EXHIBIT 10.17
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT ("Agreement") is made and entered into this
31st day of August, 2001, by and among GRANDE COMMUNICATIONS, INC., a Delaware
corporation, (hereinafter referred to as "Buyer") and USOL, INC., a Delaware
corporation, (hereinafter referred to as "Seller") joined by U.S.-Austin Cable
Associates I, Ltd. ("US-Austin Cable, Ltd.").
RECITALS:
A. Seller is engaged in the business of marketing and providing cable
television, digital cable, local dial tone, long distance, dial-up internet
access, and/or high speed internet access services (collectively, "Bundled
Communication Services") to the multi-family development unit ("MDU") market in
the Austin/San Antonio Corridor (the "Business").
B. Seller owns and operates the Bundled Communication Services systems
(together the "Systems" and each a "System") located on and serving those MDU
properties (the "MDU Properties") as listed on Schedule A attached hereto.
C. Seller desires to sell and assign to Buyer, and Buyer desires to
purchase from Seller, all of the assets comprising each of the Systems, other
than the Excluded Assets (as hereinafter defined) upon the terms and conditions
set forth in this Agreement. It is the intent of the Seller and Buyer that this
transaction constitutes an "occasional sale" pursuant to Texas Tax Code Section
151.304.
D. In consideration of Buyer's agreement to retain the services of
Seller under a services agreement (the "Services Agreement") between Seller and
Buyer and Buyer's agreement to extend Bundled Communications Services to the
Contracted MDU Properties (as herein defined), Seller agrees to transfer to
Buyer various agreements which Seller has entered into with the respective
owners of the Contracted MDU Properties (subject to the terms of this
Agreement). The "Contracted MDU Properties" are listed in Schedule B attached
hereto.
AGREEMENTS:
In consideration of the mutual representations, warranties and
covenants and subject to the conditions herein contained, the parties hereto,
intending to be legally bound hereby, agree as follows:
ARTICLE I
Certain Definitions
As used in this Agreement, the following terms whether singular or
plural forms, shall have the following meanings:
"Affiliate" shall mean, with respect to any person, any other Person
controlling, controlled by or under common control with such Person, with
"control" for such person meaning the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities or voting interests,
by contract or otherwise.
"Agreement" means this Agreement including all schedules and exhibits
attached hereto, as may be amended from time to time.
"Assumed Liabilities" shall have the meaning given in Section 3.2.
"Austin/San Antonio Corridor" shall mean the cities, towns and
municipalities described on Schedule C attached hereto and the unincorporated
areas lying adjacent and contiguous to such cities, towns and municipalities.
"Bundled Communication Services" shall have the meaning specified in
Recital A of this Agreement.
"Business" shall mean the Bundled Communication Services business
conducted by Seller through the Systems in the Austin/San Antonio Corridor.
"Business Day" shall mean any day other than Saturday, Sunday or a day
on which federal Banking institutions in Austin, Texas are required or
authorized to be closed.
"Closing" has the meaning given in Section 5.1.
"Closing Date" has the meaning given in Section 5.1.
"Commercially Reasonable Best Efforts" shall mean such reasonable best
efforts as do not require the party, to (i) undertake extraordinary or
unreasonable measures, including, without limitation, the initiation or
prosecution of legal proceedings or the payment of fees in excess of normal and
usual filing and processing fees or (ii) assume any additional liability or make
any additional commitment.
"Contracted MDU Properties" means the MDUs with respect to which Seller
has obtained Rights of Entry but which have not been completely wired and have
not been included in a System which is currently operating, said Contracted MDU
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Properties being described in Schedule B (or in an amended Schedule B provided
by Seller pursuant to Section 2.3) and covering at least 720 multi-family
residential dwelling units.
"Contracts" shall have the meaning given in Section 2.1.6.
"Cut-Over" shall have the meaning set forth in Section 4.4.
"Cut-Over Date" shall have the meaning set forth in Section 3.7.2.
"Cut-Over Procedures" shall have the meaning set forth in Section 4.4.
"Door Fee" shall mean an amount equal to *[intentionally omitted].
"Deferred Property" has the meaning given in Section 5.3.
"Effective Date" shall mean August 31, 2001.
"Effective Time of a Closing" shall mean 5:00 p.m. CST on the
applicable Closing Date.
"Equipment" has the meaning given in Section 2.1.1.
"Excluded Assets" has the meaning given in Section 2.2.
"Excluded Liabilities" has the meaning given in Section 3.3.
"FAA" means the Federal Aviation Administration.
"FCC" means the Federal Communication Commission.
"FCC Licenses" has the meaning set forth in Section 6.10(f).
"Final Closing" has the meaning given in Section 5.1.4.
"Final Closing Date" has the meaning given in Section 5.1.4.
"Governmental Authority" means the United States of America, any state,
commonwealth, territory, or possession thereof, and any city, municipality,
political subdivision or quasi-governmental authority of any of the same.
"Initial Closing" has the meaning given in Section 5.1.2.
"Initial Closing Date" has the meaning given in Section 5.1.2.
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*Confidential Treatment Requested. Confidential portions of this document have
been redacted and filed separately with the Commission.
"Interim Closing" has the meaning given in Section 5.1.3.
"Interim Closing Date" has the meaning given in Section 5.1.3.
"Legal Requirements" means applicable common law and any statute,
ordinance, code or other law, rule, regulation, or order enacted, adopted or
promulgated by any Governmental Authority.
"Lien" means any security agreement, financing statement filed with any
Governmental Authority, conditional sale or other title retention agreement, any
lease, consignment or bailment given for purposes of security, any lien,
security interest, mortgage, indenture, pledge, option, encumbrance, adverse
interest, constructive trust or other trust, claim, attachment, exception to or
defect in title or ownership interest (including but not limited to,
reservations, rights of entry, right of first refusal, possibilities of
reverter, encroachment, easements, right of way, restrictive covenants, leases
and licenses) of any kind which in the case of any of the above would be
reasonably expected to materially and adversely affect Buyer's use of the
Transferred Assets, whether arising pursuant to any Legal Requirement, under any
Contract or otherwise; provided, however, that such term excludes (i) any
restrictive provisions of the ROEs or Contracts included in the copies of such
XXX and Contracts provided by Seller to Buyer and (ii) any deeds of trust or
mortgages between lenders and owners of the MDU Properties filed of record prior
to the recordation of any memorandum evidencing the ROEs.
"MDU Properties" shall mean the Multi-family Dwelling Unit properties
served by the Systems pursuant to the Rights of Entry and identified on Schedule
A.
"Multi-family Dwelling Unit" or "MDU" shall mean a multi-family
residential complex served by a System and included in one of the MDU
Properties.
"Other Agreements" has the meaning given on Section 6.5.
"Permitted Liens" (i) liens for taxes not yet due and payable or being
contested in good faith by appropriate proceedings; (ii) rights reserved to any
Governmental Authority to regulate the affected property; (iii) as to leased
Transferred Assets, interests of the lessors thereof and Liens affecting the
interests of the lessors thereof; (iv) inchoate materialmen's, mechanics',
workmen's, repairmen's or other like liens arising in the ordinary course of
business; and (v) any Liens to be released at or prior to any Closing.
"Person" means any natural person, Governmental Authority, corporation,
general or limited partnership, limited liability partnership, joint venture,
trust, association, limited liability company, or unincorporated entity of any
kind.
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"Purchase Price" has the meaning given in Section 3.1.
"Rights of Entry" or "ROEs" shall mean those certain agreements between
Seller and the respective owners of each of the MDU Properties and Contracted
MDU Properties granting Seller and Seller's permitted successors and permitted
assigns (i) an easement, license or similar right for the installation,
construction, reconstruction, operation, maintenance, inspection, replacement,
repair, upgrade, and partial removal of a System on a MDU Property or a
Contracted MDU Property (as described in the XXX agreements); and (ii) the
rights to provide one or more of the Bundled Communications Services to the
residents of the MDU Properties or the Contracted MDU Properties (as described
in the XXX agreements).
"Services Agreement" shall mean that one certain Services Agreement by
and among Buyer and Seller, with a contract date of August 31, 2001.
"Subscriber" shall mean a separately billed individual within a
residential household within any of the MDU Properties that subscribes and pays
monetary amounts for one or more of the Bundled Communication Services and is
served by a System; provided if such household is assigned more than one
customer account number, each such customer account number shall be considered a
Subscriber.
"Subscriber Agreements" has the meaning given in Section 2.1.4.
"Subscriber Door" shall mean an individual residential household within
any of the MDU Properties capable of being individually billed for any
combination of the Bundled Communication Services.
"System" or "Systems" shall mean the Bundled Communication Services
reception and distribution systems consisting of one or more headends, microwave
receivers, switches, cabling, Subscriber drops and associated electronic and
other equipment which provide the Bundled Communication Services to the
Subscribers at each of the MDU Properties.
"Take-Down Schedule" has the meaning given in Section 5.1.1.
"Telephone Numbers" has the meaning given in Section 2.1.5.
"Transferred Assets" has the meaning given in Section 2.1.
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ARTICLE II
Purchase and Sale of Assets; Rights Related to Contracted MDU Properties
2.1. Purchase and Sale of Assets. Subject to the terms and conditions
set forth in this Agreement, Seller shall sell, convey, transfer, assign and
deliver to Buyer and Buyer shall purchase and acquire from the Seller, free and
clear of all Liens (except for Permitted Liens) all right, title and interest of
Seller in and to all of the assets listed or described below in this Section 2.1
and located on the MDU Properties (except those assets of the Seller which are
specifically excluded from this sale pursuant to Section 2.2). The rights,
properties, and assets listed below in this Section 2.1, together with the
rights, properties, and assets described in Section 2.3, are collectively
referred to in this Agreement as the "Transferred Assets."
2.1.1. *The equipment and other tangible personal property of
Seller that is located on the MDU Property for each XXX being purchased and that
is described in Schedule 2.1.1 ("Equipment") attached hereto, together with
Seller's interest (if any) in any warranties covering the Equipment;
2.1.2. [Intentionally Omitted.]
2.1.3. All of the Rights of Entry owned or held by Seller that
are related to the MDU Properties including those identified on Schedule 2.1.3
attached hereto;
2.1.4. All of Seller's agreements with Subscribers for Bundled
Communication Services related to the ROEs, MDU Properties and the Systems as of
the respective Closing Date for each System ("Subscriber Agreements"); the list
of current Subscribers as of August 29, 2001, is identified on a
that is being delivered by Seller to Buyer as a separate item and not as an
attachment to this Agreement. Seller recognizes that the list of Subscribers
changes each day and that the Subscriber Agreements being purchased at each
Closing will be those Subscriber Agreements in effect as of each Closing Date
with respect to the ROEs being purchased on each such Closing Date.
2.1.5. All of Seller's telephone numbers associated with the
Subscriber Agreements being purchased as of each respective Closing Date
("Telephone Numbers");
2.1.6. The agreements described on Schedule 2.1.6
(collectively, the "Contracts");
2.1.7. [Intentionally Omitted.]
2.1.8. [Intentionally Omitted.]
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2.1.9. [Intentionally Omitted.]; and
2.1.10. Seller's Subscriber lists and Subscriber records as
they relate to any XXX being purchased on each respective Closing Date;
construction and engineering maps and data, schematics and blue prints
pertaining to each XXX being purchased on each respective Closing Date; copies
of books and financial records pertaining to the operation of each XXX being
purchased on each respective Closing Date; correspondence and documents
pertaining to Subscribers, governmental authorities and other third parties
relevant to Seller's ongoing relationships with Subscribers, governmental
authorities and other third parties specific to the XXX being purchased as of
each respective Closing Date.
2.2. Excluded Assets. Anything to the contrary in Section 2.1
notwithstanding, the Transferred Assets shall exclude all assets (the "Excluded
Assets") not described or identified in Section 2.1 or in the schedules related
to Section 2.1, including equipment identified in Schedule 2.1.1 by general
equipment types and categories. Without limiting the preceding sentence, the
Excluded Assets shall include the following: (i) the Purchase Price and the
Seller's other rights under this Agreement; (ii) the organizational records,
minute books, and corporate records of the Seller; (iii) any cash or cash
equivalents of the Seller; (iv) Seller's trademarks, trade names, service marks,
service names and similar proprietary rights; (v) insurance policies and rights
and claims thereunder; (vi) bonds, letters of credit, surety instruments and
other similar instruments; (vii) any agreement, right, asset or property owned
or leased by Seller and not primarily used in connection with its operation of
the Systems; (viii) the assets listed on Schedule 2.2 hereto.
2.3. Transfer of Rights Related to Contracted MDU Properties; Addition
to Contracted MDU Properties. In consideration of Buyer entering into the
Services Agreement and Buyer's agreements with respect to extension of Bundled
Communication Services to the Contracted MDU Properties, Seller agrees to
transfer to Buyer at the Initial Closing the Rights of Entry which Seller has
obtained with respect to the Contracted MDU Properties described in Schedule B.
Schedule B shall be amended to include any Contracted MDU Properties for which
ROEs are executed after the Effective Date and of this Agreement and prior to
the Initial Closing.
2.4. Assignment of Contracts. Notwithstanding anything in this
Agreement to the contrary, this Agreement shall not constitute an assignment of
any contract, license, franchise, lease, commitment, sales order, sales
contract, service agreement, purchase order or purchase commitment if an
attempted assignment thereof, without the consent of a third party thereto,
would constitute a breach thereof or in any way adversely affect the rights of
the Buyer thereunder unless Buyer waives such consent requirement after the
condition of Closing set forth in Section 10.1 (i.e., obtaining the consents on
80% of Subscriber Doors) has been satisfied.
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ARTICLE III
Purchase Price; Assumption of Liabilities
3.1. Purchase Price. The aggregate consideration to be paid by Buyer to
Seller for the Transferred Assets pursuant to this Agreement shall consist of
(i) FOURTEEN MILLION TWO HUNDRED FIFTY TWO THOUSAND SIX HUNDRED TWENTY-FIVE AND
95/100 DOLLARS ($14,252,625.95) (the "Purchase Price"), subject to adjustment as
provided in Section 3.1.2, which shall be payable to Seller in the manner set
forth in Section 3.1.1. and (ii) the assumption by Buyer of the Assumed
Liabilities.
3.1.1. The conveyance of the Transferred Assets from the
Seller to the Buyer shall take place in a series of closings in accordance with
the provisions of Article V hereof until all of the Transferred Assets have been
conveyed to Buyer. The portion of the Purchase Price to be paid by Buyer to
Seller at each respective Closing shall be an amount equal to the total number
of Subscriber Doors included in each respective Closing multiplied by the Door
Fee.
3.1.2. The Purchase Price shall be reduced by an amount equal
to $875,000.00 (the "Excluded Equipment Adjustment") which the parties
acknowledge and agree represents the fair market value of the equipment (the
"Excluded Equipment") owned and used by Seller in the operation of the Systems
and included on Schedule 2.2 as part of the Excluded Assets.
3.2. Assumed Liabilities. At each Closing, the Buyer shall assume and
agree to pay, discharge and perform when lawfully due only those obligations of
the Seller under the contracts and agreements set forth in Schedule 3.2 attached
hereto and under the ROEs, Other Agreements and Contracts that are part of the
Transferred Assets, in each case only to the extent such obligations arise and
relate to periods after the Effective Time of a Closing (the "Assumed
Liabilities"). None of the obligations of Seller under such contracts and
agreements arising prior to the Effective Time of a Closing shall be assumed by
Buyer. Notwithstanding the foregoing definition of Assumed Liabilities, (A)
Buyer will not assume any obligation if Seller is in default under the terms of
the agreement creating such obligation, and (B) the Assumed Liabilities will not
include (i) any liabilities with respect to breaches, defaults or omissions of
Sellers under any agreements creating the Assumed Liabilities, (ii) any
obligation relating to any contract or agreement of Seller which is entered into
by Seller after the Effective Date of this Agreement in violation of the
provisions of this Agreement, (iii) except as provided in Section 3.6, any taxes
of any kind owed by Seller, (iv) any obligation owed to any Affiliate of Seller,
(v) the obligation of Seller to make payments to the owners of the MDU
Properties and Contracted MDU Properties so long as Seller is obligated to make
such payments under the terms of the Services Agreement, or (vi) the obligation
of Seller to refund prepayments by Subscribers as described in Section 3.7.3.
and to return deposits to Subscribers with respect to analog or digital
converter boxes.
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3.3. Excluded Liabilities. Buyer shall not assume any liabilities or
obligations of Seller or any other person or entity of any kind, absolute or
contingent, known or unknown, not expressly agreed to be assumed pursuant to the
provisions of Section 3.2 or any liability or obligation that arises out of the
transactions contemplated by this Agreement or results from any breach or
default by the Seller under this Agreement or any agreement, certificate or
other document or instrument that may be executed or delivered in connection
with this Agreement or the transactions contemplated hereby, or any liability or
obligation where the existence, imposition, nature or extent of such liability
or obligation gives rise to or constitutes a breach or default by the Seller or
any other person or entity under this Agreement or any other agreement,
certificate or other document or instrument that may be executed or delivered in
connection with this Agreement or the transactions contemplated hereby (the
"Excluded Liabilities"). All Excluded Liabilities shall be timely paid or
otherwise satisfied by Seller.
3.4. No Expansion of Third Party Rights. The (i) assumption by the
Buyer of the Assumed Liabilities, (ii) transfer thereof by the Seller and (iii)
limitations in the description of excluded liabilities in Section 3.3 shall in
no way expand the rights or remedies of any third party against the Buyer or the
Seller as compared to the rights and remedies which such third party would have
had against the Seller had the Buyer not assumed such liabilities. Without
limiting the generality of the preceding sentence, the assumption by the Buyer
of the Assumed Liabilities shall not create any third party beneficiary rights.
