buyer and Seller are unable to agree on the Current Items
Amount within the period provided herein, the disputed portion of the Current
Items Amount shall be determined by a partner in a major accounting firm with
substantial audit experience with multichannel video entertainment system
operators, but which is not an auditor of either Buyer or Seller (the "Qualified
Auditor"), and the determination of the Qualified Auditor shall be final and
binding upon the parties. If Buyer and Seller cannot agree with respect to
selection of the Qualified Auditor, Buyer and Seller shall each select an
auditor and those two auditors shall select the Qualified Auditor whose
determination shall be final and binding upon the parties. Buyer shall bear 50%
and Seller shall bear 50% of the expenses arising in connection with the
determination of the Qualified Auditor. Not later than 15 days after Seller and
Buyer shall have finally agreed upon the Current Items Amount, or the actual
Current Items Amount is determined by the Qualified Auditor, Seller or Buyer, as
appropriate, shall pay to the other the Current Items Amount.
2.8. Accounts Receivable, Deposits and Advance Payments.
Notwithstanding the provisions of Section 2.6 or anything else in this Agreement
to the contrary: (i) Seller shall retain all accounts receivable (and the right
to collect such accounts receivable in the ordinary course) with respect to the
operation of the MMDS Systems; (ii) Seller shall, promptly after the relevant
Closing, issue a credit to each Converted Subscriber or MDU Property owner, as
applicable, in the amount of that portion of any advance payment made to Seller
for Seller's video services which relates to periods after such Closing; and
(iii) Seller shall, promptly after the relevant Closing, refund any deposit made
by a Converted Subscriber or MDU Property owner, as applicable, in connection
with the video services received from the MMDS Systems, to the extent that
Seller is not entitled to retain such deposit under its applicable agreement
with the Converted Subscriber or MDU Property owner, as applicable.
11
ARTICLE 3
SELLER'S REPRESENTATIONS AND WARRANTIES
Seller represents and warrants to Buyer, as of the date of this
Agreement and as of each Closing, as follows:
3.1. Organization of Seller. Seller is duly organized, validly
existing, and in good standing under the laws of the State of Delaware, and is
duly qualified and in good standing as a foreign corporation in the State of
Texas. Seller has all requisite corporate power and authority to own and lease
the properties and assets it currently owns and leases and to conduct its
activities as such activities are currently conducted.
3.2. Authority. Seller 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 of
this Agreement and the consummation of the transactions contemplated hereby by
Seller have been duly and validly authorized by all necessary action on the part
of Seller, and this Agreement has been duly and validly executed and delivered
by Seller, and is the valid and binding obligation of Seller, enforceable
against Seller in accordance with its terms, except as the same may be limited
by (i) legal principles of general applicability governing the application and
availability of equitable remedies (regardless of whether enforceability is
considered in a proceeding at law or in equity) and (ii) applicable bankruptcy,
insolvency, reorganization moratorium, fraudulent conveyance, or other similar
laws now or hereafter in effect relating to creditors' rights generally.
3.3. No Conflict; Required Consents. The execution, delivery, and
performance by Seller of this Agreement do not and will not (i) conflict with or
violate any provision of the articles of incorporation or bylaws of Seller; (ii)
violate any provision of any Legal Requirements; (iii) except for Consents set
forth on Schedule 3.3 or as otherwise described on Schedule 3.3, conflict with,
violate, result in a breach of, constitute a default under (without regard to
requirements of notice, lapse of time, or elections of other persons, or any
combination thereof) or accelerate or permit the acceleration of the performance
required by agreements to which Seller is a party or by which Seller or the
Assets are bound or affected; (iv) result in the creation or imposition of any
Lien against or upon any of the Assets other than a Permitted Lien; or (v)
except as set forth on Schedule 3.3, require any consent, approval, or
authorization of, or filing of any certificate, notice, application, report, or
other document with, any Person or Governmental Authority, except with respect
to clauses (ii) and (iii) above, any violation, conflict, breach or default that
would not, individually or in the aggregate, materially and adversely affect
Seller's ability to execute, deliver and perform this Agreement.
3.4. Service Agreement and MDU Property Information. Schedule 3.4 sets
forth a true and accurate description of the following information as of the
date of this Agreement:
12
3.4.1. A list of all Service Agreements (by general category
and by market) serving MDU Properties located in the Zip Codes or
otherwise subject to this Agreement, including a designation of the MDU
Property served pursuant to the Service Agreement, a designation of
whether such Service Agreement is exclusive or non-exclusive and a
designation of whether such Service Agreement was renewed or extended
within the six-month period prior to the date of this Agreement.
3.4.2. A list of all Seasonal Service Agreements.
3.4.3. The channel and megahertz capacities of the
distribution systems used in providing video entertainment services to
the MDU Properties.
3.4.4. The number of Equivalent Basic Subscribers served
pursuant to each bulk Service Agreement, and the number of individual
subscribers served pursuant to each non-bulk Service Agreement.
Seller has provided, or will provide within two weeks of the date of
this Agreement, to Buyer true and correct copies of the channel line ups for
each of the MDU Properties identified on Schedule 3.4.
3.5. Title and Condition of On-Premises Equipment. Seller has good and
marketable title to all of the On-Premises Equipment, free and clear of all
Liens, except Permitted Liens. All of the On-Premises Equipment conforms in all
material respects with all Legal Requirements and is in good working order.
3.6. Service Agreements; Eligible Subscribers.
3.6.1. (i) Except as otherwise designated in Schedule 2.5,
Each of the Service Agreements is valid and in full force and effect,
has not expired pursuant to its terms, and, to Seller's Knowledge, is
enforceable in accordance with its terms against the parties thereto;
(ii) Seller has fulfilled when due, or has taken all action necessary
to enable it to fulfill when due, all of its material obligations under
each of the Service Agreements; (iii) there has not occurred any
material default (without regard to lapse of time, the giving of
notice, the election of any party to the Service Agreement other than
Seller, or any combination thereof) by Seller nor, to the Knowledge of
Seller, has there occurred any material default (without regard to
lapse of time, the giving of notice, the election of Seller, or any
combination thereof) by any party to the Service Agreements other than
Seller under any of the Service Agreements; (iv) except as set forth in
Schedule 3.6, neither Seller nor, to the Knowledge of Seller, any other
party to the Service Agreements is in arrears (with respect to payment
of monies, "arrears" being more than 60 days delinquent in payment of
any amount due) in the performance or satisfaction of its material
obligations under any of the Service Agreements, and no waiver or
indulgence has been granted by any of the parties thereto; and (v) the
Service Agreements represent the entire understanding and agreement
13
between the parties thereto with respect to the provision of video
entertainment services to the residents of the covered MDU Properties.
