ASSET PURCHASE AGREEMENT
among
PEGASUS COMMUNICATIONS CORPORATION
and
HORIZON TELCOM, INC.
HORIZON INFOTECH, INC.
CHILLICOTHE TELEPHONE COMPANY
--------------------------------
Dated as of October 23, 1996
--------------------------------
Table of Contents
ARTICLE I DEFINITIONS......................................................2
1.1 Certain Definitions......................................2
1.2 Other Definitions.......................................10
ARTICLE II BASIC TRANSACTION...............................................12
2.1 Sale of Assets. .......................................12
2.2 Purchase Price..........................................12
2.3 Escrow Arrangements.....................................12
2.4 Current Liabilities Adjustment..........................12
2.5 Operating Adjustment....................................14
2.6 Subscriber Adjustment...................................16
2.7 Liabilities.............................................16
2.8 Closing.................................................17
2.9 Transactions at Closing.................................17
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLING GROUP.................18
3.1 Organization and Qualification..........................18
3.2 Authority and Validity..................................18
3.3 No Breach or Violation..................................19
3.4 Consents and Approvals..................................20
3.5 Title to Assets.........................................20
3.6 Intellectual Property...................................20
3.7 Compliance with Legal Requirements......................21
3.8 Financial Information...................................21
3.9 Events Subsequent to 1995...............................22
3.10 Undisclosed Liabilities.................................23
3.11 Legal Proceedings.......................................23
3.12 Taxes Relating to the Business..........................24
3.13 Employees...............................................24
3.14 Contracts...............................................25
3.15 Books and Records; Accounts Receivable..................27
3.16 Outstanding Rights......................................28
3.17 Insurance...............................................28
3.18 Disclosure..............................................29
3.19 Brokers or Finders......................................30
3.20 Certain Payments........................................30
3.21 Subscribers.............................................30
3.22 Favorable Business Relationships........................31
3.23 Commission Program......................................31
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PURCHASER.....................31
4.1 Organization and Qualification..........................31
4.2 Authority and Validity..................................31
4.3 No Breach or Violation..................................32
4.4 Consents and Approvals..................................33
4.5 Legal Proceedings.......................................33
4.6 Finders and Brokers.....................................33
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ARTICLE V PRE-CLOSING COVENANTS OF SELLING GROUP..........................34
5.1 Additional Information..................................34
5.2 Exclusivity.............................................34
5.3 Continuity and Maintenance of Operations................35
5.4 Consents and Approvals..................................36
5.5 Securities Filings......................................37
5.6 Collateral Agreements...................................38
5.7 Notification of Certain Matters.........................38
ARTICLE VI PRE-CLOSING COVENANTS OF PURCHASER..............................39
6.1 Consents and Approval...................................39
6.2 Collateral Agreements...................................39
ARTICLE VII CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER................40
7.1 Accuracy of Representations.............................40
7.2 Covenants...............................................40
7.3 Consents................................................40
7.4 Delivery of Documents...................................41
7.5 No Material Adverse Change..............................42
7.6 No Litigation...........................................42
7.7 Minimum Subscribers.....................................43
7.8 Transition Arrangements.................................43
7.9 NRTC Compliance Certificate.............................43
ARTICLE VIII CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLING GROUP............43
8.1 Accuracy of Representations.............................43
8.2 Covenants...............................................44
8.3 Consents................................................44
8.4 Delivery of Documents...................................45
8.5 Litigation..............................................45
ARTICLE IX POST-CLOSING COVENANTS..........................................46
9.1 Transition..............................................46
9.2 Transfer Taxes and Fees.................................46
9.3 1996 NRTC Patronage.....................................46
9.4 Financial Statements....................................46
ARTICLE X TERMINATION.....................................................47
10.1 Events of Termination...................................47
10.2 Liabilities in Event of Termination.....................48
10.3 Procedure Upon Termination..............................48
ARTICLE XI REMEDIES FOR BREACH OF THIS AGREEMENT...........................48
11.1 Survival of Representations and Warranties..............48
11.2 Indemnification Provisions for Benefit of Purchaser.....49
11.3 Indemnification Provisions for Benefit of Selling
Group..................................................51
11.4 Matters Involving Third Parties.........................52
11.5 Determination of Adverse Consequences...................54
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ARTICLE XII MISCELLANEOUS...................................................54
12.1 Parties Obligated and Benefited.........................54
12.2 Notices.................................................54
12.3 Attorneys' Fees.........................................55
12.4 Waiver..................................................56
12.5 Headings................................................56
12.6 Choice of Law...........................................56
12.7 Rights Cumulative.......................................56
12.8 Further Actions.........................................56
12.9 Time of the Essence.....................................56
12.10 Late Payments...........................................57
12.11 Counterparts............................................57
12.12 Entire Agreement........................................57
12.13 Amendments and Waivers..................................57
12.14 Construction............................................57
12.15 Expenses................................................58
Exhibits
Exhibit 1 Service Areas
Exhibit 2 Escrow Agreement
Exhibit 3 Noncompetition Agreement
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ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT ("Agreement") is made as of the 23rd day
of October, 1996, by and among PEGASUS COMMUNICATIONS CORPORATION ("Purchaser"),
a Delaware corporation, HORIZON TELCOM, INC. ("Parent"), an Ohio corporation,
HORIZON INFOTECH, INC. ("Horizon"), an Ohio Corporation, and CHILLICOTHE
TELEPHONE COMPANY ("Chillicothe"), an Ohio corporation. "Seller" has the meaning
assigned to it in Section 1.1. Parent, Horizon and Chillicothe are collectively
referred to herein as the "Selling Group." Purchaser and the Selling Group are
collectively referred to herein as the "Parties."
RECITALS:
WHEREAS, Seller is a party to that certain NRTC Distribution Agreement
(as defined below) with the National Rural Telecommunications Cooperative
("NRTC"), pursuant to which NRTC has granted to Seller the right to distribute
DIRECTV(R) ("DIRECTV") programming offered by DIRECTV, Inc. ("DIRECTV") in the
zipcode areas of Ohio identified in Exhibit 1 ("Service Areas") currently
comprising approximately 155,683 primary residences (including 29,899 homes not
presently passed by cable);
WHEREAS, Purchaser is a diversified media and communications holding
company which, through an indirect subsidiary, provides DIRECTV services in
areas of Connecticut, Massachusetts, Michigan, New Hampshire, New York and
Texas;
WHEREAS, Purchaser desires to purchase the Assets (as hereinafter
defined) from Seller, and Seller desires to sell the Assets to Purchaser, upon
the terms and subject to the conditions set forth herein.
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NOW, THEREFORE, in consideration of the premises and mutual promises
herein made, and in consideration of the representations, warranties, covenants
and agreements herein contained, and intending to be legally bound hereby, the
Parties agree as follows:
ARTICLE I
DEFINITIONS
1.1 Certain Definitions. The following terms shall, when used in
this Agreement, have the following meanings:
"Accountant" means Coopers & Xxxxxxx L.L.P.
"Accounts Receivable" mean the accounts receivable identified
in the Books and Records.
"Adverse Consequences" mean all actions, suits, proceedings,
hearings, investigations, charges, complaints, claims, demands, injunctions,
judgments, orders, decrees, rulings, damages, assessments, dues, penalties,
fines, interest, costs, amounts paid in settlement, Liabilities, obligations,
Taxes, liens, losses, expenses and fees (including court costs, settlement
costs, legal, accounting, experts' and other fees, costs and expenses).
"Affiliate" means, with respect to any Person: (i) any Person
directly or indirectly owning, controlling, or holding with power to vote 10% or
more of the outstanding voting securities of such other Person; (ii) any Person
10% or more of whose outstanding voting securities are directly or indirectly
owned, controlled, or held with power to vote, by such other Person; (iii) any
Person directly or indirectly controlling, controlled by, or under common
control with such other Person; and (iv) any officer, director or partner of
such other Person. "Control" for the foregoing purposes shall mean the
possession, directly or indirectly, of the power to direct or cause
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the direction of the management and policies of a Person, whether through the
ownership of voting securities or voting interests, by contract or otherwise.
"Applicable Rate" means a rate per annum equal to the
corporate base rate of interest announced from time to time by Citibank in New
York City, plus 3%.
"Assets" mean all properties, assets, privileges, powers,
rights, interests and claims of every type and description that are owned,
leased, held, used or useful in the Business and in which Seller has any right,
title or interest or in which Seller acquires any right, title or interest on or
before the Closing Date, wherever located, whether known or unknown, and whether
or not now or on the Closing Date on the Books and Records of Seller, including
the Contracts, Books and Records, Personal Property, Intangibles, Accounts
Receivable, Intellectual Property, Inventory and NRTC Patronage Capital.
Notwithstanding the foregoing, Assets shall not include items identified on
Schedule 1.1(a).
"Assumed Liabilities" mean:
(a) Seller obligations to Subscribers for: (i) Subscriber
deposits held by Seller as of the Closing Date and which are refundable, in the
amount for which Purchaser receives credit under Section 2.4(a); (ii) Subscriber
deferred or prepaid income held by Seller as of the Closing Date for services to
be rendered by the Business after the Closing Date, in the amount for which
Purchaser receives credit under Section 2.4(a); (iii) the delivery of DIRECTV
services to Subscribers of the Business after the Closing Date;
(b) obligations accruing and relating to periods after
the Closing Date under the NRTC Distribution Agreement; and
(c) the Closing Current Liabilities, including items
identified on Schedule 1.1(b).
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Notwithstanding anything in this Agreement to the contrary, the Assumed
Liabilities shall not include: (i) any Liability of the Selling Group or its
Affiliates for income, transfer, sales, use and other Taxes arising in
connection with the consummation of the transactions contemplated hereby; (ii)
any other Liability of the Selling Group for Taxes; (iii) any Liability of the
Selling Group for costs and expenses incurred in connection with this Agreement,
the Collateral Documents or the transactions contemplated hereby or thereby;
(iv) any obligation of the Selling Group under this Agreement or the Collateral
Documents; (v) any Liability of the Selling Group for current or long-term
obligations and Liabilities except as otherwise specifically provided in this
Agreement; (vi) any Liability of the Selling Group to employees or independent
contractors of the Selling Group whether under any contract, Employee Benefit
Plan or otherwise; (vii) any Liability of the Selling Group relating to civil,
criminal and/or administrative cases, proceedings, hearings or investigations,
or awards of arbitration tribunals; (viii) any Liability of any company in the
Selling Group to any Affiliate of any company in the Selling Group; or (ix) any
other Liability of the Selling Group not specifically included in Assumed
Liabilities pursuant to (a), (b) and (c) above.
"Basis" means any past or present fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act or transaction that forms or could form the
basis for any specified consequence.
"Books and Records" mean all books and records relating
principally to the Business and all portions of or extracts from other Selling
Group books and records, which portions or extracts relate principally to the
Business, including purchase and sale order files, invoices, sales materials and
records, customer lists, mailing lists, technical data and records, all
correspondence with and documents pertaining to NRTC, DIRECTV, DSS Systems,
subscribers, suppliers,
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Governmental Authorities and other third parties, all records evidencing the
accounts receivable and a schedule of accounts receivable aging and all other
financial records.
"Business" means the DIRECTV distribution business conducted
by Seller on the date of this Agreement and through the Closing Date pursuant to
rights granted under the NRTC Distribution Agreement.
"Business Day" means any day other than Saturday, Sunday or a
day on which banking institutions in New York, New York are required or
authorized to be closed.
"Closing Current Liabilities" mean Liabilities from the
operations of the Business incurred in the Ordinary Course as of the Closing
Date.
"Collateral Documents" mean the Noncompetition Agreement,
Escrow Agreement and any other documents, instruments and certificates to be
executed and delivered by the Parties hereunder or thereunder.
"Committed Member Residence" has the meaning assigned to it
in the NRTC Distribution Agreement.
"Confidentiality Agreement" means that certain Confidentiality
Agreement dated May 24, 1996 between Purchaser and Xxxxxxx & Associates, L.P.
"DSS System" means the satellite receiving system for DIRECTV
consisting of an eighteen inch satellite antenna dish, an integrated receiver
decoder and a remote control.
"Employee Benefit Plan" means any: (a) nonqualified deferred
compensation or retirement plan or arrangement that is an Employee Pension
Benefit Plan; (b) qualified defined contribution retirement plan or arrangement
that is an Employee Pension Benefit Plan; (c) qualified defined benefit
retirement plan or arrangement that is an Employee Pension Benefit Plan
(including
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any Multiemployer Plan); or (d) Employee Welfare Benefit Plan or material
fringe benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in
ERISA Section 3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in
ERISA Section 3(l).
"Encumbrance" means any mortgage, pledge, lien, encumbrance,
charge, security interest, security agreement, conditional sale or other title
retention agreement, limitation, option, assessment, restrictive agreement,
restriction, adverse interest, restriction on transfer or any exception to or
defect in title or other ownership interest (including restrictive covenants,
leases and licenses).
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Escrow Agreement" means the form of escrow agreement attached
hereto as Exhibit 2.
"Estimated Current Liabilities" mean Liabilities from the
operations of the Business incurred in the Ordinary Course which are estimated
as of the Closing Date and set forth on the Estimated Current Liabilities
Schedule (which include items identified on Schedule 1.1(b) and exclude any
Liabilities on account of Subscriber deposits and deferred or prepaid income).
"Estimated Current Liabilities Schedule" means the schedule of
Estimated Current Liabilities attached hereto as Schedule 1.1(c).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder.
"GAAP" means United States generally accepted accounting
principles as in effect from time to time.
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"Government Authority" means: (i) the United States of
America; (ii) any state, commonwealth, territory or possession of the United
States of America and any political subdivision thereof (including counties,
municipalities and the like); (iii) any foreign (as to the United States of
America) sovereign entity and any political subdivision thereof; or (iv) any
agency, authority or instrumentality of any of the foregoing, including any
court, tribunal, department, bureau, commission or board.
"HCG" means Xxxxxx Communications Galaxy, Inc., an affiliate
of DIRECTV.
"Intangibles" mean all accounts, notes and other receivables,
claims, deposits, repayments, refunds, causes of action, choses in action,
rights of recovery, rights of set-off, rights of recoupment and other intangible
assets owned, used or held for use in the Business.
