ASSET PURCHASE AGREEMENT dated October 19, 2006 by and between CONSOLIDATED SMART BROADBAND SYSTEMS, LLC and MULTIBAND CORPORATION
dated
October 19, 2006
by
and between
CONSOLIDATED
SMART BROADBAND SYSTEMS, LLC
and
MULTIBAND
CORPORATION
THIS
ASSET PURCHASE AGREEMENT (the “Agreement”) is made and entered into as of
October 19, 2006, by and between Multiband Corporation, a Minnesota corporation
(“Multiband”), and Rainbow Satellite Group, LLC, a Connecticut limited liability
company and wholly owned subsidiary of Multiband (“Rainbow” and together with
Multiband, the “Sellers” and individually, a “Seller”), and Consolidated Smart
Broadband Systems, LLC, a California limited liability company
(“Purchaser”).
WHEREAS,
Sellers provide
voice, data, and video services, including cable television and Internet
services, to multiple dwelling unit customers in the United States (the “Private
Cable Operator Business”).
WHEREAS,
Sellers wish to sell to Purchaser, and Purchaser wishes to buy from Sellers,
certain assets used by Sellers in the conduct of each Seller’s Private Cable
Operator Business in California (collectively, the “Business”) on the terms and
for the consideration hereinafter provided.
NOW
THEREFORE, in consideration of the respective representations, warranties,
covenants and agreements contained herein, and subject to the terms and
conditions set forth herein, the parties hereto agree as follows:
ARTICLE
1
DEFINITIONS
1.1 Specific
Xxxxxxxxxxx.Xx
used
in this Agreement, the following terms shall have the meanings set forth or
referenced below:
(a) “Affiliate”
of
a
specified Person means a Person that directly or indirectly through one or
more
intermediaries, controls, or is controlled by, or is under common control with,
the person specified. “Control” shall mean ownership of more than 50% of the
shares of stock entitled to vote for the election of directors in the case
of a
corporation, and more than 50% of the voting power in the case of a business
entity other than a corporation.
(b) “Annualized
Average Normalized PPC”
means,
with respect to each XXX Property, the average of the prepaid programming
commissions normalized to reflect a prepaid programming commission rate of
$175.00 per DTH Subscriber activation for the eight month period ending on
August 31, 2006 with respect to the calculation of the Purchase Price,
annualized to convert the normalized 8-month prepaid programming commissions
to
an annual amount, and (ii) for the six month period ending on November 30,
2007
with respect to the calculation of the Earnout Amount, annualized to convert
the
normalized 6-month prepaid programming commissions to an annual amount.
(c) “Assets”
means
(i) all of the XXX Agreements, (ii) all inventory and equipment owned by Sellers
related to the Business and the Assets, including, without limitation, all
the
equipment listed on Schedule
1.1(b),
the
distribution Systems, including, SMATV head-end distribution systems, L-Band
distribution systems and master antenna television distribution systems used
for
central distribution of the signals to the Sellers’ existing subscribers, all
customer premise equipment and System Equipment and all uninterrupted power
supply devices and all inventory of or relating to the Business, (iii) all
of
the RandM Assets, (iv) all fixed assets, including, without limitation, all
tools, supplies and the two (2) Astro Vans leased by Sellers and the 2 Ford
Vans
owned by Sellers as set forth on Schedule
3.6,
but
specifically excluding all furniture, phone and computer equipment, (v) all
goodwill associated with the Business and relating to any of the assets
described in this Section
1.1(b),
(vi)
all accounts receivable distributed pursuant to Section
5.7 below,
including, without limitation, Bulk Service fees, SMATV Non-Bulk Service fees,
receiver fees and other amounts with respect to any XXX Agreement for any XXX
Property identified on Schedule
3.8(a) and
any
residuals, prepaid programming commissions or other amounts due to Sellers
from
DirecTV and outstanding as of the Closing Date, (vii) all books, records
(including, without limitation, customer records as otherwise set forth in
this
Agreement) and data relating to any Asset, (viii) all subscriber agreements
between each Seller and a customers at each XXX Property and (ix) any permits
and licenses used or necessary for the Business.
-1-
(d) “Assumed
Liabilities”
means
the liabilities described in Section
2.2(a).
(e) “Authorizations”
has
the
meaning set forth in Section
3.11.
(f) “Business”
means
the Private Cable Operator Business of Sellers conducted by Sellers in
California prior to the Closing.
(g) “Bulk
Digital Service”
means
digital television service delivered to all of the units at an XXX Property
for
a prescribed monthly fee.
(h) “Bulk
EBU Subscribers”
means,
as
of the
month ended August 31, 2006 with respect to the calculation of the Purchase
Price and as of the month ended November 30, 2007 with respect to the
calculation of the Earnout Amount,
the
number of subscribers at an XXX Property that has Bulk Service computed by
taking (A) the total number of units at an XXX Property times (B) fifty percent
(50%).
(i) “Bulk
Service”
means
Bulk Digital Service or Bulk SMATV Service.
(j) “Bulk
SMATV Service”
means
television service delivered through a SMATV System to all of the units at
an
XXX Property for a prescribed monthly fee.
(k) “COBRA”
has
the
meaning set forth in Section
3.35(c).
(l) “Code”
means
the Internal Revenue Code of 1986, as amended.
(m) “Closing”
and
“Closing
Date”
have
the meanings set forth in Section
2.7.
(n) “Closing
Date Direct Costs”
means
the direct costs of Seller as of the Closing Date as set forth on Schedule
3.5(c).
-2-
(o) “Closing
Date Free Cash Flow”
means
the free cash flow of Purchaser calculated for each year in the number of Whole
Years in the Weighted Average Remaining XXX Agreement Term as of the Closing
Date and calculated by taking Closing Date Gross Revenue in the amount set
forth
on Schedule
3.5(d)
for the
first year of the total number of
Whole
Years in the Weighted
Average Remaining XXX Agreement Term as of the Closing
Date,
less
Closing Date Direct Costs in the amount set forth on Schedule
3.5(c)
for the
first year in the Closing Date Free Cash Flow calculation, less Closing Date
Operating Expenses for the first year in the Closing Date Free Cash Flow
Calculation, less Maintenance CapEx, and then applying the Closing Date Free
Cash Flow Adjustments to calculate the Closing Date Free Cash Flow for
each
of the subsequent Whole Years remaining in the Weighted
Average Remaining XXX Agreement Term as of the Closing
Date, as
set forth in Schedule
2.3(a).
The
calculation of the Closing Date Free Cash Flow shall not include any amounts
with respect to the RandM Assets.
(p) “Closing
Date Free Cash Flow Adjustments”
means
the Closing Date Free Cash Flow of Purchaser calculated as of the Closing Date
for the number of Whole Years in the Weighted Average Remaining XXX Agreement
Term as of the Closing Date (i) based on the number of Subscribers as of the
Closing Date for the first year increased by an annual twenty percent (20%)
increase in the number of DTH Subscribers as of the Closing Date for each
subsequent Whole Year up to a maximum of 8,000 DTH Subscribers and is fixed
at
8,000 DTH Subscribers for each remaining Whole Year thereafter, (ii) assuming
the average term of a new Subscriber for the first year of subscription at
6
months and for each Whole Year thereafter, at 12 months, (iii) assuming the
gross revenue for each new Subscriber is $35 for each month of subscription,
(iv) assuming that the direct cost for each new Subscriber is $5.00 for each
month of subscription; (v) assuming call center and billing costs at the rate
of
$3.00 per month for each Subscriber, (vi) assuming fixed on-site marketing
costs
at the rate of $60,000.00 for each year in the calculation, (vii) assuming
fixed
office, telephone, postage and similar costs at the rate of $18,000.00 for
each
year in the calculation, (viii) assuming that each of payroll and related
benefit expenses and vehicle and vehicle-related expenses for the first year
increase at the rate of 2.5% for each subsequent year in the calculation, and
(xiv) assuming that Maintenance CapEx is fixed in the amount of $100,000.00
for
each year in the calculation.
(q) “Closing
Date Gross Margin”
means
the gross margin of Seller as of the Closing Date as set forth on Schedule
3.5(d).
(r) “Closing
Date Gross Revenue”
means
the gross revenue as of the Closing Date set forth on Schedule
3.5(b).
(s) “Closing
Date Operating Expenses”
means
the incremental variable expenses incurred to operate the Assets and includes
the following as of the Closing Date: (i) call center and billing expenses
at an
assumed monthly rate of three dollars ($3.00) per Subscriber as of the Closing
Date multiplied by twelve (12) months, (ii) onsite marketing expenses estimated
at an annual cost of $60,000.00, (iii) office, telephone, postage and similar
expenses estimated at an annual cost of $18,000.00, (iv) payroll and related
benefit expenses in the amount of $571,356.00 for the first year, and (v)
vehicle and vehicle-related expenses in the amount of $122,892.00 for the first
year.
(t) “Closing
Extension Option”
has
the
meaning sets forth in Section
2.7.
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(u) “Confidential
Information”
includes all information disclosed by any party to this Agreement to another
party, including, without limitation, the existence, terms and conditions of
this Agreement, any information about the XXX Properties or XXX Agreements,
the
existence and terms of any arrangements between Purchaser and its suppliers
or
Purchaser and Sellers, and any information in Sellers’ possession with respect
to the Assets.
(v) “Consents”
has
the
meaning set forth in Section
3.19.
(w) “Contract”
means
any contract, purchase or sale order, lease, license, commitment and other
agreement, whether written or oral, relating to the Business to which either
Seller is a party or an assignee or other beneficiary thereof, including,
without limitation, the XXX Agreements.
(x) “DirecTV”
means
DirecTV, Inc., a California corporation.
(y) “DirecTV
Residual Report”
means
that certain monthly DirecTV Residual Report, which sets forth the number and
type of Subscribers on which DirecTV pays commissions to Sellers for the
particular month indicated in the report.
(z) “Disclosure
Schedules”
means
all of the Schedules delivered by Sellers to Purchaser under this
Agreement.
(aa) “DTH
Subscriber”
means
a
direct-to-home subscriber at an XXX Property listed on the
DirecTV Residual Report with a paid residual to the Sellers per the DirecTV
Residual Report for the month ended June 30, 2006 with respect to the
calculation of the Purchase Price and per the DirecTV Residual Report for the
month ended November 30, 2007 with respect to the calculation of the Earnout
Amount.
(bb) “Earnout
Amount”
means
the greater of (i) four hundred thousand dollars ($400,000.00) or (ii) the
amount derived from the Earnout Date Free Cash Flow over the Weighted
Average Remaining XXX Agreement Term as
of the
Earnout Date, which results in the Purchaser Minimum IRR as of the Earnout
Date,
minus the cash portion of the Purchase Price paid on the Closing
Date.
(cc) “Earnout
Date”
means
the first anniversary date of the Closing or nine (9) months after the Closing
Date if the Closing Extension Option is exercised.
(dd) “Earnout
Date Direct Costs”
means,
with respect to all XXX Properties other than the RandM Assets, the sum of
each
of the following paid by the Sellers for
the
month ended November 30, 2007,
annualized to convert such 1-month costs into an annual cost: (i) all Owner
Commissions,
plus
(ii) the fees for Bulk Digital Service paid to DIRECTV, plus (iii) the fees
for
Bulk SMATV Service paid to DIRECTV, plus (iv) the transport fees paid to 4COM,
plus (v) the fees paid for SMATV Non-Bulk Service to DIRECTV.
(ee) “Earnout
Date Free Cash Flow”
means
the free cash flow of Purchaser calculated for each year in the number of Whole
Years in the Weighted Average Remaining XXX Agreement Term as of the Earnout
Date and calculated by taking the Earnout Date Gross Revenue for the first
year
of the total number of Whole Years remaining in the Weighted Average Remaining
XXX Agreement Term as of the Earnout Date, less Earnout Date Direct Costs for
the first year in the Earnout Date Free Cash Flow calculation, less Earnout
Date
Operating Expenses for the first year in the Earnout Date Free Cash Flow
Calculation, less Maintenance CapEx, and then applying the Earnout Date Free
Cash Flow Adjustments to calculate the Earnout Date Free Cash Flow for each
of
the subsequent Whole Years remaining in the Weighted Average Remaining XXX
Agreement Term as of the Earnout Date. For purposes of this definition, Earnout
Date Free Cash Flow will include the annualized Internet Gross Margin based
upon
the Purchaser’s actual Internet Gross Margin for the three (3)-month period
ended November 30, 2007. The calculation of the Earnout Date Free Cash Flow
shall not include any amounts with respect to the RandM Assets.
-4-
(ff) “Earnout
Date Free Cash Flow Adjustments”
means
the Earnout Date Free Cash Flow of Purchaser calculated as of the Earnout Date
for the number of Whole Years in the Weighted Average Remaining XXX Agreement
Term as of the Earnout Date (i) based on the number of Subscribers as of the
Earnout Date for the first year increased by an annual twenty percent (20%)
increase in the number of DTH Subscribers as of the Earnout Date for each
subsequent year up to a maximum of 8,000 DTH Subscribers and is fixed at 8,000
DTH Subscribers for each Whole Year thereafter, (ii) assuming the average term
of a new Subscriber for the first year of subscription at 6 months and for
each
Whole Year thereafter at 12 months, (iii) assuming the gross revenue for each
new Subscriber is $35 for each month of subscription, (iv) assuming that the
direct cost for each new Subscriber is $5.00 for each month of subscription;
(v)
assuming call center and billing costs at the rate of $3.00 per month for each
Subscriber, (vi) assuming fixed on-site marketing costs at the rate of
$60,000.00 for each year in the calculation, (vii) assuming fixed office,
telephone, postage and similar costs at the rate of $18,000.00 for each year
in
the calculation, (viii) assuming that each of payroll and related benefit
expenses and vehicle and vehicle-related expenses for the first year increase
at
the rate of 2.5% for each subsequent year in the calculation, and (xiv) assuming
that Maintenance CapEx is fixed in the amount of $100,000.00 for each year
in
the calculation.
(gg) “Earnout
Date Gross Revenue”
means,
with respect to all XXX Properties (other than the RandM Assets), the sum of
(i)
the DirecTV residuals paid to Sellers pursuant to the DTV Residual Report for
the month ended November 30, 2007, annualized to convert the 1-month total
to an
annual total, plus (ii) the DIRECTV annualized Average Normalized PPC, plus
(iii) the normalized receiver fees at the normalized monthly rate of $6.99
per
DTH Subscriber, calculated for a 12-month period, plus (iv) the fees for Bulk
Digital Service billed to such XXX Property for the month ended November 30,
2007, annualized to convert the 1-month fees to an annual total, plus (v) the
fees for Bulk SMATV Service billed to such XXX Property for the month ended
November 30, 2007, annualized to convert the 1-month fees to an annual total,
plus (vi) the fees for SMATV Non-Bulk Service billed to each subscriber at
such
XXX Property for the month ended November 30, 2007, annualized to convert the
1-month fees to an annual total.
(hh) “Earnout
Date Operating Expenses”
means
the incremental variable expenses incurred by Purchaser to operate the Assets
and includes the following as of the Earnout Date: (i) call center and billing
expenses at an assumed monthly rate of three dollars ($3.00) per Subscriber
as
of the Earnout Date multiplied by twelve (12) months, (ii) onsite marketing
expenses estimated at an annual cost of $60,000.00, (iii) office, telephone,
postage and similar expenses estimated at an annual cost of $18,000.00, (iv)
payroll and related benefit expenses in the amount of $585,640.00 for the first
year, and (v) vehicle and vehicle-related expenses in the amount of $125,965.00
for the first year.
-5-
(ii) “Employee
Plans”
has
the
meaning set forth in Section
3.35(a).
(jj) “Environmental
Laws or Regulations”
means
and includes any one or more of the following: the Comprehensive Environmental
Response Compensation and Liability Act (“CERCLA”), as amended by the Superfund
Amendments and Reauthorization Act of 1986 (“XXXX”), 42 U.S.C. § 9601 et
seq.; the Federal Resource Conservation and Recovery Act of 1976 (“RCRA”), 42
U.S.C. § 6921 et seq.; the Clean Water Act, 33 U.S.C. § 1321 et seq.;
the Clean Air Act, 42 U.S.C. § 7401 et seq.; any other federal, state,
county, municipal, local or other statute, law, ordinance or regulation that
relates to or deals with Hazardous Substances, human health or the environment;
and all regulations and regulatory policies promulgated by a regulatory body
pursuant to any of the foregoing statutes, laws, regulations or
ordinances.
(kk) “ERISA”
means
the Employee Retirement Income Security Act of 1974.
(ll) “ERISA
Affiliate”
has
the
meaning set forth in Section
3.35(a).
(mm) “Event”
means
any event, act, omission, circumstance, occurrence, condition or
situation.
(nn) “FCC”means
the
Federal Communications Commission.
(oo) “GAAP”
means
generally accepted accounting principles for financial reporting in the United
States, applied on a basis consistent with the basis on which the financial
statements referred to in Section
3.5
were
prepared.
(pp) “Gross
Margin”
means,
with respect to each XXX Property, the difference between the Gross Revenue
and
the Total Direct Cost for such XXX Property.
