ASSET PURCHASE AND SALE AGREEMENT
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THIS ASSET PURCHASE AND SALE AGREEMENT ("Agreement") is made as of June 8,
1998, by and among People's Choice TV Corp. ("PCTV Corp.") and Preferred
Entertainment, Inc. ("PEI") each a Delaware corporation (collectively PCTV Corp.
and PEI are referred to as "Sellers" and individually as a "Seller"), and
OnePoint Communications-Illinois, LLC, a Delaware limited liability company
("Buyer").
Sellers, through their ownership and operation of the Assets, as defined
below, provide video programming services to Subscribers at multiple dwelling
unit properties in the Chicago, Illinois, metropolitan area.
Sellers desire to sell to Buyer, and Buyer desires to purchase from
Sellers, the Assets, subject to the terms and conditions contained in this
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties contained in this Agreement, Sellers and Buyer
agree as follows:
ARTICLE 1 Definitions
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As used in this Agreement, the following terms shall have the following
meanings:
Accounts Receivable. All accounts receivable of the Sellers representing
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amounts owed to the Sellers in connection with their provision of Services to
the Properties.
Additional Closing. A purchase and sale of Assets subsequent to the Initial
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Closing, pursuant to the terms of this Agreement.
Additional Closing Date. The date on which an Additional Closing occurs.
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Advance Subscriber Payments: All amounts paid by the Subscribers to the Sellers
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for which Services have not yet been performed set forth on Schedule 3.11.
Affiliate. Any Person that directly or indirectly controls, is controlled by,
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or is under common control with, another Person.
Agreement. This Asset Purchase and Sale Agreement dated as of June 8, 1998
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among Sellers and Buyer, as the same may be amended from time to time.
AML Applications. The applications for point-to-point microwave authorizations
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filed by Sellers at the FCC to provide Services to the AML Properties.
AML Hub Sites. The locations where PEI has entered into Hub Site Agreements, as
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described in Schedule 3.8B.
AML Licenses. The point-to-point microwave licenses issued by the FCC and used
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for the provision of Services to the AML Properties including the Specchio
License, but not including the Excluded Licenses.
AML Properties. The Properties served by PEI's AML System as indicated on the
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attached Schedule 3.8A.
AML Signals. The satellite and broadcast programming channels which the
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Sellers make available to Subscribers at the AML Properties and listed on
Schedule 3.19.
AML System. The point-to-point microwave system by which PEI provides video
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programming services to the AML Properties.
Assets. All (a) rights of each Seller under or pursuant to all Contracts, (b)
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AML Licenses and AML Applications, (c) Equipment, (d) all Accounts Receivable
(e) Subscribers and customer lists relating to the Assets, (f) Permits, (g) all
data, books and records relating to the Assets, (h) Inventory, and (i) Vehicles,
but excluding the Excluded Assets.
Assumed Liabilities. All liabilities of the Sellers assumed by Buyer relating
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to the Assets set forth on Schedule 2.1, excluding the Excluded Liabilities.
Basic Subscriber. A Subscriber receiving basic video programming service ("Basic
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Services") provided to a Property, whether on an individual or bulk basis. The
number of Basic Subscribers on a bulk basis shall be determined by dividing the
monthly revenue for such bulk Basic Subscribers by the Basic Subscriber Rate.
Basic Subscriber Rate. The weighted-average regular monthly fees and charges
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for the provision of basic Services to a Basic Subscriber in the Market.
Closing. Any purchase and sale of the Assets pursuant to the terms and
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conditions of this Agreement.
Closing Date. The date on which a Closing occurs.
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Contracts. The contracts and agreements listed on Schedule 3.8B.
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Customer Deposits. All amounts held by Sellers which have been paid by
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Subscribers as deposits for converter boxes set forth on Schedule 3.11.
Equipment. All (a) personal property owned or leased by the Sellers located at
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the Properties and used for the providing of Services at the Properties and
located at the AML Hub Sites and used for the receiving and distributing of AML
Signals, including, without limitation, all of the
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antennas and downleads, all electric equipment and devices, towers, tower
equipment, poles, pole attachments, above ground and underground cable,
underground pipes and conduit, distribution system, headend amplifiers and
associated equipment, line amplifiers, earth satellite receiving stations and
related equipment and microwave equipment, (b) the Equipment not located at the
Properties or the AML Hub Sites and listed on Schedule 3.10, and (c) all
converter boxes currently located at any Property.
Excluded Assets. All (a) video programming contracts; (b) Seller's insurance
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policies and rights and claims thereunder; (c) all converter boxes except those
located in Properties (other than Inventory); (d) cash and cash equivalents; (e)
Sellers' rights under any contract, license, authorization, agreement or
commitment other than the Contracts, AML Licenses or Permits; (f) all claims,
rights and interests in and to any refunds for federal, state or local
franchise, income or other taxes or fees of any nature whatsoever relating to
the Assets for periods ending on or prior to the applicable Closing Date; (g)
Sellers' commercial, headend and transmit site leases, other than those listed
on Schedule 3.8, and any leasehold improvements (other than AML leasehold
improvements), including Seller's MMDS transmitters and related MMDS
transmission equipment, and Sellers twelve (12) fiber strands running from the
top to the bottom of the Sears Tower; (h) FCC frequencies (other than AML
Licenses), FCC channel leases, and BTA licenses; (i) other real or personal
property not located at the Properties or not related to the provision of
Services to the Properties, including MMDS testing equipment, computers and
related equipment, data processing equipment and phone systems (other than
Inventory); and (j) other right, interest or property of any Seller that is not
specifically included in the definition of Assets.
Excluded Liabilities. All liabilities and obligations, whether now or hereafter
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existing, absolute, contingent or otherwise, known or unknown (a) of any Seller,
other than any Assumed Liability; (b) arising prior to the applicable Closing
Date under all Contracts; (c) arising out of any Seller's ownership, operation,
use or occupancy of any Assets prior to the applicable Closing Date, including
but not limited to, any tax or similar liability related to any of the Assets or
the providing of the Services; (d) arising from or relating to or incurred in
connection with any Excluded Asset; (e) relating to current or former employees
of Seller, excluding such obligations of Buyer which arise from the Buyer's
employment of any of Sellers' employees; and (f) any tax or similar liability,
(g) arising out of the collective bargaining agreement (or any breach thereof)
between Arc Communications Services, Inc. and IBEW Local 134, including, without
limitation, relating to any unfair labor practice with respect to any employee,
and (h) arising from, related to or incurred in connection with the failure to
file any applications with the FCC or failure to obtain any license from the FCC
prior to the operation or activation of any AML Signal.
FCC. The Federal Communications Commission or any successor agency.
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Final Closing Date. The date that is six months after the Initial Closing Date,
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unless extended by the mutual agreement of the parties.
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GAAP. Generally accepted accounting principles set forth in the opinions and
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pronouncements of the Accounting Principles Board and the American Institute of
Certified Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board.
Government Entity. Any federal, state, local or municipal court, government or
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governmental or administrative department, commission, instrumentality, board,
agency or authority, including the United States Internal Revenue Service and
other taxing authorities.
Hub Site Agreements. The agreements under which PEI leases space for its point-
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to-point hub sites, as set forth on Schedule 3.8B.
Initial Closing. The initial purchase and sale of the Assets pursuant to the
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terms and conditions of this Agreement.
Initial Closing Date. July 1, 1998.
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Inventory. The inventory of Sellers related to the providing of the Services to
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the AML Properties, including three hundred (300) Xxxxxxx 5507 converter boxes.
Legal Rules. The requirements of all federal, state, municipal or local laws,
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codes, statutes, ordinances, rules or regulations, permits , orders, writs,
judgments, injunctions, decrees or awards issued, enacted or promulgated by any
Government Entity or any arbitrator, including the rules and regulations of the
FCC.
Lien. Any lien (including any judgment or mechanic's lien, regardless of whether
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liquidated), mortgage, assessment, security interest, easement, claim, pledge,
trust, deed of trust, option or other charge or encumbrance.
Market. Chicago, Illinois.
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MMDS Properties. The Properties served by the Sellers' MMDS Systems as indicated
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on the attached Schedule 3.8A.
MMDS Signals. The satellite and broadcast programming channels which the
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Sellers make available to Subscribers at the MMDS Properties and listed on
Schedule 3.19.
MMDS System. The multi-point microwave distribution system by which each of the
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Sellers provides video programming services to the MMDS Properties.
Permits. All permits, licenses, approvals and authorizations relating to the
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use, operation or ownership of the Assets, or used to provide Services to the
Properties.
Person. Any natural person, corporation, business trust, association, limited
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liability company, partnership, joint venture, Government Entity and any other
entity.
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Property. Any AML Property, any SMATV Property and any MMDS Property, as listed
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on Schedule 3.8A.
Related Agreements. Each of the General Assignment and Xxxx of Sale Agreement
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in the form attached as Exhibit A, the Assumption Agreement in the form attached
as Exhibit B, the Private Operational Fixed Microwave Service Non-Profit Shared
Use Agreements (the "Shared Used Agreements") attached hereto as Exhibit C, the
Non-Competition Agreements attached as Exhibit D, and the Service Agreement
attached as Exhibit E, the Owner's Acknowledgment Form attached as Exhibit F,
the Opinion of Counsel attached as Exhibit G, the Joint Marketing Agreement
attached as Exhibit H, the Required Consent in the form of Exhibit I, and if
necessary, the Escrow Agreement, attached as Exhibit J.
Required Consents. All consents, authorizations and approvals required for
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Sellers to transfer the Assets to the Buyer in accordance with this Agreement, a
list of which is set forth on Schedule 3.4.
Right of Entry Agreements. The agreements under which each Seller provides the
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Services to the Properties, as set forth on Schedule 3.8B.
Services. The video programming services provided by the Sellers to the
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residents of Properties.
Shared Use Agreement. Each of the Private Operational Fixed Microwave Service
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Non-Profit Shared Use Agreements attached hereto as Exhibit C.
SMATV Properties. The Properties served by the Sellers' SMATV Systems as
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indicated on the attached Schedule 3.8A.
SMATV Signals. The satellite and broadcast programming channels which the
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Sellers make available to Subscribers at the SMATV Properties and listed on
Schedule 3.19.
SMATV System. A satellite master antenna television system by which a Seller
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provides video programming services to a SMATV Property.
Specchio License. The AML License with Call Sign WPJA 879, licensed to Specchio
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Developers, Ltd.
Subscriber. (a) Each Unit that pays for and receives Services at the
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Properties that is not bulk billed; and (b) each Unit at the Properties that is
bulk billed and for which the property owner or manager pays for the Services
(which number in (b) shall be determined by dividing the monthly revenue for all
such bulk Subscribers by the Basic Subscriber Rate).
Transport Consents. Consents from each programming vendor for each MMDS Signal
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and AML Signal carried by the Sellers at a Property, which consent provides that
Buyer and the Sellers have the right to transport and receive the MMDS Signals
and AML Signals as contemplated in the Service Agreement.
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Unit. Each individual dwelling unit located at a Property.
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Vehicles. The trucks and vans listed on Schedule 3.28.
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ARTICLE 2 Purchase and Sale
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2.1 Purchase and Sale of Assets. Subject to the terms and conditions of this
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Agreement, on the Initial Closing Date and, to the extent required, on each
Additional Closing Date, Buyer hereby agrees to purchase from Sellers, and
Sellers hereby agree to sell to Buyer all of their respective rights, title and
interests in and to all of the Assets, free and clear of all Liens (except Liens
which are to be assumed by Buyer hereunder as part of the Assumed Liabilities).
Subject to the terms and conditions of this Agreement, on the Initial Closing
Date and, to the extent required, on each Additional Closing Date, Buyer shall
assume and agree to pay and perform, when due only, those obligations that
constitute the Assumed Liabilities set forth on Schedule 2.1, with respect to
the Assets sold to Buyer on such Closing Date. Buyer shall not assume or have
any responsibility for any of the Excluded Liabilities.