"Intellectual Property" means all of the following that are
owned, used or held solely for use in the Business, except for the name "Horizon
Infotech, Inc." and all derivations and combinations thereof and its associated
logo: (i) trademarks, service marks, trade dress, logos, trade names and
corporate names, together with all translations, adaptations, derivations and
combinations thereof (including the name SmarTView) and all applications,
registrations and renewals in connection therewith; (ii) all copyrightable
works, all copyrights and all applications, registrations and renewals in
connection therewith; (iii) trade secrets and confidential business information
(including ideas, research and development, know-how, formulas, compositions,
manufacturing and production processes and techniques, technical data, designs,
drawings, specifications, customer and supplier lists, pricing and cost
information and business and marketing plans and proposals); (iv) all computer
software (including data and related documentation); (v) all other proprietary
rights; and (vi) all copies and tangible embodiments thereof (in whatever form
or medium).
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"Inventory" means the DSS Systems and other equipment owned by
Seller for sale, lease or rent to or use by Subscribers.
"Legal Requirement" means any statute, ordinance, law, rule,
regulation, code, plan, injunction, judgment, order, decree, ruling, charge or
other requirement, standard or procedure enacted, adopted or applied by any
Governmental Authority, including judicial decisions applying common law or
interpreting any other Legal Requirement.
"Letter of Intent" means that certain Letter of Intent dated
July 8, 1996 between Purchaser and Chillicothe, as extended.
"Liability" means any liability (whether known or unknown,
whether asserted or unasserted, whether absolute or contingent, whether accrued
or unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
"Multiemployer Plan" has the meaning set forth in ERISA
Section 3(37).
"Noncompetition Agreement" means the form of noncompetition
agreement attached hereto as Exhibit 3.
"NRTC Distribution Agreement" means any contract, commitment,
agreement, instrument or other document pursuant to which NRTC and/or HCG and/or
any of their Affiliates has granted the Selling Group rights relating to the
marketing and distribution of DIRECTV, including that certain NRTC/Member
Agreement for Marketing and Distribution of DBS Services between NRTC and Seller
as amended and supplemented (Contract Number 415).
"NRTC Patronage Capital" means any equity interest in NRTC
allocated to Seller or if such equity interest is not transferrable to Purchaser
at Closing, the right to receive any distributions on account of such equity
interest (net of any Taxes paid by the Selling Group on
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account of such equity interest or owed by the Selling Group on account of such
distributions, as evidenced by documentation reasonably satisfactory to
Purchaser).
"Ordinary Course" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Permit" means any license, permit, consent, approval,
registration, authorization, qualification or similar right granted by a
Governmental Authority.
"Person" means any natural person, corporation, partnership,
trust, unincorporated organization, association, limited liability company,
Governmental Authority or other entity.
"Personal Property" means the personal property of Seller
identified on Schedule 1.1d.
"Representative" means any director, officer, employee, agent,
consultant, adviser or other representative of a Person, including legal
counsel, accountants and financial advisors.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations thereunder.
"Seller" means Chillicothe until such time as a transfer of
the NRTC Distribution Agreement to Horizon is effective, and Horizon thereafter.
"Seller's Accountant" means Xxxxxx Xxxxxxxx L.L.P.
"Subscriber" means any active DIRECTV subscriber account of
the Business, excluding the account of any subscriber who resides outside the
Service Areas or is not otherwise a Committed Member Residence.
"Tax" means any federal, state, local or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits,
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environmental, customs duties, capital stock, franchise, profits, withholding,
social security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated or other tax of any kind whatsoever, including any interest,
penalties, fees, deficiencies, assessments, additions or other charges of any
nature with respect thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for
refund or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
"Termination Date" means November 15, 1996 or December 31,
1996 if Closing is extended to December 31, 1996 as provided in Section 2.8 or a
mutually agreeable earlier date.
1.2 Other Definitions. The following terms shall, when used in
this Agreement, have the meanings assigned to such terms in the Sections
indicated.
Term Section
---- -------
"Accountant's Current Liabilities Report"............................... 2.4
"Accountant's Operating Adjustments Report"............................. 2.5(b)
"Adjusted Accountant's Current Liabilities Report....................... 2.4
"Adjusted Accountant's Operating Adjustments Report".................... 2.5(b)
"Agreement".............................................................Preamble
"Audited Financial Statements".......................................... 3.8
"Closing"............................................................... 2.7
"Closing Date".......................................................... 2.3
"Code".................................................................. 5.8
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"Contracts"............................................................. 3.14
"Current Liabilities Objection Period".................................. 2.4
"Current Liabilities Report"............................................ 2.4
"DIRECTV"...............................................................Recitals
"DIRECTV"...............................................................Recitals
"Escrow Deposit"........................................................ 2.3
"Financial Statements".................................................. 3.8
"Lease"................................................................. 9.2
"NRTC"..................................................................Recitals
"Operating Adjustment".................................................. 2.5(b)
"Operating Adjustment Objection Period"................................. 2.5(b)
"Operating Adjustments Report".......................................... 2.5(b)
"Parties"...............................................................Preamble
"Purchase Price"........................................................ 2.2(a)
"Purchaser".............................................................Preamble
"Second Current Liabilities Objection Period"........................... 2.4
"Second Operating Adjustments Objection Period"......................... 2.5(b)
"Service Areas".........................................................Recitals
"Stub Period Financial Statements"...................................... 5.5(b)
"Survival Period"....................................................... 11.1
"Transfer".............................................................. 5.2
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ARTICLE II
BASIC TRANSACTION
2.1 Sale of Assets. Subject to the terms and conditions of this
Agreement, Seller agrees to sell, transfer, assign, convey and deliver to
Purchaser at Closing, all of Seller's right, title and interest in, to and under
the Assets, free and clear of all Encumbrances, for the consideration set forth
in Section 2.2 below.
2.2 Purchase Price. In consideration for Seller's sale of the Assets
to Purchaser, Purchaser shall pay to Seller at Closing cash in an amount equal
to $12 million minus the amount of the Estimated Current Liabilities ("Purchase
Price"), subject to the escrow arrangements set forth in Section 2.3 and the
Purchase Price adjustments set forth in Sections 2.4, 2.5 and 2.6.
2.3 Escrow Arrangements. Upon execution of this Agreement by the
Parties, Purchaser shall deposit $100,000 into escrow ("Escrow Deposit")
pursuant to the terms and conditions of the Escrow Agreement, which amount shall
constitute a payment on account of the Purchase Price that reduces the amount of
the Purchase Price payable by Purchaser directly to Seller at Closing.
2.4 Current Liabilities Adjustment. Within 45 days after Closing,
Purchaser shall deliver to the Selling Group a report (the "Current Liabilities
Report"), showing in detail its final determination of Closing Current
Liabilities, together with any documents substantiating the Current Liabilities
Report. The Selling Group shall provide Purchaser with reasonable access to all
records that the Selling Group has in its possession and that are necessary or
appropriate for Purchaser to prepare the Current Liabilities Report, and
Purchaser shall provide the Selling Group with reasonable access to all records
that Purchaser has in its possession and that are necessary or appropriate for
the Selling Group to evaluate the Current Liabilities Report. Within 20 days
after receipt of the Current Liabilities Report ("Current Liabilities Objection
Period"), the Selling Group
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shall give Purchaser written notice of its objections, if any, to the Current
Liabilities Report. In the event that the Selling Group notifies Purchaser of
objections to the Current Liabilities Report within the Current Liabilities
Objection Period, Purchaser and the Selling Group shall either agree upon
Closing Current Liabilities or instruct the Accountant to make a determination
("Accountant's Current Liabilities Report") of the Closing Current Liabilities
within 20 days after delivery of such instructions, whereupon the Accountant
shall deliver the Current Liabilities Report to the Parties. Within 20 days
after receipt of the Accountant's Current Liabilities Report ("Second Current
Liabilities Objection Period"), the Selling Group shall give Purchaser written
notice of the Selling Group's objections, if any, to the Accountant's Current
Liabilities Report. In the event that the Selling Group notifies Purchaser of
objections to the Accountant's Current Liabilities Report, the Parties shall
instruct the Accountant to deliberate with Seller's Accountant and make a final
and binding determination of the Closing Current Liabilities acceptable to
Seller's Accountant ("Adjusted Accountant's Current Liabilities Report"). Within
20 days after (x) the Accountant delivers the Adjusted Accountant's Current
Liabilities Report to the Parties, (y) expiration of the Second Current
Liabilities Objection Period without notice of objections from the Selling Group
or (z) agreement by the Parties upon Closing Current Liabilities or expiration
of the Current Liabilities Objection Period without notice of objections from
the Selling Group, as applicable, Purchaser shall pay to Seller cash in an
amount equal to the excess of the Estimated Current Liabilities over the Closing
Current Liabilities, or Seller shall pay to Purchaser cash in an amount equal to
the excess of the Closing Current Liabilities over the Estimated Current
Liabilities. The Parties shall provide to the Accountant such information and
assistance as the Accountant may reasonably request for purposes of preparing
the Accountant's Current Liabilities Report. Each
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of the Selling Group and Purchaser shall pay one-half of the professional
fees charged by the Accountant for the engagement required hereunder.
2.5 Operating Adjustment.
(a) The Purchase Price shall be adjusted as follows
("Operating Adjustment") in accordance with the procedures set forth in Section
2.5(b):
i. Adjustments on a pro rata basis as of the Closing
Date shall be made for all expenses prepaid and deposits made by Seller, all as
determined in accordance with GAAP consistently applied, and to reflect the
principle that all such expenses and deposits attributable to the Business for
the period prior to the Closing Date are for the account of Seller, and all such
expenses and deposits attributable to the Business for the period on and after
the Closing Date are for the account of Purchaser.
ii. All Subscriber deposits which have not been applied
or refunded as of the Closing Date shall be retained by Seller and shall
constitute a corresponding decrease in the Purchase Price credited to the
account of Purchaser.
iii. All deferred or prepaid income as of the Closing
Date shall be retained by Seller and shall constitute a corresponding decrease
in the Purchase Price credited to the account of Purchaser.
iv. All Subscriber rebates payable under the $200
Rebate Program of DirecTV on account of Subscribers activated since August 29,
1996, shall be paid to Subscribers (or credited against Subscribers' programming
invoices) by Purchaser, and shall constitute a decrease in the Purchase Price
credited to the account of Purchaser in an amount equal to (x) the number of
Subscribers activated since August 29, 1996 minus the number of such Subscribers
who have been paid a full cash rebate by Seller multiplied by (y) $160.
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v. All DSS System access card changeover costs for
Subscribers that have been or will be billed by NRTC pursuant to NRTC's
memorandum of August 7, 1996, as updated, shall be paid by Purchaser and shall
constitute a decrease in the Purchase Price credited to the account of
Purchaser, except for those costs previously paid by Seller.
(b) Within 45 days after Closing, Purchaser shall deliver to
the Selling Group a report (the "Operating Adjustments Report"), showing in
detail its final determination of any Operating Adjustment owed to Seller or
Purchaser, together with any documents substantiating the adjustment set forth
in the Operating Adjustments Report. The Selling Group shall provide Purchaser
with reasonable access to all records that the Selling Group has in its
possession and that are necessary or appropriate for Purchaser to prepare the
Operating Adjustments Report, and Purchaser shall provide the Selling Group with
reasonable access to all records that Purchaser has in its possession and that
are necessary or appropriate for the Selling Group to evaluate the Operating
Adjustments Report. Within 20 days after receipt of the Operating Adjustments
Report ("Operating Adjustments Objection Period"), the Selling Group shall give
Purchaser written notice of its objections, if any, to the Operating Adjustments
Report. In the event that the Selling Group notifies Purchaser of objections to
the Operating Adjustments Report within the Operating Adjustments Objection
Period, Purchaser and the Selling Group shall either agree upon the Operating
Adjustment or instruct the Accountant to make a determination ("Accountant's
Operating Adjustments Report") of the Operating Adjustment within 20 days after
delivery of such instructions, whereupon the Accountant shall deliver the
Accountant's Operating Adjustments Report to the Parties. Within 20 days after
receipt of the Accountant's Operating Adjustments Report ("Second Operating
Adjustments Objection Period"), the Selling Group shall give Purchaser written
notice of the Selling Group's objections, if any, to the Accountant's Operating
Adjustments
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Report. In the event that the Selling Group notifies Purchaser of objections to
the Accountant's Operating Adjustments Report, the Parties shall instruct the
Accountant to deliberate with Seller's Accountant and make a final and binding
determination of the Operating Adjustment acceptable to Seller's Accountant
("Adjusted Accountant's Operating Adjustments Report"). Within 20 days after (x)
the Accountant delivers the Adjusted Accountant's Operating Adjustments Report
to the Parties, (y) expiration of the Second Operating Adjustments Objection
Period without notice of objections from the Selling Group or (z) agreement by
the Parties upon the Operating Adjustment or expiration of the Operating
Adjustments Objection Period without notice of objections from the Selling
Group, as applicable, Purchaser shall pay to Seller cash in an amount equal to
any Operating Adjustment owed to Seller, or Seller shall pay to Purchaser cash
in an amount equal to any Operating Adjustment owed to Purchaser. The Parties
shall provide to the Accountant such information and assistance as the
Accountant may reasonably request for purposes of preparing the Accountant's
Operating Adjustments Report. Each of the Selling Group and Purchaser shall pay
one-half of the professional fees charged by the Accountant for the engagement
required hereunder.
2.6 Subscriber Adjustment. In the event that Purchaser
waives the condition precedent to Closing set forth in Section 7.7, the Purchase
Price payable by Purchaser to Seller at Closing shall be reduced by an amount
equal to (x) the difference between 4,000 and the number of Subscribers at
Closing (as determined in accordance with Section 7.7) multiplied by (y) $3,000.
2.7 Liabilities. Subject to the terms and conditions of this
Agreement, Purchaser shall assume and become responsible for all of the Assumed
Liabilities at Closing. The Parties agree that neither Purchaser nor any of its
Affiliates shall assume, nor shall it be deemed to have assumed, nor shall it
pay, perform, discharge or be liable in any manner whatsoever for, nor shall it
have any
16
responsibility with respect to any obligation or Liability of the Business or
the Selling Group not included within the definition of Assumed Liabilities.