3.6.2. Schedule 3.6 sets forth the approximate number of
Eligible Subscribers and the number of commercial accounts that are
included in the number of Eligible Subscribers for each of the
following areas: Austin, Wichita Falls and Waco/Temple.
3.7. Litigation. Except as described on Schedule 3.7, (i) there is no
outstanding Judgment against Seller requiring Seller to take any action of any
kind with respect to the Assets; and (ii) there is no Litigation pending or
threatened in writing against Seller which, if adversely decided, would
reasonably be expected, individually or in the aggregate, to materially and
adversely affect the Assets or the ability of Seller to perform its obligations
under this Agreement.
3.8. Taxes. Seller has duly and timely paid all Taxes with respect to
the Assets that have become due and payable by it. Seller has received no notice
of, nor does Seller have any Knowledge of, any notice of deficiency or
assessment of proposed deficiency or assessment from any taxing Governmental
Authority with respect to the Assets.
3.9. Compliance with Legal Requirements.
3.9.1. Seller is in compliance with all material Legal
Requirements relating to operation of the MMDS Systems, except where
the failure to so comply would not materially and adversely affect the
Assets or the ability of Seller to perform its obligations under this
Agreement. Seller has received no written notice of any violation by
Seller of any Legal Requirement applicable to the Assets, and has no
Knowledge of any basis for the allegation of any such violation.
3.9.2. Seller has deposited with the United States Copyright
Office all statements of account and other documents and instruments,
and paid all royalties, supplemental royalties, fees and other sums to
the United States Copyright Office required under the Copyright Act
with respect to the services provided pursuant to the Service
Agreements. Seller is in compliance in all material respects with the
Copyright Act and the rules and regulations of the Copyright Office.
3.10. Environmental Laws and Regulations. To Seller's Knowledge, there
has not been any generation, use, transportation, treatment, storage, release or
disposal of any Hazardous Substance by Seller with respect to the operation of
the MMDS Systems that has created or might reasonably be expected to create any
liability under any Legal Requirement; and (ii) any Hazardous Substance handled
or dealt with in any way by Seller on the MDU properties that are the subject of
the Service Agreements has been
14
and is being handled or dealt with in all material respects in compliance with
all applicable Legal Requirements.
3.11. Bonds. There are no fidelity, performance or other bonds, or
letters of credit, posted or required to be posted by Seller in connection with
the Assets.
3.12. No Rights of First Refusal. There exists no right of first
refusal, option or similar right granting to any single Person the right to
purchase any material portion of the Assets, taken together as a whole.
3.13. Other Programmers; Programming Resale. (i) To Seller's Knowledge,
Seller is the only Person that has been granted the right by the owners of each
of the MDU Properties covered by a Service Agreement to provide video
programming to the residents of such MDU Properties; and (ii) with respect to
any bulk-billed Service Agreement, no Person has been granted the right to
re-sell the video programming services provided by Seller at rates that are
materially higher than the rates charged by Seller for such programming under
the applicable Service Agreement.
3.14. No Prior Sales. During the period beginning one year prior to the
date of this Agreement, Seller has not sold, or entered into any agreement or
made any commitment to sell, to any Person any assets or properties relating to
any former or current customers of the MMDS Systems located in any of the Zip
Codes, including the sale, transfer or assignment of any Service Agreement,
that, individually or in the aggregate, has a value that exceeds $50,000.
3.15. ITFS Programming. Schedule 3.15 describes the source and nature
of the educational programming that Seller will provide through its MMDS Systems
in the Restricted Area (as defined in the Non-Competition Covenant) after the
Final Closing Date to comply with the regulations set forth in 47 C.F.R.
Sections 74.931 and 74.932 (the "ITFS Programming").
3.16. Finders and Brokers. Other than Xxxxxxx & Associates, Seller has
not employed any financial advisor, broker or finder or incurred any liability
for any financial advisory, brokerage, finder's or similar fee or commission in
connection with the transaction contemplated by this Agreement. Seller shall
pay, and hold Buyer harmless from and against, any fees owing by Seller to
Xxxxxxx & Associates relating to the transactions contemplated by this
Agreement.
3.17. No Misrepresentation. No representation or warranty by Seller in
this Agreement contains any untrue statement of a material fact, or, to the
Knowledge of Seller, omits to state a material fact necessary to make the
statements contained therein not misleading.
3.18. Taxpayer Identification Number. Seller's U.S. Taxpayer
Identification Number is as set forth in the introductory paragraph of this
Agreement.
15
ARTICLE 4
BUYER'S REPRESENTATIONS AND WARRANTIES
Buyer represents and warrants to Seller, as of the date of this
Agreement and as of each Closing, as follows:
4.1. Organization and Qualification of Buyer. Buyer and each of the
entities comprising Buyer are duly organized, validly existing and in good
standing under the laws of the state of their organization, and are duly
registered to transact business in the State of Texas, to the extent required to
so register as a foreign entity in such state. Each of the entities comprising
Buyer has all requisite power and authority to own and lease the properties and
assets it currently owns and leases and to conduct its activities as such
activities are currently conducted, including in the State of Texas.
4.2. Authority. Buyer has all requisite power and authority to execute,
deliver, and perform this Agreement and consummate the transactions contemplated
hereby. The execution, delivery, and performance of this Agreement and the
consummation of the transactions contemplated hereby on the part of Buyer have
been duly and validly authorized by all necessary action on the part of Buyer.
This Agreement has been duly and validly executed and delivered by Buyer, and is
the valid and binding obligation of Buyer, enforceable against Buyer in
accordance with its terms.
4.3. No Conflict; Required Consents. The execution, delivery, and
performance by Buyer of this Agreement do not and will not (i) conflict with or
violate any provision of the partnership agreement of Buyer; (ii) violate any
provision of any Legal Requirements; (iii) conflict with, violate, result in a
breach of, constitute a default under (without regard to requirements of notice,
lapse of time, or elections of third parties, or any combination thereof),
accelerate, or permit the acceleration of the performance required by, any
agreement to which Buyer is a party or by which Buyer or the assets or
properties owned or leased by it are bound or affected; or (iv) require any
consent, approval or authorization of, or filing of any certificate, notice,
application, report, or other document with, any Governmental Authority or other
Person.
4.4. Litigation. There is no Litigation pending or threatened in
writing against Buyer which, if adversely decided, would reasonably be expected,
individually or in the aggregate, to materially and adversely affect the ability
of Buyer to perform its obligations under this Agreement.
4.5. Taxpayer Identification Number. Buyer's U.S. Taxpayer
Identification Number is as set forth in the introductory paragraph of this
Agreement.