(qq) “Gross
Margin Percentages”
means
twenty-six percent (26%) for Multiband and seventy-four percent (74%) for
Rainbow.
(rr) “Hazardous
Substance”
means
asbestos, urea formaldehyde, polychlorinated biphenyls, nuclear fuel or
materials, chemical waste, radioactive materials, explosives, known carcinogens,
petroleum products, pesticides, fertilizers, or any other substance that is
dangerous, toxic, or hazardous, or that is a pollutant, contaminant, chemical,
material or substance defined as hazardous or as a pollutant or contaminant
in,
or the use, transportation, storage, release or disposal of which is regulated
by, any Environmental Laws or Regulations.
(ss) “Initial
Closing”
and
“Initial
Closing Date”
has
the
meaning set forth in Section
2.7.
(tt) “IRS”
means
the United States Internal Revenue Service.
(uu) “Knowledge
of Sellers”
means
actual knowledge of each of the officers and employees of the Sellers, or the
knowledge that any of such persons would reasonably be expected to have assuming
reasonable inquiry of any facts or circumstances actually known to and
recognized by such person to create significant doubt concerning the accuracy
of
any representation, warranty or statement without regard to such “knowledge”
qualifier.
-6-
(vv) “Legal
Requirement”
means
any federal, state, local, municipal, foreign, or other constitution, law,
ordinance, principle of common law, code, regulation, statute or
treaty.
(ww) Liens”
means
liens, mortgages, charges, security interests, pledges, encumbrances,
assessments, obligations, restrictions or other third-party claims of any nature
other than statutory liens for Taxes and other governmental charges and
assessments which are not yet due and payable as of the Closing.
(xx) “Maintenance
CapEx”
means
$100,000.00 per year representing the estimated fixed cost to repair or replace
any of the Systems or System Equipment included in the Assets, including,
without limitation, costs to repair or replace wiring and parts and the related
labor costs to repair or replace such wiring and parts.
(yy) “Material
Adverse Effect”
means
an effect that, individually or in the aggregate with other related effects,
is
or could reasonably be expected to be materially adverse to the business,
results of operation or condition (financial or otherwise) of the Assets or
the
Business, considered as a whole.
(zz) “Missing
XXX Agreement”
has
the
meaning set forth in Section
3.8.
(aaa) “Multiband
Assets”
means
all of the Assets that are owned or held by Multiband, including, without
limitation, the RandM Assets.
(bbb) “Multiband
XXX Agreements”
means
each of the access and use agreements set forth on Schedule
3.8(a) hereto
identified as originating from “MBND” or “Dinamo” under the column entitled
“Origin”.
(ccc) “Multiemployer
Plan”
has the
meaning set forth in Section
3.35(a).
(ddd) “New
ROEs”
has
the
meaning set forth in Section
6.6
of this
Agreement.
(eee) “Owner”
means
the owner of any XXX Property.
(fff) “Owner
Advances”
means
any lump sum advance payments made to any Owner with respect to any XXX
Agreement.
(ggg) “Owner
Commissions”
means
any commissions, owner participation fees, Owner Advances, revenue sharing
arrangements, access fees, licensing fees, bonus payments, or other similar
fees
or payments due to any Owner or any other Person with respect to any XXX
Agreement or the transactions contemplated in this Agreement.
(hhh) “Person”
means
an individual, partnership, corporation, business trust, limited liability
company, limited liability partnership, join stock company, trust,
unincorporated association, joint venture or other entity or a governmental
body
-7-
(iii) “Pre-Closing
Owner Commissions”
means
all Owner Commissions that are required to have been paid by Sellers on or
prior
to the Closing Date.
(jjj) “Purchase
Price”
has
the
meaning set forth in Section
2.3.
(kkk) “Purchaser
Minimum IRR”
means
(i) as of the Closing, an internal rate of return to Purchaser of twenty percent
(20%) and (ii) as of the Earnout Date, an internal rate of return to Purchaser
of twenty-five percent (25%). For purposes of the calculation of the Earnout
Amount, the investment amount used in calculating the Purchaser Minimum IRR
as
of the Earnout Date will include the Purchase Price (but excluding the RandM
Assets Purchase Price and the Assumed Liabilities) plus the Earnout Amount.
(lll) “Rainbow
Assets”
means
all of the Assets that are owned or held by Rainbow.
(mmm) “Rainbow
XXX Agreements”
means
each of the California access and use agreements set forth on Schedule
3.8(a)
hereto
identified as originating from “RAIN” under the column entitled
“Origin”.
(nnn) “RandM
Assets”
means
all of the Assets that are owned or held by Multiband and which were acquired
by
Multiband from Rand’M, a California corporation, pursuant to that certain Cable
Systems Acquisition Agreement entered into effective September 13, 2006.
(ooo) “RandM
Assets Purchase Price”
means
$200,000.00.
(ppp) “XxxxX
XXX Agreements”
means
the XXX Agreements included in the RandM Assets.
(qqq) “Retained
Liabilities”
has
the
meaning set forth in Section
2.2.
(rrr) “XXX
Agreement”
means
each of the access and use agreements or service and installation agreements
set
forth on Schedule
3.8(a)
hereto
which includes all the Multiband XXX Agreements and the Rainbow XXX Agreements,
and each XxxxX XXX Agreement and each Missing XXX Agreement.
(sss) “XXX
Property”
means
each property subject to an XXX Agreement.
(ttt) “Sales
Commission”
means
with respect to each New XXX, the amount of commission payable by Sellers to
the
respective marketing representatives of Purchaser calculated by multiplying
(i)
two dollars and fifty cents ($2.50) times (ii) the number of units at each
XXX
Property covered by a New XXX times (iii) the number of years in the term of
such New XXX, including any renewal
terms under the sole control of either of the Sellers on or prior to the Closing
Date, up to a maximum of ten (10) years in the aggregate, provided, however,
that any such New XXX has a minimum initial term of five (5) years.
(uuu) “Schedule”
means
a
part of the Disclosure Schedules unless expressly identified as a Purchaser’s
Schedule.
-8-
(vvv) “Schedule
2.4 Payment”
has
the
meaning set forth in Section
2.4.
(www) “SMATV
Non-Bulk Service”
means
SMATV services delivered to individual residents at an XXX Property using a
System that encompasses a headend installed at such XXX Property and which
is
not a form of Bulk Service.
(xxx) “SMATV
Non-Bulk Subscriber”
means
a
subscriber at an XXX Property that was billed for SMATV Non-Bulk Service as
of
August 31, 2006 for the calculation of the Purchaser Price and as of November
30, 2007 for the calculation of the Earnout Amount.
(yyy) “Subscriber”
means
any DTH Subscriber, SMATV Non-Bulk Subscriber or Bulk EBS
Subscriber.
(zzz) “System”
means
the cable, direct satellite system, SMATV system, mater antenna television
or
other television system built, acquired and/or operated by Sellers at the XXX
Property, including all System Equipment and any and all other related wiring
installed at the XXX Property as of the Closing Date in connection with the
provision of cable, direct satellite television services and SMATV at the XXX
Property.
(aaaa) “System
Equipment”
means
all equipment used in, or necessary for, the safe and proper operation of the
System, including, but not limited to, satellite dishes, antennas, parabolic
receiver antennas, leads, cables,
conduit, terminals, location markers, amplifiers, down converters, wiring,
descrambling equipment, head end equipment (including all racks, security and
air conditioning units, power inserters, modulators, receivers and access
cards), pedestals, junction boxes, vaults, splitters, interdiction devices,
power supplies, receivers,
destackers, amplifiers, decoders and other electronic devices used to distribute
broadband communication signals.
(bbbb) “Taxes”
means
all taxes, additions to tax, penalties, interest, fines, duties, withholdings,
assessments, and charges assessed or imposed by any governmental authority,
including but not limited to all federal, state, county, local and foreign
income, profits, gross receipts, import, ad valorem, real and personal property,
franchise, license, sales, use, value added, stamp, transfer, withholding,
payroll, employment, excise, custom, duty, and any other taxes, obligations
and
assessments of any kind whatsoever; the foregoing shall include, but not be
limited to, any liability arising as a result of being (or ceasing to be) a
member of any affiliated, consolidated, combined, or unitary group as well
as
any liability under any tax allocation, tax sharing, tax indemnity or similar
agreement.
(cccc) “WARN
Act”
has
the
meaning set forth in Section
3.35(c).
(dddd) “Weighted
Average Remaining XXX Agreement Term”
means
as of any date, the average remaining term of the XXX Agreements including
any
automatic renewal terms under the sole control of either of the Sellers on
or
prior to the Closing Date, or the sole control of Purchaser after the Closing
Date until the Earnout Date, weighted based on the applicable Gross Margin
for
such date. For purposes of calculating the Weighted Average Remaining XXX
Agreement Term as of the date of this Agreement, any XXX Agreement that is
expired is deemed to have a remaining term (including automatic renewals) of
one
(1) month and the remaining term (including automatic renewals) of all other
XXX
Agreements is based on the actual term (including automatic renewals) remaining
as of such date. For purposes of calculating the Weighted Average Remaining
XXX
Agreement Term as of the Closing Date and as of the Earnout Date, any XXX
Agreement that is expired or has a remaining term (including any automatic
renewals) of less than twelve (12) months will be deemed to have a remaining
term (including automatic renewals) of twelve (12) months and the remaining
term
(including automatic renewals) of all other XXX Agreements will be based on
the
actual term (including automatic renewals) remaining as of such date.
-9-
(eeee) “Whole
Years”
means
at any date, the number calculated by dividing the Weighted Average Remaining
XXX Agreement Term at such date, by 12 and rounding the quotient up to the
nearest whole number for each fractional year that is greater than or equal
to
one-half (0.50).
1.2 Other
Terms.
Other
terms may be defined elsewhere in the text of this Agreement and shall have
the
meaning indicated throughout this Agreement.
1.3 Other
Definitional Provisions.
(i) The
words
“hereof,” “herein,” and “hereunder” and words of similar import, when used in
this Agreement shall refer to this Agreement as a whole and not to any
particular provisions of this Agreement.
(ii) The
terms
defined in the singular shall have a comparable meaning when used in the plural,
and vice versa.
(iii) References
to an “Exhibit”, “Annex” or to a “Schedule” are, unless otherwise specified, to
one of the Exhibits, Annexes or Schedules attached to or referenced in this
Agreement, and references to an “Article” or a “Section” are, unless otherwise
specified, to one of the Articles or Sections of this Agreement.
(iv) The
term
“Dollars” or “$” shall refer to the currency of the United States of
America.
(v) All
references to time shall refer to Los Angeles, California time.
(vi) The
term
“including” is by way of example and not limitation, whether or not followed by
the words “without limitation” or any similar phrase.
ARTICLE
2
PURCHASE
AND SALE OF ASSETS
2.1 Purchased
Assets.
Upon
the terms and subject to the conditions set forth in this Agreement, effective
as of the Closing, (a) Multiband hereby sells, transfers, assigns and conveys
to
Purchaser, and Purchaser hereby purchases, the Multiband Assets free and clear
of all Liens and encumbrances and (b) Rainbow hereby sells, transfers, assigns
and conveys to Purchaser, and Purchaser hereby purchases, the Rainbow Assets
free and clear of all Liens and encumbrances.
The
Multiband Assets and the Rainbow Assets are intended to include all the
Assets.
-10-
2.2 Assumed
Liabilities; Retained Liabilities.
Purchaser
shall assume no liabilities of Sellers other than the post-closing obligations
under the XXX Agreements following the Closing,
which
liabilities are expressly assigned to and assumed by Purchaser hereunder (the
“Assumed Liabilities”). It is expressly agreed and understood that, except for
the Assumed Liabilities, Purchaser does not assume any obligations or
liabilities of Sellers, including, without limitation, any liabilities arising
out of or relating in any way to the build-out or operation of a System or
the
System Equipment prior to Closing at each XXX Property by Sellers or others
or
with respect to any Pre-Closing Owner Commissions (the “Retained Liabilities”).
2.3 Purchase
Price; Payment.
The
total consideration for the Assets (the “Purchase Price”) shall be equal to (i)
the RandM Assets Purchase Price, plus (ii) three million, four hundred and
thirty thousand dollars ($3,430,000.00) for the other Multiband Assets and
the
Rainbow Assets, which portion of the purchase price is calculated based on
the
Closing Date Free Cash Flow and the Purchaser’s Minimum IRR and the assumption
that at the Closing, the Closing Date Weighted Average Remaining XXX Agreement
Term will be at least eighty-four (84) months, plus (iii) the Assumed
Liabilities; provided, however, that the portion of the Purchase Price described
in subsection (ii) above shall be adjusted up or down as set forth on
Schedule
2.3(a) to
reflect the actual Closing Date Weighted Average Remaining XXX Agreement Term.
Schedule
2.3(b)
sets
forth the calculation of the Purchase Price excluding the Assumed Liabilities
and the RandM Assets Purchase Price and details the calculations for Free Cash
Flow and the Purchaser’s Minimum IRR. The cash portion of the Purchase Price
attributable to the Schedule 2.4 XXX Assets will be paid by Purchaser to Rainbow
at the Initial Closing as described in Section
2.4
below.
The balance of the Purchase Price shall be paid to the Sellers at the Closing
as
follows: (i) eighty percent (80%) of the cash portion of the Purchase Price
will
be paid to Sellers based on their respective Gross Margin Percentages and (ii)
twenty percent (20%) of the cash portion of the Purchase Price shall be held
by
Purchaser as an indemnity holdback to cover claims by Purchaser under
Article
9
hereof
(the “Indemnity Holdback Amount”). The Holdback shall be released to Sellers
pursuant to the terms of Section
2.6
below.
2.4 Initial
Closing.
At
the
Initial Closing, Purchaser shall pay to Rainbow three hundred and eighty-six
thousand dollars ($386,000.00) (the “Schedule 2.4 Payment”) with respect to the
XXX Agreements and the related Assets for the five (5) XXX Properties identified
on Schedule
2.4 hereto
(the “Schedule 2.4 XXX Assets”) if (a) such XXX Agreement provides Rainbow with
the exclusive right to provide and market its private cable operator services
at
each such property, (b) the Weighted Average Remaining XXX Agreement Term of
the
XXX Agreements with respect to each of the Schedule 2.4 XXX Assets including
any
automatic renewal terms under the sole control of either of the Sellers on
or
prior to the Closing Date is at least sixty (60) months, and (c) the aggregate
Gross Margin with respect to the XXX Agreements included in the Schedule 2.4
XXX
Assets is at least fifteen thousand dollars ($15,000.00) per month. The Schedule
2.4 Payment shall be considered complete payment to Rainbow for the Assets
relating to the Schedule 2.4 XXX Assets such that title to all such Assets
will
transfer to Purchaser as of the Schedule 2.4 Assets Effective Date. At the
Closing Date, the Schedule 2.4 Payment shall be deducted from the Purchase
Price
due to Rainbow with respect to the balance of the Assets at the Closing Date
and
the Schedule 2.4 Payment shall be included as part of the Purchase Price with
respect to calculation of the Earnout Amount and the Assets shall be included
with all the other Assets for all other purposes under this
Agreement.
-11-
2.5 Earnout.
In
addition to the Purchase Price, Sellers shall be entitled to the Earnout Amount
on the Earnout Date. The Earnout Amount shall be paid to Sellers based on their
respective Gross Margin Percentages.
2.6 Indemnity
Holdback Amount.
The
Indemnity Holdback Amount shall be released as set forth below to Sellers in
accordance with the Gross Margin Percentage: (a) to the extent that on the
third
(3rd)
month
anniversary of the Closing Date any claims by Purchaser under Article
9 hereof
are less than seventeen and a half percent (17.5%) of the cash portion of the
Purchase Price paid by Purchaser as of the Closing Date, then two and a half
percent (2.5%) of the Indemnity Holdback Amount shall be released to Sellers
on
such third (3rd)
month
anniversary; (b) to the extent that on the sixth (6th)
month
anniversary of the Closing Date any claims by Purchaser under Article
9 hereof
are less than fifteen percent (15.0%) of the cash portion of the Purchase Price
paid by Purchaser as of the Closing Date, then two and a half percent (2.5%)
of
the Indemnity Holdback Amount shall be released to Sellers on such sixth
(6th)
month
anniversary; (c) to the extent that on the nine (9) month anniversary of the
Closing Date any claims by Purchaser under Article
9 hereof
are less than twelve and a half percent (12.5%) of the cash portion of the
Purchase Price paid by Purchaser as of the Closing Date, then two and a half
percent (2.5%) of the Indemnity Holdback Amount shall be released to Sellers
on
such nine (9) month anniversary; and (d) to the extent that on the first
(1st)
year
anniversary of the Closing Date, there are no claims by Purchaser under
Article
9 hereof
or
such claims are less than twelve and a half percent (12.5%) of the cash portion
of the Purchase Price paid by Purchaser as of the Closing Date, then the total
remaining balance of the Indemnity Holdback Amount shall be released to Sellers
on such first (1st)
year
anniversary of the Closing Date; provided, however, that if any claim by
Purchaser under Article
9
is
pending dispute as of the time of any release of any portion of the Indemnity
Holdback Amount, then, unless the balance of the Indemnity Holdback Amount
at
such time (excluding the amount required to be distributed at such time) is
sufficient to cover the amount of such disputed claim, then an amount equal
to
such claim shall continue to be held by Purchaser until such time as the
disputed claim is finally resolved among the parties and such amount distributed
according to such resolution or, as necessary, retained to insure that the
appropriate Indemnity Holdback Amount at such time continues to be held by
Purchaser.