3.5. Allocation of the Net Purchase Price Among the Transferred Assets.
The Buyer and the Seller agree that the Purchase Price shall be allocated among
the Transferred Assets in the manner set forth below and such allocation shall
be used by Buyer and Seller for all relevant purposes, including the preparation
and filing of all applicable income tax returns and reports.
Asset Type Percent Allocated
ROEs Contract Rights 90%
Real Property Improvements 10%
and Fixtures
3.6. Sales Tax. If any sales, use, transfer, recording or other similar
taxes are due as a result of the transactions provided for herein, such taxes
shall be paid by Buyer.
3.7. Collection and Proration Procedures.
3.7.1. Accounts Receivable. Subscribers within each respective
MDU Property will be timely notified by Seller and Buyer of the transfer of the
Subscriber Agreements to Buyer and directed to send all payments due prior to a
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specified date to Seller and all payments due subsequent to that specified date
to Buyer. If Buyer receives any payments for Bundled Communication Services
provided prior to the Effective Time of each Closing, Buyer shall promptly
deliver such payments to Seller. If Seller receives any payments for Bundled
Communication Services provided after the Effective Time of each Closing, Seller
shall promptly deliver such payments to Buyer. Buyer shall not be obligated to
collect any payments due and owing to Seller, or any of Seller's accounts
receivable, for Bundled Communication Services provided by Seller to Subscribers
within the MDU Properties prior to the Effective Time of each Closing. The
provisions of this Section 3.7.1 shall be subject to any contrary provisions of
any Systems Management Agreement entered into pursuant to Section 5.3 with
respect to a Deferred Property.
3.7.2. Proration of Expenses. Buyer will assume and pay all
invoices and bills issued after the date on which Buyer's Bundled Communications
Services begin on the applicable MDU Property and Seller's services under the
Interim Systems Management Agreement end (the "Cut-Over Date") which (i) relate
to contracts and agreements included in the Transferred Assets, or (ii) cover
any sales, use, excise, utility, gross receipts, or property taxes on any assets
included in the Transferred Assets. Seller will promptly reimburse Buyer for any
portion of such payments which is allocable to the period prior to the Effective
Time of a Closing. For purposes of making such allocation the following rules
shall apply: If an amount covered by the invoice or xxxx relates to a specific
time prior to or subsequent to the Effective Time of a Closing, such amount
shall be allocated to Seller or Buyer as appropriate. If the amounts covered by
the invoice or xxxx are not related to a specific time prior to or subsequent to
the Effective Time of a Closing, such amounts shall be allocated to Seller and
Buyer based on the number of days covered by the invoice or xxxx prior to and
subsequent to the Effective Time of a Closing. If Seller fails to promptly
reimburse Buyer for Seller's allocable share of such expenses and taxes, Buyer
shall be entitled to deduct such amounts from any sum owing to Seller pursuant
to this Agreement. The provisions of this Section 3.7.2 shall be subject to any
contrary provision of a Systems Management Agreement entered into pursuant to
Section 5.3 with respect to a Deferred Property.
3.7.3. Prepayments by Subscribers; Return of Subscriber
Deposits. In the event that Subscribers have prepaid for any Bundled
Communication Services to be provided after the Cut-Over Date, Seller shall
promptly reimburse such Subscribers for the amount of such prepayments that
cover services provided subsequent to the Cut-Over Date. Seller shall also be
responsible for returning all deposits of Subscribers, including any related to
analog or digital converter boxes used by Seller's Subscribers. With respect to
deposits made by Subscribers for analog converter boxes, Seller shall, promptly
after the applicable Closing, return the deposits to the Subscriber (either
directly or by giving the Subscriber a credit on the Subscriber's xxxx). If
Seller fails to promptly reimburse Subscribers for such prepayments or return
such deposits, Buyer shall be entitled to make such reimbursements or returns of
deposits to Subscribers and to deduct such amounts from any sums owing to Seller
pursuant to this Agreement.
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ARTICLE IV
RELATED MATTERS
4.1. [Intentionally Omitted].
4.2. Use of Names and Logos. Buyer shall be entitled to use the
trademarks, trade names, service marks, service names, logos, and similar
proprietary rights of Seller with respect a Deferred Property in accordance with
the provisions of the Interim Systems Management Agreement entered into with
respect to such Deferred Property.
4.3. [Intentionally Omitted].
4.4. Cut-Over Procedures. Buyer and Seller will substantially and
materially comply with the procedures detailed on Schedule 4.4 (the "Cut-Over
Procedures") in order to facilitate the prompt and orderly cut-over ("Cut-Over")
of the operation of each of the Systems from Seller to Buyer and to insure that
each Cut-Over will be accomplished without any interruption of service to any
Subscriber. After each Closing and prior to the Cut-Over of a System, USOL will
operate each System for the MDU Property pursuant to an Interim Systems
Management Agreement. Buyer agrees to give Seller thirty (30) days prior notice
of the Cut-Over of a System as required by the Interim Systems Management
Agreement (as defined in Section 5.3).
ARTICLE V
Closings
5.1. Closing Dates. The conveyance of the Transferred Assets from
Seller to Buyer shall take place in a series of four closings (each such event
sometimes being referred to as a "Closing" and the date of each such Closing
being referred to as a "Closing Date") as described in this Section 5.1.
5.1.1. The Take-Down Schedule. Schedule 5.1 lists all of the
MDU Properties and the Contracted MDU Properties and the calendar quarters in
which Buyer projects that such properties will be completed. The Transferred
Assets with respect to the MDU Properties shall be acquired at a Closing no
later than the end of the calendar quarter in which Buyer projects that the
property will be completed. The transfer of the ROEs for the Contracted MDU
Properties shall take place at the Initial Closing.
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5.1.2. Initial Closing. The Initial Closing will take place on
a date (the "Initial Closing Date") not later than December 31, 2001. At the
Initial Closing, Seller and Buyer will execute and deliver to each other the (i)
assignments and assumptions of the Rights of Entry and Subscriber Agreements
with respect to those MDU Properties described in the Take-Down Schedule as
being completed prior to December 31, 2001 and all Contracted MDU Properties,
and (ii) the documents contemplated by Sections 5.2.1 and 5.2.2 and by Articles
X and XI.
5.1.3. Interim Closings. An interim closing ("Interim
Closing") shall occur (i) on or prior to March 31, 2002 and (ii) on or prior to
June 30, 2002. At each Interim Closing, the parties will execute and deliver (i)
assignments and assumptions of the ROEs and Subscriber Agreements with respect
to the MDU Properties described in the Take-Down Schedule as being completed
prior to such Closing, and (ii) the documents contemplated by Sections 5.2.1 and
5.2.2 and by Articles X and XI.
5.1.4. Final Closing. The Final Closing of the transactions
contemplated by this Agreement will take place on or prior to September 30, 2002
(the "Final Closing Date") at which xxxx Xxxxxx and Buyer will execute and
deliver (i) assignments and assumptions of all remaining ROEs and Subscriber
Agreements related to the MDU Properties, and (ii) the documents contemplated by
Sections 5.2.1 and 5.2.2 and by Articles X and XI.
5.1.5. Effect of Absence of Consents to Transfer of ROEs.
Subject to satisfaction of the requirement that consents have been obtained (or
are not needed) as to 80% of the Subscriber Doors (i.e., the Buyer's Condition
of Closing set forth in Section 10.1) and Seller's satisfaction of Buyer's other
conditions of Closing, the failure of Seller to have any necessary consent to
transfer a XXX will only entitle Buyer to exclude the affected XXX(s) from the
Transferred Assets and not pay the Door Fee allocable to such XXX(s). If Seller
has not received prior to a Closing a consent from any owner of a XXX
representing the MDU Property and Seller has satisfied the other Conditions of
Closing in Article X, Buyer will still be required to purchase from Seller (for
the consideration specified in Article III) any such XXX for which a consent
from the applicable owner is subsequently obtained as long as Seller satisfies
the following conditions: (a) such consent is obtained within 6 months of the
originally scheduled Closing Date for such XXX under this Agreement, and (b) at
least three years are left on the term of such XXX at the time such consent is
obtained. The Closing for the ROEs described in the preceding sentence shall
occur within one-hundred twenty (120) days after the consent is obtained.
5.2. Closing Procedure. Subject to and after the fulfillment or waiver
of the conditions set forth in Articles X and XI in each instance, the Initial
Closing, each Interim Closing, and the Final Closing shall take place at the
offices of Bickerstaff, Heath, Smiley, Pollan, Xxxxx & XxXxxxxx, L.L.P., 000
Xxxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxx, Xxxxx. Each Closing shall be effective for
accounting purposes as of the Effective Time of a Closing. At each Closing,
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Seller shall sell, assign and convey to Buyer all of the Transferred Assets
attributable to the System or Systems made the subject of that respective
Closing and the parties shall take the following actions and all such actions
shall be deemed to have occurred simultaneously:
5.2.1. Seller's Deliveries. At each Closing, Seller shall
deliver or cause to be delivered to Buyer the following:
(a) An Officer's Certificate dated as of the
Closing, and signed by a senior executive
officer of Seller, and certifying that the
conditions to the obligations of Buyer to
purchase the Transferred Assets attributable
to each System from Seller, which are set
forth in Article X, have been satisfied;
(b) Evidence reasonably satisfactory to Buyer
that Seller has taken all action necessary
to authorize the execution of this Agreement
and the consummation of the transactions
contemplated hereby;
(c) An Incumbency Certificate dated as of the
Closing, signed by the Secretary of Buyer,
evidencing the authority of the entities and
individuals who are signatories to this
Agreement and all documents related and
collateral hereto to which Seller is a
party;
(d) Executed counterparts of a Xxxx of Sale and
Assignment and Assumption Agreement relating
to the specific Transferred Assets
attributable to the Contracted MDUs or
System(s) (as applicable) made the subject
of the Closing in the form attached hereto
as Exhibit A;
(e) An opinion of Seller's counsel, dated as of
the Closing Date, in the form attached
hereto as Exhibit B;
(f) *[Intentionally Omitted].
(g) Actual possession and operating control of
the System(s) which are transferred in the
Closing, subject to the provisions of
Section 5.3;
(h) All existing blueprints, schematics, working
drawings, plans, specifications,
projections, statistics, engineering
records, original plant records, System
construction and as-built maps relating to
the Systems, and all subscriber lists, files
13
*Confidential Treatment Requested. Confidential portions of this document have
been redacted and filed separately with the Commission.
and records used by the Seller in connection
with the operation of the Systems, including
a list of all pending subscriber hook-ups,
disconnects and repair orders, supply orders
and any other lists pertinent to the
operation of the Systems;
(i) A certificate of No Tax Due issued by the
Texas State Comptroller of Public Accounts;
and
(j) Such other documents and instruments as
Buyer may reasonably require to effect the
intent of this Agreement and consummate the
transactions contemplated hereby, including,
but not limited to any required releases of
Liens as may be reasonably requested by
Buyer.
5.2.2. Buyer's Deliveries. At each Closing, Buyer shall
deliver or cause to be delivered to Seller the following:
(a) An Officer's Certificate dated the date of
the Closing and signed by a senior executive
officer of Buyer and certifying that the
conditions to the obligation of Seller to
sell the Transferred Assets attributable to
each System, which are set forth in Article
XI, have been satisfied.
(b) Evidence, in such form as is satisfactory to
Seller, that each of the conditions to the
obligations of Seller to sell the
Transferred Assets attributable to each
System to Buyer, which is set forth in
Article XI, has been satisfied;
(c) By wire transfer to an account identified by
Seller on each Closing Date, an amount in
cash equal to that portion of the Purchase
Price attributable to the respective Closing
in accordance with the provisions of Section
3.1.1;
(d) Executed counterparts of a Xxxx of Sale and
Assignment and Assumption Agreement relating
to the Transferred Assets attributable to
the System(s) made the subject of the
respective Closing in the form attached
hereto as Exhibit A;
(e) Evidence reasonably satisfactory to Seller
that Buyer has taken all action necessary to
authorize the execution of this Agreement
and the consummation of the transactions
contemplated hereby.
14
(f) An Incumbency Certificate dated the date of
the Closing and signed by the Secretary of
Buyer evidencing the authority of the
entities and individuals who are signatories
to this Agreement and all documents related
and collateral hereto to which Buyer is a
party.
(g) An opinion of Buyer's counsel, dated as of
the Closing Date, in the form of Exhibit C.
(h) Such other documents and instruments as
Seller may reasonably require to effect the
intent of this Agreement and consummate the
transactions contemplated hereby as may be
reasonably requested by Seller.
5.3. Interim Systems Management Agreement. In the event Buyer shall
have closed on the purchase of Transferred Assets attributable to any MDU
Property or Contracted MDU Property and Buyer, in its sole and absolute
discretion, determines that Buyer desires certain post-closing services relating
to a MDU Property or Contracted MDU Property (a "Deferred Property"), then
Seller shall operate or continue to operate any Deferred Property on Buyer's
behalf for up to one hundred eighty (180) days in accordance with the terms and
conditions of the Interim Systems Management Agreement (the "Interim Systems
Management Agreement") in the form of Exhibit B to the Services Agreement.
ARTICLE VI
Representations and Warranties of the Seller
To induce Buyer to enter into this Agreement and to consummate the
transactions contemplated hereby, Seller makes the following representations and
warranties, as of the Effective Date and as of each Closing Date, which
representations and warranties shall survive each Closing and the Final Closing
to the extent provided in Section 13.1.5 below; provided, however, that with
respect to representations and warranties that only apply to Transferred Assets,
those representations will only be repeated as to the Transferred Assets being
conveyed at the Closing.
6.1 Organization and Good Standing. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, is duly qualified to do business and validly existing and in good
standing as a foreign corporation in the State of Texas, and has all requisite
power and authority to own, lease and use its properties and to carry on the
Business as it is now being conducted and to operate each of the Systems as each
System, respectively, is being operated. Seller is a 100% subsidiary of USOL
15
Holdings, Inc. ("USOL Holdings"). Except as set forth in Schedule 6.1, Seller
does not own any stock, membership interest or partnership interest in any other
entity.
6.2. Authority. Subject to Schedule 6.2, Seller has all requisite
corporate power and authority to execute, deliver, and perform this Agreement
and, subject to obtaining the consents and approvals referred to herein, to
consummate the transactions contemplated hereby. The execution, delivery, and
performance of this Agreement and the consummation of the transactions
contemplated hereby on the part of Seller have been duly and validly authorized
by all necessary action on the part of Seller. This Agreement has been duly and
validly executed and delivered by Seller, and constitutes the legal, valid and
binding obligations of Seller, enforceable against Seller in accordance with its
terms, except as may be limited by applicable bankruptcy, insolvency or similar
laws affecting creditors' rights generally or the availability of equitable
remedies.
6.3. No Conflict; Consents. Subject to Schedule 6.3 and obtaining the
consents and approvals referred to herein, the execution, delivery, and
performance by Seller of this Agreement do not and will not: (i) conflict with
or violate any provision of the articles of incorporation or bylaws of Seller;
(ii) violate any provision of any Legal Requirement; (iii) conflict with,
violate, result in a breach of, or constitute a default under any contract,
agreement or understanding to which Seller is a party or by which Seller or the
Transferred Assets are bound or affected; (iv) require any consent, approval or
authorization of, or filing of any certificate, notice, application, report, or
other document with, any Governmental Authority or other Person; or (v) result
in the creation or imposition of any Lien (other than a Permitted Lien) against
or upon any of the Transferred Assets.
6.4. Title to Transferred Assets; Sufficiency. Seller (or US-Austin
Cable, Ltd.) has good and indefeasible title to (or in the case of Transferred
Assets that are leased, valid leasehold interests in) and possession of all of
the Transferred Assets, free and clear of all Liens, except for (a) Permitted
Liens, and (b) Liens described on Schedule 6.4, all of which Liens described in
Schedule 6.4 will be terminated or released (subject to obtaining the consent of
Seller's lenders) at or prior to each respective Closing Date. The tangible
Transferred Assets, taken as a whole, are in good operating condition and
repair, ordinary wear and tear and obsolescence excepted, and except with
respect to the absence of the Excluded Assets, presently permit the Systems to
operate in accordance with the material terms of the ROEs and the Subscriber
Agreements. Except for absence of the Excluded Assets, the Transferred Assets
constitute all property and rights, real and personal, tangible and intangible,
necessary or required to operate the Systems as currently operated and conduct
the business of the Systems as currently conducted. None of the equipment
included in the Transferred Assets is subject to any lease agreement. No real
property owned or leased by Seller or any Affiliate of Seller utilized in the
Systems will be required for Buyer to operate the Systems other than Buyer's
16
rights to fixtures, such as conduits and wiring, located on the properties
covered by the XXX. Notwithstanding the foregoing, no representation is made as
to the compatibility or sufficiency of the Transferred Assets with Buyer's
existing or proposed systems and equipment.
6.5. Contracts, Agreements and Licenses. Seller has delivered to Buyer
true and complete copies of each of the ROEs, and Contracts and all amendments,
assignments and consents thereto, together with copies of any other agreements
("Other Agreements") that require consents in order to complete the transactions
contemplated by this Agreement and a list of the Subscriber Agreements and
access to copies of the Subscriber Agreements. Seller is not a party to or bound
by any material contract, agreement or understanding that relates to the Systems
after the Closing and Cut-over, or Buyer's use of the Systems after Closing and
Cut-over, except the Subscriber Agreements, the ROEs described in Schedule
2.1.3, and the Contracts described in Schedule 2.1.6. Each of the ROEs,
Subscriber Agreements, Contracts and Other Agreements is in full force and
effect, is valid, binding and enforceable in accordance with its terms. Except
as described on Schedule 6.5, there has not occurred any default by Seller nor,
to the best of Seller's knowledge, by any party to any of the ROEs, Subscriber
Agreements (except for ordinary bad debts of Subscribers), Contracts, or Other
Agreements. There are no deposits given by Subscribers or with respect to any of
the equipment included in the Transferred Assets other than deposits for analog
and digital converter boxes utilized by certain Subscribers (which Subscribers'
deposits shall be returned by Seller). Each Right of Entry will provide Buyer
with an easement, license or similar right to access the respective MDU
Properties which allows Buyer to (i) deliver service to Subscribers to the
Systems (in accordance with terms and conditions of the applicable ROEs) and
(ii) wire and equip the Contracted MDU Properties which are not presently
included within a System (in accordance with the terms and conditions of the
applicable ROEs). Except as described on Schedule 6.5, within the past 24
months, Seller has received no notification or request relating to the
disposition of any cable home wiring or any home run wiring in any System which
has not been resolved, or the intended use of such wiring by another
multichannel video programming distributor which has not been resolved.