ARTICLE 5
COVENANTS
5.1. Subscriber and Service Agreement Information. Within 15 days after
the date of this Agreement, Seller shall deliver to Buyer true, complete and
correct copies of
16
each of the Service Agreements. In addition, Seller shall deliver to Buyer the
following information within 15 days after the execution of this Agreement: (i)
the contact information for each party other than Seller to the Service
Agreements; (ii) the name, address and payment history of all Eligible
Subscribers (listed, where applicable, by MDU Property); (iii) a description of
the video entertainment and other communications services provided or available
to each Eligible Subscriber and to the residents served pursuant to each of the
Service Agreements; (iv) the recurring bulk or individually billed rates charged
by Seller for the listed services and, for the individually billed subscribers,
the number of subscribers receiving each of the services; (v) the name of any
customer receiving free and/or discounted services from Seller and a description
of the services provided to each such customer; and (vi) the billing system(s)
used with respect to the provision of video services to Eligible Subscribers and
MDU Properties.
5.2. Certain Affirmative Covenants of Seller. Except as Buyer may
otherwise consent in writing, from the date of this Agreement until the relevant
Closing Date, Seller shall (i) maintain the Assets in good working condition,
ordinary wear and tear excepted; (ii) duly comply in all material respects with
all Legal Requirements applicable to the ownership and operation of the Assets;
(iii) perform its obligations under the Service Agreements; (iv) give to Buyer,
and its counsel, accountants, and other representatives, full access upon
reasonable advance notice during normal business hours to the Assets, and
Seller's books and records to the extent relating to the Assets; (v) furnish to
Buyer and such representatives all such additional documents and other
information, including subscriber and subscriber revenue information, with
respect to the Assets as Buyer may from time to time reasonably request,
including system design and as built maps (to the extent described on Schedule
5.2) for each MDU Property served pursuant to a Service Agreement (other than
Excluded Service Agreements); and (vii) take all steps reasonably necessary to
convey the Assets to Buyer at the relevant Closing.
5.3. Certain Negative Covenants of Seller. Except as Buyer may
otherwise consent in writing or as contemplated by this Agreement, between the
date of this Agreement and the relevant Closing Date, Seller shall not (i) take
any action to modify, extend, renew, terminate, suspend, or abrogate any Service
Agreement, except for Service Agreements covering MDU Properties for which
renewal discussions are ongoing as of the date of this Agreement and listed on
Schedule 5.3; (ii) transfer, convey, or otherwise dispose of any of the Assets;
(iii) take any action that would result in the creation of a Lien on any of the
Assets, except a Permitted Lien; or (iv) engage in any marketing, promotions,
offers of discounts, subscriber installation, or collection practices with
respect to the Eligible Subscribers or MDU Properties in the Zip Codes that are
inconsistent with the past practices of Seller. Notwithstanding anything to the
contrary contained herein, Seller may conduct Seller's business in areas other
than those areas covered by the Zip Codes.
5.4. Bulk Sales. Buyer hereby waives compliance by Seller with any
applicable bulk sales law, and Seller agrees to indemnify Buyer and hold Buyer
harmless from and against any and all liability thereunder.
17
5.5. Transfer Taxes. Seller shall pay all sales, use, transfer, and
similar Taxes, fees, and assessments arising from or payable in connection with
the transfer of the Assets to Buyer.
5.6. Consents and Estoppel Letters. Seller shall use its commercially
reasonable efforts to obtain as promptly as reasonably practicable, in
substantially the form of Exhibit B to this Agreement or otherwise in substance
reasonably satisfactory to Buyer, all Consents required to assign the Service
Agreements to Buyer, or with respect to Service Agreements for which a Consent
is not required, an estoppel letter in substantially the form of Exhibit C to
this Agreement (the "Estoppel Letters"). Buyer shall be afforded the opportunity
by Seller to be involved in the process of obtaining Consents and Estoppel
Letters. Seller shall notify Buyer promptly of the receipt of any Consent or
Estoppel Letter.
5.7. Employees of Seller. Seller acknowledges that Buyer shall have no
obligation to offer employment to any of Seller's employees that render services
in connection with the operation of the MMDS Systems. Seller shall pay, remain
solely responsible for, and shall indemnify and hold harmless Buyer from and
against all Losses that Buyer may suffer arising with respect to, all salaries
and all severance, vacation, sick, holiday, and other benefits to which
employees of Seller may be entitled, as a result of their employment by Seller
or the consummation of the transaction contemplated hereby. Seller shall
provide, and shall remain solely responsible for all Losses arising from or with
respect to, any COBRA continuation coverage to which Seller's employees may be
entitled.
5.8. Transitional Matters. Buyer shall use commercially reasonable
efforts to effect a smooth transition from Seller's video entertainment services
to Buyer's cable services and to connect all of the MDU Properties subject to
transferred Service Agreements (each a "Cutover") and all Eligible Subscribers
who order Buyer's cable services to Buyer's cable television system as soon as
commercially reasonable. Except as described in Section 5.15, Buyer shall be
solely responsible for all costs and expenses incurred in connection with each
Cutover.
5.9. Notification of Certain Matters. Seller shall promptly notify
Buyer of any fact, event, circumstance, action or omission (i) which, if known
at the date of this Agreement, would have been required to be disclosed in or
pursuant to this Agreement, or (ii) the existence or occurrence of which would
cause any of Seller's representations or warranties under this Agreement not to
be true in any material respect, and with respect to clause (ii), use
commercially reasonable efforts to remedy the same.
5.10. Commercially Reasonable Efforts. Buyer and Seller shall each use
commercially reasonable efforts to take all steps within its power, and will
cooperate with the other party, to cause to be fulfilled those of the conditions
to the other party's obligations to consummate the transactions contemplated by
this Agreement that are dependent upon its actions, and to execute and deliver
such instruments and take such other commercially reasonable actions as may be
necessary to carry out the intent of this
18
Agreement and to consummate the transactions contemplated hereby; provided,
however, that Seller shall not be required to pay any money or incur any other
obligation in order to obtain any Consent.