2.2 Purchase Price and Payment.
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(a) In addition to the assumption of the Assumed Liabilities, the consideration
to be paid for the Assets (the "Purchase Price") shall be paid to the Sellers as
follows:
(i) $500,000.00 as a deposit, which amount was delivered to the Sellers
prior to the date of this Agreement;
(ii) $12,500,000.00 (the "Cash Payment") at the Initial Closing Date,
subject to the applicable adjustments set forth in this Article 2.2;
(b) On the Initial Closing Date, the Cash Payment shall be decreased, if at
all, by an amount equal to the product of (i) four hundred forty-four dollars
($444) times (ii) the difference between Twenty-Nine Thousand Two Hundred Fifty
(29,250) and the aggregate number of Units at the Properties covered by Right of
Entry Agreements which Sellers assign to Buyer as of the Initial Closing Date.
If the Right of Entry Agreements for less than all of the Properties are
delivered on the Initial Closing Date because Required Consents have not been
obtained, then Additional Closings shall be held, as necessary, subject to the
satisfaction or waiver of the conditions to an Additional Closing set forth in
Articles 6 and 7. Such Additional Closings shall be held on the first day of
each month as set forth in Article 8.1 in accordance with Article 8 and the
Sellers shall deliver to Buyer any Required Consents obtained after the Initial
Closing Date, provided the last Additional Closing Date shall occur on or before
the Final Closing Date. At each Additional Closing, Buyer shall pay to Sellers
four hundred forty four dollars ($444) per Unit for each Right of Entry
Agreement covering a Property transferred to the Buyer on such Additional
Closing Date; provided however, in no event shall the Buyer be required to pay
to the Sellers an amount greater than $13,000,000 for all of the Assets. Not
less than three business days prior to
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each Closing, Sellers shall deliver to Buyer a certificate prepared in good
faith of the number of Units at the Properties transferred to the Buyer, and
shall provide Buyer with such information as Buyer may reasonably request to
verify the number of Units so designated in such certificate. Sellers shall
permit Buyer and its agents and employees to discuss with Sellers and their
employees and representatives any such certificate and information and
procedures used in connection with the preparation of the certificate.
(c) All revenues arising from the operation of the Assets until 12:01 a.m. on
the Closing Date on which such Assets are sold to Buyer (the "Adjustment Time"),
shall be prorated between Buyer and Sellers as of the Adjustment Time in
accordance with GAAP and on the principle that Sellers shall receive all
revenues relating to such Assets allocable to the period prior to the Adjustment
Time and Buyer shall receive all revenues relating to such Assets allocable to
the period after the Adjustment Time. PCTV Corp., jointly and severally, and PEI
severally shall be responsible for all Excluded Liabilities, and Buyer shall be
responsible for all Assumed Liabilities relating to the Assets transferred on
such Closing Date. Notwithstanding the above, the Sellers and Buyer agree that
no prorations shall be made between the parties at any Closing for Accounts
Receivable or for Advance Subscriber Payments related to Properties for which a
Closing is held, except that (i) Sellers shall credit Buyer with an amount equal
to the Customer Deposits related to Properties for which a Closing is held as of
the Closing Date, and (ii) Sellers shall credit Buyer with an amount equal to
three percent (3%) of all Accounts Receivable related to Properties for which a
Closing is held as of the Closing Date, which credits shall constitute a
reduction in the Purchase Price paid to Sellers at the Closing.
(d) On the Initial Closing Date, the Cash Payment shall be decreased, if at
all, by the amount of the Purchase Price Reduction as set forth in Article 5.18
and as agreed upon by the parties. Not less than three business days prior to
the Initial Closing Date, Sellers shall deliver to Buyer a certificate prepared
in good faith setting forth the amount, if any, of the Purchase Price Reduction,
and shall provide Buyer with such information as Buyer may reasonably request to
verify the amount of the Purchase Price Reduction. Sellers shall permit Buyer
and its agents and employees to discuss with Sellers and their employees and
representatives any such certificate and information and procedures used in
connection with the preparation of the certificate.
2.3 [Reserved]
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2.4 Preliminary and Final Adjustments At least three (3) business days prior
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to the Initial Closing Date, Sellers will deliver to Buyer a report (the
"Preliminary Adjustments Report"), prepared in good faith and on a reasonable
basis, setting forth in reasonable detail a pro forma determination as of the
Initial Closing Date of the adjustments and prorations set forth in Article
2.2(c). Within thirty (30) days after the Initial Closing Date, Sellers shall
deliver to Buyer a report (the "Final Adjustments Report"), prepared in a like
manner and setting forth in reasonable detail the final determination of all
adjustments that were not calculated as of the Initial Closing Date and
containing any correction to the Preliminary Adjustments Report, including the
final measurements under the Service Standards, the final Purchase Price
Reduction under Article 5.18, if applicable, and the number of Units at the
Properties for which all Required Consents are transferred to Buyer as provided
in Article 2.2(b), in each case in accordance with this
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Agreement at the Initial Closing Date. Sellers shall permit Buyer and its agents
and employees to review such report to review any materials necessary to verify
the accuracy of such report, to review and discuss with Sellers or their
representatives any work papers generated and the procedures used in connection
with the preparation of such report, and to have access in Shelton, Connecticut
during customary business hours to such books and records relating to the
Services and the Assets necessary to enable Buyer to review such work papers and
procedures. Buyer shall notify Sellers of its objections, if any within 15
business days following the receipt by Buyer of such report (the "Review
Period"). The Review Period shall be extended, on a day-for-day basis, for each
day that Sellers do not provide the access contemplated in this Article 2.4 to
Buyer or its agents or employees. Any amount which is not in dispute shall,
within five (5) business days of the expiration of the review period, be paid in
cash, to Sellers or Buyer, as the case may be. Any disputed amounts will be
determined within ninety (90) days after the Initial Closing Date by an
independent accounting firm of recognized standing mutually acceptable to the
parties, whose determination will be conclusive. Sellers and Buyer will bear
equally the fees and expenses payable to such firm in connection with such
determination. The payment required after determination of all disputed amounts
will be made by the responsible party by cash or wire transfer of immediately
available funds to the other party within three (3) business days after the
final determination. For any Additional Closings, the parties shall follow the
procedures set forth in this Article 2.4.
2.5 Allocation of Purchase Price. Sellers and Buyer acknowledge and consent to
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(a) the payments described in this Article 2 and the Assumed Liabilities being
allocated among the Assets as set forth in Schedule 2.5, and (b) the preparation
of and submission to the Internal Revenue Service of Form 8594 in accordance
with Section 1060 of the Internal Revenue Code of 1986, as amended, reflecting
the allocation of the payments described in this Article and Assumed Liabilities
among the Assets as set forth in Schedule 2.5.
2.6 Escrow Agreement.
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(a) Prior to the Initial Closing, (i) PEI, Specchio Developers, Ltd., Specchio
Developers Investment Corp., and the Buyer shall file applications requesting
that the FCC consent to the assignment of the AML Applications to Buyer, and
(ii) PEI shall file AML Aplications for the Properties covered by STAs. If the
Wireless Bureau of the FCC does not approve all of the AML Applications prior to
the Initial Closing, Sellers, Buyer and American National Bank and Trust Company
of Chicago, as escrow agent, shall enter into at the Initial Closing the Escrow
Agreement attached as Exhibit J. In order to fund the escrow, the Buyer shall
deliver to the Escrow Agent by certified check or wire transfer the amount of
Two Million Eight Hundred Fifty Thousand Dollars ($2,850,000) (the "Escrow
Amount"), which shall be deducted from the amount of the Purchase Price paid to
the Sellers at the Initial Closing. The Escrow Amount shall be pro rated at the
Initial Closing if some, but not all, of the AML Applications have been approved
by the Wireless Bureau of the FCC, on the basis of the values on the attached
Schedule 2.6, referred to as the Application Amounts.
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(b) Subject to the procedures set forth in the Escrow Agreement, the
Application Amount for each AML Application will be delivered to PCTV Corp. upon
the occurrence of any one of the following events:
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(i) the Wireless Bureau of the FCC approves the transfer of the AML
Application to Buyer and the Wireless Bureau of the FCC approves the AML
Application and the FCC issues an AML License to Buyer;
(ii) the Buyer, at the request and full expense of the Sellers, files a
new AML application (the "OnePoint Application") to replace the pending AML
Application and the Wireless Bureau of the FCC approves the OnePoint
Application and issues an AML License to Buyer;
(iii) the Buyer ceases to provide video services to the Property related
to the AML Application, provided that such cessation is not related to the
fact that the AML Application for the Property has not been granted, or the
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termination of the Right of Entry Agreement by the owner because of a
default under the Right of Entry Agreement by the Buyer, provided that such
default by the Buyer is not related to the fact that the AML Application
for the Property has not been granted; or
(iv) the Buyer commences service under a New Delivery Method to provide
service to the Property related to the AML Application, in accordance with
Article 2.6(f).
(c) Subject to the procedures set forth in the Escrow Agreement, the
Application Amount for each AML Application will be delivered to Buyer upon the
occurrence of all of the following three events: (i) the AML Application is
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denied by the Wireless Bureau of the FCC, (ii) to the extent that the Sellers
have requested that the Buyer file a OnePoint Application, the OnePoint
Application is denied by the Wireless Bureau of the FCC, and (iii) Buyer
determines, in its sole discretion, that it is not able to serve the Property
related to the AML Application with a New Delivery Method, as described in
Article 2.6(f).
(d) Subject to the procedures set forth in the Escrow Agreement, on the day
that is two (2) years after the Initial Closing Date, any Application Amounts
remaining in the escrow account will be delivered to the Buyer. Pursuant to
Section 2(c) of the Escrow Agreement, this provision shall have no effect on any
amounts held by a court pursuant to an interpleader action.
(e) In the event that Sellers request that Buyer file OnePoint Applications as
described in Article 2.6(b) above, Buyer shall promptly file such applications
and cooperate with the Sellers to process such applications at the FCC. Sellers
agrees to bear all costs affiliated with the processing and filing of any such
OnePoint Applications.
(f) At any time during the two (2) year period following the Initial Closing
Date, the Sellers may request that the Buyer use commercially reasonable efforts
to attempt to provide service to a
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Property for which an AML Application has been filed from an existing AML Hub
Site. The Sellers may also request that the Buyer provide service to a Property
by another means acceptable to the Buyer in its sole discretion. Each method
shall be referred to as a New Delivery Method. The New Delivery Method shall not
violate any applicable laws or regulations and shall not result in any loss of
quality of service at the Property. If Buyer is able to provide service by a New
Delivery Method, Sellers shall reimburse the Buyer for all costs of designing,
permitting, equipping, installing and maintaining such New Delivery Method. Upon
the successful installation of the New Delivery Method, and the reimbursement by
the Sellers of all costs of designing, permitting, equipping and installing the
New Delivery Method, Buyer agrees that it shall direct the Escrow Agent to
deliver the Application Amount for such Property to the Sellers.
(g) Each of Buyer and each Seller agrees to make (i) only good faith requests
for distribution to it of funds in the Escrow Account and only in the case of
Buyer pursuant to the express terms of Article 2.6(c) or (d) or in the case of
Sellers pursuant to the express terms of Article 2.6(b), and (ii) only good
faith objections to any request by the other party for the release of funds in
the Escrow Account to such other party. The parties agree that should either
party deliver a written notice requesting an Escrow payment that is not made in
good faith pursuant to the express provisions of Article 2.6(b) or (c) or (d),
as applicable, or objects to a notice not in good faith (each a "Bad Faith
Notice"), the party delivering the Bad Faith Notice shall pay to the other party
all reasonable costs incurred by the other party (including reasonable attorneys
fees) in responding to, or defending against, such Bad Faith Notice.
