HomeMy WebLinkAbout20131826.tiffEXECUTION VERSION
ASSET PURCHASE AGREEMENT
by and between
BAJA BROADBAND, LLC
and
TELEPHONE AND DATA SYSTEMS, INC.
Dated as of February 25, 2013
2013-1826
CHI 7401391v.14
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
Section 1.1 Certain Defined Terms 1
Section 1.2 Other Terms 16
ARTICLE II
THE SALE AND PURCHASE OF THE TRANSFERRED ASSETS
Section 2.1 Sale and Purchase of Transferred Assets 16
Section 2.2 Excluded Assets 18
Section 2.3 Assumed Liabilities 20
Section 2.4 Excluded Liabilities 21
Section 2.5 Purchase Price 22
Section 2.6 Indemnity Escrow 23
Section 2.7 Closing 23
Section 2.8 Post -Closing Purchase Price Adjustments 24
Section 2.9 Allocation of Purchase Price 26
Section 2.10 Retained Franchises 27
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Section 3.1 Organization and Qualification; Equity Interests 27
Section 3.2 Authority 28
Section 3.3 No Conflict; Required Filings and Consents 28
Section 3.4 Transferred Assets 29
Section 3.5 Financial Statements 30
Section 3.6 Absence of Certain Changes or Events; No Undisclosed Liabilities 30
Section 3.7 Compliance with Laws and Governmental Authorizations 30
Section 3.8 Litigation 30
Section 3.9 Overbuilds 31
Section 3.10 Programming and Promotional Campaigns 31
Section 3.11 Retransmission Consent and Must -Carry; Rate Regulation; Copyright
Compliance. 31
Section 3.12 Employee Plans 32
Section 3.13 Labor and Employment Matters 34
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Section 3.14 Real Property 36
Section 3.15 Intellectual Property 37
Section 3.16 Governmental Authorizations; Regulatory and Copyright Compliance 38
Section 3.17 Taxes 39
Section 3.18 Environmental Matters 40
Section 3.19 Contracts. 40
Section 3.20 System Information 42
Section 3.21 Bonds; Letters of Credit 43
Section 3.22 Transactions with Affiliates 43
Section 3.23 No Brokers 43
Section 3.24 Insurance 43
Section 3.25 No Other Representations or Warranties; Disclaimer 43
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Section 4.1 Organization and Qualification 44
Section 4.2 Authority 44
Section 4.3 No Conflict; Required Filings and Consents 44
Section 4.4 Financing 45
Section 4.5 No Brokers 45
Section 4.6 Litigation and Claims 45
Section 4.7 No On -Sale Agreements 45
Section 4.8 Buyer Acknowledgement 45
Section 4.9 No Other Representations or Warranties 46
ARTICLE V
COVENANTS
Section 5.1 Conduct of Business Prior to the Closing 46
Section 5.2 Covenants Regarding Access and Information 47
Section 5.3 Update of Disclosure Schedules; Knowledge of Breach 50
Section 5.4 Notification of Certain Matters 50
Section 5.5 Employees 51
Section 5.6 Confidentiality 55
Section 5.7 Consents and Filings; Further Assurances 55
Section 5.8 Release of Guarantees 58
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Section 5.9 Implementation and Completion of Certain Projects 58
Section 5.10 Refunds and Remittances 59
Section 5.11 Cooperation on Subscriber Reimbursements 59
Section 5.12 Cooperation on Pending Litigation 59
Section 5.13 Public Announcements 59
Section 5.14 Cooperation on Programming Matters 59
Section 5.15 Title Commitments and Surveys 60
Section 5.16 Tax Covenants 60
Section 5.17 Exclusivity 61
Section 5.18 Bulk Transfer Laws 62
Section 5.19 Transition Services 62
Section 5.20 Programming Changes with respect to the System 62
Section 5.21 Certain Excluded Pole Contracts 6?
Section 5.22 Post -Signing and Pre -Closing Reports 63
Section 5.23 Actions Under the Management Agreement 63
Section 5.24 Delivery of Rep Letters 63
Section 5.25 Certain Leases 63
ARTICLE VI
CONDITIONS TO CLOSING
Section 6. I General Conditions 63
Section 6.2 Conditions to Obligations of Seller 64
Section 6.3 Conditions to Obligations of Buyer 64
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
Section 7.1 Termination 66
Section 7.2 Effect of Termination 66
ARTICLE VIII
INDEMNIFICATION
Section 8.1 Survival 67
Section 8.2 Indemnification by Seller 67
Section 8.3 Indemnification by Buyer 67
Section 8.4 Procedures 68
Section 8.5 Limits on Indemnification 69
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Section 8.6 Assignment of Claims 71
Section 8.7 Exclusive Remedy 71
Section 8.8 Payments 72
ARTICLE IX
GENERAL PROVISIONS
Section 9.1 Fees and Expenses 72
Section 9.2 Amendment and Modification 72
Section 9.3 Waiver 72
Section 9.4 Notices 72
Section 9.5 Interpretation 74
Section 9.6 Entire Agreement 74
Section 9.7 No Third -Party Beneficiaries 75
Section 9.8 Governing Law 75
Section 9.9 Consent to Jurisdiction 75
Section 9.10 Disclosure Generally 75
Section 9.11 Personal Liability: Non -Recourse 76
Section 9.12 Assignment; Successors 76
Section 9.13 Specific Performance 76
Section 9.14 Severability 76
Section 9.15 Waiver of Jury Trial 77
Section 9.16 Counterparts 77
Section 9.17 No Presumption Against Drafting Party 77
Section 9.18 Further Assurances 77
List of Exhibits and Schedules:
Exhibit A Form of Bill of Sale and Assignment and Assumption Agreement
Exhibit B Form of Escrow Agreement
Schedule I.1(a) Communities
Schedule 1.1(b) Relevant Persons for Purposes of Seller's "Knowledge"
Schedule I.1(c) Permitted Encumbrances
Schedule 2.2 Excluded Assets
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Schedule 2.3 Other Assumed Liabilities
Schedule 2.5 Illustrative Closing Statement
Schedule 2.9 Allocation of Purchase Price
Schedule 3.3 Required Consents
Schedule 3.4 Encumbrances
Schedule 3.6(b) Additional Liabilities
Schedule 3.8 Litigation
Schedule 3.9 Overbuilds
Schedule 3.10(b) Discount, Promotional and Bundling Offers
Schedule 3.11(a) Broadcast Television Stations
Schedule 3.11(6) Copyright Compliance
Schedule 3.11(c) FCC Compliance; Notices of Noncompliance
Schedule 3. I2(a) Employee Plans
Schedule 3.12(6) Plan Noncompliance
Schedule 3.12(i) Accelerated Employee Benefits
Schedule 3.12(k) COBRA Election
Schedule 3.13(a) Collective Bargaining Agreements
Schedule 3.13(b) Labor and Employment Claims
Schedule 3.13(c) Labor and Employment Contracts
Schedule 3.13(g) Business Employee Termination
Schedule 3.14(a) Owned Real Property
Schedule 3.14(b) Owned Real Property Exceptions
Schedule 3.14(c) Leased Real Property
Schedule 3.14(d) Leased Real Property Exceptions
Schedule 3. I4(e) Owned Real Property — Leases, Subleases and Licenses
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Schedule 3.15(a) Seller Registered Intellectual Property
Schedule 3.16(a) Franchises, Material Licenses and Other Material Governmental
Authorizations
Schedule 3.16(6) Franchise Expiration Dates
Schedule 3.16(c) Communities Served Without a Franchise or License
Schedule 3.17 Taxes
Schedule 3.18 Environmental Matters
Schedule 3.19(a) Material Contracts
Schedule 3.19(6) Material Contract Exceptions
Schedule 3.20 System Information
Schedule 3.21 Bonds/Letters of Credit
Schedule 3.22 Transactions with Affiliates
Schedule 3.24 Insurance Policies
Schedule 5.1 Conduct of Business Exceptions
Schedule 5.5(e) Severance Benefits
Schedule 5.9 Capital Projects
Schedule 5.14(6) Programming Services
Schedule 5.20 Certain Programming Services
Schedule 5.25(a) Certain Leases
Schedule 6.2(c) Video Subscribers by Franchise Area as of December 3I, 2012
Schedule 6.3(e) Certain Required Consents
Schedule 6.3(h) Required Lease Renewals
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (this "Agreement") dated as of February 25, 2013, is by and
among Baja Broadband, LLC, a Delaware limited liability company ("Seller"), and Telephone and
Data Systems, Inc., a Delaware corporation ("Buyer").
STATEMENT OF PURPOSE
A. Seller and the other Seller Parties (as defined below) are engaged in the business of
providing cable television, high speed data, voice and other services to customers in the communities
identified on Schedule 1.1(a) (each a "Community" and collectively, the "Communities") through
the cable television systems (each a "System" and collectively, the "Systems") owned and operated
by the Seller Parties.
B. Seller has agreed to sell, and to cause each other Seller Party to sell, to Buyer, and
Buyer has agreed to purchase, the Transferred Assets (as defined below) and to assume the Assumed
Liabilities (as defined below), on the terms and conditions set forth in this Agreement.
In consideration of the foregoing and the mutual covenants and agreements contained herein,
the parties agree as follows:
ARTICLE
DEFINITIONS
Section 1.1 Certain Defined Terms. The following terms have the meanings
specified below or are defined in the Sections referred to below.
"Accounts Payable" means all accounts payable of the Business outstanding and unpaid as
of the Closing Time arising from the purchase of goods and services of the Business as reflected on
the Books and Records, other than intercompany payables owed to Seller or any Subsidiary.
"Accounts Receivable" means all subscriber, advertising and miscellaneous accounts
receivable of the Business outstanding and unpaid as of the Closing Time arising from the sale or
disposition of goods and services of the Business as reflected on the Books and Records, other than
intercompany receivables due from Seller or any Subsidiary.
"Action" means any civil, criminal, administrative or arbitral action, suit, demand, claim,
hearing, arbitration, proceeding or investigation by or before any Governmental Entity or arbitrator.
"Active Customer" means a subscriber of the applicable service from a System, but
excluding (i) any subscriber who is more than sixty (60) days past due in the payment of any amount
in excess of SIO payable to any System, (ii) any subscriber who has not paid at least one full month's
payment for any service (after application of any applicable promotions or discounts), and (iii) any
subscriber, with respect to a service, which service is pending disconnection for any reason.
"Ad Valorem Taxes" is defined in Section 5.16(6).
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"Affiliate" means, with respect to any Person, any other Person that directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under common control with such
Person.
"Aggregate Accounting Fees" is defined in Section 2.8(b).
"Agreement" is defined in the opening paragraph.
"Ancillary Agreements" means the Bill of Sale and Assignment and Assumption
Agreement, the Escrow Agreement, the Transition Services Agreement, the Deeds, the Retained
Franchise Management Agreements (if any), and all other instruments and documents necessary for
each Seller Party to transfer its Transferred Assets and for Buyer to assume the Assumed Liabilities,
or otherwise executed and delivered pursuant to the terms of this Agreement.