5.11. Confidentiality and Publicity.
5.11.1. Any non-public information that either party may
obtain from the other in connection with this Agreement shall be
confidential, and following the relevant Closing Date, each party shall
keep confidential any non-public information that such party may
receive from another party in connection with this Agreement unrelated
to the MMDS systems or Assets as well as any non-public information in
the possession of such party related to the MMDS systems and Assets
(any such information that a party is required to keep confidential
pursuant to this sentence shall be referred to as "Confidential
Information"). Each party shall not disclose any Confidential
Information to any other Person (other than its affiliates and its and
their directors, officers and employees, and representatives of its
advisers and lenders, in each case, whose knowledge thereof is
necessary in order to facilitate the consummation of the transactions
contemplated hereby) or use such information to the detriment of the
other; provided that (i) such party may use and disclose any such
information once it has been publicly disclosed (other than by such
party in breach of its obligations under this Section) or which, to its
knowledge, rightfully has come into the possession of such party (other
than from the other party), and (ii) to the extent that such party may,
in the reasonable judgment of its counsel, be compelled by Legal
Requirements to disclose any of such information, such party may
disclose such information if it has used commercially reasonable
efforts, and has afforded the other the opportunity, to obtain an
appropriate protective order, or other satisfactory assurance of
confidential treatment, for the information compelled to be disclosed
(except with respect to information required to be disclosed under
applicable federal and state securities laws, which shall be governed
by Section 5.11.2 below). The non-disclosing party shall reasonably
cooperate with the disclosing party in obtaining any protective order
or other assurance of confidential treatment. In the event of
termination of this Agreement, the obligation set forth in this Section
shall continue for a period of two years after such termination.
5.11.2. Seller and Buyer shall consult with and cooperate with
the other with respect to the content and timing of all press releases
and other public announcements concerning this Agreement and the
transactions contemplated hereby. Except as required by applicable
Legal Requirements, neither Seller nor Buyer shall make any such
release, announcement, or statements without the prior written consent
and approval of the other, and each shall keep the existence and terms
of this Agreement confidential.
19
5.11.3. Except as otherwise provided herein, neither party
will at any time use any service marks, trademarks, service names,
trade names or logos of the other party without the prior written
consent of such other party.
5.12. MMDS Equipment. After each Closing, Seller shall promptly remove
all antennas and converter boxes used in connection with the MMDS System from
the premises of Converted Subscribers that were the subject of the Closing and
from the MDU Properties served pursuant to the Service Agreements transferred at
such Closing. From and after the Final Closing Date, Seller shall have the right
to transfer any rights it has in existing wiring, antennas, converter boxes, and
other Excluded Assets to Eligible Subscribers who did not become Converted
Subscribers and to other customers of Seller located in one of the Zip Codes who
are not Eligible Subscribers and, in such event, shall require each such
Eligible Subscriber or customer to sign a statement waiving and releasing any
claims and liabilities against Seller, Buyer and Buyer's affiliates (the
"Equipment Release").
5.13. Certain Programming Matters. From and after the date of this
Agreement, Seller shall not add any programming services to the programming
offered by Seller to the MDU Properties or other Eligible Subscribers without
Buyer's prior written consent.
5.14. Service Agreements. Buyer shall have the right to seek a renewal,
extension or replacement (which shall not take effect in any event until and
unless Closing occurs with respect to a Service Agreement, and which shall not
affect the calculation of the Purchase Price with respect to the Service
Agreement) of each Service Agreement (other than Excluded Service Agreements)
that may expire prior to December 31, 2002, in accordance with its terms;
provided, however, that Buyer shall not seek any renewal, extension or
replacement of any such Service Agreement which requires a Consent until such
Consent has been obtained. Buyer's rights pursuant to this Section 5.14 shall
include the right to contact the owner (or its representative) of the MDU
Property to which the Service Agreement relates, and to negotiate such terms
with respect to the extension, renewal or replacement agreement as Buyer shall
determine in its sole discretion.
5.15. Signal Leakage. Seller shall reimburse Buyer for the reasonable
costs and expenses incurred by Buyer in performing any correction of radiation
leakage relating to On-Premises Equipment included in the Assets that is
required under the rules and regulations of the FCC.
5.16. Legal Proceedings. If any Governmental Authority commences any
action, investigation, suit or proceeding against either party that could delay,
prevent or make illegal the consummation of any transactions contemplated by
this Agreement, the parties will use their commercially reasonable efforts to
(a) respond as promptly as reasonably practicable to any inquiries or requests
received from such Governmental Authority for information or documentation in
connection with such matter and (b) overcome any objections that may be raised
by such Governmental Authority to the transactions contemplated by this
Agreement. Notwithstanding the foregoing, if Buyer
20
determines in its reasonable discretion that (i) the inquiries or requests for
information and documentation by such Governmental Authority are unduly
burdensome to it, (ii) compliance with such inquiries or requests would result
in the transactions contemplated by this Agreement not being consummated by the
Final Closing Date, or (iii) such action, investigation, suit or proceeding
could result in the imposition by the Governmental Authority of conditions that
would be unduly burdensome to Buyer or would materially change the terms,
conditions or character of the transactions contemplated by this Agreement, then
Buyer may terminate this Agreement by so notifying Seller; provided, that such
termination shall not relieve Buyer of its obligations to Seller with respect to
Converted Subscribers as of the date of termination (including payment of the
Purchase Price for Converted Subscribers), subject to the satisfaction of the
conditions set forth in Section 6.1, and in the event of such termination, and
except as provided in this Section 5.16 and Section 8.2, Buyer and Seller shall
have no further liability or obligation to the other party under this Agreement,
including any Non-Competition Covenant executed by Seller in connection
herewith.
5.17. Marketing to Eligible Subscribers.
5.17.1. From and after the date of this Agreement with respect
to Eligible Subscribers who are not served pursuant to a Service
Agreement, and from and after the relevant Closing Date with respect to
Eligible Subscribers who are served pursuant to a Service Agreement
transferred to Buyer, Buyer shall use commercially reasonable efforts
to market its cable television services to each Eligible Subscriber and
to maximize the number of Converted Subscribers. Except as provided in
Section 5.17.2, "commercially reasonable efforts" shall not require
Buyer to offer an Eligible Subscriber any discounts or other economic
incentives to become a Converted Subscriber, nor shall it require Buyer
to advertise or promote its cable television services outside of the
ordinary course of business.
5.17.2. With respect to Eligible Subscribers who reside in
single family dwelling units and commercial accounts, Buyer shall make,
within 30 days after Buyer receives a complete and accurate list of
names and addresses of such Eligible Subscribers, a written offer, in a
form mutually agreed upon by Buyer and Seller (Seller not to
unreasonably withhold or delay its consent to Buyer's proposed offer),
to each Eligible Subscriber soliciting such Eligible Subscriber to
subscribe to Buyer's cable television service. Such written offer shall
include free installation, as well as any other promotion that Buyer is
then offering to similarly situated potential customers in the market
in which such Eligible Subscriber resides. The written offer shall
expire four months from the date it is made.
5.17.3. With respect to Eligible Subscribers who reside in a
MDU Property, Buyer shall make a written offer in accordance with the
provisions of
21
Section 5.17.2 no later than 10 days after the Closing that includes
the Service Agreement that relates to such MDU Property.