(h) In the event a dispute arises between the parties concerning whether or not
an Application Amount should be paid by the Escrow Agent, the parties hereby
agree to negotiate in good faith for a period of forty (40) days after the
receipt of a Seller's Notice or a Buyer's Notice (each as defined in the Escrow
Agreement), as applicable (the "Notice Date"), to attempt to resolve the
dispute. If the dispute still is not resolved after the forty (40) day period,
the parties shall submit the dispute to a senior level executive of both Buyer
and Sellers, who will review the relevant materials and, at a time and location
acceptable to all parties, discuss the dispute and suggest a resolution. In the
event that the dispute cannot be resolved within 60 days after the Notice Date,
the parties agree that the Escrow Agent shall be required to interplead the
disputed amounts to the state court for Xxxx County, Illinois and request that
the court determine the parties rights under the Purchase Agreement and the
Escrow Agreement. Upon resolution of any dispute, the parties agree to instruct
the Escrow Agent to deliver the applicable Application Amount in accordance with
any such resolution.
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ARTICLE 3 Representations and Warranties of Sellers
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PCTV Corp., jointly and severally, and PEI, represents and warrants
to Buyer, as of the Initial Closing Date and as of each Additional Closing Date,
the following:
3.1 Organization and Qualification. Each Seller is a corporation duly
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organized, validly existing and in good standing under the laws of Delaware, and
has all requisite power and authority to own, lease and use the Assets and to
provide the Services to the Properties. Each Seller is duly qualified or
licensed to do business and is in good standing under the laws of each
jurisdiction in which the character of the Assets or the nature of the Services
provided makes such qualification necessary. PCTV Gold, Inc. is a wholly-owned
subsidiary of PCTV Corp.
3.2 Authority. Each Seller has the corporate right, power and authority to
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execute, deliver and (subject to the receipt of the Required Consents) perform
its obligations under this Agreement and the Related Agreements. The execution,
delivery and performance of this Agreement and the Related Agreements by each
Seller and the transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate action on the part of each Seller.
3.3 Enforceability. This Agreement has been duly executed and delivered by
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each Seller and constitutes, and upon the execution and delivery of Sellers of
the Related Agreements, each such Related Agreement shall constitute, the valid
and legally binding obligation of each Seller enforceable against each Seller in
accordance with the terms of the Agreement and the Related Agreements.
3.4 Approvals. Except for the Required Consents and the Transport Consents,
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the execution, delivery and performance of this Agreement and the Related
Agreements, and the consummation of the transaction contemplated hereby or
thereby, does not require any additional consent, notice, authorization or
approval of, filing with, or exemption from, any third party or any other Person
which has not been made, given or otherwise accomplished.
3.5 Compliance with Laws. Except as set forth on Schedule 3.5: (a) the
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provision of Services by Sellers does not violate any Legal Rule, the
enforcement of which would have a material adverse effect on the Assets taken as
a whole; (b) no Seller is in default in any material respect under any
executive, legislative, judicial, administrative or private ruling, order, writ,
injunction or decree which may affect any of the Assets or the provision of
Services at the Properties; (c) each Seller is in material compliance with all
Legal Rules imposed by any Government Entity having jurisdiction over the Assets
or the provision of Services, including the FCC; (d) each Seller has made all
required material registrations and filings with all applicable Government
Entities relating to the Assets and the provision of Services; and (e) no Seller
has received any notice of any alleged violation of any material Legal Rule
affecting the Assets or the provision of Services.
3.6 Compliance with Other Instruments. The execution and delivery of this
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Agreement and the Related Agreements and the consummation of the transactions
contemplated hereby and thereby shall not (a) result in a breach or violation of
any term or provision of, or constitute a breach or
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default (including any event that, with the passage of time or giving of notice,
or both, would become a breach or default) under any Seller's certificate of
incorporation or bylaws, under any Contract, AML License or Permit; (b) violate
or result in the violation of any Legal Rule or any order, judgment or decree
applicable to or binding upon any Seller or any of the Assets; or (c) result in
the creation or imposition of any Lien upon any Asset.
3.7 Title and Encumbrances. Except as set forth on Schedule 3.7, the Sellers
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have good and marketable title to and possession of all of the Assets, free and
clear of all Liens. Upon each Closing, Sellers will transfer to the Buyer good
and marketable title to the Assets, free and clear of all Liens.
Notwithstanding the above, the wiring and distribution systems and the equipment
at the Properties are subject to the terms and conditions of the Right of Entry
Agreements, the Hub Site Leases and all applicable Legal Rules.
Except for all Excluded Assets, and except for tangible personal property (a)
located at the Xxxxxxx xxxxxxx reception sites (not including Equipment and
Inventory), (b) located at Sellers transmission sites (not including Equipment
and Inventory), (c) used to transport signals between the headend reception
sites and transmission sites (not including Equipment and Fiber Leases), (d)
located within the Sears tower (not including Equipment and Inventory), (e)
located at any of Seller's offices or warehouse sites (not including Equipment
and Inventory) (f) used for the providing of service to single family customers
and commercial customers (non-MDU customers), (g) used by programmers,
broadcasters, and educational licensees to create, produce, transmit and deliver
the programming and programming content to the headend reception sites or
transmission sites, and (h) used by the individual customers in order to view
the video programming, including but not limited to, televisions, phone lines
and electrical outlets, the Assets constitute all tangible personal property
material to the providing of the Services at the Properties. Buyer is not aware
of any tangible personal property not included on the above list which is
material to the providing of the Services at the Properties.
3.8 Properties and Contracts. Schedule 3.8A sets forth a complete and
------------------------
accurate list of the Properties, along with the number of Units for each
Property. Schedule 3.8B contains a complete and accurate list of all Contracts
being transferred hereunder, including (a) all Right of Entry Agreements, (b)
all Hub Site Agreements, (c) all fiber leases, (d) all retransmission
agreements, and (e) all customer service agreement for Subscribers at the
Properties. The Right of Entry Agreements set forth on Schedule 3.8B constitute
all of the agreements under which Sellers provide Services to residential
multiple dwelling units in the Market. The Hub Site Leases set forth on
Schedule 3.8B constitute all the point-to-point microwave hub site agreements
used by Sellers for the providing of Services to the Properties. The fiber
leases set forth on Schedule 3.8B constitute all of the fiber leases used by
Sellers for the providing of Services to the Properties. Except for agreements
with ABC, CBS, and NBC, the retransmission agreements set forth on Schedule 3.8B
constitute the only retransmission agreements used by the Sellers for the
providing of Services to the Properties. The Subscriber Contracts set forth on
Schedule 3.8B constitute all of the Subscriber Contracts used by the Sellers for
the providing of Services to the Properties.
12
Except as described in Schedule 3.8C, each Contract is in full force and
effect and constitutes a valid and binding obligation of the parties,
enforceable in accordance with its terms, except as the same may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting generally the enforcement of creditors' rights and by general
principles of equity. Except as described in Schedule 3.8C: (a) Seller is not,
nor has any event or condition occurred or become known to any Seller that
constitutes or, with notice or the passage of time, or both, would constitute a
default by any Seller under any of the Contracts; (b) to the best of Sellers'
knowledge, no other party to any of the Contracts is in default under any of the
Contracts; (c) to the best of Seller's knowledge, no other Person is providing
video programming services to any of the Properties and no other Person has
asserted any such right to any Seller to provide video programming services to
the Properties, except as otherwise required or permitted by law; and (d) there
is no material agreement, arrangement or understanding, other than as contained
in the Contracts, between any Seller and any owner or manager of any Property
relating to the provision of Services to any Property; and (e) since the Balance
Sheet Date, Seller has not received written notice regarding the quality of any
Service provided by any Seller, the performance of any Seller under any
Contract, or the intent of any property owner or manager to terminate any
Contract. Except for the Subscriber Contracts (for which Sellers have provided
the most recent standard agreement used for the provision of the Services), a
complete and accurate copy of each Contract has been provided to Buyer.
3.9 AML Licenses. Except for FCC Licenses listed as Excluded Licenses on
------------
Schedule 3.9A, which are not being transferred to Buyer, Schedule 3.9B sets
forth a complete list of all FCC Licenses used to provide Services to the AML
Properties, and sets forth (a) the name of the Licensee, (b) the AML License
Call Sign, (c) the address of the transmit site, and (d) the location of the
destination point for the microwave path, including its geographic coordinates.
Except for the Excluded Licenses, the AML Licenses and the AML Applications
constitute all of the FCC licenses necessary to provide the Services to the
Properties. Each AML License was duly authorized and issued by the FCC, and is
in full force and effect, enforceable in accordance with its terms. The
execution, delivery and performance of this Agreement by each Seller and
consummation of the transactions contemplated by this Agreement will not result
in the revocation, suspension or limitation of any AML License. All fees and
payments due on or prior to the date hereof pursuant to the terms of each AML
License have been paid by the Sellers. A complete and accurate copy of each AML
License has been provided to Buyer.
Schedule 3.9C sets forth a list of all of the pending AML Applications for
new AML Licenses and applications for modifications to existing AML Licenses
filed by the Sellers and used to provide Services to the AML Properties. For
each AML Application, Schedule 3.9C sets forth: (a) the Call Sign of the
existing AML License, if any, for which a modification is sought, (b) the name
of the Licensee, (c) the location of the proposed transmit site, and (d) the
location of the proposed destination point for the microwave path, including its
geographic coordinates (each Property for which an AML Application has been
filed is referred to as an "Application Property"). The AML Applications marked
on Schedule 3.8C as "Filed Late" or "Currently STAs" were not filed at the FCC
prior to the activation of AML Signals to the Application Properties. The
failure to file an application prior to activation of the AML Signals may
constitute a violation of the FCC rules and regulations regarding signal
authorization.
13
PEI has received a notice from Transmission Holdings, Inc. ("Holdings") that
Holdings has filed a Petition to Deny at the FCC for paths filed by PEI from
6230 N. Kenmore to 0000 Xxxxx Xxxxxxxx Xxxx, from 850 State to 400 East Ohio,
and 444 Fullerton to 401-11 Fullerton. The Petition states that PEI did not
properly conduct a prior coordination with Holdings and that PEI's proposed
paths may cause interference with paths licensed to Holdings. PEI believes that
all necessary prior coordination was conducted and PEI does not believe that
these paths will cause interference and is working with Holdings to seek
Holdings withdrawal of its Petition.
3.10 Equipment. Each Property contains the items of Equipment necessary to
---------
provide the Services to that Property in accordance with the Right of Entry
Agreements. Since the Balance Sheet Date, no item of Equipment has been
removed, modified, or altered at any of the Properties, except in the ordinary
course of business, consistent with past practices. All items of Equipment
located at the Properties are in satisfactory operating condition and are usable
and adequate for the provision of the Services, and have been installed in
material compliance with all applicable Legal Rules. There are at least Nine
Thousand Five Hundred (9,500) converter boxes currently in use at the
Properties. Schedule 3.10 sets forth a list of the Equipment not located at the
Properties or the AML Hub Sites which is being transferred to Buyer, which
Equipment, except if otherwise indicated on Schedule 3.10, is in satisfactory
operating condition.
3.11 Accounts Receivable, Customer Deposits and Advance Subscriber Payments.
----------------------------------------------------------------------
Schedule 3.11 contains a complete and accurate aging of all Accounts Receivable,
Customer Deposits and Advance Subscriber payments as of May 31, 1998. Three
business days prior to a Closing, Sellers shall provide an updated Schedule 3.11
which shall set forth a complete and accurate aging of all Accounts Receivable,
a complete and accurate listing of Customer Deposits of each Subscriber at each
Property, and a complete and accurate listing of all Advance Subscriber Payments
of each Subscriber at each Property to be transferred to Buyer at such Closing,
in each case as of such third business day prior to such Closing. The Customer
Deposits set forth on Schedule 3.11 are all amounts held by Sellers which have
been paid by Subscribers as deposits for converter boxes. The Advance
Subscriber Payments set forth in Schedule 3.11 are all amounts paid by the
Subscribers to the Sellers for which Services have not yet been performed. The
Customer Deposits are required to be repaid in accordance with the terms of the
Subscriber Contracts. All such Accounts Receivable have arisen in the ordinary
course of business. All such Accounts Receivable are valid and enforceable
claims, and the services sold and delivered that gave rise to such Accounts
Receivable were sold and delivered in conformity with all applicable express and
implied warranties, purchase orders, agreements and specifications. To the best
of Seller's knowledge, no Account Receivable is subject to any valid defense,
offset or counterclaim, except Customer Deposits. None of such Accounts
Receivable have been assigned to or for the benefit of any Person.