"Antitrust Division" means the Antitrust Division of the United States Department of
Justice.
"Assumed Accrued Expenses" is defined in Section 2.3(g).
"Assumed Capital Lease Liabilities" is defined in Section 2.3(h).
"Assumed Contracts" is defined in Section 2.1(a).
"Assumed Deferred Liabilities" is defined in Section 2.3(i).
"Assumed Deposit Liabilities" is defined in Section 2.3(e).
"Assumed Employee Liabilities"" is defined in Section 2.3(d).
"Assumed Liabilities" is defined in Section 2.3.
"Assumed Other Current Liabilities" is defined in Section 2.3(j).
"Baja Broadband" means Baja Broadband, LLC, a Delaware limited liability company and
the sole member or stockholder of each of Baja Broadband Operating, Baja Broadband Management
and Carolina Broadband.
"Baja Broadband Management' means Baja Broadband Management, Inc., a Delaware
corporation wholly owned by Baja Broadband.
"Baja Broadband Operating" means Baja Broadband Operating Company, LLC, a
Delaware limited liability company wholly owned by Baja Broadband.
"Base Purchase Price" is defined in Section 2.5(a).
"Basic Services" means the lowest tier of cable television programming sold to subscribers
of the Systems as a package, including broadcast and satellite service programming for which a
subscriber pays a fixed monthly fee, but not including Pay TV, Expanded Basic Services, premium
services, Digital Services, any new product tier, High Speed Internet Services or Telephony Services.
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"Basic Subscribers" means, as of any date and for each System, all Active Customers of
Basic Services and Expanded Basic Services of such System who are individually billed for such
services.
"Bill of Sale and Assignment and Assumption Agreement" means a Bill of Sale and
Assignment and Assumption Agreement substantially in the form attached hereto as Exhibit A,
pursuant to which each Seller Party shall transfer to Buyer all of its rights, title and interest in and to
the Transferred Assets owned and held by such Seller Party and Buyer shall assume the Assumed
Liabilities of such Seller Party.
"Books and Records" is defined in Section 2.1(h).
"Bulk -Billed Subscriber" means any commercial, residential bulk, governmental or other
subscriber that is billed for any service in bulk or in any other manner, whether on a discounted or
undiscounted basis, other than by individual dwelling units at standard rates (including generally
applicable promotional or discount rates).
"Business" means the business of providing customers in the Communities with Video
Services, High Speed Internet Services, Telephony Services and other services conducted by the
Seller Parties through the Systems.
"Business Day" means any day that is not a Saturday, a Sunday or other day on which banks
are required or authorized by Law to be closed in either New York, New York or Chicago, Illinois.
"Business Employees" means, as of any date, all individuals employed by Baja Broadband
Management on such date (including those on approved leaves of absence).
"Business Product" means any product developed, marketed, manufactured, used in Seller's
operations, distributed, provided, licensed, or sold by Seller.
"Buyer" is defined in the opening paragraph.
'Buyer 401(k) Plan" is defined in Section 5.5(i).
"Buyer Benefit Plans" is defined in Section 5.5(c).
"Buyer Indemnified Parties" is defined in Section 8.2.
"Buyer Material Adverse Effect" means a change, occurrence, event or effect that is
materially adverse to the ability of Buyer to perform its obligations under this Agreement or the
Ancillary Agreements or to consummate the Transactions.
"Buyer Welfare Benefit Plans" is defined in Section 5.5(f)(i).
"Cable Act' means Title VI of the Communications Act of 1934, as amended, 47 U.S.C. 151
et seq., all other provisions of the Cable Communications Policy Act of 1984 and the provisions of
the Cable Television Consumer Protection and Competition Act of 1992, and the provisions of the
Telecommunications Act of 1996 amending Title VI of the Communications Act of 1934, in each
case as amended and in effect from time to time.
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"Cap" is defined in Section 8.5(b)(ii).
"Capital Lease Liabilities" means capital lease obligations determined in accordance with
GAAP and on a basis consistent with the accounting principles, practices. methodologies and policies
of Seller.
"Carolina Broadband" means Carolina Broadband, LLC, a Delaware limited liability
company wholly owned by Baja Broadband.
"Claims Deadline" is defined in Section 8.1.
"Closing" is defined in Section 2.7(a).
"Closing Date" is defined in Section 2.7(a).
"Closing Time" means 12:01 a.m. (local time with respect to each System) on the Closing
Date.
"COBRA" is defined in Section 3.12(k).
"COBRA Obligations" is defined in Section 5.5(f)(ii).
"Code" means the Internal Revenue Code of 1986, as amended, and the rules and regulations
promulgated thereunder.
"Communities" is defined in the Statement of Purpose.
"Communications Act" means the Communications Act of 1934, as amended, 47 U.S.C.
Sections 151 et seq., including amendments by the Cable Communications Policy Act of 1984, the
Cable Television Consumer Protection and Competition Act of 1992, and the Telecommunications
Act of 1996, in each case as amended and in effect from time to time.
"Communications Laws" means the Communications Act and the rules and regulations and
published decisions of the FCC thereunder, in each case as amended and in effect from time to time.
"Confidential Information' is defined in the Confidentiality Agreement.
"Confidentiality Agreement" is defined in Section 5.6(a).
"Contract" means any legally binding agreement, contract, lease, sublease, license,
indenture, mortgage, collective bargaining agreement, purchase and sales order, undertaking,
obligation, promise, evidence of indebtedness, binding commitment or instrument to which Seller or
any Subsidiary is a party and related primarily to the conduct of the Business or the operation of a
System, whether written or oral, including any amendments, supplements and other modifications
thereto, but excluding all Governmental Authorizations. For purposes of this Agreement, Contracts
include: (i) permits for wire crossings over or under railroads and other property, (ii) Pole
Attachment Agreements, and (iii) agreements relating to the purchase, sale, receipt or distribution of
news, data and microwave relay signals, or for satellite services, in each case, related or applicable to
the conduct of the Business or the operation of a System.
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"control," including the terms "controlled by" and "under common control with." means
the possession, directly or indirectly, of the power to direct or cause the direction of the management
and policies of a Person, whether through the ownership of voting securities, as trustee or executor,
as general partner or managing member, by contract or otherwise.
"Copyrights" means United States and non -United States copyrights and mask works (as
defined in 17 U.S.C. §901), whether registered or unregistered, and pending applications to register
the same.
"Copyright Act" means the Copyright Act of 1976, as amended, and the published rules and
regulations and decisions of the Copyright Office thereunder, as in effect from time to time.
"Copyright Office" means the United States Copyright Office.
"Current Accounts Receivable' means the sum of (i) the face amount of all subscriber
accounts receivable of the Business that are outstanding on the Closing Date, no pan of which in
excess of $10 is more than thirty (30) days past due (with an account being "past due," for purposes
hereof, one day after the first day of the period to which the applicable billing relates), plus (ii) ninety
percent (90%) of the face amount of all subscriber accounts receivable of the Business that are
outstanding on the Closing Date any part of which in excess of S I 0 is more than thirty (30) days past
due but no part of which in excess of S 10 is more than sixty (60) days past due, plus (iii) fifty percent
(50%) of the face amount of all subscriber accounts receivable of the Business that are outstanding
on the Closing Date any part of which in excess of $10 is more than sixty (60) days past due but no
part of which in excess of S10 is more than ninety (90) days past due, plus (iv) zero percent (0.0%) of
the face amount of all subscriber accounts receivable of the Business that are outstanding on the
Closing Date any amount of which is more than ninety (90) days past due, plus (v) the face amount
of all advertising accounts receivable and miscellaneous accounts receivable (including accounts
receivable for tower rentals) of the Business that are outstanding on the Closing Date, no amount of
which in excess of $10 is more than ninety (90) days past due.
"Current Assets" means the combined current assets of the Business as of the Closing Time
determined in accordance with GAAP and on a basis consistent with the accounting principles,
practices, methodologies and policies of Seller.
"Current Assets Transferred" means Current Assets included in the Transferred Assets,
including the amount of the following that are Current Assets: (i) Current Accounts Receivable;
(ii) Transferred Prepaid and Deposit Assets; (iii) petty cash located at any office at any Real
Property, but excluding cash and cash equivalents other than such petty cash; and (iv) any other
Current Assets set forth on Schedule 2.5. Schedule 2.5 attached hereto (including the worksheet
included as part of Schedule 2.5 showing the methodology for determining Current Accounts
Receivable) sets forth an illustration of how- Current Assets Transferred will be calculated on the
Preliminary Closing Statement and Final Closing Statement. The parties hereto agree to cooperate
during the 90 day period after the date hereof to prepare a revised Schedule 2.5 that includes the
amounts of all Current Assets and Current Assets Transferred assuming that the Closing Date was
January 1, 2013.
"Current Liabilities" means the combined current liabilities of the Business as of the
Closing Time determined in accordance with GAAP and on a basis consistent with the accounting
principles, practices, methodologies and policies of Seller.
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"Current Liabilities Assumed" means Current Liabilities included in the Assumed
Liabilities, including the amount of the following that are Current Liabilities: (i) Accounts Payable;
(ii) Ad Valorem Taxes that are prorated to Buyer pursuant to Section 5.16(6): (iii) Assumed Deposit
Liabilities; (iv) Assumed Deferred Liabilities; (v) Assumed Employee Liabilities; (vi) Assumed
Capital Lease Liabilities; (vii) Assumed Accrued Expenses; (viii) Assumed Other Current Liabilities;
and (ix) any Assumed Liabilities set forth on Schedule 2.3; but excluding any amounts relating to
indebtedness of any Seller Party being paid off at or prior to the Closing (including fees, expenses
and any interest relating thereto). Schedule 2.5 attached hereto sets forth an illustration of how
Current Liabilities Assumed will be calculated on the Preliminary Closing Statement and Final
Closing Statement. The parties hereto agree to cooperate during the 90 day period after the date
hereof to prepare a revised Schedule 2.5 that includes the amounts of all Current Liabilities and
Current Liabilities Assumed assuming that the Closing Date was January 1, 2013.
"Deed" means the special warranty deed for each parcel of Owned Real Property in the
respective form customarily used in the state in which such parcel of Owned Real Property is located.
"Digital Services" means an optional tier of digital video services offered by a System to its
customers.
"Digital Subscribers" means, as of any date and for each System, all Active Customers of
Digital Services of such System.
"Disclosure Schedules" is defined in ARTICLE III and includes Schedule Supplements.