2.7 Initial
Closing Date; Closing Date.
(a) Initial
Closing.
The
consummation of the purchase and sale of the Schedule 2.4 XXX Assets provided
for in Section
2.4
hereof
(the “Initial Closing”) shall take place at 10:00 a.m. (Pacific Standard time)
on October 19, 2006, or at such other date and time as is mutually agreed to
by
the parties (the “Initial Closing Date”), but shall be deemed effective as of
12:01 a.m. (Pacific Standard time) on September 29, 2006 (the “Schedule 2.4
Assets Effective Date”). The Initial Closing shall take place by delivery to
each of Purchaser’s and Multiband’s principal office via facsimile transmission
or email transmission in PDF file format (with originals sent via overnight
courier service) of the signed Agreement and delivery of (a) the Initial Closing
Purchase Price to be made in accordance with Section
2.4,
(b) a
fully executed assignment for each XXX Agreement listed on Schedule 2.4, other
than with respect to the XXX Agreement for the XXX Property known as the
Promenade which XXX Agreement was executed in the name of Purchaser and
therefore does not require further assignment to Purchaser, (c) a fully executed
xxxx of sale with respect to the Schedule 2.4 XXX Assets, (d) a fully executed
Secretary’s Certificate of Rainbow providing the information required by
Section
6.28
with
respect to the sale of the Schedule 2.4 XXX Assets, and (e) evidence of
compliance with the actions required by Sections
6.23
(Transfer of Chain Numbers), Section
6.24
(Transfer of Accounts) and Section
6.25
(DirecTV’s Waiver of Right of First Refusal) with respect to the Schedule 2.4
XXX Assets, or at such other place or in such other manner as the parties hereto
may agree. In addition, (x) execution of this Agreement is evidence that (1)
none of the conditions contemplated in Section
6.3 (Legislation)
or Section
6.4
(Proceedings) are present with respect to the Schedule 2.4 XXX Assets, and
(2)
there are no consents or other approvals required with respect to the Schedule
2.4 XXX Assets, (y) the information required pursuant to Section
6.17
(XXX
Agreement and Subscriber Information) shall be delivered to Purchaser within
two
(2) days after the Initial Closing Date, and (z) the information required by
Section 6.11
(Technical
Specifications), Section
6.12
(Owner
Contact Information), Section
6.13
(Deposits), Section
6.14
(Free
(“Comp”) Accounts and Service), Section
6.15
(Deposits), and Section
6.16
(Channel
Lineups and Serial Numbers) shall be delivered to Purchaser within five (5)
days
after the Initial Closing Date. All
Disclosure Schedules or other deliverables prepared by Sellers and delivered
to
Purchaser under the terms of this Agreement with respect to the Schedule 2.4
XXX
Assets shall reflect information as of 12:01 a.m. (Pacific Standard time) on
the
Schedule 2.4 XXX Assets Effective Date.
-12-
(b) Closing.
The
consummation of the purchase and sale of all of the other Assets (other than
the
Schedule 2.4 XXX Assets) provided for herein (the “Closing”) shall take place at
10:00 a.m. (Pacific Standard time) ninety (90) days after the date of this
Agreement (the “Closing Date”); provided, however, that if at such time Sellers
are in the process of continuing to negotiate New ROEs pursuant to Section
6.6
hereof,
then upon written notice to Purchaser, Multiband shall have the option to extend
the Closing for an additional ninety (90) days (the “Closing Extension Option”)
in which case, the date that is one hundred and eighty (180) days after the
date
of this Agreement shall be the “Closing Date.” The
Closing shall take place by delivery to each of Purchaser’s and Multiband’s
principal office via facsimile transmission or email transmission in PDF file
format (with originals sent via overnight courier service) of the documents
to
be delivered at the Closing and deliveries of the Purchase Price to be made
in
accordance with Section
2.3,
or at
such other place or in such other manner as the parties hereto may
agree.
All
Disclosure Schedules or other deliverables prepared by Sellers and delivered
to
Purchaser under the terms of this Agreement with respect to the Assets (other
than the Schedule 2.4 XXX Assets) shall reflect information as of 12:01 a.m.
(Pacific Standard time) on the Closing Date, unless otherwise indicated in
this
Agreement.
2.8 Proceedings.
All
proceedings taken and all documents executed and delivered by the parties hereto
at the Initial Closing with respect to the Schedule 2.4 XXX Assets shall be
deemed to have been taken and executed simultaneously and no proceedings shall
be deemed taken nor any documents executed or delivered until all have been
taken, executed and delivered. All proceedings taken and all documents executed
and delivered by the parties hereto at the Closing with respect to the Assets
(other than the Schedule 2.4 XXX Assets) shall be deemed to have been taken
and
executed simultaneously and no proceedings shall be deemed taken nor any
documents executed or delivered until all have been taken, executed and
delivered.
2.9 Purchase
Price Allocation.
The
consideration payable by Purchaser under this Agreement shall be allocated
among
the Assets (the “Allocation”) first to accounts receivable and inventory and
equipment-vehicles and the balance shall be allocated 10% to tangible personal
property and equipment and 90% to the XXX Agreements. Purchaser and each of
the
Sellers agree to (a) be bound by the Allocation and not to take any position
inconsistent with such Allocation and (b) file all returns and reports with
respect to the transactions contemplated in this Agreement, including all
federal, state and local tax returns on the basis of such Allocation, including
without limitation, IRS Form 8594.
-13-
ARTICLE
3
REPRESENTATIONS
AND WARRANTIES OF SELLERS
Unless
otherwise indicated, as of the date hereof and as of the Closing Date, each
of
the Sellers represents and warrants to Purchaser, jointly and severally, as
follows:
3.1 Organization.
Multiband is a corporation duly organized, validly existing and in good standing
under the laws of the State of Minnesota with full power and authority to
conduct its business as it is now being conducted and to own or use the
Multiband Assets. Rainbow
is a limited liability company duly organized, validly existing and in good
standing under the laws of the State of Connecticut with full power and
authority to conduct its business as it is now being conducted and to own or
use
the Rainbow Assets.
3.2 No
Subsidiaries.
The
Assets do not contain any interest, direct or indirect, in any business,
corporation, joint venture, partnership, proprietorship or other entity.
Multiband is the owner of and holds all rights with respect to the Multiband
Assets and Rainbow is the owner of and holds all rights with respect to the
Rainbow Assets. Except as set forth in Schedule
3.2,
none of
the Business is conducted through, and none of the Assets are owned by or
through, any direct or indirect subsidiary or Affiliate of Sellers.
3.3 Authority.
This
Agreement constitutes the legal, valid and binding obligation of each of the
Sellers enforceable against each of them in accordance with its terms. Upon
the
execution and delivery by the Sellers of the New ROEs, Noncompetition
Agreements, the Call Center and Billing Agreement and the Internet Agreement
and
each other agreement to be executed or delivered by each such party at the
Closing (collectively, the Sellers’ Closing Documents”), each of Sellers’
Closing Documents will constitute the legal, valid and binding obligation of
each of the Sellers, enforceable against each of them in accordance with its
terms, subject
to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium
and
similar laws of general applicability relating to or affecting creditors’ rights
and to general equity principles.
Each of
the Sellers has the absolute and unrestricted right, power and authority to
execute and deliver this Agreement and each of the Sellers’ Closing Documents to
which it is a party and to perform its obligations under this Agreement and
each
of the Sellers’ Closing Documents to which it is a party, and such action has
been duly authorized by all necessary action by such Seller’s shareholders or
members and board of directors or managers. No further proceeding on the part
of
any of the Sellers or their respective shareholders, members, managers or board
of directors is necessary to authorize this Agreement, each of the Sellers’
Closing Documents to which it is a party and the transactions contemplated
hereby.
Neither
the execution and delivery
of this Agreement nor compliance by any of the Sellers with its terms and
provisions will violate (i) any provision of the Articles of Incorporation,
Articles of Organization, Bylaws or Operating Agreement, as applicable, of
such
Seller, (ii) any Contract transferred to Purchaser or any permit or license
of
Sellers relating to the Business, or (iii) any law, statute, regulation,
injunction, order or decree of any government agency or authority or court
to
which Sellers, the Business or any of the Assets is subject, except to the
extent that any such violation would not be material with respect to the Assets
individually or in the aggregate.
-14-
3.4 Capitalization.
Multiband is and will be on the Closing Date the sole record and beneficial
owner and holder of the issued and outstanding shares of Rainbow and such shares
are and will be owned by Multiband, free and clear of all Liens. There are
no
Contracts relating to the issuance, sale or transfer of any equity securities
or
other securities of Rainbow.
3.5 Financial
Information Reports.
(a) Each
Seller has delivered to Purchaser the following financial information,
(collectively, with any updates thereof, the “Financial Information Reports”):
(a) an unaudited balance sheet as of June 30, 2006 (including the notes thereto,
the “Balance Sheet”), and (b) the related monthly statements of income for the
months of January through June 2006. Each of the Financial Information Reports
delivered to Purchaser hereunder and pursuant to Section
5.8
below is
and will be complete and correct and was and will be prepared from and is and
will be in accordance with the accounting records of the Sellers which have
been
maintained in accordance with sound business practices and based on Sellers’
financial statements which have been prepared in accordance with GAAP
consistently applied.
(b) Schedule
3.5(b) sets
forth a correct and complete schedule of the calculation of the Closing Date
Gross Revenue for each of the XXX Properties.
(c) Schedule
3.5(c)
sets
forth a correct and complete schedule of the calculation of the Closing Date
Direct Costs for each of the XXX Properties.
(d) Schedule
3.5(d)
sets
forth a correct and complete schedule of the calculation of the Closing Date
Gross Margin for each of the XXX Properties.
3.6 Sufficiency
of Assets; Title.
(a) The
Assets (a) constitute all of the assets, tangible and intangible, of any nature
whatsoever, necessary to operate Sellers’ Business in the manner presently
operated by Sellers, and (b) include all of the California operating assets
of
the Sellers used in the Business.
The
Assets are suitable for the uses for which they are currently used by Sellers
in
the Business.
(b) Schedule
3.6
contains
a true and complete listing of each vehicle that is used in the Business, each
driver that is assigned to such vehicle, whether the vehicle is owned or leased
by the Sellers and an indication as to whether the vehicle belongs to an
employee of the Sellers and if employee-owned, the applicable mileage
reimbursement rate. Sellers will pay and satisfy any and all obligations with
respect to the leased vehicles reflected on Schedule
3.6
on or
prior to the Closing and at the Closing will deliver to Purchaser title to
such
leased vehicles and the Sellers’ owned vehicles, free and clear of all
Liens.
(c) Each
Seller has or will have, and, upon consummation of the transactions contemplated
hereby, will convey to Purchaser, full right, title and interest, and good
and
marketable title, to their respective Assets, free and clear of all Liens.
To
the
Knowledge of Sellers, there are no claims, objections or bases for objections
which any Owner of any XXX Property or any predecessor
to either of the Sellers may raise in connection with any XXX Agreement or
the
other Assets and the transactions contemplated by this Agreement.
-15-
3.7 Contracts.
Each
Contract required to be listed on a Schedule hereto is valid and subsisting
and
is in full force and effect in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws
of
general applicability relating to or affecting creditors’ rights and to general
equity principles, and there have been no amendments, creditors modifications,
or supplements to any such Contract. There is no default by either Seller or
claim of default by either Seller, or, to the Knowledge of Sellers, any other
party thereto, under any such Contracts and no Event has occurred that, with
the
passage of time or the giving of notice or both, could reasonably be expected
to
constitute a default by either Seller or, to the Knowledge of Sellers, any
other
party thereto under any such Contract, or could reasonably be expected to permit
modification, acceleration, or termination of any such Contract, or result
in
the creation of any Lien on any of the Assets. No party to any Contract has
notified any Seller of its intention to terminate any Contract and to the
Knowledge of Sellers, no party to any Contract has indicated its intent to
do
so, whether by exercising any termination or buy-out rights under any Contract
or otherwise.
3.8 XXX
Agreements.
(a) Attached
hereto as Schedule
3.8(a) is
a
complete and correct list of each Multiband XXX Agreement and each Rainbow
XXX
Agreement that is included in the Assets, including, without limitation, the
correct and complete: (i) name and address of each XXX Property, (ii) the number
of units at each XXX Properties, (iii) the type of service provided at each
XXX
Property, and (iv) the expiration date of the term of each XXX Agreement,
provided, however, that the failure to set forth the exact correct number of
units and property name of each Property will not have or be reasonably expected
to have a Material Adverse Effect. Except as set forth on Schedule
3.8(a) and
Schedule
3.8(b) below,
there are no other Contracts (whether oral or written) entered into between
either of the Sellers and any of the Owners of the XXX Properties that affect
any of the Assets other than the RandM Assets.
(b) Schedule
3.8(b) sets
forth a true and correct list of each XXX Agreement with respect to which
neither of the Sellers is paying any Owner Commissions or any programming fees
to DirecTV, 4COM or any other programming services provider. There are no
revenues or expenses associated with such XXX Properties because there are
no
subscribers at such XXX Properties and although Sellers have the right to
provide television service and programming to such XXX Properties, no such
service is currently provided by the Sellers. The failure to provide such
service is not a breach of the XXX Agreements for such XXX Properties.
(c) As
of the
Closing, Schedule
3.8(c) includes
(i) a complete and correct list of each XxxxX XXX Agreement that is included
in
the Assets, including, without limitation, the correct and complete: (1) name
and address of each XXX Property, (2) the number of units and the number and
type of Subscribers at each XXX Property, (3) the type of service provided
at
each XXX Property, and (4) the expiration date of the term of each XXX
Agreement, and (ii) a complete and correct list of each XXX Agreement that
is
included in the Assets but for which Sellers do not have copies of the
respective XXX Agreements (each, a “Missing XXX Agreement”), including, without
limitation, the correct and complete: (1) name and address of each such XXX
Property, (2) the number of units and the number and type of Subscribers at
each
such XXX Property, (3) the type of service provided at each such XXX Property,
(4) to the extent available, the expiration date of the term of each Missing
XXX
Agreement and (5) name of the Seller that provides the services pursuant to
such
Missing XXX Agreement. Except as set forth on Schedule
3.8(c),
there
are no other Contracts (whether oral or written) entered into between either
of
the Sellers and any of the Owners of the XXX Properties that affect any of
the
RandM Assets. Sellers represent that they have all right, title and interest
in
and to each Missing XXX Agreement and that the applicable Seller indicated
has
the right to provide the Services at such XXX Properties.
-16-
(d) The
Weighted Average Remaining XXX Agreement Term of the XXX Agreements is ten
(10)
months as of September 30, 2006. As of the Closing, the Weighted Average
Remaining XXX Agreement Term of the XXX Agreements will be at least sixty (60)
months.
(e) Prior
to
the Closing, Sellers have delivered to Purchaser, true and complete files for
each XXX Agreement,
including, without limitation, the fully executed XXX Agreement, any schedules,
exhibits, annexes, memoranda, assignments and amendments thereto,
all
correspondence with respect to each XXX Agreement since the acquisition date
of
each applicable XXX Agreement, and all instruments of transfer, assignment,
conveyance and other instruments evidencing the applicable Seller’s chain of
title with respect to each XXX Agreement, and hereby represents that each such
transfer, assignment or other conveyance was in all respects legally effected
and sufficient to convey, transfer and assign to the applicable Seller all
right, title and interest in each XXX Agreement and the Assets
(collectively, the “XXX Files”).
Each
XXX Agreement (i) represents the valid, binding and legal obligation of
the
respective Seller
and each
other
party
thereto,
enforceable against such party in accordance with its terms; (ii) contains
the
expiration date of the term of such XXX Agreement and the exact number of
apartment, dwelling or similar units at such XXX Property; and (iii) is in
full
force and effect according to the terms set forth in the XXX Agreement and
has
not been modified, supplemented or amended in any way.
3.9 SMATV
Non-Bulk Properties.
Schedule
3.9 sets
forth a correct and complete list by XXX Property of each XXX Property that
has
SMATV Non-Bulk Service, the number of SMATV units, the number of channels
available at each such XXX Property, which channels include local and transport
stations delivered by 4COM, the monthly rate charged per subscriber for the
SMATV Non-Bulk Service, the total monthly revenues at such XXX Property for
the
SMATV Non-Bulk Service, the number of SMATV Non-Bulk Service subscribers, the
total monthly transport fees payable by Sellers to 4COM for the transport
stations at such XXX Property and the total monthly fees payable by Sellers
to
DirecTV for the SMATV Non-Bulk Service.