3.12 Basic Subscribers. At the Initial Closing, the Properties shall have at
-----------------
least Twelve Thousand Two Hundred Fifty (12,250) Basic Subscribers.
3.13 Financial Statements and Related Information. The gross revenues earned
--------------------------------------------
by Sellers from providing video programming services at the Properties from
January 1, 1997 through December
14
31, 1997 (the "Period"), calculated in accordance with the principles of GAAP,
was not less than Five Million, Two Hundred and Eight Thousand, Four Hundred and
Seventy One Dollars ($5,208,471). Schedule 3.13A sets forth (a) the number of
Basic Subscribers as of December 31, 1997, which statement is subdivided between
Subscribers who receive the Services on an individual and a bulk basis, and (b)
the weighted average Basic Subscriber Rate charged to Subscribers of the
Services at the Properties during the Period.
Schedule 3.13B sets forth the unaudited balance sheets and income statements
(together the "Financial Statements") for PEI for the one year period ending
December 31, 1997 (the "Balance Sheet Date"). The Financial Statements fairly
present the financial condition of PEI as of the Balance Sheet Date and the
results of operations for such entities for the one year period ending on the
Balance Sheet Date.
Schedule 3.13C sets forth the unaudited balance sheets and income statements
(together the "Quarter End Statements") for PEI for the three month period
ending March 31, 1998. The Quarter End Statements fairly present the financial
condition of PEI as of March 31, 1998 and the results of operations for PEI for
the three month period ending on March 31, 1998.
Buyer understands and acknowledges that the Financial Statements and Quarter
End Statements do not constitute any presentation of the financial condition or
results of operations of the Assets, which Assets are only a portion of the
assets and business operations covered by the Financial Statements and the
Quarter End Statements. There are no direct costs arising from or in connection
with the providing of Services at the Properties by Sellers that are not
reflected in the Financial Statements or Quarter End Statements, excluding
corporate overhead and certain other expenses of PEI that are expensed through
Sat-Tel Services, Inc.
3.14 Litigation. Except as set forth in Schedule 3.14, there is no claim,
----------
action, litigation, proceeding or investigation pending, or to the best of
Sellers' knowledge, threatened before any court or Government Entity, nor is
there any outstanding judgment, order, decree, award, stipulation or injunction
issued by any court or Governmental Entity which may affect any of the Assets or
the Services or impair any Seller from performing its obligations under this
Agreement and the Related Agreements.
3.15 Taxes. All taxes related to the Assets or the providing of Services,
-----
related to taxable periods or portions thereof ending on or prior to the
applicable Closing Date, have been reported and duly paid, collected or withheld
and remitted to the appropriate governmental agency, except for current taxes
not due and payable on or prior to the applicable Closing Date.
3.16 Broker Fees. Except for a fee owed to Communications Equity Associates by
-----------
Sellers, which constitutes an Excluded Liability, no broker, finder or similar
agent has been employed by or on behalf of Sellers in connection with this
Agreement or the Related Agreements and no Seller has entered into an agreement
or understanding of any kind with any Person for the payment of any brokerage
commission, finder's fee or similar compensation in connection with the
Agreement and the Related Agreements.
15
3.17 Employee Matters. Except for the agreement between Arc Communications
----------------
Services, Inc. and International Brotherhood of Electrical Workers Union Local
No. 134 dated January 1, 1989, as amended, no Seller is a party to any contract
with any labor organization, nor has it agreed to recognize any union or other
collective bargaining unit nor has any union or other collective bargaining unit
been certified as representing any of its employees with respect to the
operation of the Assets or the provision of the Services.
3.18 Permits. Schedule 3.18 contains a complete and accurate list of all
-------
Permits (other than AML Licenses and AML Applications) used to provide the
Services to the Properties or to own, lease or operate the Assets. The
execution, delivery and performance of this Agreement by each Seller and
consummation of the transaction contemplated by this Agreement will not result
in the revocation, suspension or limitation of any Permit. Each Seller
possesses all Permits, all Permits are in full force and effect, and all fees
and payments due on or prior to the date hereof pursuant to the terms of each
Permit have been paid by Sellers. Each Seller is in material compliance with
the terms pursuant to which the Permit was issued. No suspension or
cancellation of any Permit is pending or, to the best of each Seller's
knowledge, threatened.
3.19 Signals. Schedule 3.19 sets forth a complete and accurate list of all
-------
MMDS Signals, SMATV Signals and AML Signals carried at the Properties.
3.20 Liabilities to Subscribers. No Seller has any obligation or liability to
--------------------------
any Subscriber except with respect to (i) Customer Deposits and Advance
Subscriber Payments, and (ii) the obligation to supply services to the
Subscribers in the ordinary course of business in accordance with and pursuant
to the terms of the Contracts.
3.21 Affiliations. Except for the Blackstone Group and its Affiliates, no
-------------
Seller or any officer, director or key employee of any Seller or any Affiliate
of any Seller has, directly or indirectly a material interest in (a) any Person
that owns or manages a Property, (b) any Person that provides programming
services to any Property or (c) any Person that manufactures any Equipment or
items in Inventory or distributes or sells Equipment to any Property or any
manager or owner of any Property.
3.22 Restoration. Other than in Seller's ordinary course of business
-----------
consistent with past practice, no claims have been brought by any Person that
any property has been damaged, destroyed, disturbed or removed in the process of
construction or maintenance of the Assets or providing of the Services at the
Properties, which has not been or will not be prior to the Initial Closing or
any applicable Additional Closing, repaired, restored or replaced.
3.23 Franchise Requirements. Except for the Chicago Cable Commission inquiry
----------------------
described in Schedule 3.14, no Seller has received notice from any Governmental
Entity of its intent to enforce any proposed or enacted ordinance pursuant to
which such Seller will be required to enter into a franchise agreement or
similar agreement with a Governmental Entity with respect to the Services. All
locations where wire that is used by the Sellers for the provision of the
Services at the Properties that crosses public rights-of-way are set forth on
Schedule 3.23.
16
3.24 Disclosure. No written information contained in any Schedule delivered
----------
pursuant to this Agreement at the Initial Closing or any Additional Closing
contains or will contain any untrue statement of a material fact or omit to
state a material fact required to make the statements not misleading. To the
extent that any representation or warranty in this Article 3 is qualified as to
"knowledge" of any Seller, the representation and warranty shall be limited to
the actual knowledge of such Seller, its officers and directors (as listed on
the attached Schedule 3.24), as of the date hereof, after having made a
reasonable investigation sufficient to ascertain the accuracy of the information
to which such representation and warranty relates.
3.25 Rate Regulation. No Seller has received notice of any action taken or
---------------
proposed to be taken by any Governmental Entity to enable such Governmental
Entity to regulate the Basic Subscriber Rates or any cable television service
rates charged to Subscribers by such Seller under the Communications Act of
1934, as amended.
3.26 Telephony Services. No Seller has entered into a contract to provide
------------------
telephony services to a Property.
3.27 Inventory. The Inventory constitutes all material inventory of Sellers
---------
used in the provision of Services to the AML Properties. Except for items of
Inventory that may be utilized for conversion of a Property to AML pursuant to
the Joint Marketing Agreement, all items of Inventory are set forth on Schedule
3.27 and are usable and saleable in the ordinary course of business, consistent
with past practice.
3.28 Vehicles. Schedule 3.28 sets forth a complete and accurate list of the
--------
Vehicles being transferred and conveyed to the Buyer. At the Initial Closing,
Sellers shall payoff all amounts owed under the vehicle leases and Sellers shall
direct the leasing company to deliver title to the Vehicles, and the Buyer shall
receive good and marketable title to each and all of the Vehicles, free and
clear of all Liens. The Vehicles are being delivered "as is" with no
representations concerning the Vehicles' condition, quality or fitness for a
particular purpose.
3.29 No Changes. Except as set forth on Schedule 3.29, since the Balance Sheet
----------
Date there has not been any material adverse change in or condition affecting
the Assets taken as a whole.
3.30 Service Standard Reports. The Service Standard reports delivered to Buyer
------------------------
pursuant to Article 5.18 shall be true and correct on the date of delivery to
Buyer in accordance herewith and based on the books and records of Sellers.
ARTICLE 4 Representations and Warranties of Buyer
--------- ---------------------------------------
Buyer represents and warrants to Sellers, as of the Initial Closing Date and
as of each Additional Closing Date, the following:
4.1 Organization and Qualification Buyer is a limited liability company duly
------------------------------
organized, validly existing and in good standing under the laws of the State of
Delaware and, prior to the Initial
17
Closing, will be authorized to transact business as a foreign limited liability
company in the State of Illinois.
4.2 Authority Buyer has the limited liability company right, power, legal
---------
capacity and authority to execute, deliver and perform its obligations under
this Agreement. The execution, delivery and performance of this Agreement and
the Related Agreements by Buyer and the transactions contemplated hereby and
thereby have been duly authorized by all necessary limited liability company
action on the part of Buyer.
4.3 Enforceability Upon execution and delivery by Buyer, this Agreement and
--------------
the Related Agreements shall constitute the valid and legally binding obligation
of Buyer enforceable as against Buyer in accordance with the terms hereof.
4.4 Approvals Except for the Transport Consents, the execution, delivery and
---------
performance of this Agreement and the Related Agreements by Buyer and the
consummation by Buyer of the transactions contemplated hereby and thereby do not
require any consent, notice, authorization or approval which will not have been
made, given or otherwise accomplished by the Initial Closing Date.
4.5 Compliance with Laws. Neither the execution and delivery of this
---------------------
Agreement by Buyer nor the consummation of the transactions contemplated hereby
will violate or result in the violation of any Legal Rule applicable to Buyer.
4.6 Compliance with Other Instruments. The execution and delivery of this
---------------------------------
Agreement and the Related Agreements by Buyer and the consummation of the
transactions contemplated hereby and thereby shall not result in a breach or
violation of any term or provision of, or constitute a breach or default
(including any event that, with the passage of time or giving of notice, or
both, would become a breach or default) under Buyer's charter documents or under
any other agreement to which the Buyer is bound.
ARTICLE 5 Covenants of Sellers and Buyer
--------- ------------------------------
Commencing on the date hereof and continuing through the Final Closing Date
or as otherwise expressly provided in this Article 5, PCTV Corp., jointly and
severally, PEI, and the Buyer severally covenant and agree:
5.1 Access to Assets. Prior to the Initial Closing Date, Sellers shall give
----------------
Buyer, and their respective employees and representatives, during normal
business hours and with reasonable prior notice and provided a representative of
Sellers is present at all times, access to all of the Assets and the Properties
(subject to the Property owners' right to limit such access) and copies of the
Contracts, the AML Licenses, AML Applications, and Permits, and access to the
Equipment, books and records, Inventory, facilities, technical information,
personnel and such other documents and information regarding the Assets,
Services, and the Properties that Buyer and their representatives may reasonably
request.
18
5.2 Qualification. Until the Final Closing Date, each Seller shall maintain
-------------
all qualifications to transact business and remain in good standing in Delaware
and under the laws of each jurisdiction in which the character of the properties
owned, leased or operated by it or the nature of the activities conducted by it
makes such qualification necessary.