"Dispute Notice" is defined in Section 2.8(a)
"Employee Plans" means all employee benefit plans maintained by Seller or any of its
ERISA Affiliates in connection with the Business or the Systems or on behalf of any current or
former employees or consultants with respect to the Business or the Systems or their dependents or
with respect to which Seller or any of its ERISA Affiliates participates, contributes or has any
obligation, including all "employee benefit plans' within the meaning of Section 3(3) of ERISA
(whether or not subject to ERISA), all formal written plans and all other compensation and benefit
plans, contracts, policies, programs and arrangements, whether written or unwritten (other than
routine administrative procedures), including all pension, profit sharing, savings and thrift, bonus,
stock bonus, stock option or other cash or equity -based incentive or deferred compensation,
severance pay, medical and life insurance plans, employment or consulting agreements, stay or
retention bonuses or compensation, executive or incentive compensation programs or arrangements,
sick leave, vacation pay, paid time -off, plant closing benefits, salary continuation for disability,
retirement arrangements, adoption assistance, fringe benefits, patent award, tuition reimbursement or
scholarship programs, employee discount programs, meals, travel, or vehicle allowances, plans
subject to Code Section 125, and plans providing benefits or payments in the event of a change of
control, change in ownership or effective control or sale of a substantial portion (including all or
substantially all) of the assets of any business or portion thereof.
"Encumbrance" means any charge, claim, mortgage, deed of trust, lien, option, pledge,
security interest, right of first refusal or other restriction of any kind.
"Environmental Laws" mean any Laws of any Governmental Entity: (i) related to releases
or threatened releases to soil, surface water, groundwater, air or any other environmental media of
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any Hazardous Substances; (ii) governing the use, treatment, storage, disposal, transport or handling
of Hazardous Substances; or (iii) related to the protection of the environment. Such Environmental
Laws shall include the Resource Conservation and Recovery Act, the Comprehensive Environmental
Response, Compensation and Liability Act, the Emergency Planning and Community Right -to -Know
Act, the Occupational Safety and Health Act, the Clean Air Act, the Clean Water Act, the Safe
Drinking Water Act and the Toxic Substances Control Act.
"Equipment" means electronic devices, trunk and distribution coaxial and optical fiber
cable, amplifiers, optical nodes, drops, power supplies, conduit, vaults and pedestals, grounding and
pole hardware, subscriber devices (including converters, encoders, cable modems, media terminal
adaptors, digital terminal adaptors, transformers behind television sets and fittings), headend
hardware (including origination, earth stations, transmission and distribution systems, CMTSs,
routers and servers), test equipment, vehicles, towers, tower equipment, microwave equipment, office
equipment, computers, billing equipment, furniture, fixtures, supplies, inventory, and other tangible
personal property owned or leased by a Seller Party, in each case that are used or held for use in
connection with the Business, including the vehicles listed on Schedule 3.20, but excluding any
Excluded Assets.
`Equity Interest" means any ownership or other similar interest, however designated, in the
equity of any Person, including capital stock, partnership interests, membership interests, and any
option or warrant with respect thereto and any similar right to acquire any such interest.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and
the rules and regulations thereunder, as in effect from time to time.
"ERISA Affiliate" means, with respect to Seller: (i) any corporation which at any time on or
before the Closing Date is or was a member of the same controlled group of corporations (within the
meaning of Section 414(6) of the Code) as Seller: (ii) any partnership, trade or business (whether or
not incorporated) which at any time on or before the Closing Date is or was under common control
(within the meaning of Section 414(c) of the Code) with Seller; (iii) any entity, which at any time on
or before the Closing Date is or was a member of the same affiliated service group (within the
meaning of Section 414(m) of the Code) as Seller, any corporation described in clause (i) above or
any partnership, trade or business described in clause (ii) above; and (iv) any entity which at any time
on or before the Closing Date is or was required to be aggregated with Seller under Section 414(o) of
the Code.
"Escrow Agent" is defined in Section 2.6.
"Escrow Agreement" means the escrow agreement in the form attached hereto as Exhibit B,
pursuant to which Seller, Buyer and the Escrow Agent provide for the management of the Escrow
Fund.
"Escrow Amount" is defined in Section 2.6.
"Escrow Fund" is defined in Section 2.6.
`Estimated Purchase Price" is defined in Section 2.5(b).
"Excluded Assets" is defined in Section 2.2.
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"Excluded Liabilities" is defined in Section 2.4.
"Existing Information" is defined in Section 5.3.
"Expanded Basic Services" means an optional tier of video services greater than Basic
Services offered by a System to its customers under various names but excluding a la carte channels,
premium services, Digital Services, any new product tier, Pay TV, High Speed Internet Services and
Telephony Services.
"FCC" means the Federal Communications Commission
"Final Order" means an action by the FCC as to which: (i) no request for stay of the action
by the FCC is pending, no such stay is in effect, and if any time period is permitted by statute or
regulation for filing any request for such a stay, such time period has passed; (ii) no petition for
rehearing or reconsideration, or application for review, of the action is pending before the FCC, and
the time permitted for filing any such petition or application has passed; (iii) the FCC does not have
the action under reconsideration on its own motion and the time in which such reconsideration is
permitted has passed; and (iv) no appeal to a court, or request for stay by a court, of the FCC's action
is pending or in effect, and the deadline for filing any such appeal or request has passed.
"Financial Statements" is defined in Section 3.5(a).
"Final Closing Statement" is defined in Section 2.8(a).
"Franchise" means each franchise (as such term is defined in the Communications Laws)
granted or enacted by a Governmental Entity authorizing the construction, upgrade, maintenance and
operation of any part of a System.
"Franchise Area" means, with respect to any System, the geographic area in which a Seller
Party is authorized to operate such System pursuant to an applicable Franchise.
"Franchising Authority" means a United States federal, state or local governmental
authority that has issued a Franchise, or which has the authority and power, pursuant to federal, state
or local law, to grant a Franchise.
"FTC" means the Federal Trade Commission.
"Fundamental Representations" means the representations and warranties set forth in
Section 3.1(a)(i), (a)(ii) and (c) (Organization and Qualification), Section 3.2 (Authority), Section
3.17 (Taxes), Section 3.23 (No Brokers), Section 4.1 (Organization and Qualification), Section 4.2
(Authority), and Section 4.5 (No Brokers)
"GAAP" means United States generally accepted accounting principles as in effect on the
date hereof.
"Governmental Authorizations" means all permits, Licenses, certificates, Franchises,
waivers, concessions, exemptions, orders and other authorizations and approvals that are held by any
Seller Party in the operation of the Business and issued or obtained from a Governmental Entity.
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"Governmental Entity" means any United States federal, state or local governmental,
regulatory or administrative authority, agency, division, instrumentality or commission or ally
judicial or arbitral body.
"Guarantees" is defined in Section 3.21.
"Hazardous Substances" means all substances, materials, chemicals, wastes or pollutants
that are regulated under or for which liability or standards of care are imposed by Environmental
Law, including without limitation, (i) asbestos or asbestos containing materials, radioactive materials,
lead, and polychlorinated biphenyls, any petroleum or petroleum product, solid waste, mold,
mycotoxin, and radon gas; (ii) any waste or substance that is listed, defined, designated or classified
as, or otherwise determined by any Environmental Law to be, ignitable, corrosive, radioactive,
dangerous, toxic, explosive, infectious, mutagenic or otherwise hazardous; (iii) any pollutant,
contaminant, waste, chemical or other material or substance (whether solid, liquid or gas) that is
defined as a "solid waste," "hazardous waste," "hazardous material," "hazardous substance,"
"extremely hazardous waste," "restricted hazardous waste," "pollutant," "contaminant," "hazardous
constituent," "special waste," "toxic substance," or a word, term, or phrase of similar meaning or
regulatory effect under any Environmental Law.
"High Speed Internet Services" means Internet access and backbone connectivity services
offered by a System to its customers through a cable modem and cable modem termination system,
including residential and commercial high speed internet, fiber and WAN services.
"Hired Employee" means any Business Employee who is offered employment by the Buyer
or its Affiliate pursuant to Section 5.5(a), who accepts such offer of employment and who actually
becomes an employee of. and performs services for. the Buyer or its Affiliate after the Closing Time.
"HSI Subscribers" means, as of any date and for each System, all Active Customers of High
Speed Internet Services of such System.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
"Improvements" is defined in Section 3.14(e).
"Indemnified Party" is defined in Section 8.4(a).
"Indemnifying Party" is defined in Section 8.4(a).
"Insurance Matters" is defined in Section 2.2(j).
"Intellectual Property" means all (a) Copyrights; (b) Patent Rights; (c) Trademarks; (d)
Trade Secrets; (e) domain names: (f) all registrations, renewals. extension, continuations, divisions,
or reissues of, and applications for, any of the rights referred to in clauses (a) through (e) above; and
(g) Other IP.
"Intellectual Property Rights" means and includes all rights of Intellectual Property, which
may exist or be created under the laws of any jurisdiction in the world.
"Knowledge," with respect to Seller, means the actual knowledge of the individuals named
on Schedule 1.1(b) as of the date of this Agreement (or, with respect to a certificate delivered
9
( iii 7l0UY1, N
pursuant to this Agreement, as of the date of delivery of such certificate) acquired after reasonable
inquiry into the matter, but without any implication of further verification or investigation concerning
such knowledge or any continuing duty to remain informed about such matter.
"Law" means any applicable common law, statute, law, ordinance, regulation, rule, permit or
permit condition, code, injunction, judgment, administrative or judicial decree or order of any
Governmental Entity, including any judicial decisions applying common law or interpreting any
other Law.
"Leased Real Property" is defined in Section 3.14(c).
"Leases" means leases, subleases, licenses and other Contracts (including any assignments,
amendments or supplements thereto, or recorded notices or memoranda thereof) for the Leased Real
Property.
"Leave Employee" is defined in Section 5.5(b).
"Lender" is defined in Section 2.7(b)(v).
"LFA Approvals" means all consents, approvals or waivers required to be obtained from any
Governmental Entity with respect to the assignment, transfer or change in control of any Franchise in
connection with the Transactions.
"License" means all TV translator station, satellite, Cable Television Relay Services
("CARS"), Television Receive Only ("TVRO") earth station, tower, microwave, business, radio,
common carrier and other FCC licenses, authorizations, and registrations, and all other licenses,
certificates, filings, permits, registrations, and other authorization issued by the FCC and/or a PUC
that is held by a Seller Party and that relate to the Business, other than a Franchise.
"Losses" is defined in Section 8.2.
"Management Agreement" means that certain Management Agreement, dated August 25,
2008 between Baja Broadband Holding Company, LLC and the Manager, as amended by the First
Amendment to Management Agreement, dated April I. 2010, the Second Amendment to
Management Agreement, dated April I, 2011, and the Third Amendment to Management
Agreement, dated April 1, 2012_
"Manager" means Last Mile Communications LLC.