6.6. Employee Benefits. Neither Seller nor any Employee Benefit Plan
(as defined in the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) maintained by Seller is in violation of the provisions of ERISA; no
reportable event, within the meaning of Sections 4043(c)(1), (2), (3), (5), (6),
(7), (10) or (13) of ERISA, has occurred and is continuing with respect to any
such Employee Benefit Plan; and no prohibited transaction, within the meaning of
Title I of ERISA, has occurred with respect to any such Employee Benefit Plan.
Buyer is not required under ERISA, the Code or any collective bargaining
agreement to establish, maintain or continue any Employee Benefit Plan
maintained by Seller or any Affiliate of Seller. Seller has made all required
contributions to its Employee Benefit Plans.
17
6.7. Employees.
(a) Except as set forth on Schedule 6.7, there are no
collective bargaining agreements applicable to any
person employed by Seller that renders services in
connection with the Systems, and Seller has no duty
to bargain with any labor organization with respect
to any such persons. There are not pending any unfair
labor practice charges against Seller, nor is there
any demand for recognition, or any other request or
demand from a labor organization for representative
status with respect to any person employed by Seller
that renders services in connection with the Systems.
(b) Seller is in substantial compliance with all
applicable Legal Requirements respecting employment
conditions and practices, has withheld all amounts
required by any applicable Legal Requirements or
Contracts to be withheld from the wages or salaries
of its employees, and is not liable for any arrears
of wages or any taxes or penalties for failure to
comply with any of the foregoing.
(c) Seller has not engaged in any unfair labor practice
within the meaning of the National Labor Relations
Act and has not violated any Legal Requirement
prohibiting discrimination on the basis of race,
color, national origin, sex, religion, age, marital
status, or handicap in its employment conditions or
practices. Except as set forth on Schedule 6.7,
there are no pending or, to Seller's knowledge,
threatened unfair labor practice charges or
discrimination complaints relating to race, color,
national origin, sex, religion, age, marital status,
or handicap against Seller before any Governmental
Authority nor, to Seller's knowledge, does any basis
therefor exist.
(d) There are no existing or, to Seller's knowledge,
threatened labor strikes, disputes, grievances,
arbitration proceedings or other labor controversies
affecting the Systems or the employees employed for
the Systems. There are no pending or, to Seller's
knowledge, threatened representation questions
respecting Seller's employees. To Seller's knowledge,
there exists no basis for any of the above.
(e) Seller will give all notices and take all actions (if
any) as may be necessary to comply with the Worker
Adjustment and Retraining Notification Act.
18
6.8. Litigation. Except as set forth on Schedule 6.8, there are no
material actions, suits, claims, governmental investigations or arbitration
proceedings pending or, to the best of the Seller's knowledge, threatened
against or affecting any of the Transferred Assets or Assumed Liabilities, or
which question the validity or enforceability of this Agreement or any action
contemplated hereby, and Seller is not aware of any basis for any of such
matters. Except as set forth in Schedule 6.8, there are not material actions,
suits, claims, governmental investigations or arbitration proceedings pending,
or to the best of Seller's knowledge, threatened against USOL Holdings, Seller
or any subsidiaries of USOL Holdings or Seller which could reasonably be
expected to materially and adversely affect the Transferred Assets or Assumed
Liabilities, and Seller is not aware of any basis for any such material matters.
There are no outstanding orders, decrees or stipulations issued by any federal,
state, local or foreign judicial or administrative authority in any proceeding
to which the Seller is or was a party or which could reasonably be expected to
materially and adversely affect the Transferred Assets or Assumed Liabilities.
6.9. Tax Returns; Other Reports. Seller and USOL Holdings have timely
filed all federal, state and local tax returns and other tax reports relating to
the Systems that are required to be filed on or prior to the date hereof, and
has timely paid all taxes shown thereon to be due and payable. Except as set
forth on Schedule 6.9, neither Seller nor USOL Holdings has received any notice
of deficiency or assessment of proposed deficiency or assessment from any taxing
Governmental Authority pertaining to the Systems. All taxes with respect to
Seller, USOL Holdings, the Transferred Assets, or the business or operation of
the Systems that are due and payable have been timely paid.
6.10. Compliance with Legal Requirements.
(a) Seller has complied in all material respects and is
in compliance in all material respects with all Legal
Requirements applicable to it or to the Systems,
including but not limited to the Communications Act,
the Cable Act, the Copyright Act, the Occupational
Safety and Health Act, the Texas Public Utility
Regulatory Act (the "TPURA"), and rules and
regulations promulgated thereunder. Except as set
forth on Schedule 6.10, Seller has not received
notice from any Governmental Authority of any
material violation of its rules and regulations
insofar as they apply to the Systems.
(b) Except as set forth in Schedule 6.10, Seller has
submitted all material filings, current annual
reports and other notices, that are required under
the rules and regulations of the FCC, the FAA, and
the TPURA. The Systems are in substantial compliance
with signal leakage criteria prescribed by the FCC,
19
and the must-carry and retransmission consent
provisions of the Cable Act and the FCC rules and
regulations promulgated thereunder.
(c) Seller has deposited with the U.S. Copyright Office
all material statements of account and other
documents and instruments, and paid all royalties,
supplemental royalties, fees and other sums to the
U.S. Copyright Office under the Copyright Act with
respect to the business and operations of the Systems
as are required to obtain, hold and maintain the
compulsory license for cable television systems
prescribed in the Copyright Act. The Systems are in
substantial compliance with the Copyright Act and the
rules and regulations of the U.S. Copyright Office
promulgated thereunder, except as to potential
copyright liability arising from the performance,
exhibition or carriage of any music on the Systems.
To the knowledge of Seller, there is no inquiry,
claim, action or demand pending before the U.S.
Copyright Office or from any other party that
questions the copyright filings or payments made by
Seller with respect to any of the Systems. Seller has
provided Buyer or its representatives copies of all
such filings with the Copyright Office relating to
the Systems for the following reporting periods: the
first and second calendar quarter of the year 2001;
all four calendar quarters of the year 2000; the
third and fourth calendar quarter of the year 1999,
which are all the periods during which Seller has
been required to make filings with the Copyright
Office.
(d) All necessary material FAA and FCC approvals have
been obtained with respect to the height and location
of towers used in connection with the operation of
the Systems and are listed on Schedule 6.10(f) and
such towers are being operated in compliance in all
material respects with applicable FAA and FCC rules.
(e) The rates charged by Seller to the Subscribers
materially comply with all FCC requirements and all
other Legal Requirements.
(f) Schedule 6.10(f) sets forth all licenses, permits,
authorizations, registrations or other authority
issued by the FCC (the "FCC Licenses") that are held
by Seller and used in, or related to, the operation
of the Systems. The FCC Licenses are all such
licenses required for Seller to operate the Systems
as currently operated. The FCC Licenses are in full
force and effect, and Seller has received no notice
of any investigation, forfeiture, or other
administrative action relating to any FCC License.
20
(g) Except as Seller has otherwise disclosed to Buyer in
writing, none of the Systems or Equipment uses any
public streets or rights of way to distribute cable
television services. No System is operated under a
cable franchise issued by any municipality, and
Seller has received no notice from any municipality
relating to regulation of any Systems as a franchised
cable system.
6.11. System Information. The Systems satisfy the following
requirements and standards:
(a) *[Intentionally Omitted].
(b) Each Subscriber Door (other than Contracted MDU
Property Subscriber Doors) is presently wired to a
System in material compliance with the requirements
of the applicable XXX; and
(c) The status of various aspects of the Systems with
respect to equipment, wiring and other matters is set
forth in Schedule 6.11(c).
6.12. Environmental Matters.
(a) Seller has received no notice of, and to Seller's
knowledge there are no circumstances relating to, any
past or present condition, circumstance, activity,
practice or incident (including without limitation,
the presence, use, generation, manufacture, disposal,
release or threat to release of any Hazardous
Substances from or on the Transferred Assets), that
could interfere with, prevent continued compliance
with, or result in any material losses pursuant to,
any Legal Requirement with respect to pollution or
protection of the environment, or that is reasonably
likely to give rise to any liability, based upon or
related to the processing, distribution, use,
treatment, storage, disposal, transport, or handling,
or the emission, discharge, release, or threatened
release into the environment, of any Hazardous
Substance on, from or attributable to the Transferred
Assets.
(b) "Hazardous Substances" has the meaning given in the
Comprehensive Environmental Response, Compensation
and Liability Act of 1980 (42 U.S.C.A. Sections 9601
et seq. ("CERCLA"), as amended, and rules and
regulations promulgated thereunder.
21
*Confidential Treatment Requested. Confidential portions of this document have
been redacted and filed separately with the Commission.
(c) Seller has provided Buyer with complete copies
of, or a list of and access to, (i) all studies,
reports, surveys or other materials either in
Seller's possession or known to Seller and to which
Seller has access relating to the presence or alleged
presence of Hazardous Substances at, on or affecting
the Transferred Assets, (ii) all notices or other
materials either in Seller's possession or known to
Seller and to which Seller has access that were
received from any Governmental Authority having the
power to administer or enforce any Environmental Laws
relating to current or past ownership, use or
operation of the Transferred Assets and (iii) all
materials either in Seller's possession or known to
Seller and to which Seller has access relating to any
claim, allegation or action by any private third
party under any environmental law regarding the
Transferred Assets.
6.13. Financial and Operational Information. Seller has delivered to
Buyer for each of the Systems as of December 31, 2000, and as of June 30, 2001,
and for the periods then ended, financial statements in the form attached as
Schedule 6.13 (the "System Financial Statements"). The Systems' Financial
Statements have been prepared in the ordinary course of business, are based on
the books and records of the Systems, were prepared in accordance with generally
accepted accounting principles (except for the omission of notes thereto and
subject to normal year-end adjustments which will not be material in amount or
effect), applied on a consistent basis throughout the periods covered thereby,
and present fairly, in all material respects, the financial condition and
results of operations of the Systems as of the dates and for the periods
indicated.
6.14. No Adverse Change. Since June 30, 2001, (i) there has been no
material adverse change in the financial condition or the business operations of
a System from that described by Sellers in USOL Holdings, Inc.'s 10-QSB filed
with the Securities and Exchange Commission on August 14, 2001, and no event has
occurred which could reasonably be expected to have a material adverse change in
the financial condition or business operations of any System; (ii) the Systems
have not been materially and adversely affected as a result of any fire,
explosion, accident, casualty, labor trouble, flood, drought, riot, storm,
condemnation, or act of God or public force or otherwise; and (iii) Seller has
not made any sale, assignment, lease or other transfer of any of Seller's
properties related to the Systems other than in the normal and usual course of
business consistent with actual past practices.
6.15. Finders and Brokers. Seller has not employed any financial
advisor, broker or finder or incurred any liability for any financial advisory,
brokerage, finder's or similar fee or commission in connection with the
transactions contemplated by this Agreement for which Buyer will in any way have
any liability.
22
6.16. Taxpayer Identification Number. *[Intentionally Omitted.]
6.17. [Intentionally Deleted.]
6.18. Bonds, Letters of Credit, Certificates of Insurance. Except as
set forth on Schedule 6.18, there are no franchise, construction, fidelity,
performance, or other bonds or letters of credit posted, or certificates of
insurance issued, by Seller in connection with the Systems or the Assets.
6.19. Rights in Assets. Except as otherwise described in the ROEs for
the MDU Properties and the Contracted MDU Properties, no person (including any
Governmental Authority) has any right to acquire an interest in the Systems or
any material Transferred Asset (including any right of first refusal or similar
right), other than rights of condemnation or eminent domain afforded by law
(none of which have been exercised and no proceedings therefor have been
commenced).
6.20. Books and Records. All of the books, records, and accounts of the
Business are in all material respects true and complete, are maintained in
accordance with good business practice and all applicable Legal Requirements,
accurately present and reflect in all material respects all of the transactions
therein described, and are reflected accurately in the System Financial
Statements.
6.21. Accuracy of Information Furnished. No representation, statement
or information made or furnished by the Seller to the Buyer, including those
contained in this Agreement and the other information, statements and notices
referred to herein or previously or subsequently furnished by the Seller to the
Buyer pursuant hereto, contains or shall contain any untrue statement of a
material fact or omits or shall omit any material fact necessary to make the
information contained herein or therein not misleading. Seller does not have any
knowledge of any fact that has specific application to Seller or the Systems
(other than general economic or industry conditions) that could reasonably be
expected to materially and adversely affect the financial condition or business
operation of any System.
6.22. No Implied Representations or Warranties. Buyer acknowledges that
Seller is making no warranties or representations, express or implied, beyond
those set forth in the Agreement. With respect to (i) the value, condition,
merchantabilty, marketability, profitability, suitability or fitness for a
particular use or purpose of the Transferred Assets, (ii) the manner or quality
of the construction or materials incorporated into any of the Transferred
Assets, or (iii) the manner, quality, state of repair or lack of repair of the
Transferred Assets, Seller is only making the express warranties and
representations set forth in this Agreement and in the Xxxx of Sale, Assignment
23
*Confidential Treatment Requested. Confidential portions of this document have
been redacted and filed separately with the Commission.
and Assumption Agreement executed and delivered by Seller with respect to the
Transferred Assets.
ARTICLE VII
Representations and Warranties of the Buyer
To induce the Seller to enter into this Agreement and to consummate the
transactions contemplated hereby, the Buyer makes the following representations
and warranties as of the Effective Date and as of each Closing Date, which
representations and warranties shall survive each Closing and the Final Closing
to the extent provided in Section 13.2.5:
7.1. Organization of Buyer. Buyer is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Delaware,
is duly qualified to do business and validly existing and in good standing as a
foreign corporation in the State of Texas, and has all requisite corporate power
and authority to own and lease the properties and assets it currently owns and
leases and to conduct its activities as such activities are currently conducted.
Buyer is duly qualified to do business as a foreign corporation and is in good
standing in all of the jurisdictions where the Systems are located.
7.2. Authority. Buyer has all requisite corporate power and authority
to execute, deliver, and perform this Agreement and consummate the transactions
contemplated hereby. The execution, delivery, and performance of this Agreement
and the consummation of the transactions contemplated hereby by Buyer have been
duly and validly authorized by all necessary corporate action on the part of
Buyer. This Agreement has been duly and validly executed and delivered by Buyer,
and is the valid and binding obligation of Buyer, enforceable against Buyer in
accordance with its terms, except as may be limited by applicable bankruptcy,
insolvency or similar laws affecting creditors' rights generally or the
availability of equitable remedies.
7.3. No Conflict; Consents. Except as will not have a material adverse
effect on the ability of Buyer to perform its obligations hereunder, the
execution, delivery, and performance by Buyer of this Agreement do not and will
not: (i) conflict with or violate any provision of the articles of incorporation
or bylaws of Buyer; (ii) violate any provision of any Legal Requirement; (iii)
conflict with, violate, result in a breach of, or constitute a default under any
contract, agreement, or understanding to which Buyer is a party or by which
Buyer or the assets or properties owned or leased by it are bound or affected;
or (iv) require any consent, approval, or authorization of, or filing of any
certificate, notice, application, report, or other document with, any
Governmental Authority or other Person.
24
7.4. Finders and Brokers. Buyer has not employed any financial advisor,
broker or finder or incurred any liability for any financial advisory,
brokerage, finder's or similar fee or commission in connection with the
transactions contemplated by this Agreement for which Seller will in any way
have any liability.
7.5. Taxpayer Identification Number. *[Intentionally Omitted.]
7.6. Buyer's Ability to Perform. Buyer has the financial and other
resources needed to extend its system to the MDU Properties and the Contracted
MDU Properties within the time frames contemplated by the Take-Down Schedule and
to pay Seller the cash consideration contemplated by this Agreement.
7.7. No Material Adverse Change. Since June 30, 2001 there has been no
material adverse change in the financial condition or business operations of
Buyer and Buyer is not aware of any event which could reasonably be expected to
have a material adverse change in the financial condition of or business
operations of Buyer relating to the Austin/San Antonio Corridor.
7.8. Litigation. There are no material actions, suits, claims,
governmental investigations or arbitration proceedings to which Buyer is a party
pending or, to the best of the Buyer's knowledge, threatened against or
affecting any of the Buyer's assets in or related to the Austin/San Antonio
Corridor, or against or affecting Buyer's operations in the Austin/San Antonio
Corridor, or which question the validity or enforceability of this Agreement or
any action contemplated hereby, and Buyer is not aware of any basis for any of
the matters. There are no material actions, suits, claims, governmental
investigations or arbitration proceedings pending, or to the best of Buyer's
knowledge, threatened against Buyer or any of its Affiliates and Buyer is not
aware of any basis for any such material matters. There are no outstanding
orders, decrees or stipulations issued by any federal, state, local or foreign
judicial or administrative authority in any proceeding to which the Buyer is or
was a party which materially and adversely affect the transactions contemplated
by this Agreement.