5.18. Cessation of Marketing and Sales Activities. From and after the
date of this Agreement, Seller shall not (i) market its MMDS video entertainment
services, including the ITFS Programming, to, (ii) accept new orders for its
MMDS video entertainment services, including the ITFS Programming, from, and
(iii) resell any video entertainment services provided by others (including DBS
or SMATV) to, any Person who resides in any area covered by the Zip Codes or to
any MDU Property. Except as provided in Section 5.16, the obligations under this
Section 5.18 shall survive the Final Closing Date for a period of five years.
Notwithstanding the foregoing, this Section 5.18 shall not restrict Seller's
ability to (a) offer, market, sell, provide or otherwise deploy Non-Video
Services (as defined in the Non-Competition Covenant); (b) after the Final
Closing Date, offer and provide the ITFS Programming at no charge to any
Eligible Subscriber who did not become a Converted Subscriber and to any other
customer of Seller located in one of the Zip Codes who was not an Eligible
Subscriber, to the extent such Eligible Subscriber or customer signs an
Equipment Release; or (c) transmit a signal containing ITFS Programming through
the MMDS Systems, as permitted by the Non-Competition Covenant.
5.19. No Solicitation; Eligible Subscriber Information. Between the
date of this Agreement and the earlier of (i) the expiration or termination of
this Agreement, and (ii) the Final Closing Date, Seller shall not, and shall
cause its directors, officers, employees, agents and representatives not to, (a)
initiate, solicit or encourage, directly or indirectly, any inquiries or the
making of any proposal with respect to the Service Agreements or the Eligible
Subscribers, or (b) engage in any negotiations concerning, or provide to any
Person any information or data relating to the Service Agreements or Eligible
Subscribers for the purpose of, or have any discussions with any Person or
encourage any inquiries or the making of any proposal that constitutes or may
reasonably be expected to lead to, any effort or attempt by any other Person to
seek, the acquisition, directly or indirectly, of any of the Service Agreements
or the right to provide video entertainment services to any of the Eligible
Subscribers. From and after the Final Closing Date, Seller shall not, and shall
cause its directors, officers, employees, agents and representatives not to,
sell, transfer or otherwise make available to any Person engaged in the
distribution of video entertainment services any information, records or files
relating to any customer or former customer of Seller's video entertainment
services who is located in one of the Zip Codes or who is an owner of an MDU
Property.
22
ARTICLE 6
CONDITIONS PRECEDENT
6.1. Conditions to Buyer's Obligations. The obligation of Buyer to
consummate the transactions contemplated by this Agreement at any Closing shall
be subject to the following conditions, any of which may be waived by Buyer in
its sole discretion:
6.1.1. Accuracy of Representations and Warranties. Each of the
representations and warranties of Seller in this Agreement or in any
Transaction Document, to the extent qualified by materiality, shall be
true and accurate, and to the extent unqualified, shall be true and
accurate in all material respects, in each case at and as of the
relevant Closing Date with the same effect as if made at and as of such
Closing Date, except for changes permitted or contemplated by this
Agreement.
6.1.2. Performance Of Agreements. Seller shall have performed
in all material respects all obligations and agreements and complied
with all covenants in this Agreement or in any Transaction Document to
be performed and complied with by it at or before the relevant Closing.
6.1.3. Legal Proceedings. There shall be no Legal Requirement,
and no Judgment shall have been entered and not vacated by any
Governmental Authority with legal jurisdiction in connection with any
Litigation, which (i) enjoins, restrains, makes illegal, or prohibits
consummation of the transactions contemplated by this Agreement, or
(ii) requires separation or divestiture by Buyer of all or any
significant portion of the Assets after the Closing Date, and there
shall be no Litigation pending or threatened seeking, or which if
successful would have the effect of, any of the foregoing.
6.1.4. Consents and Estoppel Letters. As to each Service
Agreement to be transferred at the particular Closing, Buyer shall have
received originals (or copies if originals are not reasonably
available), in form and substance satisfactory to Buyer, of the Consent
or Estoppel Letter for such Service Agreement.
6.1.5. Lien Releases. There shall exist no Liens (other than
Permitted Liens) affecting the On-Premises Equipment to be transferred
at the particular Closing.
6.1.6. Non-Competition Covenant. With respect to the Final
Closing Date, Buyer shall have received a counterpart executed by
Seller of a Non-Competition Covenant in the form of Exhibit D to this
Agreement (the "Non-Competition Covenant").
23
6.1.7. Deliveries. Seller shall have made or stand willing to
and able to make all of the deliveries to Buyer set forth in Section
7.3.
6.1.8. No Material Adverse Change. The Assets to be acquired
at the particular Closing have not been materially and adversely
affected as a result of any fire, explosion, accident, casualty, labor
trouble, hurricane, flood, drought, riot, storm, condemnation,
terrorist act, act of God, act of public force or otherwise.
6.1.9. Cutover. Buyer shall have obtained any access and
easement rights necessary, in its reasonable discretion, to provide its
cable television service to the MDU Property covered by the Service
Agreement to be transferred at such Closing, and such MDU Property
shall have been Cutover to Buyer's cable television system.
6.1.10. Tax Clearance Certificates. Seller shall have provided
to Buyer, prior to the First Closing Date and to the Final Closing
Date, tax clearance letters from the State Tax Assessor for the State
of Texas with respect to all applicable state Taxes, dated in each case
no earlier than 30 days prior to such Closing Date.
6.1.11. FTC Approval. The Federal Trade Commission shall have
been advised of the transactions contemplated by this Agreement and (i)
shall have declined to take any further action with respect thereto, or
(ii) having reviewed the transactions contemplated by this Agreement,
shall have indicated that it will not object to the consummation of
such transactions.
6.2. Conditions to Seller's Obligations. The obligation of Seller to
consummate the transactions contemplated by this Agreement at any Closing shall
be subject to the following conditions, any of which may be waived by Seller in
its sole discretion:
6.2.1. Accuracy of Representations and Warranties. The
representations and warranties of Buyer in this Agreement or in any
Transaction Document shall be true and accurate at and as of the
relevant Closing Date with the same effect as if made at and as of such
Closing Date, except for changes permitted or contemplated by this
Agreement.
6.2.2. Performance of Agreements. Buyer shall have performed
in all material respects all obligations and agreements and complied
with all covenants in this Agreement or in any Transaction Document to
be performed and complied with by it at or before Closing.
6.2.3. Legal Proceedings. There shall be in effect no Legal
Requirement, and no Judgment shall have been entered and not vacated by
any Governmental Authority with legal jurisdiction in connection with
any Litigation, which enjoins, restrains, makes illegal, or prohibits
consummation of the transactions
24
contemplated hereby, and there shall be no Litigation pending or
threatened seeking, or which if successful would have the effect of,
the foregoing.