"Material Adverse Effect" means a change, occurrence, event or effect that is materially
adverse to the assets, properties, operations, business, financial condition or results of operations of
Seller and the Subsidiaries, taken as a whole; provided, that none of the following (or the results
thereof) shall be taken into account, either alone or in combination in determining whether a Material
Adverse Effect has occurred: (a) any actual or proposed change in Law, regulations, accounting rules
or standards or interpretations thereof applicable to Seller or any Subsidiary; (b) any change in
international, national, regional, local or industry -wide political, economic or business conditions
(including financial and capital market conditions); (c) changes within the multichannel video
programming, high-speed data or telephony industries generally (including (i) any federal or state
governmental actions or (ii) litigation matters for which neither Seller or any other Seller Party is a
defendant and competition in those industries); (d) changes in technology; (e) acts of war (whether or
10
( iii 7l(U91, u
not declared), sabotage or terrorism, military actions or the escalation thereof', or other force majeure
events occurring after die date of this Agreement that either (i) do not directly affect any Seller Party,
the Business or any of the Systems or (ii) the adverse effect of which on any System has been
substantially mitigated prior to Closing by a Seller Party through the repair or replacement of the
Transferred Assets lost or damaged thereby, and excluding, in the case of this clause (e), any effects
resulting from a troop deployment from Fort Carson, CO; (f) any loss of subscribers; (g) conditions
generally affecting or related to attributes of Buyer or its Affiliates or otherwise attributable to
actions taken by Buyer or its Affiliates, including any violation of the terms of this Agreement by
Buyer; (h) any adverse effect as a result of the execution of this Agreement or the announcement of
the sale process by which Seller is offering the Transferred Assets for sale or the Transactions, or the
taking of any action contemplated or required by this Agreement; (i) any adverse change in or effect
on the Business, the Transferred Assets or any Seller Party that is cured before the earlier of (x) the
Closing Date and (y) the date on which this Agreement is terminated pursuant to ARTICLE VII
hereof; and (j) any change, occurrence, event or effect to the extent affecting any or all of the
Excluded Assets.
"Material Contracts" is defined in Section 3.19(a).
"Military Subscriber" means each residential subscriber of the System serving Fort Carson,
CO, who is a member or whose spouse is a member of any branch of the U.S. armed forces.
"Monthly P&Ls" is defined in Section 3.5(a).
"Net Deployed Military Subscribers" means the remainder of (a) the aggregate number of
Military Subscribers who were subscribers to Video Services, High Speed Internet Services or VOIP
Services, as the case may be. on December 31. 2012, and who either (i) have been disconnected due
to a tour of duty after December 31, 2012, or (ii) are pending disconnection due to a tour of duty as
of the Closing Date, less (b) the aggregate number of Military Subscribers as of the Closing Date
who are replacement troops for troops deployed on tours of duty after December 31, 2012, and who
became subscribers to Video Services, High Speed Internet Services or VOIP Services, as the case
may be, after December 31, 2012, but in no case shall the number of Net Deployed Military
Subscribers be less than zero.
"New Information" is defined in Section 5.3.
"Non -Current Liabilities" means the combined liabilities of the Business as of the Closing
Time determined in accordance with GAAP and on a basis consistent with the accounting principles,
practices, methodologies and policies of Seller, that are not Current Liabilities.
"Non -Current Liabilities Assumed" means all Non -Current Liabilities that are Assumed
Liabilities, including any (i) Assumed Capital Lease Liabilities, (ii) Assumed Deposit Liabilities,
(iii) Assumed Deferred Liabilities; (iv) Assumed Employee Liabilities, and (v) Assumed Accrued
Expenses, in each case that are not Current Liabilities.
"Order" is defined in Section 3.15(e).
"Other IP" means operating records, instnictions, processes, formulas, inventions,
formulation information, manufacturing technology, validations, package specifications, chemical
specifications, chemical and finished goods analytical test methods, data, stability samples and
lI
(iii 7!01391, N
prototypes, clinical data, product specifications, drawings and technology, Software, and
manufacturing know-how related to the Business Products.
"Owned Real Property" is defined in Section 3.14(a).
"Patent Rights" means United States and non -United States patents, provisional patent
applications, patent applications, continuations, continuations -in -part, divisions, reissues,
reexaminations, substitutions, utilization models, patents of addition, supplementary protection
certificates, inventors' certificates, patent term extensions, pediatric data package exclusivity
extensions, patent disclosures, industrial designs, inventions (whether or not patentable or reduced to
practice) and improvements thereto.
"Pay TV" means for each System, video programming selected by and sold to subscribers on
a per channel or per program basis for monthly or transactional fees in addition to the fee for Basic
Services or Expanded Basic Services.
"Permitted Encumbrances" means (a) statutory liens for current Taxes not yet due or
delinquent; (b) mechanics', carriers', workers', repairers' and other similar liens arising or incurred
in the ordinary course of business relating to obligations as to which there is no default on the part of
Seller or any Subsidiary, or the validity or amount of which is being contested in good faith by
appropriate proceedings, or other Encumbrances securing the performance of bids, trade contracts,
leases or statutory obligations (including workers' compensation, unemployment insurance or other
social security legislation); (c) zoning, entitlement, conservation restrictions and other land use and
environmental regulations by any Governmental Entity applicable to the Real Property which are not
being violated in any material respect by any Seller Party as of the Closing Date and which do not
materially impair the use of the Real Property or Improvements thereon as currently used; (d) in the
case of any Leased Real Property: (i) landlords' liens, (ii) the rights of any lessor under the Leases,
(iii) any Encumbrances granted by any lessor of such Leased Real Property or any such lessor's
predecessors in title, and (iv) any other terms or provisions in the Leases: (e) any severed mineral or
oil and gas estates, or mineral or oil and gas leasehold estates, or rights of a proprietor of a vein or
lode to extract or remove his ore, in each instance which do not materially impair the use of the Real
Property or building or structure thereon as currently being used; (f) those Encumbrances described
as "Permitted Encumbrances" on Schedule I.1(c), each of which shall be released and discharged on
or prior to the Closing Date: (g) any Encumbrance relating to or created in connection with or
pursuant to an Assumed Liability; and (h) all exceptions, restrictions, easements, imperfections of
title, charges, rights -of -way and other non -monetary Encumbrances with respect to Real Property
(including discrepancies and conflicts in boundary lines, shortages in area, encroachments, and other
facts that a current survey or inspection of the property would disclose) that do not materially
interfere with the present use of the affected parcel of Real Property, the operation of the Business
taken as a whole, or materially detract from the value of the Real Property.
"Person" means an individual, corporation, partnership, limited liability company, limited
liability partnership, syndicate, person, trust, association, organization or other entity, including any
Governmental Entity, and including any successor, by merger or otherwise, of any of the foregoing.
"Phase I Assessment" is defined in Section 5.2(d).
"Phase II Assessment" is defined in Section 5.2(d).
12
( iii 7!01391, IJ
"Pole Attachment Agreement" means any Contract relating to the use of any public utility
or cooperative utility facilities, including all pole line. joint pole or master contracts for pole
attachment rights and the use of conduits of a public or cooperative utility.
"Potential Contributor" is defined in Section 8.6.
"Pre -Closing Tax Periods" is defined in Section 5.16(6).
"Preliminary Closing Statement" is defined in Section 2.5(b).
"Prime Rate" means the annual interest rate set forth as the Prime Rate in the Money Rates
table of The Wall Street Journal on the Closing Date.
"Programming Agreements" means Retransmission Consent Agreements, must carry
elections, and all other contracts, agreements or arrangements providing for the right or obligation to
receive or provide programming or other content for transmission to subscribers or for use on or for
any of the Systems.
"Programming Services" is defined in Section 5.14(b).
"PUC" means any state public utilities commission or other Governmental Authority of a
state that has regulatory authority over any of the telecommunications operations of the Systems (but
excluding any Franchising Authority).
"Purchase Price" is defined in Section 2.5(a).
"Real Property" is defined in Section 2.1(b). For purposes of clarity, Real Property does not
include any real property interest that is used primarily in the operation of any cable system
described on Schedule 2.2 (Excluded Assets).
"Registered Intellectual Property" means all Intellectual Property Rights that are registered
or filed with any Governmental Body, including all applications for any Intellectual Property Rights
to be registered with any Governmental Entity.
"Related Real Property Agreements" is defined in Section 3.19(a)(ii).
"Representatives" is defined in Section 5.2(a).
"Required Consent" means any authorization, approval or consent of any Governmental
Entity or other Person under any License, Franchise, Contract, Lease or other instrument that by Law
or by its terms requires such third party action as a condition for a Seller Party to assign or transfer
control of such License, Franchise, Contract, Lease or other instrument in connection with the
Transactions or otherwise to consummate the Transactions.
"Retained Franchise" is defined in Section 2.10.
"Retained Franchise Liabilities" is defined in Section 5.7(c)(iv).
"Retained Franchise Management Agreement" is defined in Section 2.10.
13
('III 71oI;9n 14
"Retransmission Consent Agreement'" means any agreement or grant of consent validly
authorizing the retransmission of a television broadcast station's signal by any System.
"RGUs" (Revenue Generating Units) means the sum of the Video Subscribers, HSI
Subscribers and Telephony Subscribers for all of the Systems plus, solely for purposes of calculating
RGUs as of the Closing Date, any Net Deployed Military Subscribers, with the intent that any loss of
RGUs between December 31, 2012 and the Closing Date attributable to troop deployment activity
shall be disregarded in the calculation of RGUs as of the Closing Date.
"Schedule Supplement" is defined in Section 5.3.
"Seller" is defined in the opening paragraph.
"Seller 401(k) Plan" is defined in Section 5.5(i).
"Seller Indemnified Parties'" is defined in Section 8.3.
"Seller Intellectual Property" means all Intellectual Property Rights owned by, licensed to
or used by any Seller Party.
"Seller Owned Intellectual Property" means all Intellectual Property Rights owned by any
Seller Party, including all Seller Registered Intellectual Property.
"Seller Party" means any or all of Seller, Baja Broadband Management, and Baja
Broadband Operating, as the context may require, but expressly not including Carolina Broadband.
"Seller Registered Intellectual Property" is defined in Section 3.15(a).
"Seller Welfare Benefit Plans" is defined in Section 5.5(f)(i).
"Software" means computer software programs and software systems, including databases,
compilations, tool sets, compilers, higher level or "proprietary" languages and related documentation
and materials, whether in source code, object code or human readable form.
"Subscriber Services'" means, collectively, Basic Services, Expanded Basic Services, Pay
TV, Digital Services, and High Speed Internet Services.
"Subsidiary" means any or all of Baja Broadband Management, Baja Broadband Operating
or Carolina Broadband, as the context may require.
"Surveys"" is defined in Section 5.15.
"Systems" is defined in the Statement of Purpose.
"Tangible Personal Property" is defined in Section 2.1(f).
"Tax Allocation Schedule" is defined in Section 2.9.
14
( iii 7l(U91, u
"Tax Return" means any return, declaration, report, claim for refund, information return or
other statement or document relating to Taxes (including any schedule or attachment thereto and any
amendment thereof) filed or required to be filed with any taxing authority.
"Taxes" means any (i) federal, state, local or foreign income, gross receipts, license, payroll,
employment, excise, severance, stamp, occupation, premium, windfall profits, environmental
(including taxes under Code Section 59A), 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 taxes of any kind
whatsoever, together with any interest, penalty, or addition thereto and (ii) any liability for the
payment of amounts determined by reference to amounts described in clause (i) as a result of being
or having been a member of any group of corporations that files, will file, or has filed Tax Returns on
a combined, consolidated or unitary basis, as a result of any obligation under any agreement or
arrangement, as a result of being a transferee or successor, or otherwise.