2.8 Closing. The Closing of the transactions contemplated by this
Agreement and the Collateral Documents ("Closing") shall take place at the
offices of Purchaser, or at such other location as the parties may agree on the
following date:
(a) November 15, 1996 or such earlier date as the parties
may agree, provided the conditions precedent to the obligations of the Parties
hereunder set forth in Articles VII and VIII (other than those conditions with
respect to actions the respective Parties will take at Closing) are satisfied or
waived; or
(b) if Closing has not occurred by November 15, 1996 because
the consents required under the NRTC Distribution Agreement have not been
obtained, December 31, 1996 or such earlier date as the Parties may agree,
provided the conditions precedent to the obligations of the Parties hereunder
set forth in Articles VII and VIII (other than those conditions with respect to
actions the respective Parties will take at the Closing) are satisfied or
waived.
2.9 Transactions at Closing. At the Closing:
(a) Seller shall:
i. contribute, transfer, convey, assign and deliver
the Assets to Purchaser, free and clear of any Encumbrances other than the
Assumed Liabilities;
ii. along with the other companies in the Selling
Group, deliver to Purchaser such documents, instruments and certificates as are
required by this Agreement to be delivered by the Selling Group.
17
(b) Purchaser shall deliver to Seller:
i. the Purchase Price (subject to the escrow
arrangements and adjustments set forth in Sections 2.3 and 2.5) by wire transfer
of immediately available funds to such account or accounts as Seller shall
designate to Purchaser prior to the Closing; and
ii. such documents, instruments and certificates as are
required by this Agreement to be delivered by Purchaser.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLING GROUP
The Selling Group hereby represents and warrants to Purchaser that the
statements contained in Article III are correct and complete as of the date of
this Agreement and will be correct and complete as of the Closing Date (as
though made then and as though the Closing Date were substituted for the date of
this Agreement throughout Article III).
3.1 Organization and Qualification. Each company in the Selling
Group is a corporation duly organized, validly existing and in good standing
under the laws of the State of Ohio, with all requisite power and authority to
own, lease and use its assets as they are currently owned, leased and used and
to conduct its business as it is currently conducted. Each company in the
Selling Group is duly qualified or licensed to do business and in good standing
in each jurisdiction in which the character of the properties owned, leased or
used by it or the nature of the activities conducted by it make such
qualification necessary, except any such jurisdiction where the failure to be so
qualified or licensed would not have a material adverse effect on the Assets or
the Business or on the validity, binding effect or enforceability of this
Agreement or the Collateral Documents.
3.2 Authority and Validity. Each company in the Selling Group has
all requisite power and authority to execute and deliver, to perform its
obligations under, and to consummate the
18
transactions contemplated by, this Agreement and the Collateral Documents to
which it is a party. The execution and delivery by each company in the Selling
Group of, the performance by each company in the Selling Group of its
obligations under, and the consummation by each company in the Selling Group of
the transactions contemplated by, this Agreement and the Collateral Documents to
which it is a party have been duly authorized by all requisite corporate action
of each respective company in the Selling Group. This Agreement has been duly
executed and delivered by each company in the Selling Group and is the legal,
valid, and binding obligation of each company in the Selling Group, enforceable
against each such company in accordance with its terms. Upon the execution and
delivery of the Collateral Documents to which it is a party by each company in
the Selling Group, the Collateral Documents will be the legal, valid and binding
obligations of each such company, enforceable against each such company in
accordance with their respective terms.
3.3 No Breach or Violation. Subject to obtaining the consents,
approvals, authorizations, and orders of and making the registrations or filings
with or giving notices to Governmental Authorities and Persons recited in the
exception to Section 3.4, the execution, delivery and performance by each
company in the Selling Group of this Agreement and the Collateral Documents to
which it is a party, and the consummation of the transactions contemplated
hereby and thereby in accordance with the terms and conditions hereof and
thereof, do not and will not conflict with, constitute a violation or breach of,
constitute a default or give rise to any right of termination or acceleration of
any right or obligation of any company in the Selling Group under, or result in
the creation or imposition of any Encumbrance upon the Assets or the Business by
reason of the terms of (i) the certificate of incorporation, by-laws or other
charter or organizational document of any company in the Selling Group, (ii) any
material contract, agreement, lease, indenture or other
19
instrument to which any company in the Selling Group is a party or by or to
which any company in the Selling Group or the Assets may be bound or subject,
(iii) any order, judgment, injunction, award or decree of any arbitrator or
Governmental Authority or any statute, law, rule or regulation applicable to any
company in the Selling Group or (iv) any Permit of any company in the Selling
Group, which in the case of (ii), (iii) or (iv) above would have a material
adverse effect on the Assets or the Business or the ability of any company in
the Selling Group to perform its obligations under this Agreement or any
Collateral Document.
3.4 Consents and Approvals. Except (i) as required under the NRTC
Distribution Agreement, and (ii) as set forth in Schedule 3.4 hereto, no
consent, approval, authorization or order of, registration or filing with, or
notice to, any Governmental Authority or any other Person is necessary to be
obtained, made or given by any company in the Selling Group in connection with
the execution, delivery and performance by it of this Agreement or any
Collateral Document or for the consummation by it of the transactions
contemplated hereby or thereby.
3.5 Title to Assets. Seller has exclusive, good and marketable
title to the Assets, free and clear of any and all Encumbrances of any kind and
nature.
3.6 Intellectual Property.
(a) Seller owns or has the right to use, pursuant to
license, sublicense, agreement or permission, all Intellectual Property used in
the operation of the Business as currently conducted and as currently proposed
to be conducted, all of which Intellectual Property is identified on Schedule
3.6(a). Each item of Intellectual Property owned or used by Seller in the
Business immediately prior to the Closing hereunder will be owned or available
for use by Purchaser on identical terms and conditions immediately subsequent to
the Closing hereunder. Seller has taken
20
all necessary and desirable action to maintain and protect each item of
Intellectual Property that it owns or uses in connection with the Business.
(b) Neither Seller nor any predecessor in interest has in
its operation of the Business interfered with, infringed upon, misappropriated
or otherwise come into conflict with, and the operation of the Business as
currently conducted does not violate or infringe upon, any Intellectual Property
rights of third parties, and neither Seller nor any predecessor in interest has
received any charge, complaint, claim, demand or notice alleging any such
interference, infringement, misappropriation or violation (including any claim
that Seller or its predecessor in interest must license or refrain from using
any Intellectual Property rights of any third party). To the best knowledge of
the Selling Group, no third party has interfered with, infringed upon,
appropriated or otherwise come into conflict with any Intellectual Property
rights of Seller.
3.7 Compliance with Legal Requirements. Seller and any
predecessor in interest have operated the Business in compliance with all Legal
Requirements. No action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand or notice has been filed, commenced or, to the best of
the Selling Group's knowledge, threatened against Seller or any predecessor in
interest alleging any failure to so comply and there is no Basis for any claim
that such a failure to comply exists.
3.8 Financial Information. The Selling Group has delivered, or
will deliver not later than the Closing Date to Purchaser the following
financial statements ("Financial Statements"): (i) audited statements of net
assets to be acquired, statements of operations and statements of cash flows for
the Business as of and for the fiscal years ended December 31 of each of 1993
through 1995 ("Audited Financial Statements"); (ii) internally prepared
statements of operations for the Business for each month of fiscal year ended
December 31, 1995 and of fiscal year ending
21
December 31, 1996 (to date); and (iii) internally prepared statements of net
assets to be acquired and statements of operations for each quarter of the
fiscal year ended December 31, 1995 and of the fiscal year ending December 31,
1996 (to date). The Financial Statements (including the notes thereto) have been
prepared in accordance with GAAP applied on a consistent basis throughout the
periods covered thereby and present fairly the net assets to be acquired,
results of operations and cash flows of the Business as of the dates and for the
periods indicated, subject in the case of the unaudited Financial Statements
only to normal year-end adjustments (none of which will be material in amount)
and the omission of footnotes. Purchaser shall pay on the Closing Date the
reasonable fees and expenses of the Selling Group's Accountant related to its
preparation of the Financial Statements, provided that Purchaser's liability
therefor shall in no event exceed $40,000.
3.9 Events Subsequent to 1995. Except as set forth on Schedule
3.9, since fiscal year ended December 31, 1995: (i) no company in the Selling
Group has sold, leased, transferred or assigned any assets of the Business,
tangible or intangible, except in the Ordinary Course; (ii) no company in the
Selling Group has entered into any agreement, contract, lease or license (or
series of related agreements, contracts, leases and licenses) relating to the
Business and involving more than $1,000 or outside the Ordinary Course; (iii) no
third party has accelerated, terminated, modified or canceled any material
agreement, contract, lease or license (or series of related agreements,
contracts, leases and licenses) relating to the Business; (iv) no company in the
Selling Group has imposed or permitted the imposition of any Encumbrance upon
any assets of the Business, tangible or intangible; (v) no company in the
Selling Group has made any capital investment in, any loan to, or any
acquisition of the securities or assets of, any other Person (or series of
related capital investments, loans or acquisitions) relating to the Business;
(vi) no company in the Selling Group has issued any note, bond or other debt
security or created, incurred, assumed
22
or guaranteed any indebtedness for borrowed money or capitalized lease
obligations relating to the Business; (vii) no company in the Selling Group has
delayed or postponed the payment of accounts payable and other Liabilities
relating to the Business and outside the Ordinary Course; (viii) no company in
the Selling Group has canceled, compromised, waived or released any right or
claim (or series of related rights and claims) relating to the Business and
involving more than $1,000 or outside the Ordinary Course; (ix) no company in
the Selling Group has granted any license or sublicense of any rights under or
with respect to any Intellectual Property used or useful in the Business; (x)
there has not been any other material occurrence, event, incident, action,
failure to act or transaction outside the Ordinary Course involving the Business
except that is generally known in the industry; and (xi) no company in the
Selling Group has committed to any of the foregoing. Since the fiscal year ended
December 31, 1995, there has been no material adverse change in, and no event
has occurred which is likely, individually or in the aggregate, to result in any
material adverse change in, the operations, assets, prospects or condition
(financial or otherwise) of the Business.
3.10 Undisclosed Liabilities. To the best of the Selling Group's
knowledge, no company in the Selling Group has any Liability relating to the
Business and there is no Basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim or demand against
any company in the Selling Group giving rise to any Liability relating to the
Business, except for Liabilities set forth in Schedule 3.10 (none of which
results from, arises out of, relates to, is in the nature of, or was caused by
any breach of contract, breach of warranty, tort, infringement or violation of
any Legal Requirement).
3.11 Legal Proceedings. Except as set forth on Schedule 3.11,
there are no outstanding judgments or orders against or otherwise affecting the
Business or the Assets. There is no action,
23
suit, complaint, proceeding or investigation, judicial, administrative or
otherwise, that is pending or threatened and which, if adversely determined,
might materially and adversely affect the Business or the Assets or which
challenges the validity or propriety of any of the transactions contemplated by
this Agreement or the Collateral Documents. To the best of the Selling Group's
knowledge, there is no Basis upon which any such action, suit, proceeding or
investigation could be brought or initiated.
3.12 Taxes Relating to the Business. The Selling Group has duly and
timely filed in proper form all Tax Returns for all Taxes relating to the
Business required to be filed with the appropriate Governmental Authority. All
Taxes relating to the Business due and payable by the Selling Group (or claimed
to be due and payable) have been paid (regardless whether Tax Returns relating
to such Taxes have been duly and timely filed or if filed, regardless whether
such Tax Returns are deficient), except such amounts as are being contested
diligently and in good faith and are not in the aggregate material and for which
the Selling Group has adequately reserved in its financial statements. Except as
set forth in Schedule 3.12, there are no pending Tax audits, claims or
proceedings relating to the Assets or the Business and income therefrom.
3.13 Employees.
(a) No Affiliate of the Selling Group has any material
financial interest, direct or indirect, in any supplier or other outside
business which has engaged in business transactions with the Business.
(b) The Selling Group has complied with all Legal
Requirements relating to the employment of labor for the Business, including
ERISA, continuation coverage requirements with respect to group health plans,
and those relating to wages, hours, collective bargaining, unemployment
compensation, worker's compensation, equal employment opportunity, age and
24
disability discrimination, immigration control and the payment and withholding
of social security and other Taxes, and the Business is not liable for any
arrearage of wages or any Taxes for failure to comply with any of the foregoing.
(c) With respect to employees who provide services to the
Business:
i. No company in the Selling Group is a Party to or is
bound by any collective bargaining agreement, nor has experienced any strikes,
grievances, claims of unfair labor practices or other collective bargaining
disputes.
ii. No company in the Selling Group has committed any
unfair labor practices.
iii. No company in the Selling Group has recognized or
agreed to recognize nor is required to recognize any union or other collective
bargaining unit.
iv. No union or other collective bargaining unit has
been certified as representing any of such employees, nor has any company in the
Selling Group received any requests from any party for recognition as a
representative of employees for collective bargaining purposes.
v. To the Selling Group's best knowledge, no employees
are engaged in any organizing activity with respect to any labor organization.
vi. No company in the Selling Group has employment
agreements of any kind, oral or written, express or implied, that would require
Purchaser or any Affiliate of Purchaser to employ any Person after the Closing
Date.
3.14 Contracts. Schedule 3.14 contains a true, correct and complete
list of each contract agreement or commitment, whether written or oral, relating
principally to the Business ("Contracts"), including:
25
i. the NRTC Distribution Agreement;
ii. any agreement (or group of related agreements) for
the lease or rental of personal property to or from any Person (including any
form of lease or rental agreements for DSS Systems accompanied by an itemized
list of the Subscribers who are parties to such agreements and the expiration
dates of such agreements);
iii. any agreement (or group of related agreements) for
the purchase or sale of supplies, products or other personal property, or for
the furnishing or receipt of services (including any forms of agreement or
purchase order relating to the sale of DSS Systems or the sale of DIRECTV
services);
iv. any agreement concerning a partnership or joint
venture;
v. any agreement (or group of related agreements)
under which the Selling Group has created, incurred, assumed or guaranteed any
indebtedness for borrowed money, or any capitalized lease obligation, or under
which the Selling Group has imposed an Encumbrance;
vi. any agreement concerning confidentiality or
noncompetition;
vii. any agreement involving any officer, director or
shareholder of the Selling Group;
viii. any agreement for the employment of any individual
on a full-time, part-time, consulting or other basis;
ix. any agreement relating to the services of sales
representatives, agents and other independent contractors (including agreements
relating to the installation of DSS Systems);
26
x. any agreement under which the Selling Group has
advanced or loaned any amount to any employees or any of Selling Group's current
or former directors, officers or shareholders;
xi. any agreement under which the consequences of a
default or termination could have a material adverse effect on the financial
condition, operations, results of operations or future prospects of the
Business; and
xii. any other agreement (or group of related
agreements) the performance of which involves consideration in excess of $1,000.