7.9. Accuracy of Information Furnished. No representation, statement or
information made or furnished by the Buyer to the Seller, including those
contained in this Agreement and the other information, statements and notices
referred to herein or previously or subsequently furnished by the Buyer to the
Seller pursuant hereto, contains or shall contain any untrue statement of a
material fact or omits or shall omit any material fact necessary to make the
information contained herein or therein not misleading. Buyer does not have any
knowledge of any fact that has specific application to Buyer or the Austin/San
Antonio Corridor (other than general economic or industry conditions or similar
matters) that could reasonably be expected to materially and adversely affect
the financial condition or business operation of Buyer.
25
*Confidential Treatment Requested. Confidential portions of this document have
been redacted and filed separately with the Commission.
ARTICLE VIII
Seller's Covenants
8.1. Commercially Reasonable Best Efforts. Seller will use its
Commercially Reasonable Best Efforts to cause to be satisfied as soon as
practicable and prior to each respective Closing Date all of the conditions set
forth in Article X to the obligation of the Buyer to purchase the Transferred
Assets hereunder.
8.2. Conduct of Systems Prior to Final Closing. From and after the
execution and delivery of this Agreement and until the Final Closing Date,
except as otherwise provided by the prior written consent of Buyer, Seller will
(i) conduct its Business and operate each respective System in a prudent and
businesslike manner consistent with Seller's actual past practices; (ii) perform
all of its obligations under all of the ROEs and Subscriber Agreements without
material breach or default; (iii) operate the Business and each of the Systems
in substantial compliance with all applicable legal requirements and provide
Buyer with copies of all filings, reports, notices or correspondence relating to
the Systems submitted to, or received from, the FCC, the Copyright Office, TPURA
or any other regulatory agencies; (iv) continue the pricing, marketing,
advertising, promotion and other activities with respect to the Business and
each System (including without limitation billing and collection) substantially
and materially in the normal and ordinary course of business consistent with
Seller's past practices; and (v) use its Commercially Reasonable Best Efforts to
(A) preserve the current business organization of the Business intact, including
preserving existing commercial relationships, (B) keep available the services of
its employees providing services in connection with the Business and (C)
maintain inventories of equipment and supplies consistent with past practices
and consistent with the terms of this Agreement; provided however that, unless
otherwise approved by Buyer, Seller shall cease all special promotions to
Subscribers thirty (30) days prior to the date of Buyer's acquisition (as
specified in the Take-Down Schedule attached as Schedule 5.1) of an XXX.
8.3. (a) Consents from MDU Owners. Seller will use its Commercially
Reasonable Best Efforts with respect to each XXX to obtain all required consents
to transfer of ROEs to Buyer. The form and content of such consents shall be
reasonably satisfactory to Buyer. Buyer will cooperate with Seller in its
efforts to obtain the consents and amendments described in this Section 8.3(a)
by providing USOL with a current financial balance sheets for Buyer, a current
list of officers and directors of Grande, and a current list of major
shareholders of Buyer in such form as Buyer shall reasonably deem appropriate
("Grande Financial Information") Buyer agrees that Seller may provide copies of
the Grande Financial Information to owners of MDU Properties in connection with
obtaining the consents described in this Section 8.3.(a).
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(b) Efforts Regarding Amendments and Estoppel Certificates.
Seller will use its Commercially Reasonable Best Efforts with respect to each
XXX to (i) if an XXX has a term of less than 66 months, obtain an extension of
the remaining term to ninety-six (96) months; (ii) amend the XXX(s) (if
necessary) to expand the scope of services to include the right to exclusively
provide and market video and the non-exclusive right to provide telephone and
internet services and the exclusive right to market telephone and internet
services; (iii) obtain a Minimum Point of Entry for telephone and cable service,
(iv) eliminate or improve any buy-out options of the owner of the property; (v)
obtain estoppel certificates, and (vi) obtain subordination and non-disturbance
agreements from holders of deeds of trust covering the MDU Properties if not
already obtained. With respect to (v) and (vi), Buyer recognizes and understands
that Seller may use its sole and absolute discretion to determine (a) whether
and, if so, when to approach certain owners of MDU Properties or lien holders
regarding items (v) - (vi), and with respect to (v) and (vi), Seller's success
in obtaining one or more of items (v) and (vi) shall not be a condition of any
Closing. Seller's success in obtaining any one or more of items (i) -(iv) and
the extent of any such items obtained shall not be a condition to any Closing
and, so long as Seller exercises its Commercially Reasonable Best Efforts, any
failure to by Seller to obtain any such items shall not be considered a breach
of this Agreement. Buyer will cooperate with Seller in its efforts to obtain the
items described in this Section 8.3(b) by providing USOL with the Grande
Financial Information. Buyer agrees that Seller may, to the extent approved in
writing by Grande, provide copies of the Grande Financial Information to owners
of MDU Properties in connection with the matters described in this Section
8.3(b).
8.4. Access to Properties and Records. From and after the execution and
delivery of this Agreement, Seller will afford to representatives of the Buyer
access, during normal business hours and upon reasonable notice, to Seller's
premises sufficient to enable Buyer to inspect the Transferred Assets, and
Seller will furnish to such representatives during such period all such
information relating to the foregoing investigation as Buyer may reasonably
request; provided, however, that any furnishing of such information to Buyer and
any investigation by Buyer shall not affect the right of Buyer to rely on the
representations and warranties made by Seller in or pursuant to this Agreement.
8.5. Publicity. Seller and Buyer shall consult with and cooperate with
the other with respect to the content and timing of all press releases and other
public announcements, and any oral or written statements to Seller's employees
concerning this Agreement and the transactions contemplated hereby. Neither
Seller nor Buyer shall make any such release, announcement, or statements
without the prior written consent of the other, which shall not be unreasonably
withheld or delayed; provided, however, that Seller or Buyer may at any time
make any announcement required by Legal Requirements so long as such party,
promptly upon learning of such requirement, notifies the other of such
requirement and consults with the other in good faith with respect to the
wording of such announcement.
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8.6. Notification of Certain Matters.
(a) Seller will promptly notify Buyer in writing of any
fact, event, circumstance, action or omission (i)
which, if known on the Execution Date of this
Agreement, would have been required to be disclosed
in or pursuant to this Agreement, or (ii) the
existence or occurrence of which would cause Seller's
representations or warranties under this Agreement
not to be true in any material respect, and with
respect to clause (ii), Seller shall use Commercially
Reasonable Best Efforts to remedy the same. Promptly
upon becoming aware of such matter, Seller will
notify Buyer in writing of any fact, event,
circumstance, action or omission which constitutes a
breach by Seller of any of the representations or
warranties made by Seller in the performance of or
compliance with any covenant, agreement or obligation
required to be performed or complied with prior to
the date of any Closing.
(b) Seller will promptly notify Buyer in writing of any
material adverse change to the financial condition or
business operations of the Systems.
8.7. Certain Negative Covenants of Seller. Between the date hereof and
the Final Closing, Seller shall not solicit or participate in negotiations with
any third party with respect to the sale of the Transferred Assets or the
Systems or any transaction inconsistent with those contemplated hereby and will
promptly notify Buyer of the specifics of any offers or inquiries received from
third parties regarding the acquisition of any of the Transferred Assets.
Additionally, except as Buyer may otherwise consent in writing, or as
contemplated by this Agreement, between the date of this Agreement and the Final
Closing Seller shall not (a) modify, terminate, renew, suspend, or abrogate any
XXX, Contract, Other Agreement or (b) modify, terminate, renew, suspend or
abrogate any other material agreement or contract if such action would
reasonably be expected to adversely affect the Transferred Assets or Buyer's use
of the Transferred Assets after Closing, (c) sell, assign, lease or otherwise
dispose of any of the Transferred Assets, unless such Transferred Assets are
consumed or disposed of in the ordinary course of business consistent with
actual past practice or disposed of in conjunction with the acquisition of
replacement property or are no longer used or useful in the business or
operation of the Systems, (d) create, assume, or permit to exist any Lien
(except for Permitted Liens) upon any Transferred Asset, (e) change subscriber
rates for any tier of service or change billing, collection, installation,
disconnect, marketing or promotional practices with respect to any of the
Systems included in the Transferred Assets, (f) seek amendments or modifications
to existing ROEs, Contracts or Other Agreements or accept or agree to accede to
any material modification or amendment to, or any condition to the transfer of,
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any of the ROEs, Contracts, Other Agreements that will adversely affect Buyer,
(g) enter into any transaction or permit the taking of any action that would
result in any of Seller's representations and warranties contained in this
Agreement not being materially true and correct when made or at any Closing,
including without limitation the Final Closing.
8.8. Access to MDU Properties for Upgrades, Wiring and Cut-Over. Seller
and Buyer acknowledge that Buyer anticipates (i) making any necessary upgrades
and installing additional equipment for the MDU Properties and (ii) wiring the
Contracted MDU Properties, so that such properties will have all needed
upgrades, wiring, and/or new equipment installations prior to Buyer's
acquisition and needed to facilitate Cut-Over of the MDU Property and/or
Contracted MDU Property. Seller agrees to use its Commercially Reasonable Best
Efforts to provide Buyer with the necessary access to the MDU Properties and
Contracted MDU Properties in order to make such upgrades, install such wiring
and new equipment and Buyer agrees to pay and be responsible for any damages
suffered by the owners of such properties or by Seller as a result of Buyer's
negligent or intentionally wrongful activities. Subject to the Buyer's rights
with respect to any breaches of Seller's warranties and representations, Buyer
shall pay all of the costs and expenses (including any out-of-pocket third party
costs for construction supervision incurred by Seller) of upgrades, wiring and
installations made pursuant to this Section 8.8 to the extent needed for
Cut-Over to, or with, Buyer's equipment and system; provided, however, that
Buyer will not pay for (i) any improvements or repairs needed in order to comply
with the terms of Seller's ROEs, unless such upgrades are required for Cut-Over,
or (ii) any cost or expenses of USOL's employees. In the event that Seller is
not able to obtain the access contemplated by the foregoing provisions of this
Section 8.8, Buyer will acquire (i) the MDU Properties in accordance with the
Take-Down Schedule and (ii) the Contracted MDU Properties by September 30, 2002,
and (iii) accomplish the necessary activities contemplated by this Section 8.8
after the applicable Closing.
ARTICLE IX
Buyer's Covenants
9.1. Commercially Reasonable Best Efforts. Buyer will use its
Commercially Reasonable Best Efforts to cause to be satisfied as soon as
practicable and prior to each respective Closing Date all of the conditions set
forth in Article XI to the obligation of the Seller to transfer and sell the
Transferred Assets hereunder.
9.2. Conduct of Business Prior to Final Closing. From and after the
execution and delivery of this Agreement and until the Final Closing Date, Buyer
will (i) conduct its business in a prudent and businesslike manner consistent
with Buyer's actual past practices; (ii) operate its business in substantial
compliance with all applicable legal requirements; and (iii) use its
Commercially Reasonable Best Efforts to preserve the current business of Buyer
intact, including preserving its existing commercial relationships and its
franchise agreements.
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9.3. Notification of Certain Matters.
(a) Buyer will promptly notify Seller in writing of any
fact, event, circumstance, action or omission (i)
which if known on the Execution Date of this
Agreement, would have been required to be disclosed
in or pursuant to this Agreement, or (ii) the
existence or occurrence of which would cause Buyer's
representations or warranties under this Agreement
not to be true in any material respect, and with
respect to clause (ii), Buyer shall use Commercially
Reasonable Best Efforts to remedy the same. Promptly
upon becoming aware of such matter, Buyer will notify
Seller in writing of any fact, event, circumstance,
action or omission which constitutes a breach by
Buyer of any of the representations or warranties
made by Buyer in the performance of or compliance
with any covenant, agreement or obligation required
to be performed or complied with prior to the date of
any Closing.
(b) Buyer will promptly notify Seller in writing of any
material adverse change to the financial condition or
business operations of its business as it relates to
the Systems.
ARTICLE X
Conditions to Obligations of the Buyer
The obligation of Buyer to purchase the Transferred Assets shall,
subject to the provisions of Section 5.1.5, be subject to the fulfillment at or
prior to each Closing Date of each of the following conditions:
10.1. Conditions of Initial and Other Closings. Buyer shall have
obtained, and shall hold at the time of the Initial Closing and each other
Closing, consents from owners of the MDU Properties which (together with those
MDU Properties where no consent is required) represent ROEs covering at least
80% (or *[Intentionally Omitted) or the total *[Intentionally Omitted]
Subscriber Doors in the MDU Properties. Further, Buyer shall have obtained, and
shall hold at the time of the Initial Closing, consents from owners of the MDU
Properties which represent all of the ROEs to be acquired at the Initial Closing
pursuant to the Takedown Schedule,
10.2. Consent to Transfer of XXX Transferred at a Closing.
Notwithstanding satisfaction of Section 10.1, but subject to the provisions of
Section 5.1.5, Seller shall have obtained all necessary consents to the transfer
of the ROEs to be transferred to Buyer at the Closing. The form and substance of
such consents shall be reasonably satisfactory to Buyer.
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*Confidential Treatment Requested. Confidential portions of this document have
been redacted and filed separately with the Commission.
10.3. Accuracy of Representations and Warranties and Compliance With
Obligations. (a) All of Seller'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 each Closing as if then made without giving effect to
any revisions or supplements to Seller's disclosure schedules.
(b) Except as provided in Section 10.3(d) below, each of the
representations and warranties in Sections 6.2, 6.10 and 6.13 (except to the
extent such warranty refers to a different date), and each of Seller's
representations and warranties in this Agreement that contains an express
materiality qualification, shall have been accurate in all respects as of the
date of this Agreement, and shall be accurate in all respects as of the time of
each Closing as if then made, without giving effect to any revisions or
supplements to Seller's disclosure schedules.
(c) Seller shall have performed and complied with all of its
obligations required by this Agreement to be performed or complied with at or
prior to each Closing Date including Seller's deliveries as required under
Section 5.2.1.
(d) Notwithstanding the foregoing, Seller and Buyer
acknowledge and agree that because the Closings will occur over an approximate
one year period, the representations and warranties of Seller contained in
Article VI may change because of events that may occur after the Effective Date.
Prior to each Closing Seller will disclose to Buyer any changes with respect to
the warranties and representations in Article VI that have arisen because of
events occurring after the Effective Date. Seller and Buyer agree that any
changes in such Article VI information, even if such changes are considered
material as they generally relate to Seller or to USOL Holdings, Inc. or to
US-Austin Cable Ltd., shall not be considered a failure to satisfy this Section
10.3 condition to closing as long as any such new information does not adversely
affect (i) Seller's ability sell the Transferred Assets to Buyer free and clear
of all Liens (other than Permitted Liens), (ii) Buyer's ability to utilize the
Transferred Assets after the applicable Closing, or (iii) any aspects of the
quality, character or value of the Transferred Assets, including, but not
limited to, the matters covered by Sections 6.4, 6.5, 6.10, 6.11, 6.12, 6.14
(ii) and (iii), 6.19 or 6.21 (as it relates to the Transferred Assets).
10.4. Receipt of Other Necessary Consents or Approvals. All other
necessary consents or approvals of third parties (including without limitation
any Governmental Authorities) in addition to those referred to in Sections 10.1
and 10.2, to any of the transactions contemplated hereby, the absence of which
would adversely affect Buyer's rights hereunder, shall have been obtained. The
form and substance of such consents and documentation shall be reasonably
satisfactory to Buyer.
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10.5. No Adverse Litigation. There shall not be pending or threatened
any action or proceeding by or before any court or other governmental body which
shall seek to restrain, prohibit or invalidate the sale of the Transferred
Assets to Buyer or any other transaction contemplated hereby, or which might
materially and adversely affect the right of Buyer to own, operate or control
the Transferred Assets.
ARTICLE XI
Conditions to Obligations of the Seller
The obligations of the Seller to sell the Transferred Assets shall be
subject to the fulfillment at or prior to each Closing Date of each of the
following conditions:
11.1. Accuracy of Representations and Warranties and Compliance With
Obligations. (a) All of Buyer'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 each Closing as if then made without giving effect to any
revisions or supplements to Buyer's disclosure schedules.
(b) Each of the representations and warranties in Sections 7.2
and 7.7, and each of Buyer's representations and warranties in this Agreement
that contains an express materiality qualification, shall have been accurate in
all respects as of the date of this Agreement, and shall be accurate in all
respects as of the time of each Closing as if then made, without giving effect
to any revisions or supplements to Buyer's disclosure schedules.
(c) Buyer shall have performed and complied with all of its
obligations required by this Agreement to be performed or complied with at or
prior to each Closing Date including Buyer's deliveries as required under
Section 5.2.2.
11.2. Consent of Seller's Lenders. Seller shall have obtained a consent
from the lenders under its Credit Agreement dated December 30, 1999, as amended,
to permit the transactions contemplated by this Agreement and to modify Seller's
financial covenants in a manner reasonably acceptable to Seller.
ARTICLE XII
Certain Actions After Closing
12.1. Delivery of Property Received After Closing. In the event that
after Closing, a party receives any checks or other payments that belong to the
other party, such party shall be entitled to deposit and collect such amounts
32
but shall promptly transfer the amounts so deposited or collected to the party
entitled to receive same.
12.2. Buyer Appointed Attorney for the Seller. Effective on each
Closing Date, Seller hereby constitutes and appoints Buyer, its successors and
assigns, the true and lawful attorney of Seller, in the name of either Buyer or
Seller (as Buyer shall determine in its sole discretion) but for the benefit and
at the expense of Buyer (except as otherwise herein provided), (i) to institute
and prosecute all proceedings which Buyer may deem proper in order to collect,
assert or enforce any claim, right or title of any kind in or to the Transferred
Assets (or other related rights arising after the Closing Date); and (ii) to
defend or compromise any and all actions, suits or proceedings in respect of any
of the Transferred Assets which arise after the Closing Date. Seller
acknowledges that the foregoing powers are coupled with an interest and shall be
irrevocable. Buyer shall be entitled to retain for its own account any amounts
collected pursuant to the foregoing powers, including any amounts payable as
interest in respect thereof.