"Telephony Services" means any level of VoIP Services offered by a System to its
customers.
"Telephony Subscribers' means, as of any date of determination and for each System, all
active lines providing Telephony Services to Active Customers of such System.
"Termination Date" is defined in Section 7.1(d).
"Third Party" is defined in Section 8.4(a).
"Third Party Claim" is defined in Section 8.4(a).
"Title Commitments' is defined in Section 5.15.
"Title Company" is defined in Section 5.15.
"Trademarks" mean means United States, state and non -United States trademarks, service
marks, trade names, designs, logos, slogans and general intangibles of like nature, whether registered
or unregistered, and pending registrations and applications to register the foregoing.
"Trade Secrets" means trade secrets and confidential ideas, know-how, concepts, methods,
processes, formulae, technology, algorithms, models, reports, data, customer lists, supplier lists,
mailing lists, business plans and other proprietary information, all of which derive value, monetary or
otherwise, from being maintained in confidence.
"Transfer" is defined in Section 5.5(f)(ii).
`Transfer Taxes" is defined in Section 5.I6(a).
"Transferred Assets" is defined in Section 2.1.
"Transferred Confidential Information" is defined in Section 5.6(b).
"Transferred Prepaid and Deposit Assets' is defined in Section 2.1(c).
15
cum uoi:vn u
"Transactions" means, collectively, the transactions contemplated by this Agreement and
the Ancillary Agreements.
"Transaction Proposal" is defined in Section 5.17.
"Transition Services" is defined in Section 5.19.
"Transition Services Agreement" is defined in Section 5.19.
"Termination Date" is defined in Section 7.1(d).
"Video Services" means Basic Services, Expanded Basic Services, Pay TV and Digital
Services.
"Video EBUs" (or Equivalent Billing Units) means, as of any date and for each System, the
sum of the number derived by dividing (i) the total monthly billings for sales of Basic Services and
Expanded Basic Services by the System during the most recent month ended prior to the date of
calculation to Bulk -Billed Subscribers of the System that receive Basic Services or Expanded Basic
Services (but excluding billings in excess of a single month's charges for any account), by (ii) the
standard monthly rate then in effect (without discount of any kind) charged by the System to single
family households for Basic Services or Expanded Basic Services, respectively. For purposes of the
foregoing, the portion of the billings to each such Bulk -Billed Subscriber representing an installation
or other non -recurring charge, a charge for equipment or for any additional outlet, a charge for any
tiered service (whether or not included within Pay TV), Digital Services, or a pass -through charge for
sales Taxes, line -itemized franchise fees and similar charges shall be excluded.
"Video Subscribers" means, as of any date of determination and for each System, all Basic
Subscribers and Video EBUs of such System.
"VoIP Services' means interconnected Voice -over -Internet -Protocol services as that term is
defined in Part 9 of the rules of the FCC, including such services provided to customers through use
of an embedded multimedia terminal adapter.
"WARN Act" is defined in Section 3.13(j).
Section 1.2 Other Terms. Other terms may defined elsewhere in this Agreement,
and unless otherwise indicated, shall have such meaning throughout this Agreement.
ARTICLE II
THE SALE AND PURCHASE OF THE TRANSFERRED ASSETS
Section 2.1 Sale and Purchase of Transferred Assets. Subject to the terms and
conditions of this Agreement, at the Closing Seller shall, and shall cause each other Seller Party to,
sell, assign, transfer and convey to Buyer, and Buyer shall purchase, acquire and accept from each
Seller Party, all of such Seller Party's right, title and interest as of the Closing Time in and to all
assets, properties and rights owned or leased by such Seller Party on the Closing Date, whether real,
personal or mixed, tangible or intangible, in electronic form or otherwise, and relating primarily to
the Business conducted or the Systems owned by such Seller Party, including the assets, properties
and rights identified below to the extent relating primarily to the Business conducted or the Systems
16
( iii 7l(U91, u
owned by such Seller Party, but excluding the Excluded Assets of such Seller Party (collectively, the
"Transferred Assets"), without duplication:
(a) all Contracts of such Seller Party. including all Programming Agreements
to the extent transferable to Buyer at Closing and all Contracts for cable guide usage, billing
services, provisioning services, or procurement identified on Schedule 3.19(a) ("Assumed
Contracts"), other than any Contracts described on Schedule 2.2 or that otherwise are included
in the Excluded Assets;
(b) all real property, leaseholds and other interests in real property and
appurtenances thereto owned or leased by such Seller Party at the physical locations set forth on
Schedule 3.14(a) and Schedule 3.14(c), and all other interests of such Seller Party in real property
(i.e., real property interests other than an ownership or leasehold interests, such as easements in
gross or other real property rights that are personal to such Seller Party) used or held for use in
the operation of a System, together with such Seller Party's right, title and interest in, to and
under all structures, facilities or improvements located thereon, all fixtures, systems, equipment
and other items of personal property attached or appurtenant thereto, and all easements, licenses
and rights appurtenant thereto (the "Real Property");
(c) all prepaid expenses and deposits held by third parties as of the Closing
Date for the account of a Seller Party, including deposits on leases and deposits for utilities, but
excluding any prepaid expenses or deposits relating to Insurance Matters, made or paid by a
Seller Party to the extent transferable ("Transferred Prepaid and Deposit Assets");
(d) all petty cash located at any office at any Real Property on the Closing
Date;
(e) all Accounts Receivable, notes receivable and other receivables due to
such Seller Party, together with any unpaid interest or fees accrued thereon or other amounts due
with respect thereto, except as provided in clause (ii) of Section 2.2(1);
(f) all machinery, Equipment, furniture, furnishings, inventory, parts, spare
parts, vehicles and other tangible personal property owned or leased by such Seller Party (the
"Tangible Personal Property" );
(g)
Seller Party:
to the extent transferable, all Governmental Authorizations held by such
(h) all books of account, general, financial and accounting records, files,
invoices, customers and suppliers lists, other distribution lists, billing records, engineering
records, drawings, blueprints, schematics, copyrights, FCC and other regulatory records, manuals
and customer and supplier correspondence owned by such Seller Party other than personnel
records relating to Business Employees who do not become Hired Employees (the "Books and
Records");
(i) all guarantees, warranties, indemnities and similar rights in favor of such
Seller Party to the extent transferable;
17
( iii 7l(U91, u
0) all telephone numbers and IP addresses assigned to such Seller Party,
other than those that constitute Excluded Assets:
(k) all rights under any Patent Right, Trademark, service mark, trade name or
Copyright, whether registered or unregistered, and any application therefor used by the Business,
including the name "Baja Broadband" and variations on such name;
(I) insurance proceeds, and rights, claims or causes of action thereunder
relating to damaged or destroyed property of the Business that has not been repaired or replaced
prior to the Closing; and
(m) all rights, claims and causes of action with respect to any System, the
Transferred Assets, or the Assumed Liabilities of the Business for the period prior to the Closing
Date, but not including rights, claims and causes of action relating to any Excluded Asset or any
Excluded Liability.
Section 2.2 Excluded Assets. Notwithstanding anything herein to the contrary,
Seller or the appropriate Subsidiary shall retain, and the Transferred Assets shall not include any
assets or properties of any kind or nature, wherever located and whether real, personal or mixed,
tangible or intangible, in electronic form or otherwise, that are identified below (collectively, the
"Excluded Assets"):
(a) all Contracts that are specifically identified on Schedule 2.2; all
Contracts that relate primarily to any cable system that is not a System and is listed on Schedule
2_2; and all Contracts (including those for management and consulting services) between Seller
(or any Affiliate of Seller) and any Subsidiary or between Subsidiaries;
(b) all intercompany receivables due to any Seller Party Subsidiary from any
Affiliate of such Seller Party;
(c) all cash, cash equivalents, checks, bank deposits and short-term
investments of Seller or any Subsidiary, other than petty cash located at any office at any Real
Property;
(d) all bank accounts, bank records and statements of Seller or any
Subsidiary;
(e) all stocks, certificates of deposit and similar investments, bonds,
guaranties in lieu of bonds, letters of credit and similar instnuments obtained or held by Seller or
any Subsidiary, and all rights relating thereto;
(0 Seller's and each Subsidiary's books and records of internal corporate
proceedings, personnel records relating to the Business Employees who do not become Hired
Employees, and books and records that Seller or any Subsidiary is required by Law to retain;
(g) all Tax Returns, Tax reports, Tax records and Tax work papers of Seller
or any Subsidiary other than any such information relating to Ad Valorem Taxes;
(h) all accounting books and records and internal reports relating to the
business activities of Seller or any Subsidiary to the extent unrelated to the Business or the
1K
( iii 7l(U91, u
Transferred Assets, including all books and records relating to any cable system listed in
Schedule 2.2 or to any other Excluded Asset or Excluded Liability;
(i) except to the extent included in Current Assets, all Tax assets (including
any interest in or right to any Tax refund or Tax prepayments as well as deferred Tax assets)
relating to the Business, the Transferred Assets or the Assumed Liabilities for, or applicable to,
any taxable period (or portion thereof) ending on or prior to the Closing Time) of Seller or any
Subsidiary:
Q) all insurance policies and rights, claims or causes of action thereunder and
all insurance proceeds that Seller or any Subsidiary is entitled to receive, other than insurance
proceeds, or rights, claims or causes of action thereunder, relating to damaged or destroyed
property of the Business that has not been repaired or replaced prior to the Closing ("Insurance
Matters"):
(k) all rights, claims and interest in and to any refunds of fees of any nature
whatsoever, including fees paid to the United States Copyright Office or any chose in action
owned by Seller or any Subsidiary relating to such refunds;
(I) all rights, claims and causes of action (i) relating to any Excluded Asset
or any Excluded Liability or (ii) against former (i.e., disconnected) customers of the Business in
connection with bill collection efforts involving amounts that have been completely written off
by Seller prior to Closing;
(m) all rights of Seller and each Subsidiary under this Agreement and the
Ancillary Agreements;
(n) all Contracts related to Seller's or any Subsidiary's indebtedness for
borrowed money;
(o) all routine local and state Governmental Authorizations held by Seller or
a Subsidiary in connection with general business or employment activities or Tax matters to the
extent (i) unrelated to the Business or the Transferred Assets, (ii) non -transferable to Buyer, or
(iii) customarily replicated by buyers of cable system assets in transactions similar to the
Transactions;
(p)
Transferred Assets;
all Intellectual Property to the extent unrelated to the Business or the
(q) all Employee Plans and any assets relating thereto except to the extent
involved in the Transfer;
(r) all prepaid expenses and deposits made or paid by Seller or any
Subsidiary to the extent not included in the Transferred Prepaid and Deposit Assets, including
any prepaid expenses or deposits relating to Insurance Matters; and
(s) any contracts and other assets or properties used primarily in the
operation of any cable system that is not a System and is listed in Schedule 2.2, and any other
Contracts and other assets or properties listed in Schedule 2.2.