The Selling Group has delivered to Purchaser a correct and complete
copy of each written agreement listed on Schedule 3.14 and a written summary
setting forth the terms and conditions of each oral agreement listed therein.
With respect to each such agreement: (A) the agreement is legal, valid, binding,
enforceable and in full force and effect; (B) the agreement will continue to be
legal, valid, binding, enforceable and in full force and effect on identical
terms following the consummation of the transactions contemplated hereby; (C) no
party is in breach or default, and no event has occurred which with notice or
lapse of time would constitute a breach or default, or permit termination,
modification or acceleration, under the agreement; and (D) no party has
repudiated any provision of the agreement.
3.15 Books and Records; Accounts Receivable. Schedule 3.15
identifies and describes all of the Books and Records. The Books and Records
accurately and fairly represent the Business and its results of operations in
all material respects. All Accounts Receivable and Inventory of the Business are
reflected properly on such Books and Records. The Accounts Receivable net of bad
debt reserves are, to the knowledge of Seller, valid receivables subject to no
setoffs or counterclaims and are, to the knowledge of Seller, current and
collectible, and will be collected in
27
accordance with their terms at their recorded amounts.
3.16 Outstanding Rights. Except for this Agreement, there is no
agreement to which any company in the Selling Group is a party or is otherwise
bound relating to the direct or indirect sale of all or substantially all the
Assets, the direct or indirect transfer of the Business, a merger or
consolidation of Seller with or into any entity or the sale of all or the
controlling portion of Parent's or Seller's capital stock.
3.17 Insurance. Schedule 3.17 sets forth the following information
with respect to each insurance policy relating to the Business (including
policies providing property, casualty, liability and workers' compensation
coverage and bond and surety arrangements) to which Seller and any predecessor
in interest have been a party, a named insured, or otherwise the beneficiary of
coverage at any time:
i. the name, address, and telephone number of the agent;
ii. the name of the insurer, the name of the policyholder
and the name of each covered insured;
iii. the policy number and the period of coverage;
iv. the scope (including an indication of whether the
coverage was on a claims made, occurrence or other basis) and amount (including
a description of how deductibles and ceilings are calculated and operate) of
coverage; and
v. a description of any retroactive premium adjustments or
other loss-sharing arrangements.
With respect to each such insurance policy: (A) the
policy is legal, valid, binding, enforceable, and in full force and effect; (B)
neither Seller, nor any predecessor in interest nor any other party to the
policy is in breach or default (including with respect to the payment of
premiums
28
or the giving of notices), and no event has occurred which, with notice or the
lapse of time, would constitute such a breach or default, or permit termination,
modification or acceleration, under the policy; and (C) no party to the policy
has repudiated any provision thereof. The Business and the Assets have been
covered since the beginning of Business operations in scope and amount customary
and reasonable for such a business and in the case of workers' compensation
coverage, in scope and amount required by applicable Legal Requirements.
Schedule 3.17 describes any self-insurance arrangements affecting the Assets or
the Business. Schedule 3.17 also sets forth each insurance claim (other than
medical claims) made or loss incurred relating to the Business pursuant to
property, casualty, liability, workers' compensation and bond and surety
policies and, except as indicated therein, no such claim is outstanding.
3.18 Disclosure. No representation or warranty of the Selling
Group in this Agreement or the Collateral Documents and no statement in any
certificate, report, instrument, list or other document furnished or to be
furnished by the Selling Group pursuant to this Agreement or the Collateral
Documents or in connection with the transactions contemplated hereby or thereby,
contained, contains or will contain on the date such agreement, certificate,
report, instrument, list or other document was or is delivered, any untrue
statement of a material fact, or omitted, omits or will omit on such date to
state any material fact necessary in order to make the statements made, in light
of the circumstances under which they were made, not misleading, nor will any
such representation or warranty or statement contain on the Closing Date any
untrue statement of a material fact or omit on the Closing Date to state any
material fact necessary in order to make the statements made, in light of the
circumstances under which they were made, not misleading. There is no fact known
to the Selling Group and not disclosed in this Agreement that is not applicable
to or known by Purchaser and the other NRTC members and affiliates providing
DIRECTV services
29
and which fact materially or adversely affects or may in the future materially
or adversely affect, the Business or the Assets.
3.19 Brokers or Finders. Except for Xxxxxxx & Associates, L.P.,
whose fee shall be paid solely by the Selling Group, no broker or finder has
acted directly or indirectly for the Selling Group in connection with the
transactions contemplated by this Agreement, and the Selling Group has incurred
no obligation to pay any brokerage or finder's fee or other commission in
connection therewith.
3.20 Certain Payments. Neither Seller nor any predecessor
in interest nor any of their Representatives has directly or indirectly, on
behalf of or for the purpose of assisting the Business, made any contribution,
gift, bribe, rebate, payoff, influence payment, kickback, or other similar
payments to any Person, private or public, regardless of form, whether in money,
property or services, to obtain favorable treatment in securing business, to pay
for favorable treatment for business secured, to obtain special concessions or
for special concessions already obtained, or in violation of any Legal
Requirement, nor has any such person established or maintained any fund or asset
that has not been recorded in the Books and Records.
3.21 Subscribers. Neither Seller or any predecessor in interest has
solicited, nor has Seller or any predecessor in interest encouraged any
Representative or any other Person to solicit, nor has Seller or any predecessor
in interest employed any scheme or device for the purpose of encouraging, nor
has Seller or any predecessor in interest encouraged any Representative or any
other Person to employ any scheme or device for the purpose of encouraging,
Persons residing outside the Service Areas or Persons who would not be deemed
Committed Member Residences to become subscribers of the DIRECTV service offered
by the Business.
30
3.22 Favorable Business Relationships. To the best knowledge of the
Selling Group, there are no favorable business relationships relating to the
Business with lessors, licensors, Subscribers, suppliers or other business
associates of the Selling Group which will terminate after Closing.
3.23 Commission Program. On October 1, 1996, Seller implemented a
commission program for DSS System retailers (that do not participate in the
national commission program of the NRTC), which Commission Program is attached
hereto as Schedule 3.23.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to the Selling Group that the
statements contained in this Article IV are correct and complete as of the date
of this Agreement and will be correct and complete as of the Closing Date (as
though made then and as though the Closing Date were substituted for the date of
this Agreement throughout this Article IV).
4.1 Organization and Qualification. Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, with all requisite power and authority to own, lease and use
its assets and to conduct its business as it is currently conducted. Purchaser
is duly qualified or licensed to do business in and is in good standing in each
jurisdiction in which the character of the properties owned, leased or used by
it or the nature of the activities conducted by it makes such qualification
necessary, except any such jurisdiction where the failure to be so qualified or
licensed and in good standing would not have a material adverse effect on
Purchaser or on the validity, binding effect or enforceability of this
Agreement.
4.2 Authority and Validity. Purchaser has all requisite power and
authority to execute and deliver, to perform its obligations under, and to
consummate the transactions contemplated by, this Agreement and the Collateral
Documents. The execution and delivery by Purchaser of, the
31
performance by Purchaser of its obligations under, and the consummation by
Purchaser of the transactions contemplated by, this Agreement and the Collateral
Documents have been duly authorized by all requisite corporate action of
Purchaser. This Agreement has been duly executed and delivered by Purchaser and
is the legal, valid and binding obligation of Purchaser, enforceable against
Purchaser in accordance with its terms. Upon Purchaser's execution and delivery
of the Collateral Documents to which it is a party, the Collateral Documents
shall be the legal, valid and binding obligations of Purchaser, enforceable
against Purchaser in accordance with their respective terms.
4.3 No Breach or Violation.
Subject to obtaining the consents, approvals, authorizations, and orders of and
making the registrations or filings with or giving notices to Governmental
Authorities and Persons recited in the exception to Section 4.4, the execution,
delivery and performance by Purchaser of this Agreement and the Collateral
Documents to which it is a party and the consummation of the transactions
contemplated hereby and thereby in accordance with the terms and conditions
hereof and thereof, do not and will not conflict with, constitute a violation or
breach of, constitute a default or give rise to any right of termination or
acceleration of any right or obligation of Purchaser under, or result in the
creation or imposition of any Encumbrance upon the property of Purchaser by
reason of the terms of (i) the certificate of incorporation, by-laws or other
charter or organizational document of Purchaser, (ii) any material contract,
agreement, lease, indenture or other instrument to which Purchaser is a party or
by or to which Purchaser or its property may be bound or subject, (iii) any
order, judgment, injunction, award or decree of any arbitrator or Governmental
Authority or any statute, law, rule or regulation applicable to Purchaser or
(iv) any Permit of Purchaser, which in the case of (ii), (iii) or (iv) above
would have a material
32
adverse effect on the ability of Purchaser to perform its obligations under this
Agreement or any Collateral Document.
4.4 Consents and Approvals. Except (i) as required under the NRTC
Distribution Agreement, (ii) as required under the Securities Act and the
Exchange Act, and (iii) as set forth in Schedule 4.4 hereto, no consent,
approval, authorization or order of, registration or filing with, or notice to,
any Governmental Authority or any other Person is necessary to be obtained, made
or given by Purchaser in connection with the execution, delivery and performance
by Purchaser of this Agreement or any Collateral Documents or for the
consummation by Purchaser of the transactions contemplated hereby or thereby.
4.5 Legal Proceedings. There is no action, suit, proceeding or
investigation, judicial, administrative or otherwise, that is pending or, to the
best knowledge of Purchaser, threatened against Purchaser and that challenges
the validity or propriety of, or may prevent or delay, any of the transactions
contemplated by this Agreement or the Collateral Documents.
4.6 Finders and Brokers. Except for Xxxxxxx & Associates, L.P.,
whose fee shall be paid solely by the Selling Group, no broker or finder has
acted directly or indirectly for Purchaser in connection with the transactions
contemplated by this Agreement and the Collateral Documents, and Purchaser has
incurred no obligation to pay any brokerage or finder's fee or other commission
in connection therewith.
33
ARTICLE V
PRE-CLOSING COVENANTS OF SELLING GROUP
The Selling Group covenants and agrees, from and after the execution
and delivery of this Agreement to and including the Closing Date (except if
another time period is specified below), as follows:
5.1 Additional Information. The Selling Group shall provide to
Purchaser and its Representatives (i) full and free access to all of the Assets
and (ii) such financial, operating and other documents, data and information
relating to the Business and the Assets as Purchaser may reasonably request. The
Selling Group shall take all action necessary to enable Purchaser and its
Representatives to discuss the Assets and Business with the Selling Group's
executives, employees, independent accountants, and counsel who provide services
to the Business. Notwithstanding any investigation that Purchaser may conduct of
the Business and the Assets, Purchaser may fully rely on the Selling Group's
representations, warranties, covenants and indemnities set forth in this
Agreement, the Collateral Documents and any documents, instruments or
certificates delivered thereunder, which will not be waived or affected by or as
a result of such investigation.
5.2 Exclusivity. The Selling Group shall not: (i) solicit,
initiate or encourage the submission of any proposal or offer from any Person
relating to the direct or indirect sale or transfer of any of the Assets by
means of any extraordinary transaction, including a reorganization involving the
Assets or the direct or indirect sale or transfer of the capital stock of Seller
or Parent by means of any extraordinary transaction ("Transfer"); or (ii)
participate in any discussions or negotiations regarding, furnish any
information with respect to, assist or participate in or facilitate in any other
manner any effort or attempt by any Person to do or seek a Transfer. The Selling
34
Group shall provide to Purchaser copies of any written proposals, offers or
inquiries, with respect to a Transfer received by Seller after the execution of
the Letter of Intent.
5.3 Continuity and Maintenance of Operations.
(a) Seller shall: (i) use its best efforts to comply with
all Legal Requirements relating to the Business; (ii) fulfill all of its
obligations under and maintain in full force and effect all Contracts, including
the NRTC Distribution Agreement, and shall not, without the prior written
consent of Purchaser, alter, modify or amend any of the foregoing; (iii) use its
best efforts in consultation with Purchaser and its Affiliates, to promote the
financial success of the Business and promptly notify Purchaser of any material
change in the prospects or condition (financial or otherwise) of the Business;
and (iv) use its best efforts to promote, develop and preserve its relationships
with the NRTC, DSS retailers, participating cooperatives and its present
employees as well as the goodwill of its suppliers, customers and others having
business relations with it, and promptly notify Purchaser of any material change
in its relationship with any such Person; provided, however, that Seller's
obligation to use its "best efforts" hereunder shall not require that Seller
make any capital expenditures out of the Ordinary Course or bear litigation
costs relating to any such obligation. Without limiting the generality of the
foregoing, Seller shall maintain the Assets in good order, condition and repair,
shall maintain insurance relating to the Business as in effect on the date of
this Agreement and shall keep and maintain all of the Books and Records in the
Ordinary Course. Other than in the Ordinary Course, Seller shall not itself pay
or credit in any way any Accounts Receivable prior to the Closing Date, and
shall not permit any of its agents or employees, or any officers, directors or
shareholders of the Selling Group, to do so either. Seller shall continue to
enforce its procedures for disconnection and discontinuance of service to
35
Subscribers whose accounts are delinquent in accordance with those procedures in
effect on the date of this Agreement.