12.3. Execution of Further Documents. From and after each Closing, upon
the reasonable request of Buyer, Seller shall execute, acknowledge and deliver
all such further acts, deeds, bills of sale, assignments, transfers,
conveyances, powers of attorney and assurances as may be required to convey and
transfer to and vest in Buyer and protect its right, title and interest in all
of the Transferred Assets, and as may be required or otherwise appropriate to
carry out the transactions contemplated by this Agreement, including notices
signed by Seller and Buyer to be filed of record and to reflect the transfer of
the ROEs to Buyer.
12.4. Employment by the Buyer of the Seller's Employees;
Non-Solicitation
12.4.1. Buyer shall evaluate and consider for employment under
its own hiring policies, procedures and standards any of Seller's technical
employees working in the Systems identified by Seller; provided, however, that
Buyer shall have no obligation whatsoever, to employ any of the persons
currently employed by Seller. Nor shall Buyer have any obligation to continue,
or institute any replacement or substitution for, any vacation, severance,
incentive, bonus, profit sharing, pension or other employee benefit plan or
program of Seller. Seller shall compensate its employees for all amounts due to
such employees for compensated absences accrued as of each Closing Date,
including vacation, holiday and sick pay benefits.
12.4.2. Seller shall be solely responsible for compliance with
COBRA, including the health care continuation coverage provisions thereof, with
respect to any employee of Seller who is terminated on or before any Closing
Date or with respect to whom a qualifying event occurs before or on any Closing
Date, whether such termination or qualifying event occurs in connection with the
consummation of this transaction or otherwise. Moreover, Seller will remain
33
solely liable with respect to any retiree medical obligations concerning the
employees of the Seller, regardless of whether the Buyer subsequently hires any
such employee.
12.4.3. Buyer shall not solicit for employment of any of
Seller's employees, other than Seller's technical employees identified by
Seller, who are employed with respect to Systems acquired by Buyer. Seller shall
not solicit for employment of any of Buyer's employees. The placing of general
advertisements by Seller or Buyer requesting applications for employment or the
unsolicited receipt of an application for (or an inquiry relating to)
employment, shall not constitute solicitation that violates this Section 12.4.3.
12.5. Payment of Obligations. From and after each Closing, the Seller
shall pay and perform all of its obligations with respect to the Excluded
Liabilities (which include, without limitation, trade payables of the Seller)
when due and prior to the time any thereof shall become delinquent, and Seller
shall provide evidence thereof to the Buyer from time to time as requested.
12.6. Buyer's Right of Set-off. In the event that Seller fails to
promptly pay Buyer any sums due to Buyer pursuant to this Agreement, Buyer may,
upon notice to Seller specifying in reasonable detail the basis therefore,
set-off the amount to which Buyer may be entitled pursuant to Article XIII
against amounts otherwise payable to Seller pursuant to this Agreement. The
exercise of such right of set-off by Buyer in good faith, whether or not
ultimately determined to be justified, will not constitute a default under this
Agreement. No exercise or failure to exercise such right of set-off shall
constitute an election of remedies by Buyer.
12.7. Payments with Respect to Buy-outs of ROEs. Seller and Buyer
acknowledge that certain of the ROEs for the MDU Properties contain provisions
allowing the owner of the MDU Property to buy the interest of the XXX owner in
the XXX and the wiring and equipment of the XXX owner utilized in the MDU
Property. Attached as Schedule 12.7 is a list of the ROEs that Seller represents
are the ROEs that have such buy-outs, excluding any buy-out that is tied to the
performance of the XXX owner. If any buy-out of a XXX is exercised by the owner
of a MDU Property within the first twelve (12) months after the Closing of
Buyer's acquisition of the related XXX, then Seller will pay to Buyer the total
Door Fees paid by Buyer under this Agreement for such XXX and Buyer shall be
entitled to retain all amounts paid to Buyer by the owner of the MDU Property.
If any such buy-out is exercised by the owner of the MDU Property after twelve
(12) months, but before forty-eight (48) months, following the Closing of
Buyer's acquisition of the related XXX, Seller will pay to Buyer an amount equal
to the Door Fees paid by Buyer for such XXX, less the amount paid to the Buyer
by the owner of the MDU Property. If a buy-out is exercised by the owner of a
MDU Property more than forty-eight (48) months after the Closing of Buyer's
acquisition of the related XXX, Seller will have no obligation to make payments
to Buyer with respect to such exercise of the owner's buy-out right.
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ARTICLE XIII
Indemnification
13.1. Agreement by Seller to Indemnify. Seller agrees that it will
indemnify and hold Buyer harmless in respect of the aggregate of all Buyer's
Indemnifiable Damages (as herein defined).
13.1.1. "Buyer's Indemnifiable Damages" means, without
duplication, the aggregate of all expenses, losses, costs, deficiencies,
liabilities and damages (including related counsel and paralegal fees and
expenses) incurred or suffered by Buyer, on a pre-tax basis, together with
interest thereon from the date of loss until paid at the rate of 10% per annum,
to the extent (i) resulting from any breach of a representation or warranty of
Seller in or pursuant to Article VI or elsewhere herein; (ii) resulting from any
breach of the covenants or agreements of Seller in this Agreement; or (iii)
resulting from the failure of Seller to pay, discharge or perform any liability
or obligation of Seller which is not expressly assumed by Buyer pursuant to this
Agreement or resulting from any dispute concerning any such liability or
obligation.
13.1.2. Without limiting the generality of the foregoing, with
respect to the measurement of Buyer's Indemnifiable Damages, Buyer shall have
the right to be put in the same financial position as it would have been in had
each of the representations and warranties of Seller been true and correct and
had each of the covenants of Seller been performed in full.
13.1.3. Within ten (10) business days after Buyer has received
written notice of or has actual knowledge of any claim by a person not a party
to this Agreement (a "Third Person") or the commencement of any action or
proceeding by a Third Person, Buyer shall give Seller written notice of such
claim or the commencement of such action or proceeding. Such notice shall state
the nature and the basis of such claim and a reasonable estimate of the amount
thereof. Seller shall have the right to defend and settle, at its own expense
and by its own counsel, any such matter so long as Seller pursues the same in
good faith and diligently. If Seller undertakes to defend or settle, it shall
promptly notify Buyer of its intention to do so and Buyer shall cooperate with
Seller and its counsel in the defense thereof and in any settlement thereof.
Such cooperation shall include, but shall not be limited to, furnishing Seller
with any books, records or information reasonably requested by Seller that are
in Buyer's possession or control. Notwithstanding the foregoing, the Buyer shall
have the right to participate in any matter through counsel of its own choosing
at its own expense (unless there is a conflict of interest that prevents counsel
for Seller from representing Buyer, in which case Seller will reimburse the
Buyer for the expenses of its counsel); provided that Seller's counsel shall be
lead counsel and shall determine litigation and settlement steps, strategy and
the like. After Seller has notified the Buyer of its intention to undertake to
35
defend or settle any such asserted liability, and for so long as Seller
diligently pursues such defense, Seller shall not be liable for any additional
legal expenses incurred by Buyer in connection with any defense or settlement of
such asserted liability, except to the extent such participation is requested by
Seller, in which event Buyer shall be reimbursed by Seller for reasonable
additional legal expenses and out-of-pocket expenses and except as provided in
the immediately preceding sentence. If Seller does not undertake to defend such
matter to which Buyer is entitled to indemnification hereunder, or fails
diligently to pursue such defense, the Buyer may undertake such defense through
counsel of its choice, at the cost and expense of Seller, and Buyer may settle
such matter, and Seller shall reimburse Buyer for the amount paid in such
settlement and any other liabilities or expenses incurred by Buyer in connection
therewith.
13.1.4. A claim by Buyer for indemnification of any matter not
involving a claim by a Third Person, may be asserted by notice to Seller.
13.1.5. Time Limitations on Claims Against Seller. If a
Closing occurs, Seller will have no liability (for indemnification or otherwise)
with respect to any representation or warranty, or covenant or obligation to be
performed and complied with prior to such Closing, other than those in Sections
6.2, 6.4 and claims relating to Seller's obligation to pay Excluded Liabilities
(the "Extended Claims"), unless on or before eighteen (18) months after the
applicable Closing Date Buyer notifies Seller of a claim specifying the factual
basis of that claim in reasonable detail; provided, however, that any Extended
Claims or a claim for indemnification or reimbursement based upon any obligation
to be performed and complied with after a Closing may be made at any time.
13.2. Agreement by Buyer to Indemnify. Buyer agrees that it will
indemnify and hold Seller harmless in respect of the aggregate of all
Indemnifiable Damages (as herein defined).
13.2.1. "Seller's Indemnifiable Damages" means, without
duplication, the aggregate of all expenses, losses, costs, deficiencies,
liabilities and damages (including related counsel and paralegal fees and
expenses) incurred or suffered by Seller, on a pre-tax basis, together with
interest thereon from the date of loss until paid at the rate of 10% per annum,
to the extent (i) resulting from any breach of a representation or warranty of
Buyer in or pursuant to Article VII or elsewhere herein; (ii) resulting from any
breach of the covenants or agreements of Buyer in this Agreement; or (iii)
resulting from the failure of Buyer to pay, discharge or perform the Assumed
Liabilities.
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13.2.2. Without limiting the generality of the foregoing, with
respect to the measurement of Seller's Indemnifiable Damages, Seller shall have
the right to be put in the same financial position as it would have been in had
each of the representations and warranties of Buyer been true and correct and
had each of the covenants of Buyer been performed in full.
13.2.3. Within ten (10) business days after Seller has
received written notice of or has actual knowledge of any claim by a person not
a party to this Agreement (a "Third Person") or the commencement of any action
or proceeding by a Third Person, Seller shall give Buyer written notice of such
claim or the commencement of such action or proceeding. Such notice shall state
the nature and the basis of such claim and a reasonable estimate of the amount
thereof. Buyer shall have the right to defend and settle, at its own expense and
by its own counsel, any such matter so long as Buyer pursues the same in good
faith and diligently. If Buyer undertakes to defend or settle, it shall promptly
notify Seller of its intention to do so, Seller shall cooperate with Buyer and
its counsel in the defense thereof and in any settlement thereof. Such
cooperation shall include, but shall not be limited to, furnishing Buyer with
any books, records or information reasonably requested by Buyer that are in
Seller's possession or control. Notwithstanding the foregoing, the Seller shall
have the right to participate in any matter through counsel of its own choosing
at its own expense (unless there is a conflict of interest that prevents counsel
for Buyer from representing Seller, in which case Buyer will reimburse the
Seller for the expenses of its counsel); provided that Buyer's counsel shall be
lead counsel and shall determine litigation and settlement steps, strategy and
the like. After Buyer has notified the Seller of its intention to undertake to
defend or settle any such asserted liability, and for so long as Buyer
diligently pursues such defense, Buyer shall not be liable for any additional
legal expenses incurred by Seller in connection with any defense or settlement
of such asserted liability, except to the extent such participation is requested
by Buyer, in which event Seller shall be reimbursed by Buyer for reasonable
additional legal expenses and out-of-pocket expenses and except as provided in
the immediately preceding sentence. If Buyer does not undertake to defend such
matter to which Seller is entitled to indemnification hereunder, or fails
diligently to pursue such defense, the Seller may undertake such defense through
counsel of its choice, at the cost and expense of Buyer, and Seller may settle
such matter, and Buyer shall reimburse Seller for the amount paid in such
settlement and any other liabilities or expenses incurred by Seller in
connection therewith.
13.2.4 A claim by Seller for indemnification of any matter not
involving a claim by a Third Person, may be asserted by notice to Buyer.
13.2.5 Time Limitations on Claims Against Buyer. If a Closing
occurs, Buyer will have no liability (for indemnification or otherwise) with
respect to any representation or warranty, or covenant or obligation to be
performed and complied with prior to such Closing, other than those in Sections
7.2, and claims relating to Buyer's obligation to pay Assumed Liabilities (the
37
"Extended Claims"), unless on or before eighteen (18) months after the
applicable Closing Date, Seller notifies Buyer of a claim specifying the factual
basis of that claim in reasonable detail; provided, however, that any Extended
Claims or a claim for indemnification or reimbursement based upon any obligation
to be performed and complied with after a Closing may be made at any time.
13.3. Indemnification Threshold. Neither party shall have any
obligation to indemnify the other until the aggregate damages from all claims
for Buyer Indemnified Damages or Seller Indemnified Damages (which ever is
applicable, hereinafter in this Section 13.3 referred to as the "Damages")
suffered by the party seeking indemnity exceeds the sum of Two Hundred
Twenty-five Thousand Dollars ($225,000.00). Provided, however, once the sum of
Two Hundred Twenty-Five Thousand Dollars ($225,000.00) in aggregate of Damages
from all claims as provided herein is exceeded, the total amount of the
aggregate Damages suffered by the party seeking indemnity shall be collected
without regard to the Two Hundred Twenty-five Thousand Dollars ($225,000.00) de
minimis figure provided for herein.
13.4. Mediation of Disputes. Any controversy, claim, or dispute arising
out of or relating to this contract, or the breach thereof, that cannot be
settled by good faith negotiation between the parties will be submitted for
non-binding mediation prior to the exercise of any legal remedies by either
party hereto. The mediator will be selected by mutual agreement of the parties.
13.5. Enforceability of Modifications to Survival of Remedies. Seller
and Buyer each acknowledge and agree (i) that the amounts involved in this
Agreement are in excess of the amounts that permit the parties to limit the
survival periods of their remedies under Section 16.070 of the Texas Civil
Practices and Remedies Code and (ii) that such statute otherwise applies to this
transaction.
ARTICLE XIV
Miscellaneous
14.1. Transaction Expenses. Each party shall bear its own expenses
incurred in connection with the transactions contemplated hereby. Buyer will
indemnify and hold harmless the Seller from the commission, fee or claim of any
person or entity employed or retained or claiming to be employed or retained by
Buyer to bring about, or to represent it in, the transactions contemplated
hereby. Seller will indemnify and hold harmless Buyer from the commission, fee
or claim of any person or entity employed or retained or claiming to be employed
or retained by Seller to bring about, or to represent any of them in, the
transactions contemplated hereby.
38
14.2. Amendment and Modification. The parties hereto may amend, modify
and supplement this Agreement in such manner as may be agreed upon by them in
writing.
14.3. Termination.
14.3.1. Anything to the contrary herein notwithstanding, this
Agreement may be terminated and the subsequent transactions contemplated hereby
may be abandoned:
(a) By the mutual written consent of all of the
parties hereto at any time prior to any
Closing Date;
(b) By Buyer, if Seller has not satisfied
Buyer's Condition of Closing set forth in
Section 10.1 and Buyer's other conditions of
the Initial Closing on or prior to December
31, 2001 (other than as a result of the
failure of Buyer to satisfy its obligations
under this Agreement);
(c) By Seller, if Buyer has not satisfied
Seller's Conditions of the Initial Closing
set forth in Section 11.1 on or prior to
December 31, 2001 (other than as a result of
the failure of Seller to satisfy its
obligations under this Agreement);
(d) By the Buyer at any time prior to each
Closing Date if there shall be a pending or
threatened action or proceeding by or before
any court or other governmental body which
shall seek to restrain, prohibit or
invalidate the sale of the Transferred
Assets or any portion thereof to the Buyer
or any other transaction contemplated
hereby, or which might affect the right of
the Buyer to own, operate in their entirety
or control the Transferred Assets, or any
material portion thereof, and which, in the
reasonable judgment of the Buyer, makes it
inadvisable to proceed with the transactions
contemplated by this Agreement; and
(e) By any party in the event of the material
breach by any other party of any provision
of this Agreement, which breach is not
remedied by the breaching party within 15
days after receipt of notice thereof from
the non-breaching party.
(f) By Seller if Seller has used its
Commercially Reasonable Best Efforts to
satisfy Buyer's Condition of Closing set
forth in Section 11.2, but such condition
has not been satisfied on or prior to
December 31, 2001.
39
If this Agreement is terminated pursuant to clause (a) of this Section
14.3.1, no party shall have any liability for any costs, expenses, loss of
anticipated profit or any further obligation for breach of warranty or otherwise
to any other party to this Agreement. Any termination of this Agreement pursuant
to clause (b), (c), (d), (e) or (f) of this paragraph 14.3.1 shall be without
prejudice to any other rights or remedies of the respective parties. Except with
respect to partial terminations of the obligation to acquire ROEs as to which
consents are not obtained (as set forth in Section 5.1.5), any rightful
termination by Buyer pursuant to the provisions of this Section 14.3.1 shall
relieve Buyer of any obligation to pay Seller any portion of the Purchase Price
as to the Transferred Assets not yet acquired.
14.3.2. The risk of any loss to the properties to be sold by
the Seller hereunder and all liability with respect to injury and damage
occurring in connection therewith shall be the sole responsibility of the Seller
until the completion of each Closing. If any material part of said properties
subject to the Closing shall be damaged by fire or other casualty prior to the
completion of the Closing hereunder, the Seller shall so notify the Buyer and
the Buyer shall have the right and option:
(a) To terminate this Agreement, without
liability to any party hereto as to any MDU
Property and related Transferred Assets
damaged by fire or other casualty; or
(b) To proceed with any given Closing hereunder,
in which event such casualty shall not
constitute a breach by the Seller of any
representation, warranty or covenant in this
Agreement, and the Buyer shall be entitled
to receive and retain the insurance
proceeds, if any, arising from such
casualty.