19
('III 7-OU91, 14
Section 2.3 Assumed Liabilities. In connection with the purchase and sale of the
Transferred Assets pursuant to this Agreement, at the Closing, Buyer shall assume and pay,
discharge, perform or otherwise satisfy the following liabilities and obligations (the "Assumed
Liabilities"), without duplication:
(a) Current Liabilities Assumed;
(b) all liabilities and obligations accruing, arising out of or relating to the
conduct of the Business, the operation of the Systems or the ownership or use of the Transferred
Assets from and after the Closing Time, including all liabilities and obligations of any Seller
Party under any Contract or Governmental Authorization included among the Transferred Assets
to be performed or paid on or after, or in respect of periods following, the Closing Date:
(c) any Taxes to be paid by Buyer pursuant to Section 5.16(b);
(d) all liabilities and obligations specifically assumed by Buyer pursuant to
Section 5.5 ("Assumed Employee Liabilities") or relating to the hiring, employment or
termination of any Hired Employee by Buyer or any Affiliate of Buyer after the Closing, or
directly relating to Buyer's decision not to hire any Business Employee, other than any liabilities
and obligations (i) with respect to any severance compensation that may be payable to such
Business Employee or (ii) resulting from or relating to faulty information regarding such
Business Employee provided by Seller;
(e) all liabilities and obligations accruing, arising out of or relating to funds
of third parties on deposit with a Seller Party, to the extent relating to the Business, including
deposits (including any accrued interest on such deposits) by subscribers served by a System for
converters, encoders, decoders, cable television service and related sales ("Assumed Deposit
Liabilities" );
(f) Accounts Payable except to the extent expressly retained by a Seller Party
as an Excluded Liability or relating to an Excluded Asset:
(g) accrued programming costs under each Programming Agreement that is
assumed by Buyer unless otherwise directed by the programmer, broadcaster or other third party
to a particular Programming Agreement, and other accrued expenses relating to the Business
except to the extent expressly retained by a Seller Party as an Excluded Liability or relating to an
Excluded Asset ("Assumed Accrued Expenses"):
(h) Capital Lease Liabilities of the Business ("Assumed Capital Lease
Liabilities"):
(i) all liabilities and obligations relating to the advance payments to a Seller
Party, to the extent relating to the Business, including advance payments by subscribers served
by a System, and accounted for as deferred revenue on Schedule 2.5 ("Assumed Deferred
Liabilities"), except to the extent expressly retained by a Seller Party as an Excluded Liability or
relating to an Excluded Asset;
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(j) other current liabilities relating to the Business as set forth on Schedule
2.5 ("Assumed Other Current Liabilities"), except to the extent expressly retained by a Seller
Party as an Excluded Liability or relating to any Excluded Asset: and
(k) any other liabilities and obligations described in Schedule 2.3.
Section 2.4 Excluded Liabilities. Notwithstanding any other provision of this
Agreement to the contrary, Buyer is not assuming, and Seller shall, or shall cause the appropriate
Subsidiary to, pay, perform or otherwise satisfy, the following liabilities and obligations (the
`Excluded Liabilities"):
(a) all Taxes arising from or with respect to the Transferred Assets or the
operation of the Business that are incurred in or attributable to any period, or any portion of any
period, ending on or prior to the Closing Date, except to the extent included in Current Liabilities
Assumed, but expressly including as Excluded Liabilities all deferred Tax liabilities;
(b) any indebtedness of Seller or any Subsidiary for borrowed money or
guarantees thereof outstanding as of the Closing Time, whether or not current;
(c) all liabilities and obligations specifically retained by Seller or any
Subsidiary pursuant to Section 5.5;
(d) all liabilities and obligations in respect of or relating to any Employee
Plan, except as expressly assumed by Buyer pursuant to Section 5.5(g):
(e) except as expressly assumed by Buyer pursuant to Section 5.5, all
liabilities and obligations in respect of or relating to former employees of any Seller Party or any
Affiliate thereof, to employees of any Seller Party or any Affiliate thereof who are not Business
Employees immediately prior to the Closing Date, to Business Employees who do not become
Hired Employees, or to consultants with respect to the Business or Systems:
(f) all liabilities and obligations in respect of or relating to Business
Employees who become Hired Employees and arising prior to or on the Closing Date, except as
expressly assumed by Buyer pursuant to Section 5.5(g);
(g) any liability or obligation accruing from or arising out of the conduct of
the Business, the operation of the Systems or the ownership or use of the Transferred Assets prior
to the Closing Date, except to the extent such liability or obligation is assumed by Buyer under
Section 2.3, but expressly including as an Excluded Liability all liability under the Copyright Act
for reporting periods ended prior to the Closing Date;
(h) any liability or obligation relating to an Excluded Asset;
(i) any deferred revenue or other current liabilities that are excluded in
Schedule 2.5;
(j) all intercompany payables owed by any Seller Party to any Affiliate of
such Seller Party;
(k) any liability or obligation arising from or related to a violation of
21
(ill 7-401?91, N
Environmental Laws by any Seller Party, or any release of a Hazardous Substance, which
violation or release occurred or commenced prior to the Closing Date, or any liability under
Environmental Laws arising from any off -site placement or disposal of any Hazardous Substance
generated by or associated with the operation of the Business prior to the Closing Date; and
(I) All other liabilities and obligations that do not relate to the Business or
that are not Assumed Liabilities.
Section 2.5 Purchase Price
(a) The consideration for the sale and purchase of the Transferred Assets
shall consist of an aggregate amount in cash equal to $267,500,000 (the "Base Purchase Price,"
as adjusted in accordance with Section 2.5(c) and Section 2.8, the `Purchase Price"), and
Buyer's assumption of the Assumed Liabilities.
(b) At least five Business Days prior to the Closing, Seller shall deliver to
Buyer its good faith estimate of the adjustments to the Base Purchase Price required by Section
2.5(c), computed in a manner consistent with the example set forth in Schedule 2.5, together with
the estimated Purchase Price calculated based thereon (the "Estimated Purchase Price"), any
supporting schedules with respect to Seller's calculation thereof, and payment instructions with
respect thereto (the "Preliminary Closing Statement"). For purposes of preparing estimates for
the adjustments contemplated in Section 2.5(c)(i) and Section 2.5(c)(ii) to be set forth on the
Preliminary Closing Statement, Seller shall base its estimates using relevant account balances as
of the latest month -end for which such account balances are available prior to the Closing Date ,
as reasonably adjusted in good faith by Seller and reasonably acceptable to Buyer in good faith
for significant expected changes in such account balances for activity occurring or reasonably
expected to occur prior to the Closing Date. If Buyer disputes any estimate or calculation set
forth in the Preliminary Closing Statement, the parties shall negotiate in good faith to resolve
such dispute prior to the Closing Date; provided, however, if the parties are unable to reach
agreement prior to the Closing Date with respect to any such dispute, the parties shall
nevertheless proceed to Closing, subject to the terms and conditions set forth herein, utilizing the
information contained in the Preliminary Closing Statement and the calculation of the Purchase
Price set forth therein as revised to reflect any agreements of the parties with respect thereto. In
such event, any amount remaining in dispute will be resolved in the Final Closing Statement
pursuant to Section 2.8. If the parties are able to reach agreement prior to the Closing Date with
respect to any such dispute, the parties shall proceed to Closing, subject to the terms and
conditions set forth herein, utilizing the information contained in the Preliminary Closing
Statement as adjusted to reflect the agreement reached between the parties, and the calculation of
the Purchase Price set forth therein. Schedule 2.5 attached hereto sets forth an illustration of the
Preliminary Closing Statement. The parties hereto agree to cooperate during the 90 day period
after the date hereof to prepare a revised Schedule 2.5 that reflects adjustments made to the
Purchase Price that would be required if the Closing Date had been January I, 2013.
(c) The Base Purchase Price shall be increased or decreased as set forth
below:
(i) the Base Purchase Price shall be decreased by the amount by which
the estimated Current Assets Transferred are less than the estimated Current Liabilities Assumed or
increased by the amount by which the estimated Current Assets Transferred exceed the estimated
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('III 7-401?91, N
Current Liabilities Assumed:
(ii) the Base Purchase Price shall be decreased by any Non -Current
Liabilities Assumed (excluding any indebtedness, all of which is being paid off by Seller at the
Closing, including fees, expenses and any interest relating thereto) other than those that are Assumed
Capital Lease Liabilities associated with the Contract included as item 4 of part (iii)(b) of Schedule
3.19(a) (the Irrevocable License and Fiber Interconnection Agreement, dated August 24, 2007,
between Dixie Escalante Rural Electric Association and Seller), as further described in Note 5 of the
Consolidated Financial Report of Baja Broadband Holding Company, LLC dated December 31,
2011; and
(iii) if the number of RGUs as of the Closing Date in the aggregate is less
than _, then the Base Purchase Price shall be reduced by an amount equal to the dollar amount
obtained by multiplying such shortfall by provided, however, that the maximum amount that
the Base Purchase Price may be decreased pursuant to this Section 2.5(c)(iii) shall be �.
(d) At the Closing, Buyer shall pay to Seller the Estimated Purchase Price,
less the Escrow Amount, by wire transfer of immediately available funds to the bank account
designated by Seller in the Preliminary Closing Statement.
Section 2.6 Indemnity Escrow. At the Closin = Bu er shall deposit in escrow a
portion of the Purchase Price in an amount in cash equal to (the "Escrow Amount") by
wire transfer of immediately available funds with U.S. Bank National Association (the "Escrow
Agent"), to be held by the Escrow Agent in accordance with the terms and conditions of the Escrow
Agreement. The Escrow Amount plus any interest or earnings thereon (the "Escrow Fund") shall be
held and disbursed in accordance with the terms and conditions of the Escrow Agreement and this
Agreement, including: (i) the provisions of Section 2.8(c)(ii); (ii) the provisions of Section 5.7(c)(iv);
(iii) the release to Seller on the first year anniversary of the Closing Date of an amount equal to fifty
(50) percent of the Escrow Fund remaining on such date and not reserved for payment of any
outstanding claims for indemnification of indemnifiable Losses made by Buyer in accordance with
and subject to the provisions of ARTICLE VIII: and (iv) the release to Seller on the eighteen -month
anniversary of the Closing Date of an amount equal to the Escrow Fund remaining on such date and
not reserved for payment of any outstanding claims for indemnification of indemnifiable Losses
made by Buyer in accordance with and subject to the provisions of ARTICLE VIII.
Section 2.7 Closing.
(a) The sale and purchase of the Transferred Assets and the assumption of the
Assumed Liabilities contemplated by this Agreement shall take place at the offices of Sidley
Austin LLP, One South Dearborn St., Chicago, IL 60603, at 10:00 a.m. Central time, or by
facsimile, electronic and overnight deliveries (the "Closing"), on the first Business Day of the
month immediately following the first month in which all conditions to the obligations of the
parties set forth in ARTICLE VI (other than such conditions as may, by their terms, be satisfied
only at the Closing or on the Closing Date), have been satisfied or to the extent permitted by
applicable Law, waived (or at such other place, date, or time as may be agreed by the parties).