3.10 HDTV
Properties.
Schedule 3.10
sets
forth a correct and complete list of each XXX Property that is HDTV ready,
together with the applicable HDTV platform installed at such XXX Property and
a
list of XXX Properties that have requested an HDTV upgrade.
-17-
3.11 Exclusivity.
(a) Except
as
set forth on Schedule
3.8(a),
each of
the XXX Properties is exclusive to the respective Seller represented as holding
the rights to such XXX Property with respect to the System and System Equipment
(the “Exclusive Agreements”).
(b) Except
as
set forth on Schedule
3.8(a)
with
respect to the Exclusive Agreements,
(a)
there
is currently no franchise cable operator (“FCO”) connected to any minimum point
of entry at any of the XXX Properties and no FCO has over built any of the
Sellers’ Systems at any of the XXX Properties; (b) no unit at any XXX Property
is serviced by the FCO; and (c) Sellers have sole and exclusive access to each
of the XXX Properties in connection with (1) the provision of television service
and programming delivered to each of the units on such XXX Properties using
the
cable distribution system and inside wiring at each such XXX Property and (2)
the solicitation of residents residing at each XXX Property.
3.12 Access
to XXX Properties.
Pursuant to each XXX Agreement, each Seller has the right of ingress, egress,
access and right of way across, through, in or on each part and all of the
XXX
Property covered by such XXX Agreement, to each unit within such XXX Property
and to all Systems and System Equipment located on such XXX Property and used
in
the operation of the cable television or other similar system on such XXX
Property, sufficient to provide the services that are required to be provided
pursuant to each XXX Agreement. Neither Seller has been notified by any Owner
of
any XXX Property about any limitations or restrictions on such Owner’s ability
to grant such rights to such Seller.
3.13 Ownership
of Assets.
Except
as set forth on Schedule
3.13,
Multiband owns all the Systems, the Systems Equipment used to provide the
services to each of the XXX Properties under the Multiband XXX Agreements and
all the other Multiband Assets and Rainbow owns all the Systems, the Systems
Equipment used to provide the services to each of the XXX Properties under
the
Rainbow XXX Agreements and all the other Rainbow Assets. Neither Seller has
previously assigned or transferred any of its right, title or interest in,
to or
under the Assets, and each Seller holds such right, title and interest free
and
clear of any and all Liens. Neither Seller has removed any of the Systems,
Systems Equipment or other Assets that were located on any XXX Property at
the
time that Purchaser surveyed each of the XXX Properties during the period from
September 20-22, 2006 (the “Inspection”). All of the Assets are materially in
the same condition and functioning in the same manner as during the Inspection.
3.14 Accounts
Receivable.
Schedule
3.14
sets
forth a correct and complete summary of all of the accounts receivable with
respect to each XXX Property included in the Assets, including the aging of
each
account receivable segregated by Performing Subscriber and Non-performing
Subscriber (the “Aging A/R Summary Report”), with supporting details to be
electronically delivered to Purchaser at the Closing. All accounts receivable
reflected on Schedule
3.14
represent or will represent valid obligations arising from sales actually made,
services actually performed or services actually billed by Sellers.
3.15 Absence
of Undisclosed Liabilities.
Except
as set forth on Schedule
3.15,
other
than obligations under the XXX Agreements with respect to the applicable XXX
Property to which such XXX Agreement relates, there are no Liens, debts,
liabilities or obligations, of any nature, affecting the Assets.
Each
Seller shall pay, discharge and perform promptly, when due, any and all Retained
Liabilities of the Sellers that directly or indirectly affect the Assets.
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3.16 Absence
of Certain Changes and Events.
(a) Since
June 30, 2006, there has not been any change or occurrence that reasonably
indicates there may be any change, in the management, business, prospects,
results of operations or condition (financial or otherwise) of the Assets or
the
Business that has or could reasonably be expected to have a Material Adverse
Effect.
(b) Since
June 30, 2006, neither Seller has (i) transferred or otherwise disposed of
any
of the Assets; (ii) entered into any compromise or settlement of or suffered
any
judgment in any litigation, proceeding, or governmental investigation relating
to the Assets; (iii) suffered any material damage or destruction to, or loss
of,
any of the Assets whether or not covered by insurance; (iv) entered into any
Contract, including, without limitation, with respect to Owner Commissions
or
other side Contract requiring any payments to be made with respect to the
Assets; (v) except as set forth on Schedule
3.16, entered
into any Contract
to purchase or otherwise acquire control of any access
and use agreements or service and installation agreements
similar
in nature to the XXX Agreements, either directly or indirectly, in the States
of
California and Arizona, including, without limitation, acquiring the assets
of
any system operator or other Person that engages in the Private Cable Operator
Business in California or Arizona or (vi) entered into any written or oral
Contract, other than this Agreement, to do any of the things enumerated in
(i)
through (v) of this Section
3.16.
3.17 Litigation.
(a) Set
forth
on Schedule
3.17
is a
true and complete list of all actions, suits, proceedings, audits and
investigations instituted against or by any Seller affecting the Business or
the
Assets, since the acquisition of each XXX Agreement by the respective Seller,
and a brief description of the nature and status thereof. There are no actions,
suits or proceedings served and pending or, to the Knowledge of Sellers,
threatened against or by either Seller relating to or affecting the Assets,
at
law, in equity or otherwise, in, before or by any court, arbitrator or
governmental agency or authority. There are no unsatisfied judgments or
outstanding orders, injunctions, decrees, stipulations or awards (whether
rendered by a court or administrative agency or by arbitration) against or
affecting any of the Assets or the Business. Prior to the date of this
Agreement, each Seller has delivered to Purchaser for review all Owner complaint
files maintained by such Seller relating to the Assets for the past two (2)
years.
(b) As
of the
Closing, to the Knowledge of Sellers, (i) there are no claims, rights or actions
that have accrued or could be asserted by either Seller against the Owner of
any
XXX Property specifically identified in this Agreement or any Schedule, Annex
or
Exhibit hereto or any of its affiliates (collectively, the “Owner Parties”) for
any default, breach or violation by any Owner Parties under the applicable
XXX
Agreement; and (ii) neither Seller has any offsets or defenses that could be
asserted in any action against any Owner Parties for payments or other
obligations due under the applicable XXX Agreement.
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3.18 Compliance
with Law.
Neither
Seller is in violation of any applicable law, ordinance or regulation of any
governmental entity which would affect the Assets or the Business. All
governmental approvals, registrations, notifications, permits, licenses and
other permissions or authorizations (collectively, “Authorizations”) required in
connection with the conduct of the Business have been obtained and are in full
force and effect and are being complied with by each Seller. Except as set
forth
on Schedule
3.18,
since
the acquisition by the respective Seller of each XXX Agreement, neither Seller
has received any written notification of any asserted past or present violation
in connection with the conduct of the Business of any applicable law, ordinance
or regulation, or any written complaint, inquiry or request for information
from
any governmental entity relating thereto. Neither of the Sellers nor any of
the
Assets is the subject of any federal, state or local enforcement action or,
to
the Knowledge of Sellers, other investigation, including but not limited to
those relating to Environmental Laws and Regulations.
3.19 Consents.
Schedule
3.19
lists
each consent, approval, waiver or authorization (collectively, the “Consents”)
that is legally or contractually required on the part of any Seller to duly
and
validly transfer or assign each of the Assets as contemplated
hereby.
3.20 Programming
Services Fees.
Schedules
3.9, 3.30 and 3.31 set
forth
all the fees for programming services paid to 4Com and DirecTV in connection
with the Assets. Except as set forth on Schedules
3.9, 3.30 and 3.31,
neither
Seller pay fees to any other programming aggregator or supplier with respect
to
the XXX Properties. Neither Seller is providing any foreign programming pursuant
to the terms of any cross license or other similar agreement with any third
party providers.
3.21 Subscriber
Information.
(a) Schedule
3.21 sets
forth a correct and complete list of the residual payments that DirecTV has
paid
to Sellers for the month ended June 30, 2006 and the total number of DTH
Subscribers of Sellers with respect to the XXX Properties as of June 30, 2006.
The information contained in Schedule
3.21
is
consistent with the information provided to Sellers by DirecTV for the month
ended June 30, 2006.
(b) On
or
prior to the Closing Date, each Seller has delivered to Purchaser correct and
complete copies of all of each Seller’s subscriber records for all of such
Seller’s subscribers. Such copies contain all the terms of the Contracts,
agreements, understandings and arrangements between the parties thereto with
respect to the subject matter thereof.
3.22 Utility
Payments.
Except
for the XXX Agreement with respect to the Mira Verde XXX Property that provides
for reimbursement to certain homeowners at the rate of $5.51 per year for
utility services, there are no other utility payments payable by either Seller
to any Owner or resident of an XXX Property.
3.23 Control
Room and Head End Rental Payments.
There
are no lease rental or similar fees payable by any Seller for use of any space
required in connection with any System or component thereof at any XXX Property,
including, without limitation, any rooftop lease or similar
arrangements.
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3.24 Retransmission
Fees.
There
are no retransmission fees or similar payments or compensation payable to any
Owner in connection with retransmission of signals from any XXX Property to
other properties serviced by any Seller.
3.25 Owner
Commissions.
Schedule
3.25 sets
forth a correct and complete list for each XXX Property of the amount of Owner
Commissions payable to each Owner for the month ended August 31, 2006 and will
be updated to reflect such Owner Commissions through the Closing Date, the
type
of revenue on which any such Owner Commissions are calculated, the frequency
of
payment and the due date for each such payment.
3.26 Owner
Advances.
There
are no Owner Advances required to be paid under the terms of any of the XXX
Agreements.
3.27 Free
Off-Air Channels.
Neither
Seller is required to provide free access to any off-air channels or similar
local programming or SMATV Non-Bulk Service under the terms of any XXX
Agreement.
3.28 UCCs.
Neither
of the Sellers nor, to the Knowledge of Sellers, any predecessor of Sellers
has
filed any UCC-1 National Financing Statement with respect to the
Assets.
3.29 Memorandums
of Agreement.
Neither
Seller has recorded or is aware of any predecessor having recorded any
memorandum of agreement or similar instrument in the public records in the
county in which any XXX Property subject to an XXX Agreement is
located.
3.30 Bulk
SMATV Service.
Except
as set forth on Schedule
3.30,
neither
Seller is required to provide Bulk SMATV Service to any XXX
Property.
For each
XXX Property at which any Seller is required to provide Bulk SMATV Service,
Schedule
3.30 sets
forth the type of Bulk SMATV Service provided at such XXX Property (whether
analog or SMATV with a digital overlay for providing DirecTV), the number of
units at such XXX Property, the number of channels available on each System
for
such XXX Property, the current rate charged to each Owner for such Bulk SMATV
Service, the additional fees charged to each Owner by Multiband, the fees
charged by DirecTV to Multiband for the SMATV Bulk Service programming cost,
the
transport fees charged by 4COM to Multiband for such XXX Property and an
indication of whether such XXX Property is invoiced directly by Sellers for
all
costs or by DirecTV for programming costs and by Sellers for the additional
fees. For the XXX Properties invoiced by Sellers, the rates that the Sellers
charge Owners for Bulk SMATV Service are at least the same as those rates which
DirecTV charges the Sellers for such Bulk SMATV Service.
3.31 Bulk
Digital Service.
Except
as set forth on Schedule
3.31,
neither
Seller is required to provide Bulk Digital Service to any XXX Property. For
each
XXX Property at which a Seller is required to provide Bulk Digital Service,
Schedule
3.31 sets
forth the type of Bulk Digital Service provided at such XXX Property (whether
digital or BCA), the number of units at such XXX Property, the current rate
charged to each Owner for such Bulk Digital Service, the additional fees charged
to each Owner by Sellers, the fees charged by DirecTV to Sellers for the Bulk
Digital Service programming cost and an indication of whether such XXX Property
is invoiced directly by Sellers for all costs or by DirecTV for programming
costs and by Sellers for the additional fees. For the XXX Properties invoiced
by
Sellers, the rates that the Sellers charge Owners for Bulk Digital Service
are
at least the same as those rates which DirecTV charges the Sellers for such
Bulk
Digital Service.
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3.32 Other
Commissions.
At the
Closing, there will be no commission payments due from Sellers to any Person
with respect to the Assets except for the December 2006 Owner Commissions which
will be paid by Purchaser after the Closing.
3.33 DirecTV
Registration and Charges.
Neither
Seller has registered any of the XXX Properties with any direct broadcast
satellite provider other than DirecTV. Schedule
3.33 sets
forth a correct and complete list of the DirecTV prepaid programming commissions
paid to Sellers for the months of January through August 2006.
3.34 Employees.
(a) Except
for Xxxxxx Xxxxxxx, Schedule
3.34 sets
forth a correct and complete list of the following information for each
employee, independent contractor, consultant and agent of the Sellers employed
in the Business, including each employee on leave of absence or layoff status,
employer, name, job title, date of hire, date of commencement of employment,
current compensation paid, each individual that is employed by the Sellers
in
connection with the Business, their title and rate of pay.
(b) Neither
Seller has violated the Worker Adjustment and Retraining Notification Act (the
“WARN Act”) or any similar state or local Legal Requirement and neither the
Closing nor the transactions contemplated under this Agreement will cause or
result in any such violation.
(c) No
former
or current employee of either Seller is a party to or is otherwise bound by,
any
Contract that in any way adversely affected, affects or will affect the ability
of such Seller or Purchaser to conduct the business as heretofore carried on
by
such Seller.
(d) No
present or former employee of any Seller or of any Subsidiary has advanced
any
material claim (whether under any applicable law, through any governmental
agency, under an employment agreement, collective bargaining agreement, personal
service or independent contractor agreement or otherwise) that is currently
pending, or to the Knowledge of Sellers, threatened for (i) overtime pay, wages,
salaries or profit sharing, vacation pay, paid time off (including, without
limitation, potential sick leave) or pay in lieu of vacation or time off, (ii)
any violation of any law relating to minimum wages or maximum hours of work,
(iii) discrimination against employees on any basis, (iv) unlawful employment
or
termination practices, (v) unfair labor practices, (vi) any violation of
occupational safety and/or health standards, (vii) benefits under any employee
plans or compensation arrangement, or (viii) breach of any employment, personal
service or independent contractor agreement. Neither of the Sellers nor any
Subsidiary is a party to any collective bargaining agreement or is the subject
of any labor dispute or activity involving the proposed organization of a union
for any group or class of employees, and there has not been any strike or work
stoppage of any kind called or, to the Knowledge of Sellers, threatened, against
either of the Sellers or any Subsidiary.
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3.35 ERISA.
(a) Schedule
3.35 sets
forth a correct and complete list of all “employee benefit plans” as defined by
Section 3(3) of ERISA, all specified fringe benefit plans as defined in Section
6039D of the Code, and all other bonus, incentive compensation, deferred
compensation, profit sharing, stock option, stock appreciation right, stock
bonus, stock purchase, employee stock ownership, savings, severance,
change-in-control, supplemental unemployment, layoff, salary continuation,
retirement, pension, health, life insurance, disability, accident, group
insurance, vacation, holiday, sick leave, fringe benefit or welfare plan, and
any other employee compensation or benefit plan, agreement, policy, practice,
commitment, Contract or understanding (whether qualified or nonqualified,
currently effective or terminated, written or unwritten) and any trust, escrow
or other agreement related thereto that (i) is maintained or contributed to
by
any Seller or any other corporation or trade or business controlled by,
controlling or under common control with such Seller (within the meaning of
Section 414 of the Code or Section 4001(a)(14) or 4001(b) of ERISA) (“ERISA
Affiliate”) or has been maintained or contributed to in the last six (6) years
by any Seller or any such Seller’s ERISA Affiliate, or with respect to which any
Seller or any ERISA Affiliate has or may have any liability, and (ii) provides
benefits, or describes policies or procedures applicable to any current or
former director, officer, employee or service provider of any Seller or any
such
Seller’s ERISA Affiliate, or the dependents of any thereof, regardless of how
(or whether) liabilities for the provision of benefits are accrued or assets
are
acquired or dedicated with respect to the funding thereof (collectively the
“Employee Plans”). Schedule
3.35
identifies as such any Employee Plan that is (i) a “Defined Benefit Plan” (as
defined in Section 414(l) of the Code); (ii) a plan intended to meet the
requirements of Section 401(a) of the Code; (iii) a “Multiemployer Plan” (as
defined in Section 3(37) of ERISA); or (iv) a plan subject to Title IV of ERISA,
other than a Multiemployer Plan. Also set forth on Schedule
3.35
is a
complete and correct list of all ERISA Affiliates of Sellers during the last
six
(6) years.
(b) Sellers
have delivered to Purchaser true, accurate and complete copies of (i) the
documents comprising each Employee Plan (or, with respect to any Employee Plan
which is unwritten, a detailed written description of eligibility,
participation, benefits, funding arrangements, assets and any other matters
which relate to the obligations of Seller or any ERISA Affiliate) and all
material documents, reports or filings related to each such Employee
Plan.