In the event that Buyer elects to terminate this Agreement as to a MDU
Property and related Transferred Assets damaged by fire or casualty, Seller
shall have the right within nine (9) months thereafter to rebuild and restore
the Transferred Assets related to the MDU Property to a condition and quality at
least equal to the condition and quality of Transferred Assets before the fire
or casualty. If such Transferred Assets are so rebuilt and restored and Seller
provides Buyer with one hundred twenty (120) days prior written notice of its
intent to sell the rebuilt and restored Transferred Assets to Buyer, Buyer will
purchase the Transferred Assets in accordance with the terms of the Agreement at
a time designated by Buyer which is within one hundred twenty (120) days after
Buyer's receipt of the notice of Seller's intent to sell the rebuilt and
restored Transferred Assets. In the alternative, rather than rebuilding and
restoring the damaged Transferred Assets, Buyer shall have the right to
substitute comparable Transferred Assets and sell such substitute Transferred
Assets to Buyer in accordance with the terms of this Agreement by giving one
hundred twenty (120) days prior written notice of intent to sell such substitute
40
Transferred Assets to Buyer; provided that the Buyer shall have reasonable
discretion to (i) determine whether the proposed substitute Transferred Assets
are comparable to the damaged Transferred Assets, and (ii) the right to reject
such substitute Transferred Asset if Buyer reasonably determines that they are
not comparable.
14.4. Remedies. Seller and Buyer acknowledge that, if either is in
material breach or default of its covenants, agreements or obligations
hereunder, the other would be irreparably damaged by such breach or default and
that, in addition to the other remedies that may be available at law or in
equity, the other party shall be entitled to specific performance of this
Agreement and injunctive relief. All rights and remedies under this Agreement
are cumulative of, and not exclusive of, any rights or remedies otherwise
available, and the exercise of any of such rights or remedies shall not bar the
exercise of any other rights or remedies.
14.5. Entire Agreement. This Agreement, including the exhibits and
schedules, and other documents executed and delivered contemporaneously with
this Agreement, contain the entire agreement of the parties hereto with respect
to the purchase of the Transferred Assets, and supersedes all prior
understandings and agreements (oral or written) of the parties with respect to
the subject matter hereof, including without limitation superseding and
replacing the following documents: (i) that one certain nonbinding letter of
intent dated July 10, 2001 (as amended August 8, 2001 and as amended August 17,
2001 and August 29, 2001), by and among Seller and Buyer. The separate
Confidentiality Agreement dated April 4, 2001 between Seller and Buyer shall
continue to be binding on the parties and survive all Closings. The parties
expressly represent and warrant that in entering into this Agreement they are
not relying on any prior representations made by any other party concerning the
terms, conditions or effects of this Agreement which terms, conditions or
effects are not expressly set forth herein. Any reference herein to this
Agreement shall be deemed to include the schedules and exhibits.
14.6 Interpretation. The Recitals are incorporated as part of this
Agreement. When a reference is made in this Agreement to an article, section,
paragraph, clause, schedule or exhibit, such reference shall be to an article,
section, paragraph, clause, schedule or exhibit of this Agreement unless
otherwise indicated. The headings contained herein and on the schedules are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement or the schedules. Whenever the words "include",
"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation". Time shall be of the essence in this
Agreement.
14.7. Execution in Counterpart. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, but all of
which taken together shall constitute one and the same instrument.
41
14.8. Notices. Any notice, consent, approval, request, acknowledgment,
other communications or information to be given or made hereunder to any of the
parties by any other party shall be in writing and (a) delivered personally, (b)
sent by certified mail, postage prepaid, or (c) sent by facsimile (notices sent
by facsimile must be sent and received on a Business Day prior to 5:00 p.m. at
recipients location to be effective on such day and if sent after 5:00 pm on a
Business Day the notice will be effective on the next Business Day) as follows:
If to the Seller, addressed to:
USOL, Inc.
00000 Xxxxxx Xxxx.
Xxxxxx, Xxxxx 00000
Attention: Xxxx Xxxxx
Fax number: (000) 000-0000
With copy to:
Xxxxx, Martens & Xxxxxx, L.L.P.
0000 X. XxXxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Attn: Xxxxx Xxxxx
Fax number: (000) 000-0000
If to the Buyer, addressed to:
Grande Communications, Inc.
000 Xxxxxxx Xxxxxx
Xxx Xxxxxx, Xxxxx 00000
Attention: J Xxxxxxx
Fax number: (000) 000-0000
With a copy to:
Grande Communications, Inc.
000 Xxxxxxx Xxxxxx
Xxx Xxxxxx, Xxxxx 00000
Attention: General Counsel
Fax number: (000) 000-0000
42
Bickerstaff, Heath, Smiley, Pollan, Xxxxx & XxXxxxxx, L.L.P.
000 Xxxxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000-0000
Attn: Xxxx X. Xxxxxxxx, Esq.
Fax number: (000) 000-0000
Any party may change the address to which notices hereunder are to be sent to
him or it by giving written notice of such change of address in the manner
herein provided for giving notice. Any notice delivered personally shall be
deemed to have been given on the date it is so delivered, any notice delivered
by registered or certified mail shall be deemed to have been given on the date
it is received, and any notice sent by facsimile shall be deemed to have been
given on the date it was sent (so long as the sender receives confirmation of
transmission and a hard copy of such notice is sent by U.S. mail).
14.9. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Texas applicable to contracts made
and to be performed therein by residents thereof.
14.10. Confidentiality; Publicity. Except as may be required by law or
as otherwise permitted or expressly contemplated hereby, no party hereto or
their respective Affiliates, employees, agents and representatives shall
disclose to any third party the subject matter or terms of this Agreement
without the prior consent of the other parties hereto. No press release or other
public announcement related to this Agreement or the transactions contemplated
hereby will be issued by any party hereto without the prior approval of the
other parties hereto, except that any party hereto may make such public
disclosure which it believes in good faith to be required by law (in which case
such party will consult with the other parties hereto prior to making such
disclosure).
14.11. Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner adverse to
any party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the greatest extent possible.
14.12. Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto without the prior consent of the party hereto.
43
14.13. Binding Effect; No Third Party Beneficiaries. This Agreement
shall inure to the benefit of, be binding upon and be enforceable by and against
Seller and Buyer and their respective successors and permitted assigns, and
nothing herein expressed or implied shall be construed to give any other person
or entity any legal or equitable rights hereunder.
14.14. Additional Representations. Each party hereto expressly
represents and warrants to all other parties hereto that (a) before executing
this Agreement, said party has fully informed itself or himself of the terms,
contents, conditions and effects of this Agreement; (b) said party has relied
solely and completely upon its or his own judgment in executing this Agreement;
(c) said party has had the opportunity to seek and has obtained the advice of
counsel before executing this Agreement; (d) said party has acted voluntarily
and of its or his own free will in executing this Agreement; (e) said party is
not acting under duress, whether economic or physical, in executing this
Agreement; and (f) this Agreement is the result of arm's-length negotiations
conducted by and among the parties and their counsel.
[Remainder of this page intentionally blank.]
44
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
duly executed as of the day and year first above written.
SELLER:
USOL, INC.
A Delaware Corporation
BY:___________________________
Name:_________________________
Title:___________________________
BUYER:
GRANDE COMMUNICATIONS, INC.
A Delaware Corporation
BY:______________________________
Name:___________________________
Title:_____________________________
U.S.-Austin Cable Associates I, Ltd., does hereby join in this Purchase
Agreement for the limited purpose of (i) agreeing to convey to Buyer in
accordance with the terms of this Purchase Agreement that portion of the
Transferred Assets which is owned by the undersigned and (ii) agreeing that the
consideration to be paid by Buyer for the assets so conveyed may be paid to
USOL, Inc. and that Buyer shall have no obligation to see to the proper
application of such sales proceeds.
U.S.-Austin Cable Associates I, Ltd.
BY: USOL, Inc., General Partner
BY:__________________________,
its ___________________________
SCHEDULE A
*[Intentionally Omitted.]
*Confidential Treatment Requested. Confidential portions of this document have
been redacted and filed separately with the Commission.
SCHEDULE B
*[Intentionally Omitted.]
*Confidential Treatment Requested. Confidential portions of this document have
been redacted and filed separately with the Commission.
SCHEDULE C
Cities and Towns in Austin/San Antonio Corridor
City
Austin
San Xxxxxx
Xxxx Lake Hills
Sunset Valley
Pflugerville
Buda
Round Rock
*Rollingwood
*Cedar Park
*Georgetown
*Xxxx
*Leander
New Braunfels
San Antonio
Windcrest
Universal City
Alamo Heights
Schertz
Hollywood Park
Xxxxx Park
Kirby
Balcones Heights
Selma
Garden Ridge
Cibolo
Xxxxxxxx
Xxxx Valley
Xxxxxxx Hills
Live Oak
Castle Hills Hill Country Village
*Shavano Park
NOTE: Grande shall not be obligated to provide any service to starred properties
until such time as they have received an enforceable franchise for each
respective area.
EXHIBIT A
XXXX OF SALE, ASSIGNMENT AND ASSUMPTION AGREEMENT
THIS XXXX OF SALE, ASSIGNMENT AND ASSUMPTION AGREEMENT (this
"Agreement") is made as of ____________, 2001, by USOL, Inc., a Delaware
corporation ("Seller"), and Grande Communications, Inc., a Delaware corporation
("Buyer"). The sale, assignment and assumption accomplished by this Agreement is
made in connection with a certain Purchase Agreement dated ___________, 2001,
between Seller and Buyer (the "Purchase Agreement"). Capitalized terms used
herein shall have the meanings assigned to them in the Purchase Agreement unless
the context requires otherwise.
By this Agreement, Seller assigns, transfers, and conveys to Buyer all
of its rights, title, and interest in and to that portion of the Transferred
Assets described on Schedule 1 attached hereto (the "Scheduled Transferred
Assets") to have and to hold all and singular the Scheduled Transferred Assets
unto Buyer and its successors and assigns to their own use and behalf forever,
and Buyer assumes, accepts, and undertakes and agrees to perform and discharge
when due that portion of the Assumed Liabilities described on Schedule 2
attached hereto (the "Scheduled Assumed Liabilities") (as Buyer of the Scheduled
Transferred Assets and Scheduled Assumed Liabilities from Seller) arising from
and after the date of this Agreement.
Except for the Scheduled Assumed Liabilities, Assignee does not assume
and shall not be obligated to pay, perform, or discharge any liability,
obligation, debt, charge, or expense of Seller of any kind, description, or
character, whether accrued, absolute, contingent, or otherwise.
Seller hereby warrants to Buyer that Seller is the lawful owner of the
Scheduled Transferred Assets, that all components of the Scheduled Transferred
Assets are free from any mortgage, pledge, lien, charge, encumbrance, lease or
security interest, except with regard to the Permitted Liens, and that Seller
has good right as to all persons to sell the same as aforesaid; and Seller
hereby covenants with Buyer that Seller, to the extent of the foregoing
warranty, will warrant and forever defend all such components and the Scheduled
Transferred Assets against the claims and demands of all persons. This Xxxx of
Sale is binding on Seller and its successors and assigns and inures to the
benefit of Buyer and its successors and assigns.
Buyer agrees to indemnify and hold Seller harmless for the Scheduled
Assumed Liabilities in accordance with the provisions of Section 13.2 of the
Purchase Agreement. Seller agrees to indemnify and hold Buyer harmless from all
of the Excluded Liabilities (as defined in the Purchase Agreement), in
accordance with the provisions of Section 13.1 of the Purchase Agreement.
This Agreement shall be governed by and interpreted and enforced in
accordance with the internal laws of the State of Texas without regard to
conflicts of law principles (whether of the State of Texas or any other
jurisdiction) that would result in the application of the laws of any
jurisdiction other than the State of Texas.
Signed as of the date first written above.
SELLER:
USOL, INC.
A Delaware Corporation
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
BUYER:
GRANDE COMMUNICATIONS, INC.
A Delaware Corporation
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
2.1.1 CHART
*[Intentionally Omitted.]
*Confidential Treatment Requested. Confidential portions of this document have
been redacted and filed separately with the Commission.
SCHEDULE 2.1.1
--------------
Equipment included in Transferred Asset
---------------------------------------
The following categories of Equipment are part of the Transferred Assets to the
extent such category is marked with an "x" in the chart immediately following
this page. All MDU Properties listed in the chart immediately following this
page have the Transferred Assets described below if such chart has an "x" marked
under such category for such MDU Property.
Cable Plant
-----------
Fixed assets include the medium for transporting cable signals from the headend
room to the buildings (outside plant). This is comprised of various grades of
buried coaxial cable, CATV pedestals, building entrance terminals/lockboxes and
active/passive devices.
Phone Plant
-----------
Fixed assets include the medium for transporting telephone signals from the
switch room to the buildings (outside plant). This is comprised of various
grades of buried telephone cable, MPOE, telephone pedestals, 50 and 100 pair
protectors (gas and solid state), building entrance terminals/lockboxes and
active/passive devices.
Analog Converter Boxes
----------------------
Converter boxes are equipment that allows for the reception of a cable signal
via a set-top box located in the user's apartment.
Traps
-----
Traps include tap-mounted subscriber devices utilized to remove or add cable
services at the unit level. This includes positive and negative traps. If Buyer
in its sole discretion determines traps will not be used on the property on
which they are located, they will be transferred to Seller at no cost. Seller
will be responsible for removing the traps from the property.
Utility Buildings - Removable
-----------------------------
Removable utility buildings include non-permanent rooms for storage of headend
equipment. Buyer will assume any recurring cost associated with the building. If
Buyer in its sole discretion determines any removable building will not be used
on the property on which it is located, it will be transferred to Seller at no
cost. Seller will be responsible for removing the building from the property.
Service Equipment - Plant
-------------------------
Service equipment includes miscellaneous assets used in the maintenance of the
Cable or Phone outside plant.
Security Equipment
------------------
Security fixed assets includes cameras and equipment that allow for residents to
monitor a "gate" camera channel at the property.
PBX Systems
-----------
Includes on-premise PBX (key systems) used by leasing offices to support their
internal office phone system.
Spare Parts
-----------
Spare materials located on the MDU Property used in the outside plant for
maintenance purposes, including active and passive devices.
SCHEDULE 2.1.3
--------------
*[Intentionally Omitted].
*Confidential Treatment Requested. Confidential portions of this document have
been redacted and filed separately with the Commission.
SCHEDULE 2.1.4
--------------
None
SCHEDULE 2.1.6
--------------
Contracts
---------
None.
2.2 CHART
*[Intentionally Omitted]
*Confidential Treatment Requested. Confidential portions of this document have
been redacted and filed separately with the Commission.
SCHEDULE 2.2
------------
Excluded Assets
---------------
The Excluded Assets are everything not described as a Transferred Asset on
Schedule 2.1.1. Without limiting the foregoing, some of the Excluded Assets
located on the MDU Properties are described below.
SMATV/Headend Equipment
-----------------------
Headend equipment includes assets that receive, modulate, process, amplify and
combine television signals for transmission through television coaxial cable.
Headend equipment includes relay racks, modulators, processors, combiners,
digicyphers, IRD's, multi-switches, QAM transcoders, encoders, off-air antennae
and satellite dishes.
Microwave Equipment
-------------------
Microwave equipment includes assets utilized in18 GHz point-to-point
transmission and reception. Such assets include receivers, receiving dishes,
splitting networks, transmitters, transmit dishes and dehydrators.
Phone Switch Equipment
----------------------
Telephone equipment includes the primary DXC, LXC and LIM telephone switching
and routing equipment. Phone switch equipment includes racks/cabinets, power
supplies, batteries, CSU/DSU and switch cabling.
Towers and Monopoles
--------------------
Towers and monopoles include the support structures and equipment used to
transmit and/or receive cable television signals. Such assets include transmit
towers/monopoles and receive towers/monopoles. Tower/monopole bases/platforms
will remain.
Service Equipment
-----------------
Service equipment includes miscellaneous assets used in the maintenance of USOL
headends, microwave and switch equipment. Service equipment includes spare
parts, tools and test equipment.
Digital Converter Boxes
-----------------------
Converter boxes are equipment that allows for the reception of a cable signal
via a set-top box located in the users apartment. Any customer receiving digital
cable service requires a converter box to receive this service.
Interdiction Equipment
----------------------
Interdiction equipment (addressable taps) allows for the remote upgrading and
downgrading of cable services at multiple properties via a "controller" which is
kept in a central location. Seller will remove interdiction housings. Grande
will be responsible for replacing Interdiction taps with their own taps.
Without limiting the foregoing, the some of the Excluded Assets are identified
by an "x" marked next to the applicable MDU Property for the applicable category
above on the chart that immediately follows this page. Any item identified by an
"x" on such chart is part of the Excluded Assets.
SCHEDULE 3.2
------------
Assumed Liabilities
-------------------
1. All obligations of Seller under all of the ROEs listed or described in
Section 2.1.3 of the Agreement or in Schedule 2.1.3 of the Agreement.
2. All obligations of Seller under all of the Subscriber Agreements in effect as
of each Closing under the ROEs listed or described in Section 2.1.3 of the
Agreement or in Schedule 2.1.3 of the Agreement; provided, however, Buyer shall
not assume any obligations to refund prepayments made by Subscribers, nor shall
Buyer assume any obligations to refund deposits made by Subscribers.
SCHEDULE 4.4
------------
*[Intentionally Omitted].
*Confidential Treatment Requested. Confidential portions of this document have
been redacted and filed separately with the Commission.
SCHEDULE 5.1
------------
*[Intentionally Omitted].
*Confidential Treatment Requested. Confidential portions of this document have
been redacted and filed separately with the Commission.
SCHEDULE 6.1
------------
Ownership Interest of Seller
----------------------------
Ownership of 50,000,000 outstanding shares (99%) of the common stock of
TheResidentClub, Inc., a Delaware Corporation.
50% general partnership interest in U.S.- Austin Cable Associates I, Ltd.,
a Texas Limited Partnership.