The day on which the Closing takes place is referred to herein as the "Closing Date." Subject to
the consummation of the Closing on the Closing Date, the sale and purchase of the Transferred
Assets and the assumption of the Assumed Liabilities contemplated by this Agreement will be
deemed effective as of the Closing Time.
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(b) At the Closing, Seller shall cause to be delivered to Buyer or Buyer's
Representatives the following documents:
(i) duly executed copies of each of the Ancillary Agreements required to
be executed by any Seller Party;
(ii) a duly executed certificate of an officer of Seller pursuant to Section
6.3(a);
(iii) an affidavit stating, under penalties of perjury, Seller's taxpayer
identification number and that Seller is not a foreign person in accordance with Section 1445(b)(2) of
the Code;
(iv) copies of all Required Consents and LFA Approvals obtained prior to
Closing;
(v) letters duly executed by each of General Electric Capital Corporation
and Stellus Capital (each, a "Lender") confirming that all Encumbrances on the Transferred Assets
in favor of such Lender will be automatically released upon Closing and authorizing Seller and/or
Buyer to file and record all lien release documentation (duly executed by such Lender, if required by
such Lender or applicable Law) necessary to document the release of such Encumbrances in any
public recording office; and
(vi) all other documents reasonably requested by Buyer that are
reasonably necessary to effect the intent of this Agreement and consummate the Transactions.
(c) At the Closing, Buyer shall deliver or cause to be delivered to Seller or
Seller's Representatives the following documents, in form and substance reasonably acceptable
to Seller:
(i) duly executed copies of each of the Ancillary Agreements required to
be executed by Buyer;
(ii) a duly executed certificate of an officer of Buyer pursuant to Section
6.2(a); and
(iii) all other documents reasonably requested by Seller that are
reasonably necessary to effect the intent of this Agreement and consummate the Transactions.
Section 2.8 Post -Closing Purchase Price Adjustments.
(a) Within ninety (90) days after the Closing Date, Buyer shall deliver to
Seller the data, work papers and supporting schedules showing in reasonable detail Buyer's good
faith calculation of the adjustments to the Base Purchase Price required by Section 2.5(c),
computed in a manner consistent with the example set forth in Schedule 2.5, and the final
Purchase Price based thereon (the "Final Closing Statement"). If Seller disputes any matter or
item set forth in the Final Closing Statement, Seller may, within thirty (30) days after receipt of
the Final Closing Statement, provide to Buyer a written statement (the "Dispute Notice") of such
disputes. If Seller does not deliver to Buyer any Dispute Notice concerning the Final Closing
Statement, then Seller shall be deemed to have accepted the Final Closing Statement and the
24
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amounts set forth in the Final Closing Statement shall be final and binding on all parties to this
Agreement. If Seller timely delivers a Dispute Notice, Buyer and Seller shall use good faith
efforts to jointly resolve such disputes within thirty (30) days after Buyer's receipt of the Dispute
Notice, which resolution, if achieved, shall be final and binding upon all parties to this
Agreement. If Buyer and Seller cannot resolve such disputes to their mutual satisfaction within
such 30 -day period, Buyer and Seller shall, within the following ten (10) days, jointly engage a
nationally recognized independent public accounting firm jointly selected by them to review the
Final Closing Statement together with Seller's statement of disputes and any other relevant
documents. In the event that Buyer and Seller cannot agree on an independent public accounting
firm during such timeframe, then each of Buyer, on the one hand, and Seller, on the other hand,
shall select a nationally recognized independent public accounting firm within ten (10) days of
the end of such 10 -day period, which two firms in turn shall select a third nationally recognized
independent public accounting firm within ten (10) days of their selection and such third
independent public accounting firm shall be jointly engaged by Buyer and Seller within ten (10)
days of its selection. In the event that the two firms fail to agree on a third independent public
accounting firm within the 10 -day period, then each shall choose two nationally recognized
independent public accounting firms and out of such four firms one shall be randomly selected
from a hat by Buyer, and such selected independent public accounting firm shall be jointly
engaged by Buyer and Seller within ten (10) days of selection. The parties agree that the
independent public accounting firm ultimately engaged by them shall not be one that is regularly
engaged by Buyer or Seller. Such independent public accounting firm shall calculate the
adjustments to the Base Purchase Price required by Section 2.5(c) using the items included in the
Final Closing Statement that are not disputed by Buyer and Seller and shall make its own
determination of any item that is disputed by Buyer and Seller, but otherwise in accordance with
the provisions of this Agreement and the past principles, practices, methodologies and policies of
Seller; provided, however, in no event shall any such determination by such fine for any disputed
item be outside the range therefor set forth in the Final Closing Statement and the written
statement of disputes. The determination of such firm shall be accompanied by a certificate of
such firm that its determination was prepared in accordance with this Agreement with respect to
such dispute. Such firm shall report its conclusions as to such disputes and its determination of
the adjustments to the Base Purchase Price required by Section 2.5(c) and the final Purchase
Price based thereon pursuant to this Section 2.8 no later than thirty (30) days after it is engaged
by Buyer and Seller, which determination shall be final and binding on all parties to this
Agreement and not subject to further dispute or judicial review.
(b) The fees and expenses (including any related indemnity obligation to such
independent public accounting firm) of such independent public accounting firm (the "Aggregate
Accounting Fees") shall be allocated between Buyer, on the one hand, and Seller, on the other
hand, as follows: a portion of the Aggregate Accounting Fees equal to the product of the
Aggregate Accounting Fees times a fraction, the numerator of which is the aggregate dollar
amount of the disputed items resolved by the independent public accounting firm in favor of
Seller and the denominator of which is the aggregate dollar amount of all disputed items
submitted to the independent public accounting firm for resolution, shall be allocated to Buyer,
and the remainder shall be allocated to Seller (in each case as finally determined by the
independent public accounting fine).
(c) Within five Business Days after the final determination of the Purchase
Price: (i) if the Purchase Price (as finally determined in accordance with Section 2.8(a) exceeds
the Estimated Purchase Price, Buyer will pay to Seller, by wire transfer of immediately available
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funds to the bank account designated in writing by Seller, the amount of such excess, together
with interest thereon from the Closing Date to the date of payment at the Prime Rate: or (ii) if the
Purchase Price (as finally determined in accordance with Section 2.8(a)) is less than the
Estimated Purchase Price, Seller will pay to Buyer from the Escrow Fund, by wire transfer of
immediately available funds to the bank account designated in writing by Buyer, the amount of
such deficit, together with interest thereon from the Closing Date to the date of payment at the
Prime Rate.
(d) Seller will provide to Buyer reasonable access during regular business
hours on reasonable advance notice to the Books and Records and to any other information, to
the extent necessary for Buyer to review the Preliminary Closing Statement, to prepare the Final
Closing Statement, to respond to Seller's objections to the Final Closing Statement (if any), and
to prepare materials for presentation to the independent public accounting firm in connection
with Section 2.8(a). Buyer will provide to Seller reasonable access to the Books and Records and
to any other information used by Buyer in preparing the Final Closing Statement, including to
any Hired Employees or other employees of Buyer, during regular business hours and on
reasonable advance notice. Each party will cooperate with the independent public accounting
firm selected in accordance with Section 2.8(a) as may be reasonably necessary and will
promptly provide to such independent public accounting firm such information as may be
reasonably requested by such independent public accounting firm.
Section 2.9 Allocation of Purchase Price. The Purchase Price (and other relevant
items for Tax purposes, including the Assumed Liabilities) will be allocated among the Transferred
Assets as contemplated by Schedule 2.9; provided, however, that amounts allocated to items included
in the calculation of the Current Assets and Current Liabilities will be subject to appropriate
adjustment to reflect the final determination thereof in accordance with Section 2.8. Buyer will, not
later than ninety (90) days after the Closing Date, prepare and deliver to Seller a schedule (the "Tax
Allocation Schedule") that (a) reasonably allocates the final Purchase Price (and other relevant items
for Tax purposes, including the Assumed Liabilities) among the Transferred Assets in accordance
with Section 1060 of the Code and any U.S. Treasury Regulations pursuant thereto (or any
comparable provisions of state and local tax Law) or any successor provision and (b) is in the form
contemplated by Schedule 2.9. The intangible asset portion of the Tax Allocation Schedule shall be
based on a report prepared by a third party valuation expert selected by Buyer, at Buyer's cost.
Seller will have the right to raise reasonable objections to the Tax Allocation Schedule within ten
(10) Business Days after its receipt thereof, in which event Buyer and Seller will negotiate in good
faith to resolve such objections. The allocation of the final Purchase Price shall reflect the cash
payments at Closing as adjusted by the post -closing Purchase Price adjustments, as applicable.
Buyer and Seller agree (i) to complete and file (and cause each of their Affiliates to complete and
file), all Tax Returns, reports and forms (including, IRS Form 8594), and any amendments thereto, as
and when required by applicable Law in a manner consistent with either the allocation set forth on
the Tax Allocation Schedule as finally agreed upon by the parties or, if the parties do not reach
agreement on the Tax Allocation Schedule within ten (10) Business Days after the date on which
Buyer receives written notice (if any) of Seller's reasonable objections to the Tax Allocation
Schedule, the final allocation proposed by such party, and (ii) to take no position inconsistent with
such allocation in any audit or examination by any taxing authority; provided, however, this clause
(ii) shall not preclude a party from settling or otherwise resolving, either administratively or after the
commencement of any audit or Action relating to such allocation.
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Section 2.10 Retained Franchises. If the LFA Approval required with respect to
any Franchise is not obtained prior to Closing, then such Franchise (each, a "Retained Franchise")
shall not be transferred to Buyer at Closing, and Seller and Buyer shall execute a retained franchise
management agreement in form and substance reasonably satisfactory to Buyer and Seller (each, a
"Retained Franchise Management Agreement") with respect to each Retained Franchise. Each
Retained Franchise Management Agreement shall provide that Buyer shall manage such Retained
Franchise on behalf of Seller, subject to the following: (i) Buyer shall bear all expenses relating to
the Retained Franchise and the operation thereof and shall receive and be entitled to retain all of the
revenues generated by such operations as its management fee: and (ii) such management shall
continue with respect to such Retained Franchise until such time as such Retained Franchise is
assigned and transferred to Buyer in accordance with this Agreement or is revoked. Seller shall
transfer, at no additional cost to Buyer, each Retained Franchise to Buyer within ten (10) Business
Days after the LFA Approval for such transfer is received. Notwithstanding that a LFA Approval for
a Retained Franchise has not been obtained, at any time following six months after the Closing Date,
either Seller or Buyer may request that such Retained Franchise be transferred and assigned to, and
received and assumed by Buyer, at no additional cost to Buyer, and unless the other party reasonably
objects to such requested transfer and assignment at such time due to any pending or threatened
litigation or pending settlement with the Governmental Entity that granted such Retained Franchise,
Seller and Buyer promptly shall take such action and execute such documents as may be reasonably
necessary to transfer and assign such Retained Franchise. In the event that Buyer is legally
prohibited from managing any Retained Franchise, Buyer and Seller shall negotiate in good faith to
resolve the management thereof to preserve the purpose and intent of this Section 2.10. The Base
Purchase Price shall not be reduced in respect of any Franchise not transferred at the Closing, and
any adjustments to the Base Purchase Price pursuant to this Agreement shall be made as of the
Closing Time as if the Retained Franchises were transferred at the Closing. In addition, Buyer shall
become liable for the Assumed Liabilities with respect to the Retained Franchises as of the Closing
Time except any such liabilities that a Seller Party may be legally obligated to retain as the franchisee
thereunder, and all representations and warranties (except as to those Required Consents that have
not been obtained) made in connection with the Retained Franchises shall be made as of the Closing
Date rather than any subsequent transfer date. Buyer shall pay the expenses of defending any legal
challenges alleging the premature, unlawful or invalid transfer of any of the Franchises, including
reasonable attorneys' fees and consultants' fees as well as the actual amount of any judgments
obtained by a Governmental Entity resulting from (x) the transfer of any such Franchise without
proper consent, or (y) any action taken by Buyer as manager and any amounts paid to reinstate any
such Franchise revoked. If a Retained Franchise is revoked for any reason, there shall be no
compensation or other remuneration paid by any party to another party as a result of such revocation.