(c) Seller
has, at all times, complied, and currently complies, in all material respects
with the applicable continuation requirements for its welfare benefit plans,
including (1) Section 4980B of the Code (as well as its predecessor provision,
Section 162(k) of the Code) and Sections 601 through 608, inclusive, of ERISA,
which provisions are hereinafter referred to collectively as "COBRA" and (2)
any
applicable state statutes mandating health insurance continuation coverage
for
employees. Except for the continuation coverage requirements of COBRA, neither
Seller has any obligations or potential liability for benefits to employees,
former employees or their respective dependents following termination of
employment or retirement under any of the Employee Plans that are Employee
Welfare Benefit Plans.
(d) The
form
of all Employee Plans is in compliance with the applicable terms of ERISA,
the
Code, and any other applicable laws, and such plans have been operated in
compliance with such laws and the written Employee Plan documents. All required
reports and descriptions of the Employee Plans (including Internal Revenue
Service Form 5500 Annual Reports, Summary Annual Reports and Summary Plan
Descriptions and Summaries of Material Modifications) have been (when required)
timely filed with the IRS, the U.S. Department of Labor or other governmental
body and distributed as required, and all notices required by ERISA or the
Code
or any other Legal Requirement with respect to the Employee Plans have been
appropriately given.
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(e) Each
Seller has maintained workers' compensation coverage as required by applicable
state law through purchase of insurance and not by self-insurance or
otherwise.
(f) None
of
the transactions contemplated by this Agreement will result in an amendment,
modification or termination of any of the Employee Plans. No written or oral
representations have been made to any employee or former employee of any Seller
promising or guaranteeing any employer payment or funding for the continuation
of medical, dental, life or disability coverage for any period of time beyond
the end of the current plan year (except to the extent of coverage required
under COBRA). No written or oral representations have been made to any employee
or former employee of any Seller concerning the employee benefits of
Purchaser.
(g) No
accumulated funding deficiency (as defined in section 302 of ERISA and section
412 of the Code), whether or not waived, exists with respect to any Plan. No
liability to the Pension Benefit Guaranty Corporation has been or is expected
by
any Seller or any ERISA Affiliate to be incurred with respect to any Plan by
any
Seller or any ERISA Affiliate that could reasonably be expected to have a
material adverse effect on the Business or the Assets. Neither Seller
participates in or contributes, or has participated in or contributed, to any
Multiemployer Plan.
3.36 Taxes.
Each
Seller has filed and paid, or has made provision for the payment of, and will
pay all Taxes that affect the Assets. On or prior to the Closing Date, each
Seller will deliver to Purchaser a copy of the Business Property Statements
filed on or before April 1, 2006 for the calendar year 2006 and City Tax returns
filed in January 2006 for each city in which an XXX Property is
located.
3.37 Maintenance
of Insurance.
Each
Seller maintains with financially sound and reputable insurers, insurance in
such amounts and against such liabilities and hazards as is customarily
maintained by other companies operating similar businesses as the Business
and
necessary to preserve the value of the Assets (the “Insurance”).
3.38 Rooftop
Rights.
Schedule
3.38 attached
hereto sets forth a correct and complete list of all rooftop right or similar
Contracts entered into by any Seller with respect to sending
or receiving internet or other services via a rooftop microwave system. Each
of
the Sellers has secured all rights, licenses and permits necessary to exercise
such rooftop rights and to use a rooftop microwave system.
3.39 System
Operators.
Schedule
3.39
sets
forth a true and complete list of all system operators affiliated with each
Seller in California or Arizona and the number of subscribers each system
operator has as of the date of this Agreement and as of the Closing Date.
Purchaser agrees that it shall not disclose the information set forth in
Schedule
3.39
to
anyone other than its employees and representatives who have a need to know
such
information and solely in connection with the purposes of this
Agreement.
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3.40 Free
“Comp” Accounts.
Except
for the free or complimentary accounts provided to Owners of the XXX Properties
to be disclosed to Purchaser on or prior to the Closing pursuant to Section
6.14,
neither
Seller is required to provide any other form of free service, including, without
limitation, free introductory service to new Subscribers, under the terms of
any
of the XXX Agreements. Neither Seller is required to pay any Owner Commissions
under any XXX Agreement with respect to any free “comp” accounts or service at
any of the XXX Properties.
3.41 Acquisitions.
Since
January 1, 2006, neither of the Sellers nor any of their direct or indirect
subsidiaries have entered into, or are contemplating entering into, and there
is
not pending any Contract, whether written or oral, including, without
limitation, any letter of intent, regarding any acquisitions, mergers, joint
ventures, divestitures or other material company events that would affect the
Assets or the Business.
3.42 Transport
Subscribers.
Each
Seller has accurately and completely reported the number of transport
subscribers at all of the XXX Properties to 4COM.
3.43 No
Brokers or Finders.
Neither
of the Sellers nor any of their Affiliates, employees or agents have incurred
any obligation or liability, contingent or otherwise, for brokerage or finders’
fees or agents’ commissions or other similar payments in connection with the
sale of either Sellers’ Business or the Assets or the transactions contemplated
by this Agreement.
3.44 Disclosure.
To the
Knowledge of Sellers, no representation or warranty by any Seller in this
Agreement, and no information disclosed in the Schedules or Exhibits supplied
by
Sellers, contains any untrue statement of a material fact or, taken as a whole,
omits to state a material fact necessary to make the statements contained herein
or therein not misleading.
ARTICLE
4
REPRESENTATIONS
AND WARRANTIES OF PURCHASER
As
of the
Closing, Purchaser represents and warrants to the Sellers as
follows:
4.1 Organization
of Purchaser.
Purchaser is a limited liability company duly formed, existing and in good
standing under the laws of the State of California.
4.2 Authority.
Purchaser has all requisite company power and authority to enter into this
Agreement and to perform its obligations hereunder. This Agreement has been
duly
authorized, executed, and delivered by Purchaser and constitutes a legal, valid
and binding agreement of Purchaser, enforceable against Purchaser in accordance
with its terms. No further proceeding on the part of Purchaser is necessary
to
authorize this Agreement and the transactions contemplated hereby. Neither
the
execution and delivery of this Agreement nor compliance by Purchaser
with its terms and provisions will violate (i) any provision of the articles
of
organization or operating agreement of Purchaser, (ii) any contract, permit
or
license of Purchaser, or (iii) any law, statute, regulation, injunction, order
or decree of any government agency or authority or court to which Purchaser
or
any of Purchaser’s assets is subject.
-25-
4.3 Consents.
Except
as set forth on Purchaser’s Schedule
4.3,
there
is no consent, approval, waiver or authorization that is legally or
contractually required on the part of Purchaser to duly and validly purchase
or
acquire each of the Assets as contemplated hereby.
4.4 No
Brokers or Finders.
Except
for Purchaser’s obligation to pay Paradigm Marketing Group, Inc. a brokers fee
or commission for the services of Mr. Xxxxxx
Xxxxxxx
in
connection with the transactions contemplated by the Agreement, neither
Purchaser nor any of its affiliates, employees or agents have
incurred any obligation or liability, contingent or otherwise, for brokerage
or
finders’ fees or agents’ commissions or other similar payments in connection
with the transactions contemplated by this Agreement.
4.5 Disclosure.
To the
Knowledge of Purchaser, no representation or warranty by Purchaser in this
Agreement contains any untrue statement of a material fact or, taken as a whole,
omits to state a material fact necessary to make the statements contained herein
or therein not misleading.
ARTICLE
5
CERTAIN
COVENANTS AND AGREEMENTS
5.1 Confidentiality.
All
Confidential Information in connection with the transactions contemplated by
this Agreement shall be kept confidential by each Seller and such Seller’s
respective members, managers, officers, directors, employees, agents and
representatives, Purchaser and its respective officers, directors, employees,
agents and representatives (the “Purchaser’s Agents”), and shall not be
disclosed by any of the parties hereto to anyone (other than their respective
affiliates, members, shareholders, representatives and agents (including,
without limitation, accountants, bankers, financial advisors and attorneys)
with
a reasonable need to know such information) at anytime for any purpose, without
the prior written consent of the other party, provided that following the
Closing, the Purchaser may disclose or permit the Purchaser’s Agents to disclose
such information to third parties as reasonably necessary in connection with
Purchaser’s acquisition and operation of the Assets.
5.2 Access
to Information and Records.
In
connection with the transactions contemplated by this Agreement, during the
period from the signing of this Agreement through the Closing Date, each Seller
shall (a) give Purchaser the same full and free access as such Seller has to
the
Assets, including, without limitation, the XXX Properties, the Systems or any
part thereof at the XXX Properties, the Owners, the property management team
and
the subscribers at each XXX Property and the such Seller’s personnel,
Contracts,
books
and records and other documents and data relating to the Assets or the Business;
(b) furnish Purchaser with copies of all such Contracts, books and records
and
other existing documents and data as Purchaser may reasonably request; (c)
furnish Purchaser with such additional financial, operating and other relevant
data and information as Purchaser may reasonably request; and (d) otherwise
cooperate and assist, to the extent reasonably requested by Purchaser, with
Purchaser’s investigation of the XXX Properties, Assets and financial condition
related to each Seller.
5.3 Operation
of the Business of Sellers.
Between
the date of this Agreement and the Closing, each Seller shall:
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(a) Conduct
its business only in the ordinary course and consistent with past
practice;
(b) Except
as
otherwise directed by Purchaser in writing, and without making any commitment
on
Purchaser’s behalf, use its best efforts to preserve intact its current business
organization, keep available the services of its officers, employees and agents
and maintain its relations and goodwill with subscribers, Owners, employees,
agents and others having business relationships with any Seller;
(c) Confer
with Purchaser prior to implementing operational decisions of a material nature
with respect to the Business or the Assets;
(d) Otherwise
report periodically to Purchaser concerning the status of the Business and
each
Seller’s operations and finances with respect thereto;
(e) Make
no
material changes in management personnel involved in the Business without prior
consultation with Purchaser;
(f) Maintain
the Assets in a state of repair and condition that complies with Legal
Requirements and is consistent with the requirements and normal conduct of
the
Business, including, without limitation, the requirements under the XXX
Agreements;
(g) Keep
in
full force and effect, without amendment, all material rights relating to each
Sellers’ Business;
(h) Comply
with all Legal Requirements and contractual obligations applicable to the
operations of each Seller’s Business;
(i) Continue
in full force and effect the Insurance;
(j) Except
as
required to comply with ERISA or to maintain qualification under Section 401(a)
of the Code, not amend, modify or terminate any Employee Plan without the
express written consent of Purchaser, and except as required under the
provisions of any Employee Plan, not make any contributions to or with respect
to any Employee Plan without the express written consent of Purchaser, provided
that the Sellers shall contribute that amount of cash to each Employee Plan
necessary to fully fund all of the benefit liabilities of such Employee Plan
on
a plan termination basis as of the Closing Date;
(k) Maintain
all books and records of each Seller relating to the Business in the ordinary
course of business;
(l) Notify
Purchaser within seventy-two (72) hours after receiving or becoming aware of
any
indication of interest, solicitation or discussions between any Seller and
any
system operator in California or Arizona with respect to any acquisition, sale
or joint venture of such system operator’s assets in whole or in part;
and
(m) Cease
negotiating or discussing any new, or renewal of any, right of entry or service
and installation or similar agreement with any owner or manager of a real
property desiring to secure the services of any Seller in connection with its
Private Cable Operator Business and provide Purchaser with notice of any such
requests or expressions of interest for such negotiations or discussions within
seventy-two (72) hours of any Seller becoming aware of same.
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5.4 Negative
Covenant.
Except
as otherwise expressly permitted herein, between the date of this Agreement
and
the Closing Date, neither Seller shall (a) take any affirmative action, or
fail
to take any reasonable action within its control, as a result of which any
of
the changes or events listed in Section
3.16
would be
likely to occur; (b) make any modification to any material Contract; (c) fail
to
take any action to maintain the Systems at any of the XXX Properties in working
order; (d) fail to respond to any service calls from subscribers at any of
the
XXX Properties or otherwise permit the service level of performance by any
Seller with respect to the Assets to decline below the standard level of service
provided by such Seller and consistent with past practice; or (d) enter into
any
compromise or settlement of any litigation, proceeding or governmental
investigation relating to the Assets, the Business or the Assumed
Liabilities.
5.5 Consents.
Each
Seller shall cooperate with Purchaser and its representatives in obtaining
all
the Consents required to effect the transactions contemplated by this
Agreement.
5.6 Notification.
Between
the date of this Agreement and the Closing, each Seller shall promptly notify
Purchaser in writing if it becomes aware of (a) any fact or condition that
causes or constitutes a breach of any of the Sellers’ representations and
warranties made as of the date of this Agreement or (b) the occurrence after
the
date of this Agreement of any fact or condition that would or would be
reasonably likely to (except as expressly contemplated by this Agreement) cause
or constitute a breach of any such representation or warranty had the
representation or warranty been made as of the time of the occurrence of, or
either Seller’s discovery of, such fact or condition. Should any such fact or
condition require any change to the Disclosure Schedules specifying such change,
such delivery shall not affect any rights of Purchaser under Section
8.2
and
Article
9.
During
the same period, each Seller shall promptly notify Purchaser of the occurrence
of any breach of any covenant of the Sellers in this Article
5
or of
the occurrence of any event that may make the satisfaction of the conditions
in
Article
6
impossible of unlikely.
5.7 No
Negotiation.
Until
such time as this Agreement shall be terminated pursuant to Section
8.1 with
respect to all the Assets, neither Seller shall directly or indirectly solicit,
initiate, encourage or entertain any inquiries or proposals from, discuss or
negotiate with, provide any nonpublic information to or consider the merits
of
any inquiries or proposals from any Person (other than Purchaser) relating
to
any business combination transaction involving any Seller or the sale of such
Seller’s Business or any of the Assets. The Sellers shall notify Purchaser of
any such inquiry or proposal with twenty-four (24) hours of receipt or awareness
of the same by either Seller.
5.8 Updated
Financial Information Reports.
Until
the Closing Date, each Seller shall deliver to Purchaser within twenty (20)
days
after the end of each month a copy of the balance sheet and income statements
for such month prepared in a manner containing information consistent with
such
Seller’s current practices and certified by such Seller’s chief financial
officer as to compliance with Section
3.5. In
addition, within five (5) days after the end of each month the Sellers shall
deliver to Purchaser each of the following in the same form as presented in
the
Disclosure Schedules: the DirecTV Residual Report (Schedule 3.21), the Bulk
SMATV Gross Revenues and Direct Costs (Schedule 3.30), the Bulk Digital Gross
Revenues and Direct Costs (Schedule 3.31), Owner Commissions (Schedule 3.25),
DirecTV PPC Reports (Schedule 3.33), Payroll (Schedule 3.34) and SMATV Non-Bulk
Service and DTH Non-Bulk Gross Revenues and Direct Costs (Schedule
3.9).
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5.9 Payment
of Liabilities.
Each
Seller shall pay, make adequate provision for the payment of, or otherwise
satisfy in the ordinary course of business all of its liabilities and
obligations, including, without limitation, all Retained Liabilities. If any
such liabilities or obligations are not so paid, provided for or otherwise
satisfied, or if Purchaser reasonably determines that the failure to make any
payments will impair Purchaser’s use or enjoyment of the Assets or the conduct
of the Business with the Assets, Purchaser may, at any time after the Closing
Date, elect to make all such payments directly (but shall have no obligation
to
do so) and deduct the full amount of all such payments from the Indemnity
Holdback Amount.
5.10 Employees
and Employee Benefits.
For
the
purpose of this Agreement, the term “Active Employees” shall mean all employees
listed on Schedule
3.34
who are
employed on the Closing Date by any Seller, including employees on temporary
leave of absence, including family medial leave, military leave, temporary
disability or sick leave, but excluding employees on long-term disability
leave.
(a) Purchaser
is not obligated to hire any Active Employee but may interview all Active
Employees. Purchaser will provide Sellers with a list of Active Employees to
whom Purchaser has made an offer of employment that has been accepted to be
effective on the Closing Date (the “Hired Active Employees”). Subject to Legal
Requirements, Purchaser will have reasonable access to the facilities and
personnel records (including performance appraisals, disciplinary actions,
grievances and medical records) of each Seller for the purpose of preparing
for
and conducting employment interviews with all active Employees and will conduct
the interviews as expeditiously as possible prior to the Closing Date. Each
Seller will provide access upon reasonable prior notice during normal business
hours. Effective immediately before the Closing, each Seller will terminate
the
employment of all of its Hired Active Employees.
(b) Neither
of the Sellers nor their Affiliates or related shareholders, members, managers,
directors, officers or others in a similar capacity affiliated with the Sellers
or any of their Affiliates (collectively, “Related Persons”) shall solicit the
continued employment of any Active Employee (unless and until Purchaser has
informed Sellers in writing that the particular Active Employee will not receive
any employment offer from Purchaser) or the employment of any Hired Active
Employee after the Closing. Purchaser shall inform Sellers promptly of the
identities of those Active Employees to whom it will not make employment
offers.