SCHEDULE 6.3
------------
Required Consents
-----------------
1. Consents from owners of the MDU Properties under the ROEs listed or described
in Section 2.1.3 of the Agreement or in Schedule 2.1.3 to the Agreement, to the
extent such consents are required under the terms of such ROEs.
2. Consent from the Seller's lenders under its Credit Agreement dated December
30, 1999, as amended, to permit the transactions contemplated by this Agreement
and to modify Seller's financial covenants in a manner reasonably acceptable to
Seller.
SCHEDULE 6.4
------------
Liens to be Released at each applicable Closing
-----------------------------------------------
1. At each Closing, all Liens held by Seller's lenders under its Credit
Agreement dated December 30, 1999, as amended, must be released as to the ROEs
that are the subject of each such Closing.
2. Any Liens held by applicable governmental authorities in connection with
Xxxxxx County, et al v U.S. On-Line Cable, L.L.C. and a/k/a U.S. OnLine
Communications, L.L.C., Cause No. GV-101743, Xxxxxx County, Texas.
SCHEDULE 6.5
------------
*[Intentionally Omitted.]
*Confidential Treatment Requested. Confidential portions of this document have
been redacted and filed separately with the Commission.
SCHEDULE 6.7
------------
Exceptions as to Seller's Empoloyee Representations
---------------------------------------------------
None.
SCHEDULE 6.8
------------
*[Intentionally Omitted].
*Confidential Treatment Requested. Confidential portions of this document have
been redacted and filed separately with the Commission.
SCHEDULE 6.9
------------
*[Intentionally Omitted].
*Confidential Treatment Requested. Confidential portions of this document have
been redacted and filed separately with the Commission.
SCHEDULE 6.10
-------------
*[Intentionally Omitted]
*Confidential Treatment Requested. Confidential portions of this document have
been redacted and filed separately with the Commission.
SCHEDULE 6.10(f)
----------------
*[Intentionally Omitted].
*Confidential Treatment Requested. Confidential portions of this document have
been redacted and filed separately with the Commission.
SCHEDULE 6.11(c)
SYSTEMS STATUS
*[Intentionally Omitted]
*Confidential Treatment Requested. Confidential portions of this document have
been redacted and filed separately with the Commission.
SCHEDULE 6.13
-------------
*[Intentionally Omitted]
*Confidential Treatment Requested. Confidential portions of this document have
been redacted and filed separately with the Commission.
SCHEDULE 6.18
-------------
*[Intentionally Omitted].
*Confidential Treatment Requested. Confidential portions of this document have
been redacted and filed separately with the Commission.
SCHEDULE 12.7
-------------
*[Intentionally Omitted]
*Confidential Treatment Requested. Confidential portions of this document have
been redacted and filed separately with the Commission.
EXHIBIT B
FORM OF OPINION OF COUNSEL TO THE SELLER
----------------------------------------
________ ____, 2001
Grande Communications, Inc.
000 Xxxxxxx Xxxxxx
Xxx Xxxxxx, Xxxxx 00000
Ladies and Gentlemen:
We have acted as counsel to USOL, Inc., ("Seller") a Delaware corporation,
and U.S.-Austin Cable Associates I, Ltd., ("USACA") a Texas limited partnership,
in connection with the Purchase Agreement, dated August ___, 2001 (the
"Agreement"), among Seller, and Grande Communications, Inc., a Delaware
corporation ("Buyer") and being joined by USACA. This is the opinion letter
contemplated by Section 5.2.1(e) of the Agreement. All capitalized terms used in
this opinion letter without definition have the respective meanings given to
them in the Agreement.
Our opinions are limited in all respects to the substantive law of the
State of Texas and the General Corporation Law of the State of Delaware, and the
federal law of the United States, and we assume no responsibility as to the
applicability thereto, or the effect thereon, of the laws of any other
jurisdiction.
1. DOCUMENTS REVIEWED
(a) Documents Reviewed -Transaction Documents. As counsel to Seller, we
have reviewed the following documents and instruments (collectively, the
"Transaction Documents"):
(i) the Agreement;
(ii) the Xxxx of Sale and Assignment and Assumption Agreement;
(iii) the Services Agreement (together with the form of Interim System
Management Agreement attached thereto); and
(iv) any additional documents and instruments to be delivered by
Seller or USACA at the Closing.
(b) Other Documents Reviewed. As counsel to Seller, we have reviewed the
following documents and instruments:
(i) copies of resolutions adopted by the Board of Directors of Seller
authorizing the execution, delivery and performance of the Transaction
Documents and certified by the Seller's Secretary (unless such resolutions
are effected by unanimous written consent of the Seller's directors, in
which instance no secretary's certificate is relied upon); and
2. QUALIFICATIONS
Whenever any of the phrase "to the best of our knowledge," "to our
knowledge," "known to us," or words of similar import, appears in this Opinion,
it means, unless otherwise expressly stated herein, (a) we have relied
exclusively on the review of the documents described in paragraphs (i) through
(iv) above and the Officer's Certificates referred to above, (b) we have made no
examination of public records (including, without limitation, the plaintiff or
defendant indices of state and federal courts), whether or not examination or
investigation might otherwise be reasonable or prudent and (c) no attorney (1)
who has participated in representing the Seller during the last twelve months
and (2) who is currently employed by or is a member of this firm has any
conscious awareness of facts which indicates that any of the opinions contained
herein which are made to our knowledge are untrue. Unless otherwise expressly
stated herein, we have not undertaken any independent investigation to determine
the existence or absence of any such facts or other information and no inference
as to the existence or absence of such facts should be drawn from our
representation of the Seller.
3. ASSUMPTIONS
In our examination, we have assumed, without investigation or inquiry, the
authenticity of all documents submitted to us as originals, the genuineness of
all signatures, the legal capacity of natural persons and the conformity to the
originals of all documents submitted to us as copies. In addition, we have,
without investigation or inquiry, assumed (i) that all of the parties to such
documents have all requisite power and authority to execute, deliver and perform
their respective obligations under each of the documents to which they are a
party (other than the power and authority of the Seller and USACA to execute,
deliver and perform its obligations under the Transaction Documents); (ii) that
each of the documents has been duly authorized by all necessary action on the
part of such parties (other than due authorization of the Transaction Documents
by the Seller and USACA) as are a party thereto; (iii) that each of the
documents has been duly executed and delivered by such parties as are a party
thereto (other than due execution and delivery of the Transaction Documents by
the Seller and USACA); and (iv) that each of the documents are valid, binding
and enforceable obligations of all parties (other than upon the Seller and
USACA).
As to the truth and accuracy of all factual matters which are relevant to
this Opinion, we have relied, without investigation or inquiry, solely upon
certificates or other comparable documents of officers or other representatives
of the Seller (the "Officer's Certificates"), certificates of governmental
agencies and upon the representations and warranties of each of the parties
contained in the Agreement and upon the relevant facts stated therein, all of
which we have assumed to be true and complete.
4. OPINIONS
On the basis of the foregoing and in reliance thereon, and on the basis of
such other matters as we deemed relevant under the circumstances, and upon
consideration of the applicable Texas and United States federal laws, subject to
the limitations, qualifications and assumptions set forth herein, we are of the
opinion that as of the date hereof:
(a) The Agreement, the Xxxx of Sale and Assignment and Assumption
Agreement, the Services Agreement and the other Transaction Documents have been
duly authorized, executed and delivered by Seller and constitute valid and
binding obligations of Seller, enforceable against Seller in accordance with
their terms. The Agreement and the Xxxx of Sale and Assignment and Assumption
Agreement, have been duly executed and delivered by USACA and constitute the
valid and binding obligation of USACA, enforceable against USACA in accordance
with its terms. This opinion is subject to bankruptcy, reorganization,
insolvency and other similar laws affecting the enforcement of creditors' rights
in general and to general principles of equity (regardless of whether considered
in a proceeding in equity or an action of law).
(b) Seller is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware, with corporate power and
authority to execute and deliver the Agreement and consummate the transactions
contemplated by the Agreement and the other Transaction Documents, and is duly
qualified and in good standing as a foreign corporation in the State of Texas.
USACA is a limited partnership, validly existing and in good standing under the
laws of the State of Texas and USOL, Inc., its general partner, has the
requisite power and authority to execute and deliver the Agreement and the Xxxx
of Sale and Assignment and Assumption Agreement.
(c) Neither the execution and delivery of the Agreement nor the
consummation of any or all of the transactions contemplated in the Agreement and
the other Transaction Documents (a) violates any provision of the certificate of
incorporation or bylaws (or other governing instrument) of Seller; (b) to our
knowledge, breaches or constitutes a default (or an event that, with notice or
lapse of time or both, would constitute a default) under, or results in the
termination of, or accelerates the performance required by, or excuses
performance by any Person of any of its obligations under, or causes the
acceleration of the maturity or any debt or obligation pursuant to, or results
in the creation or imposition of any Lien upon any property or assets of Seller;
or (c) to our knowledge, violates any statute, law, regulation or rule, or any
judgment, decree or order known to us of any court or other Governmental
Authority applicable to Seller. For purposes of this opinion, we have relied
upon a certificate of an officer of Seller as to the existence and identity of
judgments, decrees or orders of court covered by this paragraph.
(d) To our knowledge no consent, approval or authorization of, or
declaration, filing or registration with, any Governmental Authority is required
by Seller in connection with the execution and delivery of the Agreement or the
consummation of the transactions contemplated by the Agreement or the other
Transaction Documents.
We hereby confirm to you that to our knowledge there is no proceeding by or
before any court or Governmental Authority pending or overtly threatened against
or involving Seller or USACA that questions or challenges the validity of the
Agreement or any action taken or to be taken by Seller or USACA pursuant to the
Agreement or in connection with the transactions contemplated by the Agreement
and the other Transaction Documents.
Our opinion set forth in Paragraph (b) above that the Seller is validly
existing and in good standing under the laws of the State of Delaware is given
as of the dates set forth below and it is based solely upon:
(i) copies of the Certificate of Incorporation of Seller, certified by
the Secretary of State of Delaware as of _______;
(ii) a letter of good standing with respect to the Seller from the
Secretary of State of the State of Delaware, dated ______ ___, 200__.
(iii) copies of the Bylaws of Seller, certified to be true and correct
by the Secretary of Seller;
(iv) copies of the Certificate of Authority of Seller to do business
in the State of Texas dated ________;
(v) copies of certificates from the Comptroller of Public Accounts of
Texas and from the Secretary of State of dated ________ Texas indicating
that Seller is good standing in the State of Texas;
Our opinion set forth in Paragraph (b) above that the USACA is validly
existing and in good standing under the laws of the State of Texas is given as
of the dates set forth below and it is based solely upon:
(i) the Certificate of Limited Partnership; and
(ii) a letter of good standing with respect to USACA from the
Secretary of State of the State of Texas, dated ______ ___, 200__.
(iii) copies of certificates from the Comptroller of Public Accounts
of Texas and from the Secretary of State of dated ________ Texas indicating
that USACA is in good standing in the State of Texas;
With respect to our opinion set forth in Paragraph (b) above, that the
Seller has the "corporate power and authority" to take certain action, we
interpret that phrase to mean that the action would not be ultra xxxxx with
respect to the Seller. The opinions with respect to "corporate power and
authority" of the Seller do not, however, extend to any other federal, state or
local authorizations or approvals; however, we are not aware of any such
required authorization or approvals which have not been obtained.
With respect to our opinion set forth in Paragraph (b) above, that USACA
has the "requisite power and authority" to take certain action, we interpret
that phrase to mean that the action would not be ultra xxxxx with respect to
USACA. The opinions with respect to "requisite power and authority" of USACA do
not, however, extend to any other federal, state or local authorizations or
approvals; however, we are not aware of any such required authorization or
approvals which have not been obtained.
The opinion in Paragraph (a) above is also subject to the following
qualifications:
(1) enforceability may be subject to or limited by bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance, or
other similar laws relating to or affecting creditors' rights
generally, or the appointment of a receiver or conservator pursuant to
state or federal laws;
(2) the availability of equitable remedies, specific performance and
injunctive relief is subject to the discretion of the court before
which any proceeding therefor is brought;
(3) the enforceability of certain covenants may be limited to the
extent that the court before which any proceeding for the enforcement
thereof is brought concludes that such enforcement would be
unreasonable, unconscionable or unnecessary for the protection of the
parties to such agreement under existing circumstances;
(4) enforcement of certain rights may be unavailable if any of the
parties seek to enforce their rights other than in good faith or other
than in a manner in which it is commercially reasonable to do so;
(5) rights to indemnity may be limited by applicable state and federal
securities laws or the public policy underlying such laws;
(6) waivers of statutes of limitations, notice, jury trial, due
process and choice of venue, forum or law clauses may contravene
public policy and statutory and case law, and therefore may be
unenforceable;
(7) contractual provisions waiving broadly or vaguely stated rights or
unknown future rights, and/or provisions that rights or remedies are
not exclusive, that every right and remedy is cumulative and may be
exercised in addition to or together with any other right or remedy or
that the election of some particular remedy or remedies does not
preclude recourse to one or more others, may be unenforceable; and
(8) enforceability may be subject to or limited by the effect of
general principles of equity, including without limitation concepts of
materiality, reasonableness, good faith and fair dealing, regardless
of whether considered in a proceeding in equity or at law.
We expresses no opinion with respect to (i) the enforceability of
provisions in the Transaction Documents relating to delay or omission of
enforcement of rights or remedies, or waivers of defenses, waivers of jury
trials, or waivers of benefits of appraisement, valuation, stay, extension,
moratorium, redemption, statutes of limitation, or other nonwaivable benefits
bestowed by operation of law; (ii) the lawfulness of enforceability of
exculpation clauses, confession of judgment clauses, clauses relating to
releases of unmatured claims, clauses purporting to waive unmatured rights,
severability clauses, and clauses similar in substance or nature to the
foregoing clauses insofar as any of the foregoing are contained in the
Transaction Documents; (iii) the enforceability of the indemnification
provisions to the extent they purport to indemnify a person for such person's
own negligence or any violation of federal or state securities or blue sky laws;
(iv) the right of any person or entity to institute or maintain any action in
any court or upon matters respecting the jurisdiction of any court; (v) the
enforceability of non-competition provisions; (vi) any matters relating to
title; (vii) any matters relating to the priority or perfection of any liens or
other encumbrances; (viii) any matters related to telecommunications, telephone,
cable, or Internet laws; (ix) any matters related to the laws or regulations of
the Texas Public Utility Commission or any matter related thereto; or (x) any
matters related to the laws of the Federal Communications Commission, Federal
Aviation Administration, or the U.S. Trademark Office.
As to our opinions set forth above, we do not opine as to, and we have not
reviewed or examined: (i) any local, municipal, county, district or regional
law, statute, order, decree, administrative record, policy, procedure,
guideline, rule, requirement, regulation or notice; or (ii) any policy,
procedure, guideline, rule, requirement or regulation that is privileged,
confidential, internal, unpublished, or not of public record or widely
disseminated at the date of this opinion.
Our opinions are limited in all respects to the laws of the State of Texas,
the General Corporation Law of the State of Delaware where expressly noted and
to federal law as applied in the State of Texas. You should be aware that this
firm is not admitted to the practice of law in the State of Delaware and the
opinion herein as to the General Corporation Law of the State of Delaware is
based solely upon the unofficial compilation thereof contained in the CSC
Annotated [ 200___ ] Edition of Delaware Laws Affecting Business Entities, and
we assume no responsibility as to the applicability thereto, or the effect
thereon, of the laws of any other jurisdiction.
The opinions expressed herein are subject to statutory, regulatory and case
law developments after the date hereof. With your consent and concurrence, this
Opinion is limited to facts and applicable law in existence as of the date
hereof and we do not undertake and expressly disavow any duty or obligation to
advise you of any change in facts or applicable law after the date hereof,
whether or not relating to the specific issues addressed in this Opinion, and
you may not rely upon us in any respect with regard to continuing advice
concerning changes in applicable law or facts after the date of this Opinion.
This Opinion (a) has been furnished to you at your request, and we consider
it to be a confidential communication, which may not be furnished, reproduced,
distributed or disclosed to anyone without our prior written consent; (b) is
rendered solely for your information and assistance in connection with the above
transaction and may not be relied upon by any other person or for any other
purpose without our prior written consent; (c) is rendered as of the date
hereof, and we undertake no, and hereby disclaim any, obligation to advise you
of any changes (including any changes in law) or any new developments which
might affect any matters or opinions set forth herein; and (d) is limited to the
matters stated herein and no opinions may be inferred or implied beyond the
matters expressly stated herein.
You are hereby notified that (i) we do not consider you to be our client in
the matters to which this opinion letter relates, (ii) neither the Texas Code of
Professional Responsibility nor current case law clearly articulates the
circumstances under which an attorney may give a legal opinion to a person other
than the attorney's own client, (iii) a court might determine that it is
improper for us to issue, and for you to rely upon, a legal opinion issued by us
when we have acted as counsel to the Seller and USACA in connection with the
Transaction Documents, and (iv) you may wish to obtain a legal opinion from your
own legal counsel as to the matters addressed in this opinion letter.
Very truly yours,
XXXXX, MARTENS & XXXXXX, L.L.P.
By: _____________________________
EXHIBIT C
---------
OPINION OF COUNSEL FOR BUYER
USOL, Inc.
00000 Xxxxxx Xxxx.
Xxxxxx, Xxxxx 00000
Gentlemen:
We have acted as counsel to Grande Communications, Inc., a Delaware
corporation ("Buyer"), in connection with the Purchase Agreement dated August
_____, 2001 (the "Agreement"), between USOL, Inc. and Buyer and joined in by
U.S. - Austin Cable Associates I, Ltd., a Texas limited partnership. This is the
opinion (the "Opinion Letter") of Buyer's legal counsel contemplated by Section
5.2.2(g) of the Agreement. All capitalized terms used in this Opinion Letter
without definition have the respective meanings given to them in the Agreement.