5.3 Continuity and Maintenance of Operations. Sellers shall, from the date
----------------------------------------
hereof to the applicable Closing Dates with respect to the Assets: (a) provide
the Services to the Properties and use the Assets in the ordinary course
consistent with past practices and maintain the Equipment in satisfactory
operating condition; (b) use commercially reasonable efforts to preserve intact
the Contracts and its customers, business organizations and business
relationships related to the Assets; (c) maintain the Assets in satisfactory
condition and repair, ordinary wear and tear excepted; (d) maintain current
staffing levels and customer service performance in all material respects in
support of the Properties; (e) pay and perform their obligations with respect to
the Assets on a timely basis in accordance with the terms thereof; and (f)
provide the Services to the Properties in material compliance with all Legal
Rules. Sellers shall not (a) make any material changes in the methods by which
the Sellers collect Accounts Receivable or disconnect Subscribers, or (b) offer
to any Subscribers or any prospective subscribers free installations (except for
free installations during a conversion to AML) or provide discounts for the cost
of Sellers' Services not provided in the ordinary course of business.
Sellers shall not, from the date hereof to the applicable Closing Dates with
respect to the Assets: (a) distribute any Asset to its shareholders; (b)
mortgage, pledge or subject to any Lien any of the Assets except Liens in the
ordinary course of business; (c) sell, lease, license, transfer or otherwise
dispose of or engage in any transaction with respect to any Assets not in the
ordinary course of business; (d) cancel or forgive any Accounts Receivable,
except in the ordinary course, consistent with GAAP; (e) amend, modify or
terminate any Contract except with the consent of Buyer; or (f) change in any
material respect the pricing (including without limitation, the Basic Subscriber
Rate) for the providing of the Services at any Property.
5.4 Adverse Changes. Each Seller shall promptly notify Buyer in writing of
---------------
each material adverse change or condition affecting any of the Assets, any
Property or the Services for which a Closing has not yet occurred and which
becomes known to any Seller. If Seller is given a written notice of default or
termination for a Right of Entry Agreement for which a Closing has not yet been
held, Sellers shall notify Buyer within three (3) business days. Sellers shall
use their best efforts to cure any default and Buyer and Sellers shall
cooperate, at no expense to Buyer, to attempt to cure any such default. Subject
to the other terms and conditions of this Agreement, Sellers shall have the
right to assign the Right of Entry Agreement for which a default or cancellation
notice has been delivered to any Seller if (a) Buyer has agreed to accept the
Right of Entry Agreement subject to the notice, (b) Sellers have received
written confirmation from the owner or property manager that the default has
been cured in full, or (c) Sellers have received oral confirmation from the
owner or property manager, reasonably acceptable to Buyer, that the default has
been cured in full. In no event shall Sellers be required to pay to the owner
or property manager any additional consideration in order to cure a default or
cancellation, except to satisfy the Sellers obligation to cure a default.
19
5.5 Maintain Insurance. Each Seller shall maintain in full force and effect
------------------
all insurance policies with respect to such Assets until a Closing affecting the
Assets has occurred in amounts, scopes and coverages consistent with past
practices and shall not do, permit or allow to be done any act by which any of
such insurance policies may lapse or be suspended, impaired or canceled. Each
Seller shall give written notice to Buyer of any material damage to any of the
Assets or any of the Properties by fire or other casualty promptly upon becoming
aware of same.
5.6 Confidentiality. Each party shall keep the terms of this Agreement and
---------------
the Related Agreements and the transactions contemplated hereby and thereby, and
all information provided by any other party in connection herewith, confidential
and shall not disclose the same to any other Person except for legal counsel,
accountants, lenders, advisers and employees on a need-to-know basis in order to
carry out the terms of this Agreement. From and after the Initial Closing Date,
Sellers shall hold in confidence and shall not disclose to any Person any
confidential information with respect to the Assets, the Services or the
Properties without the prior written consent of the Buyer. Notwithstanding
anything contained in this Article 5.6, any party may disclose information if
required by applicable law or court order or in connection with either party's
disclosure or reporting obligations under any rule or regulation of the SEC,
NASDAQ, FCC or other Government Entity. If this Agreement is terminated, no
party shall use any confidential information for any business purpose, and each
party will keep confidential any information so obtained.
5.7 AML Cooperation. Sellers and Buyer acknowledge that each will be seeking to
---------------
develop their respective businesses in the Market, subject in the case of each
Seller to its compliance with the applicable Non-Competition Agreement.
(a) Sellers and Buyers agree that, as it relates to MMDS Properties being
assigned to Buyer under this Agreement, the Sellers shall use their best efforts
to cooperate with the Buyer's efforts to license any additional AML paths
required to serve the MMDS Properties. If a proposed AML path to an MMDS
Property (an "MMDS Path") causes potential interference to an existing AML path
controlled by Sellers or its affiliates (an "Existing Path"), Sellers and Buyer
agree to cooperate and attempt to develop an engineering plan that will cure any
unacceptable interference on the Existing Path and/or the MMDS Path. Both
parties agree that any such plan may involve the alteration or modification of
the engineering of the Existing Path or the MMDS Path or the use of new or
additional equipment. If, after both parties have used their best efforts to
reduce the interference to acceptable levels for both the MMDS Path and the
Existing Path, the interference has not been reduced to acceptable levels, the
Buyer shall have the right to require the Sellers to buy back the Right of Entry
Agreement related to the MMDS Path. Such right may be exercised, if at all, for
a period of twelve (12) months after the Initial Closing Date. Buyer shall give
the Sellers thirty (30) days notice of its intent to exercise this buy-back
right. If Buyer exercise this buy-back right, the Sellers shall pay to the Buyer
the amount of $444.00 per Unit for each Property for which a Right of Entry
Agreement is assigned to Sellers, and the Buyer shall assign the Right of Entry
Agreement and the related equipment to Sellers, free and clear of any Liens.
20
(b) For all other proposed AML paths, Sellers and Buyer agree that for a period
of five (5) years from the Initial Closing, they shall use each use their best
commercial efforts to resolve any interference issues related to any AML paths
or licenses . In each potential case of interference, the party that is licensed
(the "Accommodating Party") agrees to make any commercially reasonable changes
or take any commercially reasonable actions requested by the party seeking a new
license or modification (the "Interfering Party") which would reduce
interference to acceptable levels, as defined below.
Reasonable changes and actions shall include, but not be limited to: (a)
the Accommodating Party accepting interference on a licensed AML path so long as
the interference is at acceptable levels, (b) the Accommodating Party, agreeing
to test, at the Interfering Party's expense, engineering alternatives and to
implement such alternatives if the resulting interference is reduced to
acceptable levels, or (c) the Accommodating Party replacing equipment, at the
Interfering Party's expense, if the resulting interference is reduced to
acceptable levels. An Accommodating Party agrees that it shall not file any
motions to oppose the granting of a new license or the modification of an
existing license by an Interfering Party unless no commercially reasonable
alternatives changes or actions can be made or taken to reduce the interference
to acceptable levels. The Accommodating Party shall determine in its sole
discretion the acceptable level of interference for a given path based on
whether or not the interference causes a degradation in the signal of the
Accommodating Party.
5.8 No Shop Provision. In consideration of the substantial expenditure of
-----------------
time, effort and expenses to be undertaken by Buyer upon execution of this
Agreement, each Seller agrees that it will not, and will cause its directors,
officers, representatives, agents and Affiliates not to, directly or indirectly
solicit, entertain or encourage inquiries or proposals to dispose of, enter into
an agreement to dispose of, negotiate or enter into discussions with any other
party to dispose of, or enter into any merger or consolidation with respect to
the Assets. Each Seller further agrees that during such time, if any other
Person makes an inquiry with respect to any such disposition, Seller shall
immediately notify Buyer of such inquiry.
5.9 Owner's Acknowledgment Form. Within five (5) days of execution of this
---------------------------
Agreement, the Sellers will deliver to the owners or property managers of each
of the Properties an Owner's Acknowledgment Form in the form of Exhibit G. Upon
receipt of an executed Owner's Acknowledgment Form or other communications
related thereto, Sellers shall promptly send copies of such to the Buyer.
Sellers and Buyer shall discuss potential means to resolve any issue regarding
any Seller's performance under an Right of Entry Agreement or the assignment of
that Right of Entry Agreement to Buyer, presented in any Owner's Acknowledgment
Form. If an owner presents an issue, Sellers shall make reasonable efforts to
set up a meeting with the owner, Sellers and Buyer to discuss issues regarding
Sellers' performance and attend any such meeting. Notwithstanding the
foregoing, Sellers do not covenant that they will take any action to resolve any
issue presented and the resolution of any such issue shall not constitute a
condition precedent to Buyer's obligations to close under this Agreement.
Neither Buyer nor Sellers shall have any liability for the failure of an owner
or property manager to return the Owner's Acknowledgment Form and the return of
the Owner's Acknowledgment Forms by the owners and property
21
managers shall not constitute a condition precedent to Buyer's or Sellers'
obligation to close under this Agreement.
5.10 Digital Internet Service. Upon commencement of the provision of internet
------------------------
service by PEI in Chicago, PEI and Buyer will use their respective reasonable
efforts to negotiate for the providing of PEI's digital internet service to the
Subscribers of the Properties in the Market.
5.11 Employee Matters. PEI shall use commercially reasonable efforts to assist
----------------
Buyer in recruiting employees of PEI that provide technical and field service
for the Assets to accept employment with the Buyer. The parties shall mutually
agree on the employees to be recruited by the Buyer, and unless expressly agreed
to by the Sellers, the employment of any Seller employee by Buyer shall not
commence until the termination of Sellers' provision of field service in the
Services Agreement.
5.12 Satisfaction of Conditions. Each Seller shall use its best efforts to
--------------------------
cause (i) the representations and warranties set forth in Article 3 and the
Schedules and Exhibits herein to be true and correct as of each Closing Date and
(ii) the conditions precedent set forth in Article 6 to have been satisfied as
of each Closing Date. The Buyer shall use its best efforts to cause (i) the
representations and warranties set forth in Article 4 and the Schedules and
Exhibits herein to be true and correct as of each Closing Date and (ii) the
conditions precedent set forth in Article 7 to have been satisfied as of each
Closing Date. Sellers shall use their best efforts to assign all of the
Contracts to Buyer in accordance with this Agreement at the Initial Closing Date
and, if not so assigned, at each Additional Closing. Buyer shall use its best
commercial efforts to secure all Transport Consents as of the Initial Closing
Date.
5.13 Required Consents. Sellers shall use their best efforts to obtain all
-----------------
Required Consents, and Buyer shall fully cooperate with all reasonable requests
by Sellers to assist in securing Required Consents. In no case shall any Seller
or Buyer be obligated to pay any additional consideration to any property owner
in order to secure a Required Consent. The form of the Required Consent for the
Right of Entry Agreements requiring consent is attached hereto as Exhibit J.
5.14 Modification or Breach of Contracts. Commencing on the date hereof and
-----------------------------------
continuing until the applicable Closing Date, no Seller shall terminate or
modify, or commit or cause or suffer to be committed any act that will result in
a breach or violation of any term of or (with or without notice or passage of
time, or both) constitute a default under or otherwise give any Person a basis
for nonperformance under any Contract or any AML License, each of which each
Seller shall maintain in full force and effect. Each Seller shall perform all
of its contractual obligations in accordance with the respective terms thereof.
5.15 No Solicitation.
---------------
(a) Except as provided for in Article 5.11, for a two year period following the
Initial Closing Date, Buyer shall not and shall cause its Affiliates not to
knowingly contact or solicit for employment any person then employed by People's
Choice TV Corp. or any of its subsidiaries, without such entity's consent.
22
(b) For a two year period following the Initial Closing Date, Sellers shall not
and shall cause its Affiliates not to knowingly contact or solicit for
employment any person then employed by the Buyer, its Affiliates or its
subsidiaries without such entity's consent.
5.16 Turning In AML Licenses. Upon the completion of PEI's signal transport
-----------------------
obligations under the Services Agreement, PEI shall promptly turn in or cause to
be turned in FCC Licenses WNTU 820 and WPJA 878 (after the FCC has consented to
the assignment to Xxxx Wireless Holdings, Inc. of WNTX 820) to the FCC. Sellers
have requested that AML Licenses WNTT 479 and WNTX 520 be turned in to the FCC
by Specchio Developers, Ltd.