(b) Seller shall not, without the prior written consent of
Purchaser: (i) change the rates charged for the Economy Choice programming
package or deviate from DIRECTV national programming packages or rates; except
that commencing on October 9, 1996 Seller shall increase the rates charged for
Economy Choice to $16.95 for all new subscribers of that programming package and
on November 1, 1996, Seller shall notify all subscribers of that programming
package as of October 8, 1996 that the rates for the Economy Choice programming
package shall increase to $16.95 on a date approximately six months thereafter;
(ii) sell, lease, transfer, convey or assign any of the Assets (or enter into
any contract to do any of the foregoing) or permit the creation of any
Encumbrance on any of the Assets; (iii) permit the amendment or cancellation of
the NRTC Distribution Agreement or any other Contract; or (iv) enter into any
contract, commitment or agreement or incur any indebtedness or other liability
or obligation of any kind relating to the Business involving an expenditure in
excess of $5,000;
(c) No company in the Selling Group shall take or omit to
take any action that would cause any company in the Selling Group to be in
breach of any of its representations or warranties in this Agreement or the
Collateral Documents.
5.4 Consents and Approvals.
(a) As soon as practicable after execution of this
Agreement, the Selling Group shall use its best efforts to obtain any necessary
consent, approval, authorization or order of, make any registration or filing
with or give any notice to, any Governmental Authority or Person as is required
to be obtained, made or given by the Selling Group to consummate the
transactions contemplated by this Agreement and the Collateral Documents,
including, without limitation: (i)
36
consents required under the NRTC Distribution Agreement; and (ii) any
authorizations, consents, approvals, actions, filings or notices set forth in
Schedule 3.4; provided, however, that Seller's obligation to use its best
efforts hereunder shall not require that Seller bear litigation costs relating
to such obligation.
(b) The Selling Group shall cooperate with Purchaser in
providing such information and reasonable assistance as may be required in
connection with the obligations of Purchaser under Section 6.1.
5.5 Securities Filings.
(a) The Selling Group shall, promptly after execution of
this Agreement at Purchaser's cost (subject to Section 3.8), provide such
information and documents to Purchaser and its Affiliates concerning the
Business as may be required or appropriate for inclusion in any filing,
notification or report required to be made by Purchaser or any Affiliate of
Purchaser under the Securities Act or the Exchange Act; and shall cause its
counsel and independent accountants to cooperate with Purchaser, its Affiliates
and their investment bankers, counsel and independent accountants in the
preparation of such filings, notifications and reports. Seller's Accountant
shall provide its consent to the inclusion of the Audited Financials in any such
filing, notification or report without charge (unless additional work is
required on the part of Seller's Accountant and only to the extent of such
additional work). The Selling Group represents and warrants to Purchaser that no
information or document provided by the Selling Group for inclusion in any
filing, notification or report required to be made by Purchaser or any Affiliate
under the Securities Act or the Exchange Act will contain any untrue statement
of material fact or omit to state any material fact necessary in order to make
the statements made therein, in light of the circumstances under which they were
made, not misleading.
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(b) Not later than the Closing Date, the Selling Group shall
deliver to Purchaser unaudited statements of net assets to be acquired and
statements of operations for the Business as of and for the three month periods
ended March 31, June 30 and September 30, 1995 and 1996 in comparative format
("Stub Period Financial Statements"). The Stub Period Financial Statements shall
be prepared in accordance with GAAP on a basis consistent with the Financial
Statements, subject to the omission of footnote disclosures and normal year-end
adjustments (none of which will be material in amount).
(c) As soon as practicable, but no later than 30 days after
each month end, Seller shall deliver to Purchaser Seller's internally prepared
monthly statements of operations for the Business for the period June 1, 1996
through the Closing Date.
5.6 Collateral Agreements. On the Closing Date:
(a) The Selling Group shall execute and deliver the Escrow
Agreement.
(b) The Selling Group shall execute and deliver the
Noncompetition Agreement.
5.7 Notification of Certain Matters. The Selling Group shall
promptly provide to Purchaser copies of any material notices from or
correspondence from and to the NRTC or DIRECTV or any Affiliates of DIRECTV. The
Selling Group shall also promptly notify Purchaser of any fact, event,
circumstance or action that, if known on the date of this Agreement, would have
been required to be disclosed to Purchaser pursuant to this Agreement or the
existence or occurrence of which would cause any of the Selling Group's
representations or warranties under this Agreement not to be correct and/or
complete. In addition, the Selling Group shall give prompt written notice to
Purchaser of any material adverse development causing a breach of any of the
Selling Group's representations and warranties in Article III. No disclosure by
the Selling Group pursuant to this Section 5.7, however, shall be deemed to
amend or supplement this Agreement or
38
to prevent or cure any misrepresentation, breach of warranty, or breach of
covenant by the Selling Group.
ARTICLE VI
PRE-CLOSING COVENANTS OF PURCHASER
Purchaser covenants and agrees as follows:
6.1 Consents and Approvals.
(a) As soon as practicable after execution of this
Agreement, Purchaser shall use its best efforts to obtain any necessary consent,
approval, authorization or order of, make any registration or filing with or
give notice to, any Governmental Authority or Person as is required to be
obtained, made or given by Purchaser to consummate the transactions contemplated
by this Agreement and the Collateral Documents, including without limitation:
(i) consents required under the NRTC Agreement; and (ii) any authorizations,
consents, approvals, actions, filings or notices set forth in Schedule 4.4.
Notwithstanding anything in this Section 6.1 to the contrary, Purchaser shall
not be required to agree to any amendments, modifications or changes in, the
waiver of any terms or conditions of, or the imposition of any condition to the
transfer to Purchaser of, the NRTC Distribution Agreement in order to obtain the
consents required under the NRTC Distribution Agreement.
(b) Purchaser shall cooperate with the Selling Group in
providing such information and reasonable assistance as may be required in
connection with the Selling Group's obligations under Section 5.4(a).
6.2 Collateral Agreements. On the Closing Date:
(a) Purchaser shall execute and deliver the Escrow
Agreement.
(b) Purchaser shall execute and deliver the Noncompetition
Agreement.
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ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
All obligations of Purchaser under this Agreement shall be subject to
the fulfillment at or prior to Closing of each of the following conditions, it
being understood that Purchaser may, in its sole discretion, to the extent
permitted by applicable Legal Requirements, waive any or all of such conditions
in whole or in part:
7.1 Accuracy of Representations. All representations and
warranties of the Selling Group contained in this Agreement, the Collateral
Documents and any other document, instrument or certificate delivered by the
Selling Group at or prior to Closing shall be, if specifically qualified by
materiality, true in all respects and, if not so qualified, shall be true in all
material respects, in each case on and as of the Closing Date with the same
effect as if made on and as of the Closing Date. The Selling Group shall have
delivered to Purchaser a certificate dated the Closing Date to the foregoing
effect.
7.2 Covenants. The Selling Group shall, in all material respects,
have performed and complied with each of the covenants, obligations, conditions
and agreements contained in this Agreement that are to be performed or complied
with by it at or prior to Closing. The Selling Group shall have delivered to
Purchaser a certificate dated the Closing Date to the foregoing effect.
7.3 Consents.
(a) All consents, approvals, authorizations and orders
required to be obtained from, and all registrations, filings and notices
required to be made with or given to, any Governmental Authority or Person as
provided in Sections 5.4(a) and 6.1(a) shall have been duly obtained, made or
given, as the case may be, and shall be in full force and effect, and any
waiting period required by Applicable Law or any Governmental Authority in
connection with such
40
transactions shall have expired or have been earlier terminated, unless the
failure to obtain, make or give any such consent, approval, authorization,
order, registration, filing or notice, or to allow any such waiting period to
expire or terminate would not have a material adverse effect on the Assets or
the Business or the ability of the Selling Group to consummate the transactions
contemplated by this Agreement and the Collateral Documents.
(b) Notwithstanding the foregoing, this condition precedent
shall not have been satisfied if any consent, approval, authorization or order
obtained in connection with the transactions contemplated by this Agreement and
the Collateral Documents has been conditioned upon the amendment, modification,
cancellation or termination of, or waiver of any term or condition of, any
contract, commitment or agreement, or imposes upon Purchaser any condition or
requirement not now imposed upon Seller.
(c) Purchaser shall have been furnished with appropriate
evidence, reasonably satisfactory to it and its counsel, of the granting of such
consents, approvals, authorizations and orders, the making of such registrations
and filings and the giving of such notices referred to in paragraph (a) above.
7.4 Delivery of Documents. The Selling Group shall have executed
and delivered to Purchaser the following documents:
i. Escrow Agreement.
ii. Noncompetition Agreement.
iii. Xxxx of Sale and Assignment evidencing transfer of the
Assets to Purchaser in form reasonably satisfactory to Purchaser.
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iv. Opinion of Squire, Xxxxxxx & Xxxxxxx, counsel to the
Selling Group, dated the Closing Date, addressed to Purchaser, in form and
substance reasonably satisfactory to Purchaser and its counsel.
v. Such other documents and instruments as Purchaser may
reasonably request: (A) to evidence the sale, assignment, conveyance and
transfer to Purchaser of all of Seller's right, title and interest in, to and
under the Assets; (B) to evidence the accuracy of the Selling Group's
representations and warranties under this Agreement, the Collateral Documents
and any documents, instruments or certificates required to be delivered
thereunder; (C) to evidence the performance by the Selling Group of, or the
compliance by the Selling Group with, any covenant, obligation, condition and
agreement to be performed or complied with by the Selling Group under this
Agreement and the Collateral Documents; or (D) to otherwise facilitate the
consummation or performance of any of the transactions contemplated by this
Agreement and the Collateral Documents.
7.5 No Material Adverse Change. There shall have been no material
adverse change in the Assets or in the condition (financial or otherwise) of
the Business since the date hereof.
7.6 No Litigation. No action, suit or proceeding shall be pending
or threatened, and no Legal Requirement or policy of the NRTC, DIRECTV or its
Affiliates, or any applicable regulatory authority shall have been enacted,
promulgated or issued that would: (i) prohibit or adversely affect Purchaser's
ownership or operation of all or a material portion of the Business or the
Assets or otherwise materially impair the ability of Purchaser to realize the
benefits of the transactions contemplated by this Agreement and the Collateral
Documents; (ii) restrict or limit or otherwise condition Purchaser's right to
transfer and/or assign the Business or the Assets in the future; (iii) compel
Purchaser to dispose of or hold separate all or a material portion of the
Business or the
42
Assets as a result of any of the transactions contemplated by this Agreement and
the Collateral Documents; (iv) prevent or make illegal the consummation of any
transactions contemplated by this Agreement and the Collateral Documents; or (v)
cause any of the transactions contemplated by this Agreement and the Collateral
Documents to be rescinded following consummation.
7.7 Minimum Subscribers. As of the Closing Date, the Business
shall have total Subscribers of not less than 4,000, as evidenced by such Seller
documentation as Purchaser may request (including the DBS Wholesale Invoice
issued by NRTC for the most recent billing cycle).
7.8 Transition Arrangements. As of the Closing Date, Purchaser and
the Selling Group shall have entered into mutually acceptable arrangements for
transitioning the operation of the Business to Purchaser after Closing.
7.9 NRTC Compliance Certificate. The Selling Group shall have
delivered to Purchaser a certificate from NRTC dated as of the Closing Date to
the effect that Seller is in full compliance with the NRTC Distribution
Agreement and there are no payments due by Seller under the NRTC Distribution
Agreement other than payments for fees due in the Ordinary Course and not yet
payable.
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLING GROUP
All obligations of the Selling Group under this Agreement shall be
subject to the fulfillment at or prior to Closing of the following conditions,
it being understood that the Selling Group may, in its sole discretion, to the
extent permitted by applicable Legal Requirements, waive any or all of such
conditions in whole or in part.
8.1 Accuracy of Representations. All representations and
warranties of Purchaser contained in this Agreement and the Collateral Documents
shall be, if specifically qualified by
43
materiality, true and correct in all respects and, if not so qualified, shall be
true and correct in all material respects, in each case on and as of the Closing
Date with the same effect as if made on and as of the Closing Date. Purchaser
shall have delivered to the Selling Group a certificate dated the Closing Date
to the foregoing effect.
8.2 Covenants. Purchaser shall, in all material respects, have
performed and complied with each obligation, agreement, covenant and condition
contained in this Agreement and the Collateral Documents and required by this
Agreement and the Collateral Documents to be performed or complied with by
Purchaser at or prior to Closing. Purchaser shall have delivered to the Selling
Group a certificate dated the Closing Date to the foregoing effect.
8.3 Consents. All consents, approvals, authorizations and orders
required to be obtained from, and all registrations, filings and notices
required to be made with or given to, any Governmental Authority or Person as
provided in Section 6.1(a) shall have been duly obtained, made or given, as the
case may be, and shall be in full force and effect, and any waiting period
required by applicable law or any Governmental Authority in connection with such
transactions shall have expired or have been earlier terminated, unless the
failure to obtain, make or give any such consent, approval, authorization,
order, registration, filing or notice, or to allow any such waiting period to
expire or terminate would not have a material adverse effect on the Assets or
the ability of Purchaser to consummate the transactions contemplated by this
Agreement and the Collateral Documents. The Selling Group shall have been
furnished with the appropriate evidence, reasonably satisfactory to it and its
counsel, of the granting of such consents, approvals, authorizations and orders,
the making of such registrations and filings and the giving of such notices.
44
8.4 Delivery of Documents. Purchaser shall have executed and
delivered to the Selling Group the following documents:
i. Escrow Agreement.
ii. Assumption Agreement evidencing the assumption of the
Assumed Liabilities by Purchaser in form reasonably satisfactory to Seller.
iii. Opinion of Xxx X. Lodge, Senior Vice President and
General Counsel of Purchaser, dated the Closing Date, addressed to the Selling
Group, in form and substance reasonably satisfactory to the Selling Group and
its counsel.
iv. Such other documents and instruments as the Selling
Group may reasonably request: (A) to evidence assumption of the Assumed
Liabilities; (B) to evidence the accuracy of the representations and warranties
of Purchaser under this Agreement and the Collateral Documents and any
documents, instruments or certificates required to be delivered thereunder; (C)
to evidence the performance by Purchaser of, or the compliance by Purchaser
with, any covenant, obligation, condition and agreement to be performed or
complied with by Purchaser under this Agreement and the Collateral Documents; or
(D) to otherwise facilitate the consummation or performance of any of the
transactions contemplated by this Agreement and the Collateral Documents.