1. DOCUMENTS REVIEWED
(a) Documents Reviewed - Transaction Documents. As counsel to Buyer, we
have reviewed the following documents and instruments (collectively, the
"Transaction Documents"):
(i) the Agreement;
(ii) the Services Agreement;
(iii) the Xxxx of Sale and Assignment and Assumption;
(iv) the Interim Systems Management Agreement; and
(v) [List any other documents to be delivered by Buyer at the
Closing]
(b) Documents Reviewed - Other Documents Examined. In addition to the
Transaction Documents, other documents we have examined in rendering this
Opinion Letter and upon which we have relied, are as follows:
(i) the Certificate of Incorporation of Buyer, certified to be
true and correct by the Secretary of State of Delaware;
(ii) the Bylaws of Buyer, certified to be true and correct by the
Secretary of Buyer;
(iii) a copy of the Certificate of Authority of Buyer to transact
business in the State of Texas, certified by the Secretary
of State of Texas;
(iv) Certificates from the Secretary of State of Delaware and
Texas and the Texas Comptroller of Public Accounts
indicating that Buyer is in good standing in the States of
Delaware and Texas;
(v) Certificate from the Secretary of Buyer verifying the
authority of the appropriate officers of Buyer to execute,
deliver, and perform the Transaction Documents; and
(vi) Certificate of [title of officer] of Buyer, dated the date
hereof certifying as to certain factual matters (the "Buyer
Certificate").
2. QUALIFICATIONS TO FACTUAL EXAMINATION
We have been furnished with and examined original or copies, certified or
otherwise identified to our satisfaction, of all such records of Buyer,
agreements and other instruments, certificates of officers and representatives
of Buyer, certificates of public officials and other documents, and we have had
such discussions with appropriate officers of Buyer as we have deemed necessary
or desirable as a basis for the opinions hereinafter expressed. As to questions
of fact material to such opinions, we have, where relevant facts were not
independently verified or established, relied upon certificates of officers of
Buyer.
3. ASSUMPTIONS
For purposes of this Opinion Letter, we have assumed: (a) the genuineness
of all signatures on all documents (other than those of Buyer on the Transaction
Documents); (b) the authenticity of all documents submitted to us as originals;
(c) the conformity to the originals of all documents submitted to us as copies;
(d) the correctness and accuracy of all facts set forth in all certificates and
reports; and (e) the due authorization, execution and delivery of and the
validity and binding effect of the Transaction Documents with regard to the
parties to the Transaction Documents other than Buyer.
4. OPINIONS
Based upon and subject to the foregoing and the other qualifications and
limitations stated in this Opinion Letter, we are of the opinion that:
(a) Buyer is a Delaware corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and is qualified to
transact business in, and is in good standing under, the laws of the State of
Texas.
(b) Buyer has the power to engage in the transactions contemplated by the
Transaction Documents and all requisite power, authority and legal right to
execute and deliver the Transaction Documents and to perform and observe the
terms and conditions of the Transaction Documents.
(c) The Transaction Documents have been duly authorized, executed and
delivered by Buyer and constitute valid and binding obligations of Buyer,
enforceable against Buyer in accordance with their terms.
(d) Neither the execution and delivery of the Transaction Documents nor the
consummation of the transactions contemplated by the Transaction Documents: (a)
violates any provision of the Certificate of Incorporation or Bylaws of Buyer;
(b) to our knowledge, breaches or constitutes a default (or an event that, with
notice or lapse of time or both, would constitute a default) under any agreement
or commitment to which Buyer is party; or (c) to our knowledge violates any
statute, law, regulation or rule, or any judgment, decree or order of any court
or Governmental Body applicable to Buyer.
(e) To our knowledge no consent, approval or authorization of, or
declaration, filing or registration with, any Governmental Authority is required
by Buyer in connection with the execution and delivery of the Agreement or the
consummation of the transactions contemplated by the Agreement or the other
Transaction Documents.
The qualification of any opinion or statement herein by the use of the
words "to our knowledge" or "known to us" means that, during the course of
representation as described in this Opinion Letter, no information has come to
the attention of the lawyers in this firm involved in the transactions described
or the lawyers in our firm who has principal legal responsibility for our
representation of Buyer that would give such lawyers current actual knowledge of
the existence of the facts so qualified. Except as set forth herein, we have not
undertaken any investigation to determine the existence of such facts, and no
inference as to our knowledge thereof shall be drawn from the fact of our
representation of any party or otherwise.
The opinion in Paragraph 4(c) above is also subject to the following
qualifications:
(1) enforceability may be subject to or limited by bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance, or
other similar laws relating to or affecting creditors' rights
generally, or the appointment of a receiver or conservator pursuant to
state or federal laws;
(2) the availability of equitable remedies, specific performance and
injunctive relief is subject to the discretion of the court before
which any proceeding therefor is brought;
(3) the enforceability of certain covenants may be limited to the
extent that the court before which any proceeding for the enforcement
thereof is brought concludes that such enforcement would be
unreasonable, unconscionable or unnecessary for the protection of the
parties to such agreement under existing circumstances;
(4) enforcement of certain rights may be unavailable if any of the
parties seek to enforce their rights other than in good faith or other
than in a manner in which it is commercially reasonable to do so;
(5) rights to indemnity may be limited by applicable state and federal
securities laws or the public policy underlying such laws;
(6) waivers of statutes of limitations, notice, jury trial, due
process and choice of venue, forum or law clauses may contravene
public policy and statutory and case law, and therefore may be
unenforceable;
(7) contractual provisions waiving broadly or vaguely stated rights or
unknown future rights, and/or provisions that rights or remedies are
not exclusive, that every right and remedy is cumulative and may be
exercised in addition to or together with any other right or remedy or
that the election of some particular remedy or remedies does not
preclude recourse to one or more others, may be unenforceable; and
(8) enforceability may be subject to or limited by the effect of
general principles of equity, including without limitation concepts of
materiality, reasonableness, good faith and fair dealing, regardless
of whether considered in a proceeding in equity or at law.
We expresses no opinion with respect to (i) the enforceability of any
provisions in the Transaction Documents relating to delay or omission of
enforcement of rights or remedies, or waivers of defenses, waivers of jury
trials, or waivers of benefits of appraisement, valuation, stay, extension,
moratorium, redemption, statutes of limitation, or other nonwaivable benefits
bestowed by operation of law; (ii) the lawfulness of enforceability of
exculpation clauses, confession of judgment clauses, clauses relating to
releases of any unmatured claims, clauses purporting to waive unmatured rights,
severability clauses, and clauses similar in substance or nature to the
foregoing clauses insofar as any of the foregoing are contained in the
Transaction Documents; (iii) the enforceability of the indemnification
provisions to the extent they purport to indemnify a person for such person's
own negligence or any violation of federal or state securities or blue sky laws;
(iv) the right of any person or entity to institute or maintain any action in
any court or upon matters respecting the jurisdiction of any court; (v) the
enforceability of non-competition provisions; (vi) any matters relating to
title; (vii) any matters relating to the priority or perfection of any liens or
other encumbrances; (viii) any matters related to telecommunications, telephone,
cable, or internet laws; (ix) any matters related to the laws or regulations of
the Texas Public Utility Commission or any matter related thereto; or (x) any
matters related to the laws of the Federal Communications Commission, Federal
Aviation Administration, or the U.S. Trademark Office.
As to our opinions set forth above, we do not opine as to, and we have not
reviewed or examined: (i) any local, municipal, county, district or regional
law, statute, order, decree, administrative record, policy, procedure,
guideline, rule, requirement, regulation or notice; or (ii) any policy,
procedure, guideline, rule, requirement or regulation that is privileged,
confidential, internal, unpublished, or not of public record or not widely
disseminated at the date of this opinion.
Our opinions are limited in all respects to the laws of the State of Texas,
the General Corporation Law of the State of Delaware and to federal law as
applied in the State of Texas. You should be aware that this firm is not
admitted to the practice of law in the State of Delaware and the opinion herein
as to the General Corporation Law of the State of Delaware is based solely upon
the unofficial compilation thereof contained in The Delaware Law of Corporations
& Business Organization (Aspen Law & Business) (200___), and we assume no
responsibility as to the applicability thereto, or the effect thereon, of the
laws of any other jurisdiction.
The opinions expressed herein are subject to statutory, regulatory and case
law developments after the date hereof. With your consent and concurrence, this
Opinion Letter is limited to facts and applicable law in existence as of the
date hereof and we do not undertake and expressly disavow any duty or obligation
to advise you of any change in facts or applicable law after the date hereof,
whether or not relating to the specific issues addressed in this Opinion Letter,
and you may not rely upon us in any respect with regard to continuing advice
concerning changes in applicable law or facts after the date of this Opinion
Letter.
This Opinion Letter (a) has been furnished to you at your request, and we
consider it to be a confidential communication, which may not be furnished,
reproduced, distributed or disclosed to anyone without our prior written
consent; (b) is rendered solely for your information and assistance in
connection with the above transaction and may not be relied upon by any other
person or for any other purpose without our prior written consent; (c) is
rendered as of the date hereof, and we undertake no, and hereby disclaim any,
obligation to advise you of any changes (including any changes in law) or any
new developments which might affect any matters or opinions set forth herein;
and (d) is limited to the matters stated herein and no opinions may be inferred
or implied beyond the matters expressly stated herein.
You are hereby notified that (i) we do not consider you to be our client in
the matters to which this Opinion Letter relates, (ii) neither the Texas Code of
Professional Responsibility nor current case law clearly articulates the
circumstances under which an attorney may give a legal opinion to a person other
than the attorney's own client, (iii) a court might determine that it is
improper for us to issue, and for you to rely upon, a legal opinion issued by us
when we have acted as counsel to the Buyer in connection with the Transaction
Documents, and (iv) you may wish to obtain a legal opinion from your own legal
counsel as to the matters addressed in this Opinion Letter.
Very truly yours,
BICKERSTAFF, HEATH, SMILEY, POLLAN,
XXXXX & XXXXXXXX, LLP
By: ____________________________
EXHIBIT D
INTERIM SYSTEMS
MANAGEMENT AGREEMENT
*[Intentionally Omitted]
*Confidential Treatment Requested. Confidential portions of this document have
been redacted and filed separately with the Commission.
FIRST AMENDMENT
TO
PURCHASE AGREEMENT
------------------
THIS FIRST AMENDMENT (THE "FIRST AMENDMENT") TO PURCHASE AGREEMENT is made
and entered into this 28th day of September, 2001, by and among GRANDE
COMMUNICATIONS, INC., a Delaware corporation, (hereinafter referred to as
"Buyer") and USOL, INC., a Delaware corporation, (hereinafter referred to as
"Seller") and U.S.-Austin Cable Associates I, Ltd. ("US-Austin Cable, Ltd.").
RECITALS:
--------
A. Buyer, Seller and US-Austin Cable, Ltd. have entered into a Purchase
Agreement dated August 31, 2001, (the "Original Purchase Agreement") pursuant to
which Buyer has agreed to purchase certain assets from Seller and US-Austin
Cable, Ltd. Capitalized terms not defined herein shall have the meanings set
forth in the Original Purchase Agreement.
B. The Original Purchase Agreement contemplates that an Initial Closing
will take place in the fourth quarter of 2001. However, the parties have
determined that it would be mutually beneficial to have a Closing in the third
quarter of 2001 in accordance with the terms of the Original Agreement as
amended by this First Amendment.
1
AGREEMENTS:
----------
In consideration of the mutual representations, warranties and covenants
and subject to the conditions herein contained, the parties hereto, intending to
be legally bound hereby, agree as follows:
1. Definitions. Article I is amended to add the following definitions after
definition of "Door Fee" on page 3 of the Original Agreement:
"Early Closing" has the meaning given in Section 5.1.1-A."
"Early Closing Date" has the meaning given in Section 5.1.1-A."
2. Closing Dates. Section 5.1 of the Original Agreement is hereby amended
to change the word "four" in the second line to "five."
3. Early, Initial, Interim and Final Closings. Sections 5.1.2 through 5.1.4
of the Original Purchase Agreement are hereby deleted and the following are
substituted in lieu thereof:
"5.1.1-A. Early Closing. An early closing (the "Early Closing") will
take place on a date (the "Early Closing Date") not later than
September 30, 2001. At the Early Closing, Seller and Buyer will
execute and deliver to each other the (i) assignment and assumptions
of the ROEs and Subscriber Agreements with respect to those MDU
Properties described in Schedule 5.1.1-A attached hereto, (ii) the
documents contemplated by Sections 5.2.1 and 5.2.2 and Articles X and
XI, and (iii) a First Amendment to the Services Agreement.
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5.1.2 Initial Closing. An initial closing (the "Initial Closing") will
take place on a date (the "Initial Closing Date") not later than
December 31, 2001. At the Initial Closing, Seller and Buyer will
execute and deliver to each other the (i) assignments and assumptions
of the ROEs for all contracted MDU Properties and the ROEs and
Subscriber Agreements with respect to those MDU Properties described
in the Take-Down Schedule as being completed prior to December 31,
2001 to the extent not previously transferred to Buyer at the Early
Closing, and (ii) the documents contemplated by Sections 5.2.1 and
5.2.2 and by Articles X and XI.
5.1.3 Interim Closings. An interim closing ("Interim Closing") shall
occur (i) on or prior to March 31, 2002 and (ii) on or prior to June
30, 2002 (collectively the "Interim Closing Dates"). At each Interim
Closing, the parties will execute and deliver (i) assignments and
assumptions of the ROEs and Subscriber Agreements with respect to the
MDU Properties described in the Take-Down Schedule as being completed
prior to such Closing to the extent not previously transferred to
Buyer at the Early Closing, and (ii) the documents contemplated by
Sections 5.2.1 and 5.2.2 and by Articles X and XI.
5.1.4 Final Closing. The Final Closing of the transactions
contemplated by this Agreement will take place on or prior to
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September 30, 2002 (the "Final Closing Date") at which xxxx Xxxxxx and
Buyer will execute and deliver (i) assignments and assumptions of all
remaining ROEs and Subscriber Agreements related to the MDU
Properties, and (ii) the documents contemplated by Sections 5.2.1 and
5.2.2 and by Articles X and XI."
4. Interim Systems Management Agreement. Section 5.3 of the Original
Purchase Agreement is hereby amended to add the following clause prior to the
period at the end of Section 5.3.
"; provided, however that with respect to a Deferred Property acquired
at the Early Closing, the Deferred Property may be operated for up to
two-hundred and seventy (270) days pursuant to the Interim Systems
Management Agreement and the provision of Section II(A) of the Interim
Systems Management Agreement requiring thirty (30) days prior notice
shall not be applicable,
5. Efforts Regarding Amendments and Estoppel Certificates. Notwithstanding
occurrence of the Early Closing, Buyer agrees to continue to use its
commercially Reasonable Best Efforts after the Early Closing to satisfy the
requirements of Section 8.3(b) with respect to the ROEs acquired by Buyer at the
Early Closing.
6. Conditions to Obligations of Buyer. Section 10.1 of the Original
Purchase Agreement is hereby deleted and the following is substituted in lieu
thereof:
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10.1. Conditions of Early, Initial and Other Closings. Buyer shall
have obtained, and shall hold at the time of the Early Closing, the
Initial Closing and each other Closing, consents from owners of the
MDU Properties which (together with those MDU Properties where no
consent is required) represent ROEs covering at least 80% (or 9,870)
of the total 12,337 Subscriber Doors in the MDU Properties. Further,
Buyer shall have obtained, and shall hold (i) at the time of the Early
Closing, consents from owners of the MDU Properties which represent
all of the ROEs to be acquired at the Early Closing pursuant to
Section 5.1.1-A and (ii) at the time of the Initial Closing, consents
from owners of the MDU Properties which represent all the ROEs to be
acquired by Buyer at the Initial Closing as provided in Section 5.1.2.
7. Table of Contents; Schedule 5.1.1-A. Page (i) of the Table of Contents
for the Original Purchase Agreement is hereby revised to refer to the new
Section 5.1.1-A and page (iv) of such Table of Contents is hereby revised to add
Schedule 5.1.1-A to the list of Schedules. Schedule 5.1.1-A attached hereto is
added to the Schedules to the Original Purchase Agreement as herein amended.
8. Mistaken Reference to Park West Property Telecommunications Services
Agreement is Deleted. All references in the Purchase Agreement (including in any
schedules or exhibits thereto) to the following XXX are hereby deleted in their
entirety: Park West Property - Telecommunications Services
5
Agreement (as assigned) between Park West Apartments Ltd., and U.S. OnLine
Communications, L.L.C., a Washington limited liability company, d/b/a U.S.
OnLine, dated May 7, 1997.
9. Continued Effectiveness of Original Purchase Agreement. Except as
amended hereby and as previously amended or supplemented by written agreement of
the parties, the Original Purchase Agreement remains in full force and effect.
[Remainder of this page intentionally blank]
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IN WITNESS WHEREOF, the undersigned have caused this Agreement to be duly
executed as of the day and year first above written.
SELLER:
USOL, INC.
A Delaware Corporation
BY:_________________________________
Name:_______________________________
Title:______________________________
BUYER:
GRANDE COMMUNICATIONS, INC.
A Delaware Corporation
BY:_________________________________
Name:_______________________________
Title:______________________________
U.S.-AUSTIN CABLE ASSOCIATES I, LTD.
BY: USOL, Inc., General Partner
By: ________________________________
Name: ______________________________
Title: _____________________________
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SCHEDULE 5.1.1-A
To
PURCHASE AGREEMENT
*[Intentionally Omitted.]
*Confidential Treatment Requested. Confidential portions of this document have
been redacted and filed separately with the Commission.