5.17 Release or Discharge of Liens on Assets. Each Seller shall take all
---------------------------------------
action necessary to cause to be released or discharged any and all Liens on the
Assets.
5.18 Service and Signal Standards
----------------------------
(a) Service Standards. From the date hereof to the Article 5.18 Date, as
-----------------
defined below, the Sellers shall maintain the following service standards
("Service Standards") as they relate to the Chicago Properties:
(1) The average weekly customer service call abandonment rate will not exceed
six (6%) percent of all calls, excluding calls in which the customer hangs up
prior to the commencement of the recorded message (the "Call Abandonment
Standard").
(2) The average weekly wait time to respond to customer service calls shall
not exceed fifty-three seconds (.53) (the "Call Wait Standard").
(3) The Sellers shall make available, and dispatch if the customer so
requests, a technician for installation (a) within two (2) business days from
receipt of a service order for ninety (90%) of all such service orders and (b)
within three (3) business days of receipt of a service order for one hundred
percent (100%) of all such service orders (the "Installation Standard").
(4) The Sellers shall make available, and dispatch if the customer so
requests, a technician for out of service reports by the end of the thirty six
hours after receipt of such report for fifty percent (50%) of all such reports
and by the end of forty eight hours after receipt of such report for one hundred
percent (100%) of all such reports (the "Out of Service Standard").
The Service Standards, and the Signal Quality Standards set forth below, shall
be measured weekly from the date of this Agreement until the Article 5.18 Date
(the "Measurement Period"). Measurements shall be omitted when calculating the
Service Standards with respect to a Property during any period in which an event
of Force Majeure is in effect or during a signal outage and the 24 hours
following the correction of a signal outage at such Property. Sellers shall
keep records of the above measurements for such week, deliver a weekly report to
Buyer setting forth the Sellers' calculations of such measurements for such
week, and make available at its offices in
23
Countryside, Illinois during normal business hours to the Buyer the necessary
books and records to verify such measurements.
(b) Signal Standards. From the date hereof to the Initial Closing Date, the
----------------
Sellers shall maintain the following signal quality standards ("Signal
Standards") as they relate to the Properties:
(1) The video signal measured each Wednesday morning at 10:00 CST at the
AML Demarcation Point and the MMDS Demarcation Point, all as defined below,
shall meet the following standards (the "Video Quality Standards"):
(A) 8.5 to 10.0 dBmV RF input level to optical electronic at all fibers
from the headend.
(B) less than 7 dB peak to valley across the bandwidth of channels
provided.
(C) less than 3 dB variance between adjacent channels.
(D) greater than 40 dB carrier to noise ratio.
(E) less than -55 dBc composite triple beat.
The AML Demarcation Point is the point at which the signal is input into the
Ameritech fiber transmitter at the Sears Tower and the point at which the signal
is input into the AML transmitters at the Sears Tower. The MMDS Demarcation
Point is the point at which the MMDS signal is input into the MMDS transmitters
at the Sears Tower. In order to measure the Video Quality Standards, Sellers
shall provide Buyer access to the Sears Tower on the measurement dates and
representatives of both the Buyer and the Sellers shall collectively take and
record the measurements. If the Buyer's representative shall fail to attend the
measurement meeting, the Sellers shall not be required to meet the Video Quality
Standards for that week.
(2) The Sellers shall have no complete signal outages greater than sixty (60)
minutes in length at the Sears Tower headend or the Milwaukee Avenue downlink
facility ( a "Headend Outage") during the Measurement Period. The Sellers shall
have no more than one (1) complete signal outage greater than one hundred twenty
(120) minutes at any Property (each a "Property Outage"), excluding scheduled
maintenance activities (for which the Buyer has been advised in advance), during
any one week.
Notwithstanding the above, the Sellers shall not be considered in breach of the
Video Quality Standards, the Headend Outage covenant or the Property Outage
covenant with respect to a Property during an event of Force Majeure affecting
such Property.
(c) Purchase Price Reduction Subject to the restrictions and limitations set
------------------------
forth in this Article 5.18, in the event the Sellers fail to meet the Standards
set forth in this Article 5.18 during any week of the Measurement Period (except
for a Headend Outage which shall be measured during the entire Measurement
Period), the Sellers and Buyer agree that the Purchase Price payable on the
Initial Closing Date shall be reduced by the aggregate amount of Reduction
Amounts (as set forth below) for each Standard which the Sellers have failed to
perform in this Article 5.18.
24
Standard Reduction Amount
-------- ----------------
(i) Call Abandonment Standard $ 12,500
(ii) Call Wait Standard $ 12,500
(iii) Installation Standard $ 12,500
(iv) Out of Service Standard $ 12,500
(v) Video Quality Standard $ 25,000
(vi) Headend Outage $ 25,000 per outage
(vii) Property Outage $ 5,000 per outage
greater than one per week
Notwithstanding anything contained in this Article 5.18:
(i) the maximum amount the Purchase Price may be reduced pursuant to this
Article 5.18 shall be Two Hundred Sixty Thousand Dollars ($260,000.00).
(ii) except as provided for in Article 5.3, in no event shall the Sellers'
performance or non-performance of the Standards constitute a condition
precedent to the Buyer's obligations to close under this Agreement, and
(iii) Buyer's only remedy for the Sellers' failure to meet the Standards
in this Article are as set forth in Article 5.18, provided, that such
limitation on remedies shall not apply to the extent that Sellers' failure
to meet such Standards give rise to, provides the basis for, or
constitutes, an Excluded Liability, a breach of representation or warranty
or covenant (other than under this Article 5.18) or results in the failure
to satisfy a closing condition.
(d) Force Majeure. For purposes of this Article, a Force Majeure event shall
--------------
mean and the Purchase Price shall not be reduced, Sellers shall not be liable to
the Buyer under this Article, and Sellers shall not be considered in breach of
this Article, if the Sellers fail to perform their obligations under this
Agreement as a result of a cause beyond their reasonable control, including, but
not limited to, any natural calamity, severe storm, work stoppage, labor
dispute, act of God or a public enemy, act of any military, civil, or regulatory
authority, insurrection, riot, epidemic, fire, civil disturbance, explosion,
lightning strike, fiber lease failure or failure on the part of Ameritech to
maintain such fiber leases, satellite failure, failure of programmers to deliver
programming signals to Sellers' headend or power failure.
(e) Survivability. This Article 5.18 shall be terminated and be of no further
-------------
force or effect upon the earlier of (a) midnight on July 1, 1998, or (b) the
date of the consummation of the Initial Closing (the "Article 5.18 Date") except
that the Article 5.18 Date shall be extended to the Initial Closing if the
Sellers shall have failed to satisfy a condition to Closing by July 1, 1998 and
Buyer has not waived such condition. As of the Article 5.18 Date, except as
provided in the Services Agreement, the Sellers shall no longer be required to
continue to meet any of the Service Standards or the Signal Standards.
25
5.19 New Right of Entry Agreements. Subject to Buyer's consent, PEI may enter
-----------------------------
into new Right of Entry Agreements to provide Services in the Market between the
date of execution of this Agreement and the Initial Closing, and subject to any
requirement that the Sellers obtain the owner's or manager's consent, shall
assign such new Right of Entry Agreements to the Buyer. The Schedules to this
Agreement and the calculation of the number of Units being assigned to Buyer
shall also be recalculated prior to the Initial Closing to reflect any new Right
of Entry Agreements entered into by PEI.
5.20 Audit Waiver. As part of its due diligence process, the Buyer requested
------------
that Xxxxxx Xxxxxxxx & Co. conduct an audit (the "PEI Audit") of the balance
sheet and income statements of PEI related to the Properties for the years 1996
and 1997 and for the three month period from January 1, 1998 to March 31, 1998.
The PEI Audit was completed prior to the execution of this Agreement. Sellers
permitted and cooperated with the PEI Audit under the condition that the Sellers
shall not have any liability to the Buyer based on the procedures used in, or
the results of, the PEI Audit (the "Audit Results"). The Buyer acknowledges and
agrees that the Sellers' representations and warranties concerning the financial
condition of PEI are contained solely in Articles 3.11 and 3.13 of this
Agreement and the related Schedules. The Buyer hereby waives its right to bring
any actions, claims or demands against, or seek indemnification from, the
Sellers based on the Audit Results; provided however, that Buyer does not waive
its right to bring any actions, claims or demands against or seek
indemnification from the Sellers for any breach of a representation, warranty or
covenant made or to be performed by any Seller based on any information
contained in the Audit Results.
5.21. Post-Closing Obligations. Schedule 5.21 sets forth a list of obligations
------------------------
contained in certain Right of Entry Agreements that have not yet been satisfied
or completed. Buyer agrees that it shall be solely responsible for all such
obligations that arise from and after the Closing Date for Contracts transferred
on such date, in accordance with the terms of such Contracts, and in accordance
with the Joint Marketing Agreement, including but not limited to any site
preparation, construction and re-engineering of the AML network or distribution
at each Property.
5.22 Transition Cooperation. From the date of execution of this Agreement
----------------------
until the termination of Xxxxxxxx Services under the Service Agreement, Sellers
shall use its best efforts to provide to the Buyer billing updates up to twice
weekly, as requested, for all active and pending Subscribers in a form
reasonably acceptable to Buyer. Sellers shall provide all relevant Subscriber
and Property data relating to Contracts to be assigned at least five days prior
to any Closing. At Buyer's sole expense, Buyer shall have the right to include
notifications and xxxx stuffers in all Subscriber bills and shall reimburse
Sellers for any direct third party costs of such stuffers. Sellers agree to use
commercially reasonable efforts to assist Buyer to include the notifications and
xxxx stuffers in Subscriber bills. Sellers agree to use its best efforts to
assist the Buyer if Buyer adds additional programming services to the AML system
which enables transport of an enhanced AML line-up during the term of the
Service Agreement. Buyer shall reimburse Sellers for any extraordinary expenses
incurred by Sellers in providing such assistance.
26
5.23. Specchio License. Sellers shall use its best efforts to consummate the
----------------
transfer of good and marketable title to the Specchio License to Buyer, free and
clear of all Liens in accordance with this Agreement and the Shared Use
Agreement. Sellers and Buyer shall use best efforts to file the transfer
applications at the FCC for the Specchio License by June 15, 1998. Sellers
shall be responsible for all damage, cost and expense to Buyer arising from or
incurred in connection with Buyer's inability to utilize the Specchio License
because of Specchio Developers, Ltd.'s breach of the Shared Use Agreement.
ARTICLE 6 Conditions Precedent to Obligations of Buyer
--------- --------------------------------------------
6.1 Conditions Precedent of Buyer to Initial Closing The obligations of Buyer
------------------------------------------------
to consummate the transactions contemplated on the Initial Closing Date are
subject to the satisfaction, on or before the Initial Closing Date, of all the
following conditions:
(a) Each Seller shall have performed and complied with all covenants,
conditions and obligations required by this Agreement to be performed or
complied with by such Seller on or before the Initial Closing Date.
(b) All representations and warranties of each Seller contained in this
Agreement or in any Schedule or Exhibit shall be true, correct and complete in
all material respects on and as though made on the Initial Closing Date. For
purposes of the conditions contained in this Article 6.1(b) and Article 7.1(b),
material shall be defined as adverse changes to the representations and
warranties contained in this Agreement or Schedules and Exhibits that have a
value greater than $200,000 (individually or in the aggregate).
(c) Sellers shall have received and shall have delivered to Buyer the Required
Consents necessary to assign to the Buyer Right of Entry Agreements providing
Services to at least 21,500 Units and all the Required Consents necessary to
assign the Fiber Leases.
(d) Sellers shall have tendered to Buyer all documents which Sellers are
required by Article 8.2(a) and 8.2(c) to deliver to Buyer, in each case
executed.
(e) There shall be no pending litigation or government proceeding which seeks
to restrain or prohibit the consummation of the transactions contemplated
by this Agreement.