(c) It
is
understood and agreed that (i) Purchaser’s expressed intention to extend offers
of employment as set forth in this Section 5.10
shall
not constitute any commitment, Contract or understanding (express or implied)
of
any obligation on the part of Purchaser to a post-Closing employment
relationship of any fixed term or duration or upon any terms or conditions
other
than those that Purchaser may establish pursuant to individual offers of
employment, and (ii) employment offered by Purchaser is “at will” and may be
terminated by Purchaser or by an employee at any time for any reason (subject
to
any written commitments to the contrary made by Purchaser or an employee and
Legal Requirements). Nothing in this Agreement shall be deemed to prevent or
restrict in any way the right of Purchaser to terminate, reassign, promote
or
demote any of the Hired Active Employees after the Closing or to change
adversely or favorably the title, powers, duties, responsibilities, functions,
locations, salaries, other compensation or terms or conditions of employment
of
such employees.
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(d) Each
Seller shall be responsible for (i) the payment of all wages and other
remuneration due to Active Employees with respect to their services as employees
of such Seller through the Closing Date, including pro rata bonus payments
and
all vacation pay earned prior to the Closing Date; (ii) the payment of any
termination or severance payments and the provision of health plan continuation
coverage in accordance with the requirements of COBRA and Sections 601 through
608, inclusive, of ERISA; and (iii) any and all payments to employees required
under the WARN Act.
(e) Sellers
shall be liable for any claims made or incurred by Active Employees and their
beneficiaries through the Closing Date under the Employee Plans. For purposes
of
the immediately preceding sentence, a charge will be deemed incurred, in the
case of hospital, medical or dental benefits, when the services that are the
subject of the charge are performed and, in the case of other benefits (such
as
disability or life insurance), when an event has occurred or when a condition
has been diagnosed that entitles the employee to the benefit.
(f) All
Hired
Active Employees who are participants in Sellers’ retirement plans shall retain
their accrued benefits under Sellers’ retirement plans as of the Closing Date,
and Sellers (or Sellers’ retirement plans) shall retain sole liability for the
payment of such benefits as and when such Hired Active Employees become eligible
therefore under such plans. All Hired Active Employees shall become fully vested
in their accrued benefits under Sellers’ retirement plans as of the Closing
Date, and Sellers will so amend such plans if necessary to achieve this result.
Sellers shall cause the assets of each Employee Plan to equal or exceed the
benefit liabilities of such Employee Plan on a plan-termination basis as of
the
close of business on the Closing Date.
(g) Sellers
will cause their savings plan to be amended in order to provide that the Hired
Active Employees shall be fully vested in their accounts under such plan as
of
the Closing Date and all payments thereafter shall be made from such plan as
provided in the plan.
(h) Neither
of the Sellers nor their respective Related Persons will make any transfer
of
pension or other employee benefit plan assets to Purchaser. Purchaser shall
not
have any responsibility, liability or obligation, whether to Active Employees,
former employees, their beneficiaries or to any other Person, with respect
to
any employee benefit plans, practices, programs or arrangements (including
the
establishment, operation or termination thereof and the notification and
provision of COBRA coverage extension) maintained by Sellers. Each Seller shall
be solely liable for any severance payment required to be made to its employees
due to the transactions contemplated under this Agreement.
(i) Purchaser
will set its own initial terms and conditions of employment for the Hired Active
Employees and others it may hire, including, work rules, benefits and salary
and
wage structure, all as permitted by law. Each Seller, as applicable, shall
provide Purchaser with completed I-9 forms and attachments with respect to
all
Hired Active Employees.
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(j) Each
of
the Sellers and Purchaser shall give any notices required by Legal Requirements,
shall provide each other with such plan documents and summary plan descriptions,
employee data or other information and shall take whatever other actions with
respect to the plans, programs and policies described in this Section
5.10, as,
in
each case, may be reasonably required to carry out the arrangements described
in
this Section
5.10.
(k) If
any of
the arrangements described in this Section
5.10 are
determined by the IRS or other governmental body to be prohibited by law, each
of the Sellers and Purchaser shall modify such arrangements to as closely as
possible reflect their expressed intent and retain the allocation of economic
benefits and burdens to the parties contemplated herein in a manner that is
not
prohibited by law.
5.11 System
Operators.
Sellers
shall notify Purchaser within seventy-two (72) hours after being entitled to
acquire any system operator’s assets located in California or Arizona either
upon a system operator’s default or otherwise or after becoming aware of any
expression of interest from a system operator regarding such operator’s desire
to sell or otherwise dispose of all or part its assets to either Seller (each,
a
“SO Offer”). For a period of three (3) years following the Closing, each Seller
agrees to provide Purchaser with a right of first refusal regarding any SO
Offer
in California or Arizona. Purchaser shall have a period of ninety (90) days
after receipt of notice regarding any SO Offer to attempt to negotiate the
acquisition of such system operator’s assets, provided, however, that if such
Seller is unable to assign such SO Offer directly to Purchaser, such Seller
shall undertake such negotiations directly on behalf of Purchaser in order
to
acquire the assets in such SO Offer to be resold or otherwise assigned to
Purchaser. If a Seller undertakes such negotiations, it shall proceed based
on
terms and conditions acceptable to Purchaser in Purchaser’s sole discretion.
Upon concluding any such acquisition, such Seller shall take all actions
necessary to assign such assets to Purchaser on the same terms and conditions
as
acquired by Seller and approved by Purchaser. If Purchaser decides not to pursue
any SO Offer or if Purchaser’s discussions regarding any potential acquisition
from a Seller’s system operator cease completely, then following receipt of
notice of same from Purchaser, such Seller shall have the opportunity to acquire
such assets for a period of sixty days (60) days following the date of such
notice. Thereafter, any potential acquisition of the assets of such system
operator shall be subject to the right of first refusal with respect to each
SO
Offer described in this Section
5.11.
5.12 Further
Assurances; Sellers Access to Records.
At such
time and from time to time on and after the Closing Date upon request by
Purchaser, each Sellers shall do, execute, acknowledge and deliver, or cause
to
be done, executed, acknowledged and delivered, all such further acts, deeds,
assignments, transfers, conveyances, powers of attorney, and assurances that
may
reasonably be required for the better conveying, transferring, assigning,
delivering and confirming ownership to, or reducing to the possession of,
Purchaser all of the Assets and to otherwise carry out the purposes of this
Agreement. Each Seller agrees to promptly deliver, remit or return to Purchaser
all Assets and amounts received by it after the Closing that, pursuant to the
terms hereof, are owned by or are due to Purchaser. Purchaser shall permit
each
of the Sellers and their authorized representatives to have reasonable access
to, on a confidential basis, and to copy, at such Seller’s expense, during
regular business hours and upon reasonable advance
notice to Purchaser and in a manner nondisruptive to Purchaser’s conduct of its
business, such books, records and documents related to the Assets that are
reasonably necessary for such Seller to comply with any applicable law or
regulation or to respond to any legal or administrative claim or
investigation.
-31-
5.13 Taxes,
Reports and Returns.
Each
Seller shall pay any and all Taxes, including, without limitation, sales or
transfer taxes in connection with the sale of its Assets, through the Closing
Date.
Each
Seller shall promptly prepare and file all reports and returns required by
Legal
Requirements relating to the Business and its Assets as of the Closing Date.
5.14 Maintenance
of Property Relations.
Up to
and including the Closing Date, each Seller shall take all actions necessary
to
preserve the goodwill and relationship with the Owner, the property management
team and the tenants at each XXX Property for the benefit of
Purchaser.
5.15 Compliance
with Conditions.
Each
Seller shall use its commercially reasonable best efforts to bring about the
satisfaction of the conditions to the obligations of Purchaser specified in
Article
6
below.
5.16 Use
of
Tradename.
From
the Closing through March 31, 2007, each Seller agrees to permit Purchaser
to
use the name “Multiband Corporation” and “Rainbow Satellite Group, LLC”, as
applicable, solely as necessary to effect the completion of the transition
of
the Assets from such Seller to Purchaser, provided that Purchaser shall not
hold
itself out as conducting business under either the “Multiband Corporation” or
“Rainbow Satellite Group, LLC” names.
5.17 Accounts
Receivable.
Each
Seller and Purchaser agree that all accounts receivable collections shall be
allocated to either the respective Seller or the Purchaser based on the period
to which such accounts receivable relate and prorated as necessary to reflect
any amounts attributable to periods prior to the Closing Date and to periods
on
and after the Closing Date. All accounts receivable for periods ending prior
to
the Closing Date, including, prepaid programming commissions and commissions
payable to Sellers pursuant to the DirecTV Residual Report for periods ending
prior to the Closing Date and all fees with respect to Bulk Service, SMATV
Non-Bulk Service and receivers invoiced prior to the Closing Date for periods
prior to the Closing Date (the “Pre-Closing A/R”), shall be for the account of
Sellers. All accounts receivable with respect to the Assets for periods ending
on or after the Closing Date, including, without limitation, prepaid programming
commissions and commissions payable to Sellers pursuant to the DirecTV Residual
Report for periods ending on or after the Closing Date and all fees with respect
to Bulk Service, SMATV Non-Bulk Service and receivers invoiced prior to the
Closing Date for periods on or after the Closing Date (the “Post-Closing A/R”),
shall be for the account of Purchaser. Each of the Sellers agree to remit to
Purchaser any Post-Closing A/R and Purchaser agrees to remit to Multiband,
as
agent for the Sellers, any Pre-Closing A/R. All such remittances of accounts
receivable shall be made by the applicable party to the other party within
five
(5) days of receipt; provided, however, that Sellers shall provide Purchaser
with daily email update of any Post-Closing A/R collections. For purposes of
this Section 5.17, Rainbow hereby appoints Multiband as its agent for purposes
of receiving any Pre-Closing A/R remitted by Purchaser to Rainbow.
Notwithstanding the foregoing, any accounts receivable with respect to the
Schedule 2.4 XXX Assets for periods arising on or after the Schedule 2.4 Assets
Effective Date shall be for the account of Purchaser and any accounts receivable
with respect to the Schedule 2.4 XXX Assets for periods arising on or prior
to
the Schedule 2.4 Assets Effective Date shall be for the account of Rainbow.
All
such accounts receivable with respect to the Schedule 2.4 XXX Assets shall
be
handled in accordance with the terms described above for the Post-Closing A/R
and the Pre-Closing A/R but taking into account the Schedule 2.4 Assets
Effective Date.
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5.18 Noncompetition
Agreements.
Sellers
shall bear all costs necessary to secure each of the Noncompetition Agreements
described in Section
6.18 below.
5.19 Mutual
Cooperation.
Purchaser and each Seller agree to mutually cooperate in good faith with each
other in connection with Sellers’ efforts to obtain each New XXX in the name of
the respective Seller as required pursuant to Section
6.6
below.
In connection with such good faith cooperation, Purchaser shall use its
marketing representatives to assist in negotiating and securing the New ROEs,
provided, however, that the wages (excluding Sales Commissions due with respect
to the New ROEs) payable to Purchaser’s marketing representatives (the “Wages”)
shall be the only cost incurred by Purchaser in connection with Sellers’
obligations under Section
6.6
below.
5.20 Right
of First Refusal to Sell New ROEs.
In the
event that for any reason the Closing does not occur, both Sellers agree that
for a period of one year following the date of termination of this Agreement
with respect to the Assets (other than the Assets relating to the Schedule
2.4
XXX Assets) Purchaser shall have a right of first refusal to purchase any New
XXX at a purchase price that yields the Minimum Purchaser IRR as of the Closing
based on the Closing Date Cash Flow and the Weighted Average Remaining XXX
Agreement Term of the New ROEs to be purchased. Such right of first refusal
may
be exercised with respect to any or all New ROEs upon written notice by
Purchaser to Sellers identifying the New ROEs to be purchased and specifying
the
calculation of the purchase price to be paid for the New ROEs to be purchased.
Sellers agree to sell to Purchaser the New ROEs specified in the notice
delivered by Purchaser at the purchase price specified therein. The closing
of
any such purchase shall occur within thirty (30) days after the date of the
notice delivered by Purchaser.
ARTICLE
6
CONDITIONS
TO PURCHASER’S OBLIGATIONS
The
obligations of Purchaser under this Agreement (except with respect to the
Initial Closing pursuant to Section
2.7
hereof)
shall, at its option, be subject to the satisfaction, prior to the Closing
Date,
of all of the following conditions:
6.1 Representations,
Warranties, Covenants and Agreements.
Each of
the Sellers’ representations and warranties in this Agreement (considered
collectively), and each of these representations and warranties (considered
individually), shall have been accurate in all material respects as of the
date
of this Agreement, and shall be accurate in all material respects as of the
time
of the Closing as if then made, without giving effect to any supplement to
the
Disclosure Schedules. Each Seller’s representations and warranties in
Sections
3.3 and
3.5, and
each
of the representations and warranties in this Agreement that contains an express
materiality qualification, shall have been accurate in all respects as of the
time of the Closing as if then made, without giving effect to any supplement
to
the Disclosure Schedules. Sellers shall have delivered to Purchaser a
certificate dated as of the Closing Date to all such effects.
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6.2 Sellers
Performance.
All of
the covenants and obligations that the Sellers are required to perform or to
comply with pursuant to this Agreement at or prior to the Closing (considered
collectively), and each of these covenants and obligations (considered
individually), shall have been duly performed and complied with by the Closing
Date. Sellers shall have delivered to Purchaser a certificate dated as of the
Closing Date to all such effects.
6.3 Legislation.
No
statute, rule, regulation, order or interpretation shall have been enacted,
entered or deemed applicable by any domestic government or governmental or
administrative agency or court that would make the transactions contemplated
by
this Agreement illegal or that would cause Purchaser or any Affiliate or Related
Person of Purchaser to suffer any adverse consequence.
6.4 Proceedings.
There
shall not have been commenced or threatened against any Seller, or to the
Knowledge of Sellers, commenced or threatened against Purchaser or any Owner
any
proceeding (i) involving any challenge to, or seeking damages or other relief
in
connection with, any of the transactions contemplated by this Agreement or
(ii)
that may have the effect of preventing, delaying, making illegal, imposing
limitations or conditions on or otherwise interfering with the transactions
contemplated by this Agreement.
6.5 Employees.
All
requisite notice periods under the WARN Act and California’s equivalent
provision shall have expired. Purchaser shall have entered into an employment
agreement with Xxxxx Xxxxxx on terms and conditions reasonably acceptable to
Purchaser. Substantially all Active Employees of Sellers shall be available
for
hiring by Purchaser, in its sole discretion, on and as of the Closing
Date.
6.6 New
Exclusive XXX Agreements.
Receipt
by Purchaser of new fully executed Right of Entry Agreements for each XXX
Property on Schedule
3.5(d) with
a
Closing Date Gross Margin over one thousand dollars ($1,000) per month (and
which is highlighted in bold black typeface on Schedule
3.5(d))
(the
“New ROEs”) on form agreements provided by Purchaser, but in the name of the
appropriate Seller, and which provide for terms and conditions that are
acceptable to Purchaser, including, without limitation, a minimum term of ten
(10) years and an exclusive right to provide digital satellite, SMATV and
broadband services and to market such services at such property, with all costs
(including any Sales Commissions payable to Purchaser’s marketing
representatives, but excluding the Wages) incurred in connection with securing
such New ROEs paid by Sellers on or prior to the Closing.
6.7 Intentionally
Omitted.
6.8 Consents.
Receipt
by Purchaser of each of the Consents set forth on Schedule
3.19 on
forms
reasonably acceptable to Purchaser, but excluding any Consent with respect
to an
XXX Property for which a New XXX is required pursuant to Section
6.6 above.
6.9 Call
Center and Billing Services.
Each
Seller and Purchaser agree to enter into that certain Call Center and Billing
Services Agreement on terms and conditions mutually agreeable to Purchaser
and
Multiband (the
“Call Center and Billing Agreement”),
which
Call Center and Billing Agreement will provide, inter
alia,
that
(a) Sellers shall provide Purchaser with customer center call service and
billing services, (b) such services shall be billed to Purchaser at the rate
of
three dollars ($3.00) for each Subscriber, (c) Purchaser may add or remove
any
XXX Property or any other property specified by Purchaser upon ten (10) days
prior written notice to Sellers, (d) minimum performance standards that equal
or
exceed those of Purchaser’s call center or the requirements set forth in
Purchaser’s DirecTV MDU Key Account Operator Agreement, dated March 31, 2006,
and (e) all payments received or collected by Seller’s on behalf of Purchaser
pursuant to the billing services arrangement shall be received and deposited
into a lockbox account established by Purchaser.
-34-
6.10 Internet
Services Agreement.