6.2.4. Deliveries. Buyer shall have made or stand willing to
and able to make all of the deliveries to Seller set forth in Section
7.3.
ARTICLE 7
CLOSING
7.1. Closings; Time and Place. The closing of the transactions
contemplated by this Agreement shall occur periodically (each, a "Closing"),
upon the satisfaction or waiver of all of the conditions set forth in Sections
6.1 and 6.2, and shall take place at a time and location and in the manner
mutually determined by Buyer and Seller. Except as otherwise agreed by the
parties, the first Closing shall occur on the first business day of the calendar
month immediately following the month in which the condition set forth in
Section 6.1.11 is satisfied (the "First Closing Date"), unless such condition is
satisfied during the last five business days of the calendar month, in which
case the First Closing Date shall be the first business day of the second
calendar month following the month in which such condition is satisfied. Except
as otherwise agreed by the parties, subsequent Closings shall occur on the first
business day of each calendar month following the First Closing Date for a
period of five months (the date of the last such Closing being the "Final
Closing Date"). Subject to the provisions of Section 2.1, it is the intent of
the parties that a Closing occur with respect to each Service Agreement and the
Assets relating thereto, on the first Closing Date following the satisfaction or
waiver of all conditions set forth in Section 6.1 and 6.2 with respect to such
Service Agreement and related Assets. Similarly, it is the intention of the
parties that a Closing occur with respect to each Converted Subscriber on the
first Closing Date following the date on which such Eligible Subscriber became a
Converted Subscriber. Buyer shall have no obligation to pay Seller for any
Eligible Subscriber who is not a Converted Subscriber prior to the Final Closing
Date, notwithstanding that such Eligible Subscriber is or becomes a subscriber
of Buyer's cable television service.
7.2. Guarantee. If Closings do not occur with respect to Service
Agreements and Converted Subscribers (excluding New Buyer Service Agreements and
Converted Subscribers served pursuant to New Buyer Service Agreements), in the
aggregate, comprising at least "***" of the Base Number of Subscribers (the
"Guaranteed Number"), then Buyer shall pay to Seller, on the Final Closing Date,
an amount equal to "***" multiplied by the excess of the Guaranteed Number over
the actual number of Equivalent Basic Subscribers and Converted Subscribers for
which (i) a Closing has occurred or will occur on the Final Closing Date and
(ii) the Purchase Price has been paid or will be paid on the Final Closing Date
to Seller.
For purposes of this Section 7.2, the "Base Number of Subscribers" is
the sum of (a) the Equivalent Basic Subscribers served pursuant to all bulk
Service Agreements (excluding any Service Agreements that (1) are not in writing
or have expired as of the Final Closing Date (including those bulk Service
Agreement relating to the MDU
25
Properties listed on Schedule 2.5), (2) do not grant the rights reasonably
required by Buyer to install, maintain and operate its cable television system
on the premises of the MDU Property and/or provide cable television services to
the residents of the MDU Property, (3) contain terms and conditions (financial
or operational) that are materially different than the terms and conditions of
the forms of Service Agreement attached as Exhibits X-0, X-0 xxx X-0 to this
Agreement, (4) with respect to which, either Seller or the MDU Property owner
which is party to the Service Agreement is in material default of its
obligations thereunder as of the Final Closing Date, or (5) with respect to
which, the MDU Property owner is more than 60 days delinquent in payment for
cable television services previously provided by Buyer), and (b) the lesser of
(y) 5,690 and (z) the aggregate number of Eligible Subscribers.
7.3. Seller's Obligations. At each Closing, Seller shall deliver or
cause to be delivered to Buyer, with respect to the Service Agreements and
related Assets that are the subject of such Closing, the following:
7.3.1. Assignment and Xxxx of Sale. An Assignment and Xxxx of
Sale in the form of Exhibit E transferring the relevant Assets from
Seller to Buyer.
7.3.2. Officer's Certificate. A certificate executed by an
officer of Seller, dated as of Closing, reasonably satisfactory in form
and substance to Buyer, certifying that the conditions specified in
Sections 6.1.1 and 6.1.2 have been satisfied.
7.3.3. Books and Records. To the extent not previously
delivered, copies of all MDU Agreements, customer and subscriber lists,
and other files and records relating to the transferred Assets.
7.3.4. Other. Such other documents and instruments as shall be
necessary to effect the intent of this Agreement and consummate the
transactions contemplated hereby.
7.4. Buyer's Obligations. At each Closing, Buyer shall deliver or cause
to be delivered to Seller, with respect to the Service Agreements and related
Assets that are the subject of such Closing, the following:
7.4.1. Purchase Price. The Purchase Price for the relevant
Assets transferred at Closing and for each new Converted Subscriber as
of such Closing Date, as determined pursuant to Section 2.5.
7.4.2. Assumption Agreement. A fully executed Assumption
Agreement in the form of Exhibit F pursuant to which Buyer shall
assume, effective as of the Closing Date, the Assumed Obligations and
Liabilities with respect to the Assets transferred on such Closing
Date.
26
ARTICLE 8
TERMINATION AND DEFAULT
8.1. Termination Events. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned:
8.1.1. at any time, by the mutual written agreement of Buyer
and Seller;
8.1.2. by either Buyer or Seller, upon written notice to the
other, at any time, if the other is in material breach or material
default of its respective covenants, agreements, or other obligations
herein, or if any of its representations herein are not true and
accurate when made or when otherwise required by this Agreement to be
true and accurate, and such breach, default or failure is not cured
within 30 days of receipt of notice that such breach, default or
failure exists or has occurred; provided, that such terminating party
is not at such time in material breach or material default of its
representations, warranties, covenants, agreements or other obligations
herein;
8.1.3. at any time after the Final Closing Date, upon written
notice by one party to the other, with respect to any Assets that have
not been transferred by Seller to Buyer by the Final Closing Date;
8.1.4. by either Buyer or Seller, upon written notice to the
other party, if the condition to the obligation of Buyer to consummate
the transactions contemplated by this Agreement set forth in Section
6.1.11 has not been satisfied or waived by Buyer on or prior to the
date which is 60 days from the date of this Agreement; or
8.1.5. as otherwise provided herein.