8.5 Litigation. No action, suit or proceeding shall be pending or
threatened by or before any Governmental Authority and no Legal Requirement
shall have been enacted, promulgated or issued or deemed applicable to any of
the transactions contemplated by this Agreement and the Collateral Documents
that would: (i) prevent consummation of any of the transactions contemplated by
this Agreement and the Collateral Documents; or (ii) cause any of the
transactions contemplated by this Agreement and the Collateral Documents to be
rescinded following consummation.
45
ARTICLE IX
POST-CLOSING COVENANTS
The Parties agree as follows with respect to the period following
Closing:
9.1 Transition. The Selling Group shall not take any action that
is designed or intended to have the effect of discouraging any lessor, licensor,
Subscriber, supplier or other business associate of Seller or the Business from
maintaining the same business relationships with Purchaser after Closing as it
maintained with Seller prior to Closing. Seller shall refer all Subscriber
inquiries relating to the Business to Purchaser from and after Closing.
9.2 Transfer Taxes and Fees. Seller shall pay any sales, use,
transfer, excise, documentary or license taxes or fees with respect to the
transfer of any of the Assets pursuant to this Agreement and the Collateral
Documents.
9.3 1996 NRTC Patronage; Other NRTC Patronage. The Selling Group
agrees that Purchaser shall be entitled to receive the NRTC's 1996 patronage
allocation on account of the NRTC Distribution Agreement, and the Selling Group
shall instruct NRTC to allocate such patronage to Purchaser. The Selling Group
shall have an ongoing obligation after Closing to pay to Purchaser any
distributions on account of NRTC Patronage Capital.
9.4 Financial Statements. Within 45 days after Closing, the
Selling Group shall deliver to Purchaser an unaudited statement of net assets to
be acquired and statement of operations for the Business for the period from the
quarter ended September 30, 1996 to Closing, which shall be prepared in
accordance with GAAP on a basis consistent with the Stub Financial Statements.
46
ARTICLE X
TERMINATION
10.1 Events of Termination. This Agreement may be terminated and
the transactions contemplated by this Agreement may be abandoned at any time
prior to Closing as provided below:
(a) Purchaser and the Selling Group may terminate this
Agreement by mutual written consent at any time prior to Closing.
(b) Purchaser may terminate this Agreement by giving written
notice to the Selling Group at any time prior to Closing:
i. if the Selling Group has breached any material
representation, warranty or covenant contained in this Agreement in any material
respect, Purchaser has notified the Selling Group of the breach, and the breach
has continued without cure for a period of 30 days after the notice of breach;
or
ii. if Closing shall not have occurred on or before the
Termination Date by reason of the failure of any condition precedent under
Article VII (unless the failure results primarily from Purchaser itself
breaching any representation, warranty or covenant contained in this Agreement).
(c) The Selling Group may terminate this Agreement by giving
written notice to Purchaser at any time prior to Closing:
i. if Purchaser has b reached any material
representation, warranty or covenant contained in this Agreement in any material
respect, the Selling Group has notified Purchaser of the breach, and the breach
has continued without cure for a period of 30 days after the notice of breach;
or
47
ii. if Closing shall not have occurred on or before the
Termination Date by reason of the failure of any condition precedent under
Article VIII hereof (unless the failure results primarily from the Selling Group
itself breaching any representation, warranty or covenant contained in this
Agreement).
10.2 Liabilities in Event of Termination. The termination of this
Agreement will in no way limit any obligation or liability of any Party based on
or arising from a breach or default by such Party with respect to any of its
representations, warranties, covenants or agreements contained in this
Agreement, except that Purchaser's liability under this Agreement in the event
of termination shall be limited as provided in Section 11.3(c).
10.3 Procedure Upon Termination. If this Agreement is terminated by
Purchaser or the Selling Group pursuant to this Article X, notice of such
termination shall promptly be given by the terminating Party to the other Party.
ARTICLE XI
REMEDIES FOR BREACH OF THIS AGREEMENT
11.1 Survival of Representations and Warranties. All of the
representations and warranties of Purchaser and the Selling Group contained in
this Agreement, the Collateral Documents and other documents, instruments and
certifications required to be delivered hereunder and thereunder shall survive
Closing (even if the damaged Party knew or had reason to know of any
misrepresentation or breach of warranty at the time of Closing) and continue in
full force and effect for a period of two years thereafter. The period of
survival of the representations and warranties prescribed by this Section 11.1
is referred to as the "Survival Period." The liabilities of Purchaser and the
Selling Group under their respective representations and warranties will expire
as of the expiration of the Survival Period; provided, however, that such
expiration will not
48
include, extend or apply to any representation or warranty, the breach of which
has been asserted by Purchaser in a written notice to the Selling Group before
such expiration or about which the Selling Group has given Purchaser written
notice before such expiration indicating that facts or conditions exist that,
with the passage of time or otherwise, can reasonably be expected to result in a
breach (and describing such potential breach in reasonable detail). Except as
otherwise provided in this Agreement, the covenants and agreements of Purchaser
and the Selling Group in this Agreement, the Collateral Documents and in the
other documents, instruments and certificates required to be delivered by the
Selling Group or Purchaser hereunder and thereunder shall survive Closing and
shall continue in full force and effect as provided in Section 11.2(b) and
Section 11.3(b).
11.2 Indemnification Provisions for Benefit of Purchaser.
(a) If the Selling Group breaches (or if any third party
alleges facts that, if true, would mean the Selling Group has breached) any of
its representations and warranties contained in this Agreement or the Collateral
Documents or any documents, instruments and certificates delivered hereunder and
thereunder, and if Purchaser makes a written claim for indemnification against
the Selling Group within the Survival Period, then the Selling Group shall
indemnify, defend and hold harmless Purchaser and its Affiliates and the
shareholders, directors, officers, employees, agents, successors and assigns of
any of such Persons, from and against any Adverse Consequences that any such
Person may suffer through and after the date of the claim for indemnification
(including any Adverse Consequences that any such Person may suffer after the
end of the Survival Period) resulting from, arising out of, relating to or
caused by the breach (or the alleged breach).
49
(b) The Selling Group agrees to indemnify Purchaser and its
Affiliates, and the shareholders, directors, officers, employees, agents,
successors and assigns of any of such Persons, from and against the entirety of
any Adverse Consequences that any such Person may suffer resulting from, arising
out of, relating to, in the nature of, or caused by any of the following: (i)
any breach of any covenant, agreement or obligation of the Selling Group
contained in this Agreement or the Collateral Documents or any documents,
instruments and certificates delivered hereunder and thereunder; (ii) any act or
omission of the Selling Group with respect to, or any event or circumstance
related to, the ownership or operation of the Assets or the conduct of the
Business, which act, omission, event or circumstance occurred or existed prior
to or at the Closing Date, without regard to whether a claim with respect to
such matter is asserted before or after the Closing Date; (iii) any Liability of
the Selling Group or the Business that is not an Assumed Liability; (iv) any
Liability of Purchaser arising by operation of law as a consequence of the
Closing (including under any bulk transfer law of any jurisdiction or under any
common law doctrine of de facto merger or successor liability or under any
fraudulent conveyance law of any jurisdiction) that is not an Assumed Liability;
and (v) any Liability for Taxes attributable to the use, ownership or operation
of the Assets by Seller or the Business relating to periods prior to Closing.
Seller's obligations under this Section 11.2(b) shall expire at the end of two
years after the Closing Date.
(c) The Selling Group shall not have any liability for any
Adverse Consequences under Sections 11.2(a) and 11.2(b) hereof, until and unless
the cumulative total of such Adverse Consequences exceeds $50,000.
(d) The Escrow Deposit shall be applied to satisfy any claim
for indemnification of Purchaser hereunder in accordance with the terms of the
Escrow Agreement. Notwithstanding
50
the foregoing, the amount of the Escrow Deposit shall not be construed in any
way to limit the liability of the Selling Group for a claim of indemnification
hereunder.
11.3 Indemnification Provisions for Benefit of Selling Group.
(a) If Purchaser breaches (or if any third party alleges
facts that, if true, would mean that Purchaser has breached) any of its
representations and warranties contained in this Agreement or the Collateral
Documents or any documents, instruments and certificates delivered thereunder
and if the Selling Group makes a written claim for indemnification against
Purchaser within the Survival Period, then Purchaser shall indemnify, defend and
hold harmless the Selling Group and its Affiliates and the shareholders,
directors, officers, employees, agents, successors and assigns of any of such
Persons, from and against any Adverse Consequences that any such Person may
suffer through and after the date of the claim for indemnification (including
any Adverse Consequences that the Selling Group may suffer after the end of the
Survival Period) resulting from, arising out of, relating to or caused by the
breach (or the alleged breach).
(b) Purchaser agrees to indemnify the Selling Group and
its Affiliates, and the shareholders, directors, officers, employees, agents,
successors and assigns of any of such Persons, against the entirety of any
Adverse Consequences that any such Person may suffer resulting from, arising out
of, relating to, in the nature of, or caused by any of the following: (i) any
breach of any covenant, agreement or obligation of Purchaser contained in this
Agreement or the Collateral Documents or any documents, instruments and
certifications delivered hereunder and thereunder; (ii) any act or omission of
Purchaser with respect to, or any event or circumstance related to, the
ownership or operation of the Assets or the conduct of the Business, which act,
omission, event or circumstance occurred after the Closing Date; (iii) any
Assumed Liability after the Closing Date; and (iv) any Liability for Taxes
attributable to the use, ownership or operation of the Assets or the
51
transferred Business by Purchaser relating to periods after the Closing Date.
The obligations of Purchaser under this Section 11.3(b) shall expire at the end
of two years after the Closing Date.
(c) Notwithstanding anything in this Agreement to the
contrary, in the event that Closing does not occur because of Purchaser's
material breach or default with respect to any material representation,
warranty, covenant or agreement contained in this Agreement, Purchaser's
liability under this Agreement shall be limited to, and the Selling Group shall
be entitled to receive, the Escrow Deposit as liquidated damages.
11.4 Matters Involving Third Parties.
(a) If any third party shall notify either Purchaser or the
Selling Group (the "Indemnified Party") with respect to any matter (a "Third
Party Claim") that may give rise to a claim for indemnification against the
other (the "Indemnifying Party") under this Article XI, then the Indemnified
Party shall promptly notify the Indemnifying Party thereof in writing; provided,
however, that no delay on the part of the Indemnified Party in notifying any
Indemnifying Party shall relieve the Indemnifying Party from any obligation
hereunder unless (and then solely to the extent) the Indemnifying Party thereby
is prejudiced.
(b) Any Indemnifying Party shall have the right to defend
the Indemnified Party against the Third Party Claim with counsel of its choice
reasonably satisfactory to the Indemnified Party so long as: (i) the
Indemnifying Party notifies the Indemnified Party in writing within 15 days
after the Indemnified Party has given notice of the Third Party Claim that the
Indemnifying Party will indemnify the Indemnified Party from and against the
entirety of any Adverse Consequences the Indemnified Party may suffer resulting
from, arising out of, relating to, in the nature of or caused by the Third Party
Claim; (ii) the Indemnifying Party provides the Indemnified Party with evidence
acceptable to the Indemnified Party that the Indemnifying Party will have the
financial
52
resources to defend against the Third Party Claim and fulfill its
indemnification obligations hereunder; (iii) the Third Party Claim involves only
money damages and does not seek an injunction or other equitable relief; (iv)
settlement of, or an adverse judgment with respect to, the Third Party Claim is
not, in the good faith judgment of the Indemnified Party, likely to establish a
precedential custom or practice adverse to the continuing business interests of
the Indemnified Party; and (v) the Indemnifying Party conducts the defense of
the Third Party Claim actively and diligently.
(c) So long as the Indemnifying Party is conducting the
defense of the Third Party Claim in accordance with Section 11.4(b) above: (i)
the Indemnified Party may retain separate co-counsel at its sole cost and
expense and participate in the defense of the Third Party Claim; (ii) the
Indemnified Party shall not consent to the entry of any judgment or enter into
any settlement with respect to the Third Party Claim without the prior written
consent of the Indemnifying Party (not to be withheld unreasonably); and (iii)
the Indemnifying Party shall not consent to the entry of any judgment or enter
into any settlement with respect to the Third Party Claim without the prior
written consent of the Indemnified Party (not to be withheld unreasonably).
(d) If any of the conditions in Section 11.4(b) above is not
or no longer satisfied, however: (i) the Indemnified Party may defend against,
and consent to the entry of any judgment or enter into any settlement with
respect to, the Third Party Claim in any manner it reasonably may deem
appropriate (and the Indemnified Party need not consult with, or obtain any
consent from, any Indemnifying Party in connection therewith); (ii) the
Indemnifying Party shall reimburse the Indemnified Party promptly and
periodically for the costs of defending against the Third Party Claim (including
attorneys' fees and expenses); and (iii) the Indemnifying Party shall remain
responsible for any Adverse Consequences the Indemnified Party may suffer
resulting from, arising
53
out of, relating to, in the nature of or caused by the Third Party Claim to the
fullest extent provided in this Article XI.
11.5 Determination of Adverse Consequences. Purchaser and the
Selling Group shall take into account the time cost of money (using the
Applicable Rate as the discount rate) in determining Adverse Consequences for
purposes of this Article XI. All indemnification payments under this Article XI
shall be deemed adjustments to the Consideration.
ARTICLE XII
MISCELLANEOUS
12.1 Parties Obligated and Benefited. This Agreement shall be
binding upon the Parties and their respective assigns and successors in interest
and shall inure solely to the benefit of the Parties and their respective
assigns and successors in interest, and no other Person shall be entitled to any
of the benefits conferred by this Agreement. Without the prior written consent
of the other Party, no Party may assign this Agreement or the Collateral
Documents or any of its rights or interests or delegate any of its duties under
this Agreements or the Collateral Documents; provided, however, that Purchaser
may assign this Agreement or any of its rights or interests or delegate any of
its duties hereunder to an Affiliate.