Multiband and Purchaser agree to enter into that center Internet Services
Agreement on terms and conditions mutually agreeable to Purchaser and Multiband
(the “Internet Agreement”), which Internet Agreement will provide, inter
alia,
that
(a) within thirty (30) days after the Closing, Purchaser shall provide to
Multiband a list of twenty properties at which Purchaser has the right to
provide Internet services pursuant to right of entry agreements and Purchaser
shall commit to use Multiband’s Internet service solution to launch the Internet
service required to be delivered by Purchaser at such properties at such time
as
Purchaser is prepared to launch such properties, (b) Multiband agrees that
the
Internet service it provides to Purchaser will consist of a minimum of 10
megabits/second of bandwidth, (c) such services shall be billed to Purchaser
at
Multiband’s then current cost which is represented as of the Closing to comprise
a $2500.00 one-time installation fee for each property at which Purchaser
requests 10 megabits/second of bandwidth or a $3500.00 one-time installation
fee
for each property at which Purchaser requests 45 megabits/second of bandwidth,
in each case, including installation of all wireless devices and repair and
maintenance of such wireless devices for the duration of the term of the
Internet Agreement, a $300.00 monthly circuit fee for each property receiving
the services, and a $4.00 monthly fee for each internet subscriber using such
service at each property, subject to mutually agreed to changes should
Multiband’s cost structure change, (d) the initial term of the Internet
Agreement will be three (3) years, (e) upon Purchaser’s request, Multiband shall
provide Purchaser with Internet connectivity service to residents at any
property that is serviced by Purchaser during the term of the Internet
Agreement, (f) Multiband agrees to comply with performance standards that are
at
least comparable to, if not better than, the performance standards of
Purchaser’s existing Internet service solution providers, and (g) Purchaser may
request or cancel Internet service with respect to any property at anytime
upon
ten (10) days prior written notice to Multiband.
6.11 Technical
Specifications.
Receipt
by Purchaser at least ten (10) days prior to the Closing, of a correct and
complete list of the technical specifications for each XXX Property, including,
without limitation, the type of delivery system (SMATV, L-Band, HDTV, MFH1,
etc), whether it has digital service, whether it has Internet service, the
bandwidth, the applicable Seller’s Property Number, headend name and repeater
name.
6.12 Owner
Contact Information.
Receipt
by Purchaser on or before October 27, 2006, of the most currently available
name, address, telephone number and email address for each Owner of an XXX
Property, Owner’s management company, Owner’s onsite managers and asset
portfolio or equivalent managers that work for the Owner or the Owner’s
management company. Receipt by Purchaser at least ten (10) days prior to the
Closing, of a correct and complete electronic list of the most currently
available name, address, telephone number and email address for each Owner
of an
XXX Property, Owner’s management company, Owner’s onsite managers and asset
portfolio or equivalent managers that work for the Owner or the Owner’s
management company and detailed supporting calculations for the Owner
Commissions paid or to be paid consistent with past practice by each Seller
for
the period from October through December 31, 2006 for XXX Agreements with
quarterly payment
terms and for the month ended December 31, 2006 for XXX Agreements with monthly
payment terms.
-35-
6.13 Deposits.
Receipt
by Purchaser of a correct and complete report as of the Closing, identifying
the
name and address (including unit number) of each Subscriber at an XXX Property
who has provided a credit card to Sellers as security for each of such
subscriber’s deposit obligations, and a correct and complete report as of the
Closing identifying the name and address (including unit number) of each
Subscriber at an XXX Property who pays Sellers for their services by other
than
a paper check.
6.14 Free
(“Comp”) Accounts and Service.
Receipt
by Purchaser of a correct and complete list by XXX Property of the number and
type of free “comp” accounts provided by each Seller to each XXX Property under
the terms of each XXX Agreement or otherwise, to what locations on the XXX
Property such free accounts are provided and the type of service and any
specific customer premise equipment provided.
6.15 Deposits.
Receipt
by Purchaser of a correct and complete summary of all deposits due and owing
to
Subscribers or Owners that are held by each Seller as of the Closing, including,
without limitation, deposits with respect to any customer premise equipment,
deposits with respect to the provision of Bulk SMATV Service or Bulk Digital
Service and the terms under which such deposits are refundable (the “Cash
Deposits”).
6.16 Channel
Lineups and Serial Numbers.
Receipt
by Purchaser of a correct and complete listing of the channel
lineups and the receiver serial number/access and number for each channel in
the
lineup at each XXX Property, together with prices relative to each programming
package at each XXX Property, as in effect on the Closing Date, a notation
as to
whether
or not the
Systems are delivering the channel lineups as set forth in the information
delivered to Purchaser hereunder and as to whether such channel lineups are
in
fact available and fully functional at each XXX Property.
6.17 XXX
Agreement and Subscriber Information.
Receipt
by Purchaser of (a) the XXX Files;
(b)
correct and complete files of each Seller’s Subscriber records for the
Subscribers included in the Assets, including, without limitation, the address,
unit number, type of services subscribed to and amounts and descriptions of
any
deposits held by each Seller with respect to each subscriber; and
(c) a
correct and complete electronic listing of all unit labeling information for
each XXX Property; provided, however, that the general Subscriber information
and unit labeling information shall each be provided in an electronic format
suitable for uploading into Purchaser’s customer database system.
6.18 Noncompetition
Agreements.
Receipt
by Purchaser of a fully executed Noncompetition, Nonsolicitation and
Nondisclosure Agreement on terms and conditions mutually agreed to by Purchaser,
and each of the Sellers and the following principals of Multiband, respectively:
(a) Xxxxx Xxxxxx, Chief Executive Officer, (b) Xxxxx Xxxx, Chief Financial
Officer, (c) Xxxx Xxxxxxx, Chief Operating Officer, and (d) Xxxxx Xxxxx, Chief
Information Officer (collectively, the “Noncompetition Agreements”), including,
without limitation, a minimum term of five (5) years from the Closing for each
Seller and a minimum term of two (2) years from the Closing for each individual
listed in subsections (a) through (d) above, and in each case extending the
benefits of the noncompetition provisions to Purchaser and its Affiliates in
the
states of California and Arizona.
In
addition, the Noncompetition Agreements with respect to the Sellers will exclude
from the prohibition against competition, the Sellers existing system operators
as of the date of this Agreement and will specifically provide that Sellers’
provision of call center and billing services to third parties and their
provision of internet services to their system operator network and Purchaser
shall not be deemed to be competition with Purchaser provided, however, that
Sellers do not provide internet services directly to residents at any XXX
Property within the territory of California or Arizona.
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6.19 Enforcement
of Existing Covenants.
Each of
the Sellers agree to reasonably cooperate with Purchaser to enforce the existing
covenants not to compete that affect the Assets and upon request from Purchaser
will assist in taking all action reasonably necessary to try to prevent Xxxxx
Zaphirou from soliciting any of the XXX Properties included in the Assets,
including, without limitation, by providing written communications necessary
to
remind Mr. Zaphirou of his obligations regarding the Assets.
6.20 Payoff
Letters.
A
statement from each of (a) Dinamo Entertainment, Inc. (“Dinamo”) as holder of
that certain Promissory Note dated as of August 26, 2005 executed by Multiband
in the principal amount of six hundred thousand dollars ($600,000.00) in
connection with that certain Cable System Acquisition Agreement by and between
Multiband and Dinamo executed on or about August 31, 2005, and (b) Rand’M, a
California corporation, as holder of that certain Promissory Note dated as
of
September 13, 2006 executed by Multiband in the principal amount of one hundred
forty-six thousand, five hundred dollars ($146,500.00) in connection with that
certain Cable Systems Acquisition Agreement by and between Multiband and Rand’M
effective September 13, 2006, dated the Closing Date, setting forth the
principal amount then outstanding on the indebtedness represented by each note,
the interest rate thereon and a statement to the effect that Multiband, as
obligor under such note, is not in default under any of the provisions
thereof.
6.21 Instruments
of Transfer.
Receipt
by Purchaser of such instruments of transfer, assignment, conveyance and other
instruments sufficient to convey, transfer and assign to Purchaser all right,
title and interest in the Assets, together with possession of such Assets,
all
in form and substance reasonably satisfactory to Purchaser and its counsel,
including, but not limited
to, (a)
an
assignment for each XXX Agreement
and (b)
a
xxxx of
sale, each in a form mutually agreed to among the parties.
6.22 Lien
Release.
Receipt
by Purchaser of evidence satisfactory to Purchaser and its counsel of the
termination or nonexistence of any Liens with respect to the
Assets.
6.23 Transfer
of Chain Numbers.
Each
Seller will sign and approve and secure DirecTV’s approval to transfer each XXX
Agreement registered with DirecTV under a “PID” number listed on Schedule
3.8(a) from
such
Seller’s chain number with DirecTV to Purchaser’s chain number with DirecTV.
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6.24 Transfer
of Accounts.
Receipt
of evidence satisfactory to Purchaser that each Seller’s account for services
provided by 4COM and the Bulk Service and SMATV Non-Bulk Service accounts for
services provided by DirecTV shall be transferred to Purchaser’s account as of
the Closing.
6.25 DirecTV’s
Waiver of Right of First Refusal.
Receipt
by Purchaser of a waiver from DirecTV in connection with DirecTV’s waiver of its
right of first refusal that Multiband granted to DirecTV pursuant to its
agreement with DirecTV.
6.26 Board
and Lender Approvals.
Receipt
by Purchaser of all approvals required by Purchaser’s Board of Managers and its
financial institutions lenders and of all approvals required by each Seller’s
Board of Directors or Board of Managers, as applicable.
6.27 Updated
Disclosures.
Receipt
by Purchaser of each of the updated schedules and electronic lists and files
required to be delivered to Purchaser pursuant to the terms of this Agreement,
which updated schedules and electronic lists and files shall reflect information
consistent with that previously presented to Purchaser and which does not result
in a Material Adverse Effect with respect to the Assets considered as a
whole.
6.28 Secretary’s
Certificate.
Receipt
by Purchaser of a certificate of the Secretary of each Seller (a) attaching
true, correct and complete copies of all resolutions duly adopted by the Board
of Directors or Managers of such Seller authorizing such Seller’s execution,
delivery and performance of its obligations under this Agreement (and naming
specific persons who are authorized to sign those documents on behalf of
Seller), such Seller’s execution, delivery and performance of its obligations
under all other agreements and documents, and the taking by such Seller of
all
other actions, in furtherance of the foregoing, which resolutions shall not
have
been altered, amended, modified or rescinded and shall remain in full force
and
effect on the Closing Date; (b) attaching true and complete copies of the
charter documents (Articles of Incorporation and Bylaws or Articles of
Organization and Operating Agreement, as applicable) of such Seller, which
charter documents shall not have been altered, amended, modified or rescinded
and shall remain in full force and effect on the Closing Date and (c) certifying
as to the incumbency and signatures of the officers of such Seller that sign
the
Agreement and any other document delivered or to be delivered by such Seller
pursuant to any of the foregoing.
ARTICLE
7
CONDITIONS
TO SELLERS’ OBLIGATIONS
The
obligations of the Sellers under this Agreement (except
with respect to the Initial Closing pursuant to Section
2.7
hereof)
shall,
at
their option, be subject to the satisfaction, on or prior to the Closing Date,
of all of the following conditions:
7.1 Representations,
Warranties, Covenants and Agreements.
Each of
the Purchaser’s representations and warranties in this Agreement (considered
collectively), and each of these representations and warranties (considered
individually), shall have been accurate in all material respects as of the
date
of this Agreement, and shall be accurate in all material respects as of the
time
of the Closing as if then made. Each of the Purchaser’s representations and
warranties in Section
4.2, and
each
of the Purchaser’s representations and warranties in this Agreement that
contains an express materiality qualification, shall have been accurate in
all
respects as of the time of the Closing as if then made. Purchaser shall have
delivered to Sellers a certificate dated as of the Closing Date to all such
effects.
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7.2 Legislation.
No
statute, rule, regulation, order or interpretation shall have been enacted,
entered or deemed applicable by any domestic government or governmental or
administrative agency or court that would make the transactions contemplated
by
this Agreement illegal or that would cause Sellers or any Affiliate or Related
Person of Sellers to suffer any adverse consequence.
7.3 Proceedings.
There
shall not have been commenced or threatened against Purchaser, or to the
Knowledge of Purchaser, commenced or threatened against any Seller or any Owner
any proceeding (i) involving any challenge to, or seeking damages or other
relief in connection with, any of the transactions contemplated by this
Agreement or (ii) that may have the effect of preventing, delaying, making
illegal, imposing limitations or conditions on or otherwise interfering with
the
transactions contemplated by this Agreement.
7.4 Secretary’s
Certificate.
Receipt
by Sellers of a certificate of the Secretary of Purchaser (a) attaching true,
correct and complete copies of all resolutions duly adopted by the Board of
Directors of Purchaser authorizing Purchaser’s execution, delivery and
performance of its obligations under this Agreement (and naming specific persons
who are authorized to sign those documents on behalf of Purchaser), Purchaser’s
execution, delivery and performance of its obligations under all other
agreements and documents, and the taking by Purchaser of all other actions,
in
furtherance of the foregoing, which resolutions shall not have been altered,
amended, modified or rescinded and shall remain in full force and effect on
the
Closing Date; and (b) certifying as to the incumbency and signatures of the
officers of Purchaser that sign the Agreement and any other document delivered
or to be delivered by Purchaser pursuant to any of the foregoing.
ARTICLE
8
TERMINATION
8.1 Termination.
By
notice given prior to or at the Closing, subject to Section
8.2,
this
Agreement may be terminated as follows:
(a) By
Purchaser if a material breach of any provision of this Agreement has been
committed by either Seller and such breach has not been waived by
Purchaser;
(b) By
Multiband if a material breach of any provision of this Agreement has been
committed by Purchaser and such breach has not been waived by
Multiband;
(c) By
Purchaser if any condition in Article
6
has not
been satisfied as of the date specified for the Closing in Section
2.7 or
if
satisfaction of such a condition by such date is or becomes impossible (other
than through the failure of Purchaser to comply with its obligations under
this
Agreement), and Purchaser has not waived such condition on or before such
date;
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(d) By
Multiband if any condition in Article
7 has
not
been satisfied as of the date specified for the Closing in Section
2.7 or
if
satisfaction of such a condition by such date is or becomes impossible (other
than through the failure of either Multiband or Rainbow to comply with its
obligations under this Agreement), and Multiband has not waived such condition
on or before such date;
(e) By
mutual
consent of Purchaser and Multiband; and
(f) By
Purchaser if the Closing has not occurred on or before April 30, 2007, or such
later date as the parties may agree upon, unless Purchaser is in material breach
of this Agreement.
8.2 Effect
of Termination.
Each
party’s right of termination under Section
8.1 is
in
addition to any other rights it may have under this Agreement or otherwise,
and
the exercise of such right of termination will not be an election of remedies.
Unless the Initial Closing described in Section
2.4
hereof
has not occurred, if this Agreement is terminated pursuant to Section
8.1,
all
obligations of the parties under this Agreement will terminate, except that
the
obligations of the parties in this Section
8.2 and
Section
5.1 and
Article
10
(except
for those in Section
10.7)
will
survive, provided, however, that if this Agreement is terminated because of
a
breach of this Agreement by the nonterminating party or because one or more
of
the conditions to the terminating party’s obligations under this Agreement is
not satisfied as a result of the party’s failure to comply with its obligations
under this Agreement, the terminating party’s right to pursue all legal remedies
will survive such termination unimpaired. If the Initial Closing described
in
Section
2.4
hereof
has occurred, then this Agreement may only be terminated with respect to the
balance of the Assets, and this Agreement shall remain in full force and effect
with respect to the Schedule 2.4 XXX Assets.
ARTICLE
9
INDEMNIFICATION
9.1 Indemnification.
The
Sellers, jointly and severally, will indemnify and hold harmless Purchaser,
and
its members, managers, officers, employees, agents, consultants, advisors,
accountants, financial advisors, legal counsel and representatives and
Affiliates (collectively, the “Purchaser Indemnitees”), and will reimburse the
Purchaser Indemnitees for any loss, liability, claim, damage, interest and
penalties, expense (including costs of investigation and defense and reasonable
attorneys’ fees and expenses) or diminution of value, whether or not involving a
Third-Party Claim (collectively, “Damages”) arising from or in connection with
(a) any breach of any representation or warranty made by Sellers in (i) this
Agreement (without giving effect to any update to the Disclosure Schedules
required to be delivered by Sellers after the time of signing this Agreement),
(ii) the Disclosure Schedules required to be delivered by Sellers, (iii) the
updates to the Disclosure Schedules required to be delivered by Sellers, (iv)
the certificate delivered pursuant to Section
6.1,
(v) any
transfer instrument or (vi) any other certificate, document, writing or
instrument delivered by Sellers pursuant to this Agreement; (b) any breach
of
any covenant or obligation of any Seller in this Agreement or in any other
certificate, document, writing or instrument delivered by any of the Sellers
pursuant to this Agreement; (c) any liability arising out of the ownership
or
operation of the Assets prior to the Closing Date other than the Assumed
Liabilities; (d) any claim by any Person for brokerage or finder’s fees or
commissions or similar payments based upon any agreement or understanding made,
or alleged to have been made, by any Person with any Seller in connection with
the transactions contemplated by this Agreement; (e) any liability under the
WARN Act or any similar state or local Legal Requirement that may result from
an
“Employer Loss”, as defined by 29 U.S.C. § 2101(a)(6), caused by any action of
the Sellers prior to the Closing or by Purchaser’s decision not to hire previous
employees of any Seller; (f) any Employee Plan established or maintained by
any
Seller; (g) any obligation to share any of the proceeds received by any Seller
under this Agreement pursuant to the term of any of the XXX Agreements; (g)
any
costs incurred in connection with enforcing any noncompetition provision to
which Xxxxxx Xxxxxxx or the prior owners of the Rainbow Assets is bound (the
“Prior Noncompetes”); (h) any costs incurred in connection with securing any New
XXX or other new Right of Entry Agreement if such costs are incurred as a result
of a breach of the Prior Noncompetes; (i) the costs to upgrade any XXX Property
required to be covered by a New XXX pursuant to Section 6.6 hereof to MFH1
technology pursuant to Purchaser’s specifications from the Closing Date to the
Earnout Date and (j) the Retained Liabilities.