(f) Since the date of this Agreement, there shall have been no material adverse
change in the financial condition, business or results of operations of the
business relating to the Assets taken as a whole, or the condition of the
Assets, taken as a whole.
(g) The parties shall have reached an agreement on the amount of the Purchase
Price Reduction, if any, as set forth in Article 5.18.
(h) The Sellers shall have provided to the Buyer the FCC transfer application
for the Specchio License, executed by Specchio Developers, Ltd.
27
(i) The Sellers shall have provided evidence to the Buyer of executed Shared
Use Agreements between Xxxx Wireless Holdings, Inc. and Specchio Developers,
Ltd. and Xxxx Wireless Holdings, Inc. and Xxxxx Microwave, Inc. in the form of
Exhibit C and evidence of the documentation necessary for the assignment of all
the Excluded License held by Specchio Developers, Ltd. and Xxxxx Microwave, Inc.
to Xxxx Wireless Holdings, Inc.
6.2 Condition Precedent of Buyer to Additional Closings. The obligations of
---------------------------------------------------
Buyer to consummate the transactions contemplated on each Additional Closing
Date are subject to the satisfaction, on or before each such Additional Closing
Date, of all the following conditions:
(a) Each Seller shall have performed and complied with all covenants,
conditions and obligations required by this Agreement to be performed or
complied with by such Seller on or before such Additional Closing Date.
(b) All representations and warranties of each Seller contained in this
Agreement or in any Schedule or Exhibit shall be true, correct and complete in
all material respects on and as though made on such Additional Closing Date.
(c) Sellers shall have tendered to Buyer all documents which Sellers are
required by Article 8.3 to deliver to Buyer, in each case fully executed.
6.3 Waiver Buyer may waive any or all of the conditions set forth in Article
------
6.1 or Article 6.2, in whole or in part; however, no such waiver of a condition
shall constitute a waiver by Buyer of any of its other rights or remedies under
this Agreement or otherwise at law or in equity if any Seller should be in
default of any of its covenants, agreements, representations or warranties under
this Agreement.
ARTICLE 7 Conditions Precedent to Obligations of Sellers
--------- ----------------------------------------------
7.1 Conditions Precedent The obligation of Sellers to consummate the
--------------------
transactions contemplated on the Initial Closing Date are subject to the
satisfaction, on or before the applicable Closing Date, of all the following
conditions:
(a) Buyer shall have performed and complied with all covenants, conditions and
obligations required by this Agreement to be performed or complied with by
Buyer on or before the Initial Closing Date.
(b) All representations and warranties made by Buyer contained in this
Agreement or any Schedule or Exhibit shall be true, correct and complete in
all material respects on and as though made on the Initial Closing Date.
(c) Sellers shall have received the Required Consents necessary to assign to
the Buyer Contracts constituting at least 21,500 Units.
28
(d) Buyer shall have provided Sellers with Transport Consents for all of the
MMDS Signals and AML Signals.
(e) Buyer shall have tendered to Sellers the Purchase Price, subject to
adjustment in accordance with Article 2, or deposited a portion of the Purchase
Price with the Escrow Agent in accordance with Article 2.6, and all documents
which Buyer is required by Article 8.2(b) to deliver to Sellers.
(f) There shall be no pending litigation or government proceeding which seeks
to restrain or prohibit the consummation of the transactions contemplated
by this Agreement.
(g) The parties shall have reached an agreement on the amount of the Purchase
Price Reduction, if any, as set forth in Article 5.18.
7.2 Condition Precedent of Sellers to Additional Closings. The obligations of
-----------------------------------------------------
Sellers to consummate the transactions contemplated on each Additional Closing
Date are subject to the satisfaction, on or before each such Additional Closing
Date, of all the following conditions:
(a) Buyer shall have performed and complied with all covenants, conditions and
obligations required by this Agreement to be performed or complied with by Buyer
on or before such Additional Closing Date.
(b) All representations and warranties of Buyer contained in this Agreement or
in any Schedule or Exhibit shall be true, correct and complete in all
material respects on and as though made on such Additional Closing Date.
(c) Buyer shall have tendered to Sellers all documents which Buyer is required
by Article 8.3 to deliver to Sellers, in each case fully executed.
7.3 Waiver Sellers may waive any or all of the conditions set forth in
------
Article 7.1 or Article 7.2 hereof in whole or in part; however, no such waiver
of a condition shall constitute a waiver by Sellers of any of its other rights
or remedies under this Agreement or otherwise at law or in equity if Buyer
should be in default of any of the covenants, agreements, representations or
warranties made by Buyer under this Agreement.
ARTICLE 8 Closing
------------------
8.1 Closing The Initial Closing shall take place on the Initial Closing Date
-------
in the offices of Sellers in Chicago, Illinois on the first day of the first
month after all of the conditions to the Initial Closing set forth in Articles 6
and 7 have been satisfied or waived. The parties agree and acknowledge that
time is of the essence for the Initial Closing. At the Initial Closing, each of
the parties shall take all action and deliver all documents required under this
Agreement. Each Additional Closing, if any, shall be conducted via mail, on the
first day of the first month after the conditions to an Additional Closing set
forth in Articles 6 and 7 have been satisfied or waived
29
accordance herewith. At each Additional Closing, if any, each of the parties
shall take all action and deliver all documents in accordance with Article 8.3.
8.2 Closing Documents
-----------------
(a) At the Initial Closing, Sellers shall deliver to Buyer all of the
following:
(i) a Certificate of the Secretary of each Seller dated the Initial
Closing Date certifying as true and correct copies of the resolutions of
the Board of Directors of each Seller, authorizing the execution, delivery
and performance of this Agreement, the Related Agreements and transactions
contemplated herein and the incumbency of the persons executing this
Agreement and the Related Agreements on behalf of such Seller;
(ii) a Certificate from each Seller dated the Initial Closing Date,
executed by a vice president of such Seller, certifying such Seller's
satisfaction of the conditions set forth in Article 6.1(a), 6.1(b), 6.1(c),
6.1(e), 6.1(f), 6.1(h) and 6.1(i).
(iii) an executed Assignment and Xxxx of Sale Agreement in the form of
Exhibit A;
(iv) all fully-executed Required Consents received by Sellers as of the
Initial Closing Date;
(vi) copies or originals (if available) of all Contracts being assigned
to the Buyer;
(vii) all data, books and records which relate directly to the provision
of Services to the Properties;
(viii) a Certificate of Good Standing of each Seller certified as of a
recent date by the Secretary of State of the State of Delaware;
(ix) an Opinion of Counsel in substantially the form of Exhibit G.
(x) to the extent required to deliver the Assets free and clear of all
Liens, UCC termination statements.
(xi) all other assignments and other instruments reasonably necessary,
in accordance with this Agreement, to convey, assign and transfer to Buyer
good and marketable title to the Assets, free and clear of all Liens.
(b) At the Initial Closing, Buyer shall deliver to Sellers the following:
(i) a Certificate of the Secretary of Buyer certifying as to true and
correct copies of the resolutions of the Executive Board of the Buyer,
authorizing the execution, delivery and performance of this Agreement, the
Related Agreements and the transactions
30
contemplated herein, and the incumbency of the persons executing this
Agreement and the Related Agreements on behalf of the Buyer;
(ii) with respect to the Contracts, an Assumption Agreement executed by
Buyer and Sellers, in the form of Exhibit B;
(iii) a wire transfer of the Purchase Price (as adjusted pursuant to
Article 2) pursuant to instructions received from Sellers;
(iv) an Opinion of Counsel in substantially the form of Exhibit G; and
(v) the Transport Consents.
(c) At the Initial Closing, the parties shall execute and enter into the
following agreements:
(i) Shared Use Agreements between Buyer and PEI, Buyer and Specchio
Developers Investment Corp. ("SDIC") and Buyer and Specchio Developers,
Ltd. in the form of Exhibit C and all documentation necessary for the
assignment of all AML Licenses from Sellers, SDIC and Specchio Developers,
Ltd. to Buyer or its designee;
(ii) an executed Non-Competition Agreement by and between Buyer and each
Seller and by and between Buyer and each of Xxxxxx Xxxxxxxx and Xxxxxxx
Xxxxxxxx, in the form of Exhibit C; and
(iii) a Service Agreement in the form of Exhibit E.
(iv) the Escrow Agreement attached as Exhibit J, if required pursuant to
Article 2.6.
8.3 Additional Closings. For each Additional Closing, if any, for which the
-------------------
Sellers obtain the Required Consents, the Sellers shall deliver any such
Required Consents to the Buyer and the items set forth in Article 8.2(a)(ii),
(iii), (iv), and (vi) and Buyer shall deliver to the Sellers the items set forth
in Article 8.2(b)(ii) and the portion of the Purchase Price required to be
delivered at such Additional Closing pursuant to Article 2.2(b), subject to
Adjustment in Article 2.2.
ARTICLE 9 Indemnification
--------- ---------------
9.1 Indemnification by Sellers PCTV Corp. jointly and severally, and each
--------------------------
other Seller severally agrees to indemnify Buyer from and against any and all
losses, damages, expenses or costs ("Indemnifiable Losses") which Buyer may
suffer or incur by reason of or in connection with: (i) the inaccuracy of any
representation or warranty of any Seller contained in this Agreement, any
Exhibit, or Schedule or any Related Agreement, (ii) the breach by any Seller of
any covenant made by it in this Agreement, any Exhibit or Schedule or any
Related Agreement; (iii) the conduct of the business of any Seller relating to
any Property, the Services or the Assets, including any tax liability of any
Seller, on or prior to the Initial Closing Date (or with respect to Assets
transferred after the Initial Closing Date, on or prior to the Additional
Closing Date on
31
which such Assets are transferred in accordance with Article 2.1), (iv) any
Excluded Liability; or (v) any failure by any Seller to comply with any bulk
sales, bulk transfer or similar law applicable to the transactions contemplated
hereby, or (vi) the failure to consummate the transfer of good and marketable
title to the Specchio License, free and clear of all liens, to Buyer, within one
year of the Initial Closing Date or the inability of the Buyer to utilize the
--
Specchio License because of a breach of the Shared Use Agreement by Specchio
Developers, Ltd. Notwithstanding the foregoing, Sellers shall not be obligated
to indemnify Buyer under this Agreement for Indemnifiable Losses until the
Indemnifiable Losses exceed one percent (1%) of the Purchase Price, in which
event Sellers shall be obligated to indemnify Buyer for all Indemnifiable
Losses. Notwithstanding the foregoing, PCTV Corp. jointly and severally, and
each other Seller severally agrees to indemnify Buyer from and against any
Indemnifiable Losses which Buyer may suffer or incur by reason of or in
connection with (a) any Excluded Liability relating to tax matters under clause
(c) or (f) of the definition thereof, and (b) any fee, fine or penalty assessed
or imposed by the FCC as a result of or in connection with any Excluded
Liability under clause (h) of the definition thereof. The foregoing obligation
of Sellers shall be subject to and limited by each of the qualifications set
forth in Article 9.3 and 9.4.
9.2 Indemnification by Buyer. Buyer agrees to indemnify Sellers from and
------------------------
against any and all losses, damages, expenses or costs incurred ("Indemnifiable
Losses") which any Seller may suffer or incur by reason of or in connection
with: (i) the inaccuracy of any representation or warranty of Buyer contained in
this Agreement, any Exhibit, or Schedule or any Related Agreement, and (ii) the
breach by Buyer of any covenant made by it in this Agreement, any Exhibit or
Schedule or any Related Agreement; (iii) the conduct of the business of Buyer
relating to any Property, the Services or the Assets after the Initial Closing
Date (or with respect to Assets transferred after the Initial Closing Date,
after the Additional Closing Date on which such Assets are transferred in
accordance with Article 2.1); (iv) any Assumed Liability. Notwithstanding the
foregoing, Buyer shall not be obligated to indemnify Sellers under this
Agreement for Indemnifiable Losses until the Indemnifiable Losses exceed one
percent (1%) of the Purchase Price, in which event Buyer shall be obligated to
indemnity Buyer for all Indemnifiable Losses. The foregoing obligation of Buyer
shall be subject to and limited by each of the qualifications set forth in
Article 9.3 and 9.4.