8.2. Effect of Termination. If this Agreement is terminated pursuant to
Section 8.1, all obligations of the parties under this Agreement will terminate,
except (a) that each party will pay the costs and expenses incurred by it in
connection with this Agreement, and neither party will be liable to the other
for any costs, expenses or damages except as expressly provided herein; (b) that
each party will redeliver all documents, work papers and other material of the
other party relating to the transactions contemplated hereby, whether so
obtained before or after execution hereof, to the party furnishing the same; (c)
that all confidential information received by either party with respect to the
business of the other party or any of its affiliates will be treated in
accordance with Section 5.11; and (d) as provided in Sections 5.16 and 10.1.
Notwithstanding a party's right to pursue remedies for breach of contract upon
termination of this Agreement in accordance with Section 8.1, no remedies for
breaches of representations and warranties will be available if this Agreement
is terminated pursuant to Sections 8.1.1 and 8.1.3. Furthermore, in the event
this Agreement is terminated pursuant to Section 8.1 before the Final Closing
Date, no party to this
27
Agreement will be liable for any incidental, consequential, exemplary, special
or punitive damages in connection with any claim for breach of this Agreement.
ARTICLE 9
INDEMNIFICATION
9.1. Indemnification by Seller. From and after the First Closing Date,
and regardless of any investigation made at any time by or on behalf of Buyer or
any information Buyer may have, Seller shall defend, indemnify and hold harmless
Buyer, its affiliates, partners, officers, directors, employees, agents, and
representatives, and any third party claiming by or through any of them, as the
case may be, from and against any and all Losses arising out of or resulting
from:
9.1.1. any representations and warranties made by Seller in
this Agreement or in any Transaction Document not being true and
accurate when made or when required by this Agreement or such
Transaction Document to be true and accurate;
9.1.2. any failure by Seller to perform any of its material
covenants, agreements, or obligations in this Agreement or in any
Transaction Document;
9.1.3. all liabilities and obligations of Seller, and all
claims and demands made in respect thereof, whether or not known or
asserted at or prior to the relevant Closing Date (other than the
Assumed Obligations and Liabilities);
9.1.4. the operation of the MMDS Systems prior to the relevant
Closing Date;
9.1.5. any liabilities relating to Seller's employees asserted
under any Legal Requirement or otherwise pertaining to any labor or
employment matter arising out of actions occurring prior to the
relevant Closing Date;
9.1.6. all obligations and liabilities arising out of or
relating to the Excluded Assets; and
9.1.7. any liabilities arising under any bulk sales laws
applicable to the transactions contemplated hereby.
If, by reason of the claim of any Person relating to any of the matters to which
Buyer is entitled to such indemnification, a Lien is placed or made upon any of
the properties or assets owned or used by Buyer or any other indemnitee
hereunder, in addition to any indemnity obligation of Seller under this Article,
if the Lien is not released within 30 days after Seller is made aware of the
Lien, Seller, if legally possible, shall furnish a bond sufficient to obtain the
prompt release thereof within five days from receipt of notice relating thereto.
28
9.2. Indemnification by Buyer. From and after the First Closing Date,
Buyer shall defend, indemnify and hold harmless Seller, its affiliates,
shareholders, officers, directors, employees, agents, and representatives, and
any third party claiming by or through any of them, as the case may be, from and
against any and all Losses arising out of or resulting from:
9.2.1. any representations and warranties made by Buyer in
this Agreement or in any Transaction Document not being true and
accurate when made or when required by this Agreement or such
Transaction Document to be true and accurate;
9.2.2. any failure by Buyer to perform any of its covenants,
agreements, or obligations in this Agreement or in any Transaction
Document; and
9.2.3. the Assumed Obligations and Liabilities.
9.3. Claims for Indemnity; Third Party Claims.
9.3.1. Whenever a claim for Losses shall arise for which one
party ("Indemnitee") shall be entitled to indemnification under this
Article 9, Indemnitee shall notify the indemnifying party
("Indemnitor") in writing promptly after the first receipt of notice of
such claim, and in any event within such period as may be necessary for
Indemnitor to take appropriate action to resist such claim. Such notice
shall specify all facts known to Indemnitee giving rise to such
indemnification rights. The right of Indemnitee for indemnification, as
set forth in the notice, shall be deemed agreed to by Indemnitor
unless, within 30 days after receipt of such notice, Indemnitor shall
notify Indemnitee in writing that it disputes the right of Indemnitee
to indemnification. If Indemnitee shall be duly notified of such
dispute, the parties shall attempt to settle and compromise the same
first by referring such matters to an executive officer of each party
prior to commencing any Litigation to interpret the terms of this
Agreement.
9.3.2. Upon receipt by Indemnitor of a notice from Indemnitee
with respect to any claim of a third party against Indemnitee, and
acknowledgment by Indemnitor (whether after resolution of a dispute or
otherwise) of Indemnitee's right to indemnification hereunder with
respect to such claim, Indemnitor shall assume the defense of such
claim with counsel reasonably satisfactory to Indemnitee and Indemnitee
shall cooperate to the extent reasonably requested by Indemnitor in
defense or prosecution thereof and shall furnish such records,
information and testimony and attend all such conferences, discovery
proceedings, hearings, trials and appeals as may be reasonably
requested by Indemnitor in connection therewith. If Indemnitor shall
acknowledge Indemnitee's right to indemnification and elect to assume
the defense of such claim, Indemnitee shall have the right to employ
its own counsel in any such case, but the fees and expenses of such
counsel shall be at the expense of Indemnitee. If Indemnitor has
assumed the defense of any claim against
29
Indemnitee, Indemnitor shall have the right to settle any claim for
which indemnification has been sought and is available hereunder;
provided that, to the extent that such settlement requires Indemnitee
to take, or prohibits Indemnitee from taking, any action or purports to
obligate Indemnitee, then Indemnitor shall not settle such claim
without the prior written consent of Indemnitee, such consent not to be
unreasonably withheld. If Indemnitor does not assume the defense of a
third party claim or disputes Indemnitee's right to indemnification,
Indemnitee shall have the right to defend against such claim until
Indemnitor's obligation to indemnify is established pursuant to this
Section 9.3, and Indemnitor shall have the right to participate in the
defense of such claim through counsel of its choice, at Indemnitor's
expense, but Indemnitee shall have control over the defense and
authority to resolve such claim subject to this Section 9.3.
9.4. Survival of Representations and Warranties and Covenants. Unless
specified otherwise in this Agreement, the representations and warranties of
Seller and Buyer in this Agreement shall survive the Final Closing Date for a
period of 12 months, except for (i) those contained in Sections 3.1, 3.2, 3.3,
the first sentence of Section 3.5, and Sections 3.12, 4.1, 4.2 and 4.3, which
shall survive indefinitely, and (ii) those contained in Sections 3.8, 3.9 and
3.10, which shall survive for 30 days after the expiration of the applicable
statute of limitations. Seller and Buyer shall have no liability under Sections
9.1.1 and 9.2.1, respectively, unless a claim for Losses for which
indemnification is sought thereunder is asserted by Buyer or Seller, as the case
may be, within the applicable survival period. Unless specified otherwise in
this Agreement, the covenants of the parties shall survive the Final Closing
Date indefinitely.