12.2 Notices. Any notices and other communications required or
permitted hereunder shall be in writing and shall be effective upon delivery by
hand or upon receipt if sent by certified or registered mail (postage prepaid
and return receipt requested) or by a nationally recognized overnight courier
service (appropriately marked for overnight delivery) or upon transmission if
sent by telex or facsimile (with request for immediate confirmation of receipt
in a manner customary for communications of such respective type and with
physical delivery of the communication being made
54
by one or the other means specified in this Section 12.2 as promptly as
practicable thereafter). Notices shall be addressed as follows:
(a) If to Purchaser, to:
Pegasus Communications Corporation
5 Radnor Corporate Center
000 Xxxxxxxxxx Xxxx, Xxxxx 000
Xxxxxx, XX 00000
Attn: Xx. Xxxxxxxx X. Xxxxx
(with a copy to Xxx X. Lodge at the same address)
(b) If to the Selling Group, to:
Horizon Infotech, Inc.
00 Xxxx Xxxx Xxxxxx
X.X. Xxx 000
Xxxxxxxxxxx, Xxxx 00000-0000
Attn: Xxxxxxx X. XxXxxx
with a copy to:
Squire, Xxxxxxx & Xxxxxxx
Xxxxxxxxxx Center Xxxxx 0000
00 X. Xxxx Xxxxxx
Xxxxxxxx, Xxxx 00000
Attn: Xxxxx X. Xxxxxx, Esquire
Any Party may change the address to which notices are required to be sent by
giving notice of such change in the manner provided in this Section 12.2.
12.3 Attorneys' Fees. In the event of any action or suit based upon
or arising out of any alleged breach by any Party of any representation,
warranty, covenant or agreement contained in this Agreement or the Collateral
Documents, the prevailing Party shall be entitled to recover reasonable
attorneys' fees and other costs of such action or suit from the other Party.
55
12.4 Waiver. This Agreement or any of its provisions may not be
waived except in writing. The failure of any Party to enforce any right arising
under this Agreement on one or more occasions will not operate as a waiver of
that or any other right on that or any other occasion.
12.5 Headings. The Article and Section headings of this Agreement
are for convenience only and shall not constitute a part of this Agreement or in
any way affect the meaning or interpretation thereof.
12.6 Choice of Law. This Agreement and the rights of the Parties
under it shall be governed by and construed in all respects in accordance with
the laws of the Commonwealth of Pennsylvania, without giving effect to any
choice of law provision or rule (whether of the Commonwealth of Pennsylvania or
any other jurisdiction that would cause the application of the laws of any
jurisdiction other than the Commonwealth of Pennsylvania).
12.7 Rights Cumulative. All rights and remedies of each of the
Parties under this Agreement shall be cumulative, and the exercise of one or
more rights or remedies shall not preclude the exercise of any other right or
remedy available under this Agreement or applicable law.
12.8 Further Actions. The Selling Group and Purchaser shall execute
and deliver to the other, from time to time at or after Closing, for no
additional consideration and at no additional cost to the requesting Party, such
further assignments, certificates, instruments, records, or other documents,
assurances or things as may be reasonably necessary to give full effect to this
Agreement and to allow each Party fully to enjoy and exercise the rights
accorded and acquired by it under this Agreement.
12.9 Time of the Essence. Time is of the essence under this
Agreement. If the last day permitted for the giving of any notice or the
performance of any act required or permitted under
56
this Agreement falls on a day which is not a Business Day, the time for the
giving of such notice or the performance of such act shall be extended to the
next succeeding Business Day.
12.10 Late Payments. If either Party fails to pay the other any
amounts when due under this Agreement, the amounts due will bear interest from
the due date to the date of payment at the Applicable Rate.
12.11 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
12.12 Entire Agreement. This Agreement (including the Exhibits,
Schedules and any other documents, instruments and certificates referred to
herein, which are incorporated in and constitute a part of this Agreement)
contains the entire agreement of the Parties and supersedes all prior oral or
written agreements, understandings and representations to the extent that they
relate in any way to the subject matter hereof, including the Letter of Intent.
12.13 Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Selling Group and Purchaser. No waiver by any Party of any default,
misrepresentation or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation or breach of warranty or covenant hereunder or affect
in any way any rights arising by virtue of any prior or subsequent such
occurrence.
12.14 Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. If an ambiguity or question of
intent or interpretation arises, this Agreement shall be construed as if drafted
jointly by the Parties and no presumption or burden of proof shall arise
favoring or disfavoring any Party by virtue of the authorship of any of the
provisions of this
57
Agreement. Any reference to any federal, state, local, or foreign statute or law
shall be deemed also to refer to all rules and regulations promulgated
thereunder, unless the context requires otherwise. The word "including" shall
mean "including without limitation." Nothing in the Schedules shall be deemed
adequate to disclose an exception to a representation or warranty made herein
unless the Schedule identifies the exception with particularity and describes
the relevant facts in detail. Without limiting the generality of the foregoing,
the mere listing (or inclusion of a copy) of a document or other item shall not
be deemed adequate to disclose an exception to a representation or warranty made
herein (unless the representation or warranty has to do with the existence of
the document or other item itself). The Parties intend that each representation,
warranty and covenant contained herein shall have independent significance. If
any Party has breached any representation, warranty or covenant contained herein
in any respect, the fact that there exists another representation, warranty or
covenant relating to the same subject matter (regardless of the relative levels
of specificity) which the Party has not breached shall not detract from or
mitigate the fact that the Party is in breach of the first representation,
warranty or covenant. Any representation, warranty, covenant or agreement of the
"Selling Group" shall be deemed made jointly and severally by, and any other
reference herein to the "Selling Group" shall be deemed to refer jointly and
severally to, Parent, Horizon and Chillicothe, unless the context specifies that
such representation, warranty, covenant or agreement is made severally by, or
such other reference refers severally to, each of Parent, Horizon and
Chillicothe.
12.15 Expenses. Except as otherwise provided in this Agreement,
each Party shall bear its own costs and expenses (including legal fees and
expenses and accountants' fees and expenses) incurred in connection with the
negotiation of this Agreement, the performance of its obligations and the
consummation of the transactions contemplated hereby.
58
IN WITNESS WHEREOF, the Parties hereto have duly executed this
Agreement as of the day and year first above written.
PEGASUS COMMUNICATIONS CORPORATION
By: /s/ Xxx X. Lodge
--------------------------------------
Senior Vice President
HORIZON TELCOM, INC.
By: /s/ Xxxxxx XxXxxx
--------------------------------------
President
HORIZON INFOTECH, INC.
By: /s/ Xxxxxxx X. XxXxxx
--------------------------------------
President
CHILLICOTHE TELEPHONE COMPANY
By: /s/ Xxxxxx XxXxxx
--------------------------------------
President
ASSET PURCHASE AGREEMENT
among
PEGASUS COMMUNICATIONS CORPORATION
and
HORIZON TELCOM, INC.
HORIZON INFOTECH, INC.
CHILLICOTHE TELEPHONE COMPANY
Dated as of October 23, 1996
Exhibit 1
Service Areas
SmarTView Service Area
(at time of License)
Cabled Residences Non-Cabled-Residences Total
----------------- --------------------- -----
Athens 16,139 4,161 20,300
Xxxxx 4,387 4,933 9,320
Fayette 9,000 1,200 10,200
Highland 12,960 340 13,300
Hocking 4,935 4,485 9,420
Xxxxxxx 6,781 4,419 11,200
Pickaway 13,421 1,382 14,803
Pike 6,198 2,712 8,910
Xxxx 22,955 1,545 24,500
Scioto 28,250 1,450 29,700
Vinton 788 3,312 4,100
------- ------ -------
Total 125,784 29,899 155,683
======= ====== =======
SmarTView
Zip Code Summary by County
Xxxxx 45105 45144 45616 45618 45650
45660 45679 45693 45697
Athens 45701 45710 45711 45716 45717
45719 45723 45732 45735 45739
45740 45761 45764 45766 45777
45778 45780 45781 45782
Fayette 43106 43128 43142 43160
Highland 45110 45123 45132 45133 45135
45142 45155 45165 45172
Hocking 43111 43127 43135 43138 43144
43149 43152 43158
Xxxxxxx 45621 45640 45656 45692
Pickaway 43103 43113 43116 43117 43145
43146 43164
Pike 45613 45624 45642 45646 45661
45687 45690
Xxxx 43101 43115 45601 45612 45617
45628 45633 45644 45647 45673
45681
Scioto 45629 45630 45636 45649 45652
45653 45657 45662 45663 45657
45662 45663 45671 45677 45682
45684 45694 45699
Vinton 45622 45634 45651 45654 45670
45672 45695 45698
Horizon Telcom
SMARTVIEW
Eleven County Ohio Service Area
MAP
EXHIBIT 2
ESCROW AGREEMENT
This ESCROW AGREEMENT ("Agreement") dated as of October 23, 1996, by
and among Pegasus Communications Corporation, a Delaware corporation ("Buyer"),
Chillicothe Telephone Company ("Chillicothe"), an Ohio corporation, Horizon
Infotech, Inc. ("Horizon"), an Ohio corporation, and The Huntington Trust
Company, N.A. ("Escrow Agent"). Chillicothe and Horizon are collectively
referred to herein as "Seller." Buyer and Seller are collectively referred to
herein as the "Parties."
RECITALS:
WHEREAS, the Parties have entered into that certain Asset Purchase
Agreement dated as of October 23, 1996 ("Asset Purchase Agreement"); and
WHEREAS, this Agreement is the Escrow Agreement referred to in the
Asset Purchase Agreement.
NOW, THEREFORE, intending to be legally bound hereby, the parties
hereto agree as follows:
1. Definitions. Capitalized terms used in this Agreement without
definition shall have the respective meanings assigned to them in the Asset
Purchase Agreement.
2. Appointment of Escrow Agent; Establishment of Escrow.
a. The Parties hereby appoint Escrow Agent as the escrow agent under
this Agreement, and Escrow Agent hereby accepts such appointment and agrees to
hold all funds deposited with it into escrow, together with all interest and
income thereon and other proceeds thereof ("Escrow Funds"), in accordance with
the terms hereof and to perform its other duties hereunder.
b. Escrow Agent hereby acknowledges receipt of the Escrow Deposit
from Buyer.
3. Segregation and Investment of Escrow Funds.
a. Escrow Agent shall hold all Escrow Funds in a segregated account
titled: "The Huntington Trust Company, N.A. as Agent pursuant to an Escrow
Agreement dated as of October 23, 1996, among it, Pegasus Communications
Corporation, Chillicothe Telephone Company and Horizon Infotech, Inc.," and
invest and distribute the Escrow Funds pursuant to the terms of this Agreement.
b. Escrow Agent shall invest all Escrow Funds held by it from time
to time hereunder in one or more of the investments described on Schedule 1 as
directed by Seller. All income earned on and all proceeds of the Escrow Funds
shall be added to the amount thereof and distributed in accordance with the
terms hereof. Escrow Agent shall, upon request of any Party, made
not more frequently than quarterly, promptly provide such Party with an
accounting of the Escrow Funds and of all debits and credits thereto.
4. Payment of Escrow Funds.
a. Upon receipt by Escrow Agent of the joint written notice of
Seller and Buyer, Escrow Agent shall disburse Escrow Funds in the amount(s) and
to the Party(ies) specified in such notice.
b. If Seller provides written notice ("Seller's Claim Notice") to
Escrow Agent and Buyer that Seller is owed Liquidated Damages pursuant to the
terms and conditions of the Asset Purchase Agreement, specifying in reasonable
detail the contractual basis for any such claim, and Buyer does not give notice
to Seller and Escrow Agent disputing such claim ("Buyer's Counter Notice")
within 45 days following receipt by Escrow Agent and Buyer of Seller's Claim
Notice, Escrow Agent shall disburse all of the Escrow Funds to Seller. If Buyer
timely delivers Buyer's Counter Notice as provided herein, Escrow Agent shall
disburse the Escrow Funds to Seller only in accordance with (i) joint written
instructions of Buyer and Seller or (ii) a final and nonappealable judgment,
decree or order of a court of competent jurisdiction or a final and
nonappealable arbitration award, adjudicating the dispute with respect to
Seller's Claim Notice.
c. From time to time, Buyer may give notice ("Buyer's Claim Notice")
to Seller and Escrow Agent specifying in reasonable detail the nature and dollar
amount of any claim it may have under the Asset Purchase Agreement. If Seller
does not give notice to Buyer and Escrow Agent disputing such claim ("Seller's
Counter Notice") within 45 days following receipt by Escrow Agent and Seller of
Buyer's notice regarding such claim, the dollar amount of damages set forth in
Buyer's Claim Notice shall be deemed established for purposes of this Agreement
and the Asset Purchase Agreement, and the Escrow Agent shall disburse Escrow
Funds to Buyer in such amount. If Seller timely gives Seller's Counter Notice as
provided herein, then Escrow Agent shall disburse Escrow Funds relating to
Buyer's Claim Notice only in accordance with (i) joint written instructions of
Buyer and Seller or (ii) a final and nonappealable judgment, decree or order of
a court or a final and nonappealable arbitration award, adjudicating the dispute
with respect to Buyer's Claim Notice.
5. Termination of Escrow.
a. Escrow Agent shall disburse all of the Escrow Funds to Buyer not
earlier than 15 days or later than 20 days after receipt by Escrow Agent and
Seller ("Termination Waiting Period") of a written certification from Buyer that
the Asset Purchase Agreement has been terminated without Closing ("Buyer's
Termination Notice"); provided, however, that Escrow Agent shall make no
disbursement hereunder if Escrow Agent receives Seller's Claim Notice within the
Termination Waiting Period, in which event Escrow Agent shall disburse the
Escrow Funds only in accordance with (i) joint written instructions of Buyer and
Seller or (ii) a final and nonappealable judgment, decree or order of a court of
competent jurisdiction or a final and nonappealable arbitration award,
adjudicating the dispute with respect to Buyer's Termination Notice and Seller's
Claim Notice.
b. On the second anniversary of the Closing, Escrow Agent shall
disburse the remaining Escrow Funds to Seller, unless (i) any claims pursuant to
Buyer's Claim Notices are
-2-
then pending, in which case an amount equal to the aggregate dollar amount of
such claims (as shown in Buyer's Claim Notices) shall be retained by Escrow
Agent and the balance disbursed to Seller or (ii) Buyer has given notice to
Seller and Escrow Agent specifying in reasonable detail the nature of any other
claim it may have under the Asset Purchase Agreement with respect to which it is
unable to specify the amount of damages, in which case the remaining Escrow
Funds shall be retained by Escrow Agent until it receives (i) joint written
instructions of the Buyer and Seller or (ii) a final and nonappealable judgment,
decree or order of a court of competent jurisdiction or a final and
nonappealable arbitration award, whereupon Escrow Agent shall disburse the
Escrow Funds as provided therein.