9.3 Notice and Right To Defend Third-Party Claims. Upon receipt of written
---------------------------------------------
notice of any claim or proceeding under which indemnity may be sought under this
Article 9, the party seeking indemnification (the "Indemnitee") shall promptly
inform the party against whom indemnification is sought (the "Indemnitor") in
writing. The Indemnitor shall, at its own cost, defend or settle such claim or
proceeding, except that the Indemnitor shall not settle any such claim or
proceeding without the consent of the Indemnitee, unless such settlement is
without cost or liability to the Indemnitee. The Indemnitee will at its own
expense cooperate with the Indemnitor in connection with any such claim in any
way that the Indemnitor reasonably requests in connection with the defense or
settlement of any such claim. The Indemnitee shall have the right to employ
separate counsel in any such action, claim or proceeding and to participate in
the defense at Indemnitee's cost; provided however, that (i) if the Indemnitor
does not assume the defense of or diligently pursue any such claim or
proceeding, or (ii) if the Indemnitee reasonably determines (x) that there may
be a conflict between the positions of the Indemnitor and
32
Indemnitee in defending such claim or action, or (y) that there may be legal
defenses available to Indemnitee different from or in addition to those
available to Indemnitor, than separate counsel for Indemnitee shall be entitled
to participate in and conduct the defense, in the case of (i) and (ii)(x), or
such different defenses, in the case of (ii)(y), and Indemnitor shall be liable
for reasonable legal and other expenses incurred by Indemnitee in connection
with such defense.
9.4 Survival of Representations and Warranties. The representations and
------------------------------------------
warranties of the parties contained herein shall survive for a period of
eighteen (18) months after the Initial Closing Date (the "Survival Period").
The liabilities of the parties under their respective representations and
warranties shall expire as of the expiration of the Survival Period, unless
written notice setting forth in reasonable detail the claimed inaccuracy of any
such representation or warranty shall be delivered pursuant to Article 9.3 to
the party or parties against whom liability for the claimed inaccuracy is
charged on or before the expiration of the Survival Period.
ARTICLE 10 Termination
---------- -----------
10.1 Prior to Initial Closing. This Agreement may be terminated at any time
------------------------
prior to the Initial Closing:
(a) by mutual agreement of all of the parties;
(b) by Sellers, if the Initial Closing has not occurred on or before July 1,
1998, and Sellers have satisfied all condition to closing.
(c) by Buyers, if the Initial Closing has not occurred on or before July 1,
1998, and Buyers have satisfied all condition to closing (not including
for this purpose, Article 7.1(c).
(d) by Sellers if there have been a material misrepresentation, breach of
warranty or breach of covenant by Buyer under this Agreement and no
Seller is in material default of it obligations hereunder; or
(e) by Buyer is there has been a material misrepresentation, breach of
warranty, or breach of covenant by any Seller under this Agreement, and
Buyer is not in material default of its obligations hereunder.
10.2 Notice of Termination. The party giving notice of termination in
---------------------
accordance with Article 10.1(d) or Article 10.1(e) shall specify with
particularity the basis for such termination, and give the other party an
opportunity to cure. The termination shall be effective ten (10) business days
after the giving of such notice, unless the default has been cured before such
effective date.
10.3 Effect of Termination.
---------------------
(a) In the event of a termination of this Agreement pursuant to Article
10.1(a) or 10.1(b) or 10.1(c), this Agreement shall forthwith become
void and there shall be no liability or obligation on the part of any
party or their respective directors, officers, employees, agents or
other
33
representatives, except for the respective obligations of the parties
under Articles 5.6, 10.3(c), and 11.11, which shall remain in full force
and effect.
(b) In the event of termination of this Agreement pursuant to Article
10.1(d) or 10.1(e), all obligations of the parties hereunder shall
terminate, except for the respective obligations of the parties under
Articles 5.6, 10.3(c), and 11.11, which shall remain in full force and
effect, and except that such termination shall be without prejudice to
any right that the terminating party may have against the other party or
any other Person under the terms of this Agreement, including but not
limited to Article 9, or otherwise.
(c) In the event of termination of this Agreement pursuant to Article
10.1(a), Article 10.1(c) or Article 10.1(d), Sellers shall immediately
repay the Buyer by wire transfer of immediately available funds,
$300,000, the deposit paid by Buyer to PCTV Corp. prior to the date of
this Agreement. In the event of a termination of this Agreement pursuant
to Article 10.1(b) or Article 10.1(d), Sellers shall be entitled to keep
all deposits paid to the Sellers.
10.4 Termination Prior to Final Additional Closing. The Agreement may be
---------------------------------------------
terminated (a) by the Buyer with respect to the Assets not transferred to Buyer
if title to the Assets has not been transferred to the Buyer in accordance
herewith by the Final Closing Date and the Buyer has not delayed the Additional
Closing, and (b) by the Sellers with respect to the Assets not transferred to
Buyer if title to the Assets has not been transferred to the Buyer by the date
that is three months after the Final Closing Date and the Sellers have not
delayed the Additional Closing. Termination of this Agreement pursuant to this
Article 10.4 shall not in any way limit or impair any right of remedy available
to either party under this Agreement, under law, at equity or otherwise.
ARTICLE 11 General
---------- -------
11.1 Assignment. Neither Sellers, on the one hand, nor Buyer on the other, may
----------
assign its rights and obligations under this Agreement to any third party
without the express written consent of the other party, which consent may be
withheld in the sole discretion of the other party.
11.2 Parties in Interest. All of the terms and provisions of this Agreement
-------------------
shall be binding upon and inure to the benefit of and be enforceable by the
respective successors and permitted assigns of the parties hereto.
11.3 Time of Essence. Time is of the essence in each and every provision in
---------------
this Agreement.
11.4 Severability. Any provision of this Agreement that is invalid or
------------
unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective
to the extent of such invalidity or unenforceability without rendering invalid
or unenforceable the remaining provisions of this Agreement or affecting the
validity or enforceability of any provision of this Agreement in any other
jurisdiction.
34
11.5 Amendment. Except as otherwise provided herein, Buyer and Sellers may
---------
amend, modify or supplement this Agreement at any time, but only in writing duly
executed by the parties.
11.6 Entire Understanding. The terms set forth in this Agreement including
--------------------
its Schedules and Exhibits are intended by the parties as a final, complete and
exclusive expression of the terms of their agreement and may not be
contradicted, explained or supplemented by evidence of any prior agreement, or
any prior or contemporaneous oral agreement among the parties with respect to
the subject matter hereof, including, without limitation, the Letter of Intent
dated November 24, 1997 between PCTV Corp. and Buyer, and as amended. The
Schedules and Exhibits attached to this Agreement are incorporated herein by
this reference and made a part of this Agreement.
11.7 Counterparts. This Agreement may be executed simultaneously in any
------------
number of counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
11.8 Applicable Law. This Agreement shall be governed by and construed and
--------------
enforced in accordance with the laws (but not the laws of choice of law) of the
State of Illinois.
11.9 Notices. Any notice or demand desired or required to be given hereunder
-------
shall be in writing and deemed given when personally delivered, sent by
telecopier, overnight courier or deposited in the mail, postage prepaid, sent
certified or registered, return receipt requested, and addressed as set forth
below or to such other address as either party shall have previously designated
by such a notice. Any notice so delivered personally shall be deemed to be
received on the date of delivery; any notice so delivered by telecopy shall be
deemed to be received upon confirmation of transmission by telecopy; any notice
so sent by overnight courier shall be deemed to be received one Business Day
after the date sent; and any notice so mailed shall be deemed to be received on
the date stamped on the receipt.
If to Buyer: OnePoint Communications-Illinois, LLC
c/o The VenCom Group, Inc.
0000 Xxxxxxxx Xxxx, Xxxxx X-000
Xxxxxxxxxxx, Xxxxxxxx 00000
Attention: General Counsel
Telephone: (000) 000-0000
Telecopier (000) 000-0000
If to Sellers: People's Choice TV Corp.
0 Xxxxxxxxx Xxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxxxxxx 00000
Attention: General Counsel
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
35
11.10 Further Acts. If, at any time before, on or after any Closing Date, any
------------
further action by any party is necessary or desirable to carry out the purposes
of this Agreement, at the reasonable request of any other party, such party
shall take or cause to be taken all such necessary or desirable action and
execute, deliver and file or cause to be executed, delivered and filed all
necessary or desirable documentation.
11.11 Expenses.
--------
(a) Each party shall each bear its own costs and expenses incurred in
connection with the negotiation, preparation and execution of this Agreement
(including, but not limited to, any attorneys', accountants', brokers', finders'
and investment bankers' fees), whether or not the Closing occurs.
(b) Any sales, transfer or use tax assessed or imposed in connection with
the transfer of the Assets hereunder shall be borne equally by the Buyer and the
Sellers.
11.12 Attorneys' Fees. If any action or proceeding is commenced between the
---------------
parties with respect to this Agreement, the prevailing party shall be entitled
to all fees and expenses incurred by it in connection with such action or
proceeding, including reasonable attorneys' fees.
11.13 Judicial Proceeding. Each party consents to the exclusive jurisdiction
-------------------
over it of the courts of the State of Illinois and of the United States District
Courts sitting in Chicago, Illinois for the purpose of any action, claim or
cause of action arising our of or based upon this Agreement or relating to the
subject matter hereof and agrees that personal service of process may be made by
registered or certified mail pursuant to the provisions of Article 11.9. Each
party to this Agreement hereby (i) waives, to the extent not prohibited by
applicable law, and agrees not to assert, any claim that it is not subject
personally to the jurisdiction of the above-named courts, any action brought in
any such court is improper or that this Agreement or the subject matter may not
be enforced in or by any such court, and (ii) agrees not to commence or maintain
any action, claim or cause of action arising out of or based upon this Agreement
or relating to the subject matter other than before on the above-named courts
nor make any motion or take any other action seeking to cause the transfer or
removal of any such action, claim or cause of action to any court other than one
of the above-named courts.
11.14 Cumulative Remedies. Except for the limitations on indemnification under
-------------------
this Agreement as expressly set forth in Article 9, none of the rights, powers
or remedies conferred upon any party hereto shall be mutually exclusive, and
each such right, power or remedy shall be cumulative and in addition to every
right, power, or remedy, whether conferred hereby or now or hereafter available
at law, in equity, by statute or otherwise.
11.15 No Publicity. No party shall make any public statement or announcement
------------
with respect to this Agreement or the transactions contemplated hereby without
the prior written consent of the other parties hereto, which consent shall not
be unreasonably withheld or delayed, except as to the extent that such party
shall be obligated by law, in which case the other parties shall be so advised
and the parties shall use their best efforts to cause a mutually agreeable
statement or
36
announcement to be issued. Notwithstanding the above, the parties shall agree to
a form of press release to be used immediately after the execution of this
Agreement and PCTV Corp. shall have the right to file this Agreement as part of
its SEC and NASDAQ reporting and disclosure obligations.
[Signature Page Follows This Page]
37
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed by its duly authorized representative as of the date and year first
written above.
PEOPLE'S CHOICE TV CORP. ONEPOINT COMMUNICATIONS-
ILLINOIS, LLC
By By
------------------------------ ------------------------------
Its Its
----------------------------- -----------------------------
PREFERRED ENTERTAINMENT, INC.
By:
------------------------------
Its:
-----------------------------
OnePoint Communications Corp. hereby guarantees the performance by OnePoint
Communications-Illinois, LLC of all of the obligations of OnePoint
Communications-Illinois, LLC under this Agreement and the Related Agreements to
which OnePoint Communications-Illinois, LLC is a party.
ONEPOINT COMMUNICATIONS CORP.
By:
------------------------------
Its:
-----------------------------
38