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9.2 Indemnification
of Sellers.
Purchaser will indemnify and hold harmless the Sellers and each of their
shareholders, members, managers, directors, officers, employees, agents,
consultants, advisors, accountants, financial advisors, legal counsel,
representatives and Affiliates (collectively, the “Sellers’ Indemnitees”), and
will reimburse the Seller’s Indemnitees for any Damages arising from or in
connection with (a) any breach of any representation or warranty made by
Purchaser in (i) this Agreement or in any certificate, document, writing or
instrument delivered by Purchaser pursuant to this Agreement; (b) any breach
of
any covenant or obligation of Purchaser in this Agreement or in any certificate,
document, writing or instrument delivered by Purchaser pursuant to this
Agreement; (c) any claim by any Person for brokerage or finder’s fees or
commissions or similar payments based upon any agreement or understanding made,
or alleged to have been made, by any Person with Purchaser in connection with
the transactions contemplated by this Agreement and (d) any Assumed
Liabilities.
9.3
Third-Party Claims.
If a
claim by a third party is made against any indemnified party, and if the
indemnified party intends to seek indemnity with respect thereto under this
Article 9, such indemnified party shall promptly notify the indemnifying party
of such claim; provided, however, that failure to give timely notice shall
not
affect the rights of the indemnified party except to the extent the indemnifying
party has been prejudiced by such failure.
(a) The
indemnifying party shall be entitled to contest, settle or assume the defense
of
such claim, including the employment of counsel satisfactory to the indemnified
party, as provided below. If the indemnifying party elects to contest, settle
or
defend such claim, it shall notify the indemnified party within 10 days of
receipt of such claim (but in no event less than 15 days before any pleading,
filing or response on behalf of the indemnified party is due) of its intent
to
do so. If the indemnifying party elects not to settle or defend such claim
or
fails to notify the indemnified party of its election within 10 days (or such
shorter period provided above) after receipt of the indemnified party’s notice
of a claim of indemnity hereunder, the indemnified party shall have the right
to
contest, settle or compromise the claim without prejudice to any rights to
indemnification hereunder. Regardless of which party is controlling the
settlement or defense of any claim, (i) both the indemnified party and
indemnifying party shall act in good faith, (ii) the indemnifying party shall
not thereby permit to exist any Lien upon any asset of any indemnified party
or
of its Affiliates or subsidiaries without the consent of the indemnified party,
(iii) the indemnifying party shall permit the indemnified party to participate
in such settlement or defense through counsel chosen by the indemnified party,
provided that all fees, costs and expenses of such counsel in an action
controlled by the indemnifying party shall be borne by the indemnified party,
unless the indemnifying party and indemnified party have conflicting available
defenses to such third-party claim, in which case such fees, costs and expenses
shall be borne by the indemnifying party, (iv) no entry of judgment or
settlement of a claim (a “Final Claim”) may be agreed to without the written
consent of both the indemnified party and the indemnifying party, which consents
shall not be unreasonably withheld, and (v) the indemnifying party shall agree
promptly to reimburse the indemnified party for the full amount of such Final
Claim pursuant to this Article 9, subject to the following sentence. So long
as
the indemnifying party is reasonably contesting any such claim in good faith
as
permitted herein, the indemnified party shall not pay or settle any such claim.
The controlling party shall deliver, or cause to be delivered, to the other
party copies of all correspondence, pleadings, motions, briefs, appeals or
other
written statements relating to or submitted in connection with the settlement
or
defense of any such claim, and timely notices of, and the right to participate
pursuant to (iii) above in any hearing or other court proceeding relating to
such claim.
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(b) Notwithstanding
the foregoing, if the indemnified party determines in good faith that there
is a
reasonable probability that a third-party claim may adversely affect it or
its
Affiliates other than as a result of monetary damages for which it would be
entitled to indemnification under this Agreement, the indemnified party may,
by
notice to the indemnifying party, assume the exclusive right to defend,
compromise or settle such third-party claim at the indemnifying party’s sole
expense, but the indemnifying party will not be bound by any determination
of
any third party claim so defended for the purposes of this Agreement or any
compromise or settlement without its consent (which consent may not be
unreasonably withheld).
9.4 Other
Claims.
A claim
for indemnification for any matter not involving a Third-Party Claim may be
asserted by notice to the party from whom indemnification is sought and shall
be
paid promptly after notice.
9.5 Cooperation
as to Indemnified Liability.
Each
party hereto shall cooperate fully with the other party with respect to access
to books, records or other documentation within such party’s control, if deemed
reasonably necessary or appropriate by either party in the defense of any claim
that may give rise to indemnification hereunder, but in no event shall any
party
be required to waive any privilege to which it is entitled.
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9.6 Limitations.
(a) Survival.
The
representations, warranties and indemnifications for breaches contained herein,
and the covenants, agreements and indemnifications contained herein that are
to
have been fully performed prior to the Closing, shall survive the Closing,
and
remain in full force and effect until the first anniversary of the Closing
and a
party may not first raise a claim for Damages after such date not directly
related to or arising out of a claim asserted by such party prior to the first
anniversary of the Closing. No independent investigation made by a party hereto,
or by its counsel or any of its agents or employees, shall in any way limit
or
restrict the scope of the representations, warranties, covenants or agreements
made by another party in this Agreement.
(b) Exceptions.
The
first anniversary of the Closing limitation of Section
9.6(a)
above
shall not apply to Damages resulting from, arising out of, or based upon (i)
any
fraud or intentional misrepresentation by any Seller or Purchaser; (ii) any
failure by any Seller to deliver to Purchaser all Assets necessary or used
in
the conduct of the Business; (iii) any failure by any Seller to satisfy, perform
or pay the liabilities of such Seller not included within the Assumed
Liabilities; or (iv) a breach by either of the Sellers or Purchaser of any
covenant or agreement to be performed by it after the Closing (collectively,
subsections (i) through (iv) are referred to herein as the “Intentional
Damages”).
The
Intentional Damages shall survive the Closing, and remain in full force and
effect until the second anniversary of the Closing and a party may not first
raise a claim for Intentional Damages after such date not directly related
to or
arising out of a claim asserted by such party prior to the second anniversary
of
the Closing; provided, however, that any limitation with respect to a covenant
or agreement under subsection (iv) above whose performance extends beyond such
second anniversary of the Closing shall survive until the expiration or
termination of such covenant or agreement.
9.7 Right
of Setoff.
Upon
notice to Sellers specifying in reasonable detail the basis therefore, Purchaser
may set off any amount to which it may be entitled under this Article
9
against
amounts otherwise payable to Sellers. Neither the exercise of nor the failure
to
exercise such right of setoff will constitute an election of remedies or limit
Purchaser in any manner in the enforcement of any other remedies that may be
available to it.
ARTICLE
10
MISCELLANEOUS
10.1 Complete
Agreement.
The
Schedules, Annexes and Exhibits to this Agreement shall be construed as an
integral part of this Agreement to the same extent as if they had been set
forth
verbatim herein. This Agreement, the Schedules, Annexes and Exhibits hereto
and
other documents delivered pursuant to this Agreement constitute the entire
agreement between the parties hereto with respect to the subject matter hereof
and supersede all prior proposals, discussions, or agreements, whether written
or oral, relating hereto. Any disclosure contained in any Schedule hereto shall
be deemed included in each other applicable Schedule hereto but only to the
extent the disclosure in such first Schedule is on its face clear, without
the
need of additional information or explanation, as to which, if any, other
Schedule such disclosure should be deemed to be included and for what
reason.
10.2 Disclosure
Schedules.
The
information in the Disclosure Schedules constitutes (i) exceptions to particular
representations, warranties, covenant and obligations of Sellers as set forth
in
this Agreement or (ii) descriptions or lists of assets and liabilities and
other
items referred to in this Agreement. If there is any inconsistency between
the
statements in this Agreement and those in the Disclosure Schedules (other than
exceptions expressly set forth as such in the Disclosure Schedules with respect
to a specifically identified representation or warranty), the statements in
this
Agreement will control. The statements in the Disclosure Schedules and those
in
any supplement thereto, relate only to the provisions in the Section of this
Agreement to which they expressly relate and not to any other provision in
this
Agreement.
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10.3 Waiver,
Discharge, Amendment, Etc.
The
failure of any party hereto to enforce at any time any of the provisions of
this
Agreement, including the election of such party to proceed with the Closing
despite a failure of any condition to such party’s closing obligations to occur,
shall in no way be construed to be a waiver of any such provision, nor in any
way to affect the validity of this Agreement or any part thereof or the right
of
the party thereafter to enforce each and every such provision. No waiver of
any
breach of this Agreement shall be held to be a waiver of any other or subsequent
breach. Any amendment to this Agreement shall be in writing and signed by the
parties hereto.
10.4 Fees
and Expenses.
Each of
the parties hereto shall pay all fees and expenses incurred by it, including
the
fees of its respective counsel, brokers, attorneys, accountants, investment
bankers and other experts incident to the negotiation and preparation of this
Agreement and the consummation of the transactions contemplated by this
Agreement.
If this
Agreement is terminated the obligation of each party to pay its own fees and
expenses will be subject to any rights of such party arising from a breach
of
this Agreement by another party.
10.5 Notices.
All
notices or other communications to a party required or permitted hereunder
shall
be in writing and shall be given by hand delivery, courier service (with
acknowledgement of receipt), telecopy (with confirmation of transmission),
by
reputable overnight carrier for next morning delivery provided recipient must
sign for receipt, or by certified mail, postage prepaid with return receipt
requested, addressed to the parties at the following addresses:
| if to Sellers, to: | |||
|
Multiband
Corporation
0000
Xxxxxxx Xxxxxx Xxxxx
Xxx
Xxxx Xxxxxxxxx 00000
Attention:
Xxx Xxxxxx, Chief Executive Officer
Facsimile:
000-000-0000
|
|||
| With a copy to: | |||
|
Multiband
Corporation
0000
Xxxxxxx Xxxxxx Xxxxx
Xxx
Xxxx Xxxxxxxxx 00000
Attention:
Xxxxxx Xxxx, Chief Financial Officer
Facsimile:
000-000-0000
|
|||
| and if to Purchaser, to: | |||
|
Consolidated
Smart Broadband Systems, LLC
000
X. 000xx Xxxxxx
Xxxxxxx,
XX 00000
Attention:
Xxxxx X. Xxxxx, Chief Financial Officer
Facsimile:
(000) 000-0000
|
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| With a copy to: | |||
|
Consolidated
Smart Broadband Systems, LLC
000
X. 000xx Xxxxxx
Xxxxxxx,
XX 00000
Attention:
Xxxx X. Xxxxxxxx, General Counsel
Facsimile:
(000) 000-0000
|
Any
party
may change the above-specified recipient and/or mailing address by notice to
all
other parties given in the manner herein prescribed. All notices shall be deemed
given on the day when actually delivered as provided above (if delivered
personally, by courier or by telecopy) or on the day shown on the return receipt
(if delivered by mail or overnight courier).
10.6 Public
Announcement.
Except
as may be required to comply with the requirements of applicable law, no press
release or similar public announcement or communication will be made or caused
to be made concerning the execution or performance of this Agreement unless
specifically approved in advance by Purchaser. The foregoing shall not restrict
Purchaser’s and Sellers’ communications with shareholders, members, employees,
suppliers, Subscribers or customers. Notwithstanding anything to the contrary
in
Section
5.1
hereof,
the parties shall be permitted to disclose such information as is necessary
to
perform their obligations as set forth in or contemplated by this
Agreement.
10.7 Enforcement.
Each
Seller acknowledges and agrees that Purchaser would be irreparably damaged
if
any of the provisions of this Agreement are not performed in accordance with
their specific terms and that any breach of this Agreement by either Seller
could not be adequately compensated in all cases by monetary damages alone.
Accordingly, in addition to any other right or remedy to which Purchaser may
be
entitled, at law or in equity, it shall be entitled to enforce any provision
of
this Agreement by a decree of specific performance and to temporary, preliminary
and permanent injunctive relief to prevent breaches or threatened breaches
of
any of the provisions of this Agreement, without posting any bond or other
undertaking.
10.8 Governing
Law.
The
legality, validity, enforceability and interpretation of this Agreement shall
be
governed by the internal laws of the State of California, without giving effect
to the principles of conflict of laws.
10.9 Successors
and Assigns.
This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and the successors or assigns of the parties hereto.
10.10 Titles
and Headings; Construction.
The
titles and headings to sections herein are inserted for the convenience of
reference only and are not intended to be a part of or to affect the meaning
or
interpretation of this Agreement. This Agreement shall be construed without
regard to any presumption or other rule requiring construction hereof against
the party causing this Agreement to be drafted.
10.11 Severability.
If any
provision of this Agreement is held invalid, unenforceable or void by a court
of
competent jurisdiction, the remaining provisions shall nonetheless be
enforceable according to their terms. In such case, the parties agree to use
their best efforts to achieve the purpose of the invalid provision. Further,
if
any provision is held to be overbroad as written, such provision shall be deemed
amended to narrow its application to the extent necessary to make the provision
enforceable according to applicable law and shall be enforced as
amended.
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10.12 No
Third Party Benefit.
Nothing
in this Agreement or the agreements referred to herein, expressed or implied,
other than indemnification rights under Article
9
hereof,
shall confer on any Person other than the parties hereto or thereto, or their
respective permitted successors or assigns, any rights remedies, obligations
or
liabilities under or by reason of this Agreement, the agreements referred to
herein, or the transactions contemplated herein or therein.
10.13 Arbitration.
Any
action to enforce or interpret this Agreement or to resolve disputes between
the
parties shall be settled by arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration Association except to the extent
otherwise expressly provided for herein (the “Arbitration”). The parties agree
that the Arbitration shall be before a retired Superior Court or Appellate
Court
Judge in the State of California, or a California licensed attorney, with at
least 15 years of relevant commercial business legal experience, and shall
take
place in Los Angeles County, California, unless the parties mutually agree
otherwise. Any party may commence the Arbitration by sending a written demand
for Arbitration to the other party setting forth the nature of the matter to
be
resolved by Arbitration. Within fifteen (15) days of the demand for Arbitration,
an arbitrator shall be chosen by mutual agreement of the parties to the
Arbitration. If the parties cannot agree on an arbitrator within such fifteen
(15) day period, then each party will choose an arbitrator, and those
arbitrators will have fifteen (15) days to choose a third arbitrator who shall
individually preside over the Arbitration. The parties shall share equally
all
initial costs of Arbitration; provided, however, that the prevailing party
shall
be entitled to reimbursement of reasonable attorneys’ fees, costs and expenses
incurred in connection with the Arbitration. All decisions of the arbitrator
shall be final, binding and conclusive on all parties. Judgment may be entered
upon any such decision in accordance with applicable law in any court having
jurisdiction.
10.14 Time
of Essence. With
regard to all dates and time periods set forth or referred to in this Agreement,
time is of the essence.
10.15 Counterparts.
This
Agreement may be executed in any number of counterparts, each of which shall
be
deemed an original and shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
(signature
page follows)
-46-
IN
WITNESS WHEREOF, each of the parties has caused this Agreement to be executed,
in the manner appropriate for each, as of the date first above
written.
| CONSOLIDATED SMART BROADBAND SYSTEMS, LLC | |
| By: __________________________ | |
| Xxxxx X. Xxxxx, Chief Financial Officer | |
| MULTIBAND CORPORATION | |
| By: __________________________ | |
| Xxxxx Xxxxxx, Chief Executive Officer | |
| RAINBOW SATELLITE GROUP, LLC | |
| By: _________________________ | |
| Name: _______________________ | |
| Title: ________________________ | |
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Schedule
1.1(b)
Assets
All
equipment related to the provision of services with respect to each of the
XXX
Agreements listed in Schedule
3.8(a),
such as
all customer premise equipment, all components typically found in an L-Band,
master antenna television, MFH1 and satellite master antenna television
distribution system, including, without limitation, the following: "500"
distribution cabling, couplers and fittings, RG 59, RG 11 and RG 6 home run
and
home wiring, couplers, splitters and fittings, C-BAND satellite receivers and
mounting hardware, signal distribution amplifiers lock boxes and home run wiring
terminus components, including signal taps, splitters and traps, in-residence
junction boxes and wall plates and all other electronic and passive devices
used
to distribute broadband communications signals with respect to each XXX Property
covered by this Agreement.