9.5. Threshold; Limitation on Indemnification. An Indemnitor shall not
be liable for indemnification pursuant to Section 9.1.1 or 9.2.1, as applicable,
unless the amount of such Losses for which the Indemnitor, but for the
provisions of this Section 9.5, would be liable exceeds, on an aggregate basis,
$10,000 (the "Threshold Amount"), provided that the Threshold Amount shall not
apply to Buyer's obligation to pay the Purchase Price pursuant to the terms of
this Agreement. If the Threshold Amount is exceeded, the Indemnitor shall be
liable for the amount of the Losses exceeding the Threshold Amount. The maximum
aggregate amount that Seller shall be required to pay with respect to its
indemnification obligation under Section 9.1.1 or 9.2.1 in respect of claims by
all Indemnitees shall be the aggregate Purchase Price paid by Buyer to Seller.
The maximum aggregate amount that Buyer shall be required to pay with respect to
its indemnification obligation under Section 9.2.1 or 9.2.2 in respect of claims
by all Indemnitees shall be the aggregate Purchase Price due and owing by Buyer
to Seller (including the amount payable under Section 7.2, if any).
9.6. Exclusive Remedy. From and after the Final Closing Date, and
except for Section 2.7, the parties' sole and exclusive remedy in connection
with or arising out of this Agreement or any Transaction Document shall be
indemnification pursuant to this Article 9.
30
ARTICLE 10
MISCELLANEOUS PROVISIONS
10.1. Expenses. Except as otherwise provided in this Agreement, each of
the parties shall pay its own expenses and the fees and expenses of its counsel,
accountants, and other experts in connection with this Agreement.
10.2. Waivers. No action taken pursuant to this Agreement, including
any investigation by or on behalf of any party hereto, shall be deemed to
constitute a waiver by the party taking the action of compliance with any
representation, warranty, covenant or agreement herein. The waiver by any party
hereto of any condition or of a breach of another provision of this Agreement
shall not operate or be construed as a waiver of any other condition or
subsequent breach. The waiver by any party of any of the conditions precedent to
its obligations under this Agreement shall not preclude it from seeking redress
for breach of this Agreement other than with respect to the condition so waived.
10.3. Notices. All notices, requests, demands, applications, services
of process, and other communications which are required to be or may be given
under this Agreement shall be in writing and shall be deemed to have been duly
given if sent by facsimile transmission, courier, certified first class mail,
postage prepaid, return receipt requested, or overnight delivery service to the
parties hereto at the following addresses:
To Seller: Nucentrix Broadband Networks
0000 Xxxxxxxxxxxxx Xxxxxxx
Xxxxx 0000
Xxxxxxxxxx, XX 00000-0000
Attention: General Counsel
Facsimile No.: (000) 000-0000
Xxxxxx & Xxxxxx, LLP
3700 Xxxxxxxx Xxxx Center
0000 Xxxx Xxx.
Xxxxxx, XX 00000-0000
Attn: Xxxxxx X. Xxxxx
Facsimile No.: (000) 000-0000
To Buyer: Time Warner Entertainment-Advance/Xxxxxxxx
Partnership
c/o Time Warner Cable
000 Xxxxxx Xxxxx
Xxxxxxxx, XX 00000
Attention: Xx. Xxxxxx X. Xxxxxx
Facsimile: (000) 000-0000
31
Copies to: Legal Department
(at the address and facsimile number above)
Attention: General Counsel
and
Xxxxxxx & Xxxx XXX
X.X. Xxx 0000 (80201)
000 Xxxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx
Facsimile: (000) 000-0000
or to such other address as any party shall have furnished to the other by
notice given in accordance with this Section. Such notice shall be effective,
(i) if sent by facsimile transmission, when confirmation of transmission is
received, or (ii) otherwise, upon actual receipt or rejection by the intended
recipient.
10.4. Risk of Loss. The risk of any loss or damage to the Assets
resulting from fire, theft or any other casualty (except reasonable wear and
tear) shall be borne by Seller at all times prior to the relevant Closing Date
with respect to such Assets.
10.5. Binding Effect; Benefits. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns. Except for the assignment by Buyer to any
affiliate of or partner in Buyer, neither Buyer nor Seller shall assign this
Agreement or delegate any of its duties hereunder to any other party without the
prior written consent of the other, which consent shall not be unreasonably
withheld.
10.6. Entire Agreement; Amendments. This Agreement and the Exhibits and
Schedules hereto embody the entire agreement between the parties hereto with
respect to the subject matter hereof and supersedes all prior agreements and
understandings, oral or written, with respect thereto. This Agreement may not be
modified orally, but only by an agreement in writing signed by the party or
parties against whom any waiver, change, amendment, modification, or discharge
may be sought to be enforced.
10.7. Governing Law; Jurisdiction. The laws of the State of
New York
shall govern the validity, performance, and enforcement of this Agreement.
10.8. Counterparts. This Agreement may be executed in any number of
counterparts, each of which, when executed, shall be deemed to be an original
and all of which together will be deemed to be one and the same instrument.
10.9. Further Assurances. From time to time after the relevant Closing
Date, Seller shall, if requested by Buyer, make, execute and deliver to Buyer
such additional
32
assignments, bills of sale, deeds and other instruments of transfer, as may be
necessary or proper to transfer to Buyer all of Seller's right, title, and
interest in and to the Assets.
10.10. Schedules and Exhibits; Headings. All references herein to
schedules and exhibits are to the schedules and exhibits attached hereto, which
shall be incorporated in and constitute a part of this Agreement by such
reference. The headings in this Agreement are for the purpose of reference only
and shall not limit or otherwise affect the meaning of this Agreement.
[SIGNATURE PAGE FOLLOWS]
33
The parties have executed this Agreement as of the date set forth
above.
SELLER:
NUCENTRIX BROADBAND NETWORKS, INC
By: /s/ XXXXXXX X. XxXXXXX
-------------------------------
Name: Xxxxxxx X. XxXxxxx
-------------------------------
Title: President and CEO
-------------------------------
BUYER:
TIME WARNER ENTERTAINMENT-
ADVANCE/XXXXXXXX PARTNERSHIP
By: Time Warner Entertainment
Company, L.P., its managing
general partner, through its
Time Warner Cable division
By: /s/ XXXXXX X. XXXXXX
--------------------------
Xxxxxx X. Xxxxxx
Vice President
34