6. Resignation or Removal of Escrow Agent. Escrow Agent may resign at
any time upon 30 days' prior written notice to the Parties and may be removed
upon four days' prior written notice by all of the Parties to Escrow Agent.
Prior to the effective date of the resignation or removal of Escrow Agent or any
successor escrow agent, the Parties shall appoint a mutually agreeable successor
escrow agent to hold the Escrow Funds, and any such successor escrow agent shall
execute and deliver to the predecessor escrow agent and all other Parties an
instrument accepting such appointment, upon which such successor agent shall,
without further act, become vested with all of the rights, powers and duties of
the predecessor escrow agent as if originally named herein. If no successor
escrow agent is appointed prior to the effective date of the termination or
resignation of the Escrow Agent, Escrow Agent may place all of the Escrow Funds
at the disposal of a court and petition the court to act as the successor escrow
agent or to appoint another entity to act as the successor escrow agent.
7. Liability of Escrow Agent. The duties of Escrow Agent hereunder are
entirely administrative and not discretionary. Escrow Agent is obligated to act
only in accordance with instructions received by it as provided in this
Agreement, is authorized hereby to comply with any orders, judgment or decrees
of any court or arbitration panel and shall not incur any liability as a result
of its compliance with such instructions, orders, judgments or decrees. Escrow
Agent may assume the due execution, validity and effectiveness of, and the truth
and accuracy of any information contained in, any instrument or other document
presented to it which Escrow Agent shall in good faith believe to be genuine,
and to have been signed or presented by the persons or parties purporting to
sign or present the same.
Escrow Agent shall have no liability under, or duty to inquire into,
the terms and provisions of the Asset Purchase Agreement or any other agreement
to which any of the Parties is a party. In the event that any of the terms and
provisions of any other agreement conflict or are inconsistent with any of the
terms and provisions of this Agreement, the terms and provisions of this
Agreement in respect of Escrow Agent's rights and duties shall govern and
control in all respects.
If Escrow Agent shall be uncertain as to its duties or rights
hereunder, it shall be entitled to refrain from taking any action other than to
keep safely all Escrow Funds until it shall be directed otherwise by the joint
written instructions of the Parties or an order of a court of competent
jurisdiction. Escrow Agent may consult with counsel of its choice and shall not
be liable for any action taken, suffered, or omitted by it in accordance with
the written advice of such counsel. Escrow Agent shall not be required to
institute legal proceedings of any kind and shall not be required to defend any
legal proceedings which may be instituted against it in respect of the subject
matter of this
-3-
Agreement unless requested to do so by another Party hereto and indemnified to
its reasonable satisfaction against the costs and expenses of such proceedings.
The Parties hereby waive any suit, claim, demand or cause of action
of any kind which any such Party may have or assert against Escrow Agent arising
out of or relating to the execution or performance by Escrow Agent of this
Agreement, unless such suit, claim, demand or cause of action is based upon the
willful misconduct, gross negligence, or bad faith of Escrow Agent or Escrow
Agent's failure to perform an express obligation hereunder. Escrow Agent shall
be indemnified and held harmless jointly and severally by the Parties against
any and all liabilities, including judgments, costs and reasonable counsel fees,
for anything done or omitted by Escrow Agent in the performance of this
Agreement except as a result of the willful misconduct, bad faith or gross
negligence of Escrow Agent or Escrow Agent's failure to perform an express
obligation hereunder. All such reimbursements and indemnifications shall be paid
one-half by Buyer and one-half by Seller; provided, however, if reimbursements
and indemnifications relate to a dispute between Seller and Buyer with regard to
the payment of Escrow Funds hereunder and there is an adjudication of such
dispute, reimbursements and indemnifications related thereto shall be paid in
full by the Party which does not prevail in the dispute.
8. Fees and Expenses of Escrow Agent. The Parties shall pay Escrow
Agent the fee set forth in Schedule 2 as payment in full for the services to be
rendered by Escrow Agent hereunder and agree to reimburse Escrow Agent for all
reasonable expenses, disbursements and advances incurred or made by Escrow Agent
in the performance of its duties hereunder. Any such compensation and
reimbursement to which the Escrow Agent is entitled shall be borne one-half by
Buyer and one-half by Seller; provided, however, if reimbursement relates to a
dispute between Seller; on the one hand, and Buyer, on the other hand, with
regard to the payment of Escrow Funds hereunder and there is an adjudication of
such dispute, reimbursements and indemnifications related thereto shall be paid
in full by the Party which does not prevail in the dispute.
9. Notices. All notices hereunder shall be in writing and shall be
sufficiently given if hand-delivered, sent by documented overnight delivery
service or registered or certified mail, postage prepaid, return receipt
requested or by telegram or telecopy (confirmed by U.S. mail), receipt
acknowledged, addressed as set forth below or to such other person and/or at
such other address as may be furnished in writing by any Party hereto to the
other. Any such notice shall be deemed to have been given as of the date
received, in the case of personal delivery, or on the date shown on the receipt
or confirmation therefor, in all other cases.
-4-
(a) If to Buyer:
Pegasus Communications Corporation
5 Radnor Corporate Center, Xxxxx 000
000 Xxxxxxxxxx Xxxx
Xxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxxxxxxx X. Xxxxx
(with a copy to Xxx X. Lodge)
Telephone: 000-000-0000
Telecopier: 000-000-0000
(b) If to Seller:
Horizon Infotech, Inc.
00 Xxxx Xxxx Xxxxxx
X.X. Xxx 000
Xxxxxxxxxxx, Xxxx 00000-0000
Attention: Xxxxxxx X. XxXxxx
Telephone: 000-000-0000
Telecopier: 000-000-0000
(c) If to Escrow Agent:
The Huntington Trust Company, N.A.
00 Xxxxx Xxxx Xxxxxx, XX0000
Xxxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxx
Telephone: 000-000-0000
Telecopier: 000-000-0000
10. Entire Agreement and Modification. This Agreement constitutes the
entire agreement between the parties hereto with respect to the matters
contemplated herein and supersedes all prior agreements and understandings with
respect thereto. Any amendment, modification, or waiver of this Agreement shall
not be effective unless in writing. Neither the failure nor any delay on the
part of any party to exercise any right, remedy, power, or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any right, remedy, power or privilege preclude any other or further exercise of
the same or of any other right, remedy, power, or privilege.
11. Governing Law. This Agreement is made pursuant to, and shall be
construed and enforced in accordance with, the laws of the Commonwealth of
Pennsylvania.
12. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original and all of which,
when taken together, shall be deemed to constitute but one and the same
agreement. Not all parties need execute the same counterpart.
-5-
13. Further Assurances. Each of the parties hereto shall execute such
further instruments and take such other actions as any other party shall
reasonably request in order to effectuate the purposes of this Agreement.
14. Funds Transfer Security Procedures. Each of the Parties
acknowledges that the Escrow Agent will follow the security procedures set forth
in this paragraph with respect to Escrow Funds transfers. Upon receipt of
instructions to deliver Escrow Funds, the Escrow Agent will confirm the
instructions set forth in such instructions with the person executing such
instructions at the relevant telephone number listed in Section 9 hereof. Each
of the Parties will restrict access to confidential information relating to such
security procedures to authorized persons. In executing Escrow Funds transfers,
the Escrow Agent will rely upon account numbers or other identifying numbers of
a beneficiary, beneficiary's bank or intermediary bank rather than names. The
Escrow Agent shall not be liable for any loss, liability or expense resulting
from any error in an account number or other identifying number provided it has
accurately transmitted the numbers provided.
15. Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors, assigns,
heirs, executors, and administrators. If any provision of this Agreement shall
be or become illegal or unenforceable in whole or in part for any reason
whatsoever, the remaining provisions shall nevertheless be deemed valid and
binding.
-6-
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
PEGASUS COMMUNICATIONS CORPORATION
By: __________________________________________
CHILLICOTHE TELEPHONE COMPANY
By: __________________________________________
HORIZON INFOTECH, INC.
By: __________________________________________
THE HUNTINGTON TRUST COMPANY, N.A.
By: __________________________________________
-7-
EXHIBIT 3
NONCOMPETITION AGREEMENT
This NONCOMPETITION AGREEMENT ("Agreement") is made as of the ____ day
of November, 1996, by and among Pegasus Communications Corporation
("Purchaser"), a Delaware corporation, Horizon Telecom, Inc. ("Parent"), an Ohio
corporation, Horizon Infotech, Inc. ("Horizon"), an Ohio corporation, and
Chillicothe Telephone Company ("Chillicothe"), an Ohio corporation. Parent,
Horizon and Chillicothe are collectively referred to herein as the "Selling
Group." Purchaser and the Selling Group are collectively referred to herein as
the "Parties."
RECITALS:
WHEREAS, the Parties have entered into that certain Asset Purchase
Agreement dated as of October ___, 1996 ("Asset Purchase Agreement"); and
WHEREAS, the Asset Purchase Agreement requires that the Selling Group
execute and deliver this Agreement as a condition precedent to the obligations
of Purchaser and the Selling Group under the Asset Purchase Agreement.
NOW, THEREFORE, in consideration of the premises, mutual promises,
covenants, agreements, representations and warranties contained herein and in
the Asset Purchase Agreement, and intending to be legally bound hereby, the
Parties agree as follows:
1. Definitions. Capitalized terms used and not otherwise defined herein
shall have the respective meanings assigned to them in the Asset Purchase
Agreement.
2. Acknowledgements by the Selling Group. The Selling Group
acknowledges that: (i) Purchaser has required that the Selling Group make the
covenants set forth in Section 3 of this Agreement as a condition to Purchaser
consummating the transactions contemplated by the Asset Purchase Agreement; (ii)
the provisions of Section 3 of this Agreement are reasonable and necessary
because of the unique nature of the Business; and (iii) Pegasus and its
Affiliates would be irreparably damaged if the Selling Group were to breach the
covenants set forth in Section 3 of this Agreement.
3. Noncompetition. The Selling Group hereby agrees that neither the
Selling Group nor any of its Affiliates will participate in, own, manage,
operate or control, directly or indirectly, in the Service Areas (i) for a
period of three years from the date hereof, any direct-to-home satellite
(including direct broadcast satellite), instructional television fixed service,
multipoint distribution service, multichannel multipoint distribution service or
local multipoint distribution service businesses and (ii) until January 31,
1999, any multichannel wireless video businesses other than those described in
(i). The Selling Group agrees that this covenant is reasonable with respect to
its duration, geographical area and scope. Nothing herein will prevent the
Purchaser or any of its affiliates from retaining any company in the Selling
Group as its agent for purposes of distributing DirecTV services.
4. Remedies. If the Selling Group breaches the covenant set forth in
Section 3 of this Agreement, Purchaser shall be entitled to (i) damages from the
Selling Group, and (ii) the right to injunctive or other equitable relief to
restrain any breach or threatened breach or otherwise to specifically enforce
the provisions of Section 3 of this Agreement, it being agreed by the Parties
that money damages alone would be inadequate to compensate Purchaser for such
breach and that damages would be an inadequate remedy for such breach.
5. General.
(a) This Agreement shall be binding upon the Parties and shall inure
to the benefit of their Affiliates and successors.
(b) The rights and remedies of the parties to this Agreement are
cumulative and not alternative. Neither the failure nor any delay by any Party
in exercising any right, power, or
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privilege under this Agreement will operate as a waiver of such right, power, or
privilege, and no single or partial exercise of any such right, power, or
privilege will preclude any other or further exercise of such right, power, or
privilege or the exercise of any other right, power, or privilege. To the
maximum extent permitted by applicable law, (i) no claim or right arising out of
this Agreement can be discharged by one Party, in whole or in part, by a waiver
or renunciation of the claim or right unless in writing signed by the other
Parties; (ii) no waiver that may be given by a Party will be applicable except
in the specific instance for which it is given; and (iii) no notice to or demand
on one Party will be deemed to be a waiver of any obligation of such Party or of
the right of the Party giving such notice or demand to take further action
without notice or demand as provided in this Agreement.
(c) This Agreement shall be governed by the laws of the Commonwealth
of Pennsylvania without regard to conflicts of laws principles.
(d) Whenever possible, each provision and term of this Agreement
shall be interpreted in a manner to be effective and valid, but if any provision
or term of this Agreement is held to be prohibited by law or invalid, then such
provision or term shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating or affecting in any manner whatsoever the
remainder of such provision or term or the remaining provisions or terms of this
Agreement. If any of the covenants set forth in Section 3 of this Agreement is
held to be invalid or unenforceable due to its scope, breadth or duration, then
it shall be modified to the scope, breadth or duration permitted by law and
shall be fully enforceable as so modified.
(e) This Agreement may be executed in two or more counterparts, each
of which shall be deemed to be an original copy of this Agreement and all of
which, when taken together, shall be deemed to constitute one and the same
agreement.
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(f) The headings of Sections in this Agreement are provided for
convenience only and shall not affect its construction or interpretation. All
references to "Section" or "Sections" refer to the corresponding Section or
Sections of this Agreement unless otherwise specified. All words used in this
Agreement shall be construed to be of such number as the circumstances require.
Any covenant of the "Selling Group" shall be made jointly and severally by, and
any reference herein to the "Selling Group" shall be deemed to refer jointly and
severally to, Parent, Horizon and Chillicothe.
(g) This Agreement and the Asset Purchase Agreement constitute the
entire agreement between the parties with respect to the subject matter of this
Agreement and supersede all prior written and oral agreements and understandings
with respect to the subject matter of this Agreement. This Agreement may not be
amended except by a written agreement executed by the Parties.
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IN WITNESS WHEREOF, the Parties hereto have duly executed this
Agreement as of the day and year first above written.
PEGASUS COMMUNICATIONS CORPORATION
By: ____________________________________
HORIZON TELECOM, INC.
By: ____________________________________
HORIZON INFOTECH, INC.
By: ____________________________________
CHILLICOTHE TELEPHONE COMPANY
By: ____________________________________
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