Each party may, at its sole expense but subject to the other party's prior written consent, not to be
unreasonably withheld, conditioned or delayed, commence litigation against any Governmental
Entity that such party reasonably concludes has unreasonably withheld, conditioned or delayed its
consent or denied Seller's request for approval to the assignment to Buyer of the Retained Franchise
granted by such Governmental Entity.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Except as set forth in the Disclosure Schedules attached hereto (collectively, the "Disclosure
Schedules"), Seller hereby represents and warrants to Buyer as follows:
Section 3.1 Organization and Qualification; Equity Interests.
27
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(a) Each Seller Party (except Baja Broadband Management) (i) is a limited
liability company duly organized, validly existing and in good standing under the laws of the
State of Delaware, (ii) has all requisite limited liability company power and authority to own,
lease and operate its respective assets and to carry on the Business as currently conducted, and
(iii) is duly qualified to do business and is in good standing as a foreign limited liability company
in each jurisdiction, where the ownership or operation of its assets or its respective conduct of the
Business requires such qualification, except for failures to be so qualified or in good standing that
would not, individually or in the aggregate, reasonably be expected to have a Material Adverse
Effect.
(b) Baja Broadband Management is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. Baja Broadband
Management has all requisite corporate power and authority to own, lease and operate its
respective assets and to carry on the Business as currently conducted. Baja Broadband
Management is duly qualified to do business and is in good standing as a foreign corporation
company in each jurisdiction, if any, where the ownership or operation of its assets or its
respective conduct of the Business requires such qualification, except for failures to be so
qualified or in good standing that would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
(c) Seller owns all of the issued and outstanding Equity Interests in each of
Baja Broadband Operations, Carolina Broadband and Baja Broadband Management. Other than
Baja Broadband Operations, Carolina Broadband and Baja Broadband Management, Seller does
not own, directly or indirectly, of record or beneficially, any outstanding Equity Interest in any
Person or have the right or obligation to acquire any Equity Interest or other interest in any
Person.
Section 3.2 Authority. Each Seller Party has full limited liability company or
corporate power to execute and deliver this Agreement and each of the Ancillary Agreements to
which it will be a party, to perform its obligations hereunder and thereunder and to consummate the
Transactions. The execution and delivery by Seller of this Agreement and by each Seller Party of
each Ancillary Agreement to which it will be a party and the consummation by each Seller Party of
the Transactions have been duly and validly authorized by all necessary limited liability company or
corporate action. This Agreement has been, and upon their execution each of the Ancillary
Agreements to which any Seller Party will be a party will have been, duly executed and delivered by
such Seller Party. This Agreement constitutes, and upon their execution each of the Ancillary
Agreements to which a Seller Party will be a party will constitute, the legal, valid and binding
obligations of such Seller Party, enforceable against such Seller Party in accordance with their
respective terms, except as enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights generally and by general
principles of equity (regardless of whether considered in a proceeding in equity or at law).
Section 3.3 No Conflict: Required Filings and Consents.
(a) Except for the Required Consents set forth on Schedule 3.3, the
execution, delivery and performance by Seller of this Agreement and each of the Ancillary
Agreements to which any Seller Party will be a party, and the consummation of the Transactions,
do not and will not:
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(iii 7-401?91, N
(i) conflict with or violate the organizational documents (such as the
certificates of formation or limited liability company agreements or equivalent documents) of ally
Seller Party;
(ii) conflict with or violate in any material respect any Law applicable to
Seller, any Subsidiary, the Business, the Systems or any of the Transferred Assets or by which Seller,
any Subsidiary, the Business, the Systems or any of the Transferred Assets may be bound or affected;
or
(iii) conflict with, or violate in any material respect, result in any material
breach of, constitute a material default (or an event that, with notice or lapse of time or both, would
become a material default) under, accelerate performance required by the terms of or result in the
termination, suspension, or modification of, result in the creation or imposition of any Encumbrance
(other than Permitted Encumbrances), require any consent of any Person pursuant to, or give to
others any rights of termination, acceleration or cancellation of, any material Contract (including any
Material Contract included in the Excluded Assets), or material Governmental Authorization
(including all Franchises) or by which any Seller Party or its assets is bound.
(b) No Seller Party is required to file, seek or obtain any notice,
authorization, approval, order, permit or consent of or with any Governmental Entity in
connection with the execution, delivery and performance of this Agreement by Seller and each of
the Ancillary Agreements to which such Seller Party will be a party or the consummation of the
Transactions or in order to prevent the termination of any right, privilege, License or
qualification of the Business, except (i) for any filings required to be made under the HSR Act or
Communication Laws or to obtain any LFA Approval, (ii) for the Required Consents set forth on
Schedule 3.3, (iii) where such consent, approval, authorization or action, or such filing or
notification, arises in connection with the assignment or transfer of control of any immaterial
Governmental Authorization (other than any Franchise), any Excluded License, or any Contract
that is not a Material Contract or (iv) as may be necessary as a result of any facts or
circumstances relating to Buyer or any of its Affiliates.
Section 3.4 Transferred Assets. Each Seller Party has good title to all of the
Transferred Assets, free and clear of all Encumbrances except Permitted Encumbrances and any
Encumbrances described on Schedule 3.4. The Transferred Assets (i) include all assets used by
Seller and the Subsidiaries to conduct the Business as it is currently conducted, other than the assets
and properties included in the Excluded Assets, and (ii) are sufficient to permit Buyer to conduct the
Business immediately following the Closing in substantially the same manner as currently being
conducted by Seller and the Subsidiaries (subject to any modifications to the conduct of such
Business made in accordance with this Agreement and taking into account the Excluded Assets and
the services to be provided under the Transition Services Agreement). All material items of Tangible
Personal Property included in the Transferred Assets are, in the aggregate (and with due
consideration for reasonable wear and tear and the age of each specific item of Tangible Personal
Property), in sufficient operating condition and repair. Carolina Broadband does not own any assets
or conduct any business. Except for the Management Agreement, the Contracts set forth on Schedule
3.22, and the direct or indirect, as applicable, Equity Interests in Seller and the Subsidiaries, Baja
Broadband Holding Company, LLC, does not own any assets.
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Section 3.5 Financial Statements.
(a) Seller has made available to Buyer true and complete copies of the
following (collectively, the "Financial Statements"): (i) the audited consolidated balance sheet
of Baja Broadband Holding Company, LLC (Seller's sole member) as of December 31, 2011,
and the audited consolidated statements of income and cash flows of Baja Broadband Holding
Company, LLC for the year ended December 31, 2011: and (ii) the unaudited, internal, monthly
reports showing revenues and expenses of Seller and the Subsidiaries ("Monthly P&Ls") as of
the end of each month from January, 2012 through December, 2012.
(b) The Financial Statements (i) have been prepared based on the Books and
Records, (ii) have been prepared in accordance with GAAP applied on a consistent basis
throughout the periods indicated, and (iii) fairly present, in all material respects, the consolidated
results of operations and cash flows of the Business as at the date thereof and for the respective
periods indicated therein, except as otherwise noted therein and, with respect to the Monthly
P&Ls, subject to normal and recurring year-end adjustments and the absence of notes thereto.
Section 3.6 Absence of Certain Changes or Events; No Undisclosed Liabilities.
(a) Since December 31, 2011 through the date hereof: (i) Seller and the
Subsidiaries have conducted the Business, in all material respects, in the ordinary course of
business consistent with past practice, and (ii) there has not occurred any Material Adverse
Effect.
(b) To Seller's Knowledge, neither Seller nor any Subsidiary has any
liabilities which would be required to be disclosed on a balance sheet prepared in accordance
with GAAP, except for liabilities: (i) that are reflected or reserved for in the Financial
Statements, (ii) that are included in the calculation of Current Liabilities, (iii) that are set forth on
Schedule 3.6(b) as of the date hereof, or (iv) that do not exceed S50,000 individually or S 100,000
in the aggregate and were incurred in the ordinary course of business.
Section 3.7 Compliance with Laws and Governmental Authorizations.
(a) Since December 31, 2011, neither Seller nor any Subsidiary has received
any written notice of any noncompliance from any Governmental Entity, and to Seller's
Knowledge, Seller and each Subsidiary is in compliance in all material respects with all
applicable Laws in connection with the conduct or operation of the Business and the ownership
or use of the Transferred Assets.
(b) All material Governmental Authorizations necessary for Seller and the
Subsidiaries to operate the Business are in full force and effect and constitute the valid, legal,
binding and enforceable obligation of Seller or a Subsidiary. Each Seller Party is in compliance
in all material respects with the material Governmental Authorizations that it holds and no
suspension or cancellation of any of such Governmental Authorizations is pending or, to Seller's
Knowledge, threatened.
Section 3.8 Litigation. Except for investigations and nilemaking proceedings,
Actions and Orders that affect the cable television industry or the telecommunications industry
generally and except as set forth on Schedule 3.8, as of the date hereof, (a) there is no Action by or
30
( ill 7l(U91, u
against any Seller Party in connection with the Business or the Systems pending, or to Seller's
Knowledge, threatened in writing against any Seller Party or any of its Affiliates in connection with
the Business; and (b) there is no outstanding Order of any Governmental Entity specifically naming
any Seller Party that requires any Seller Party to take any action of any kind with respect to the
Transferred Assets or the operation of the Business or the Systems, or to which any Seller Party, the
Business, the Systems or the Transferred Assets are subject or by which they are bound or affected
that individually or in the aggregate, would impair or delay the ability of Buyer to effect the Closing
or would affect the legality, validity or enforceability of this Agreement or any Ancillary Agreement
or the consummation of its Transactions.
Section 3.9 Overbuilds. Except as disclosed on Schedule 3.9, to Seller's
Knowledge, as of the date of this Agreement, (i) no Person other than a Seller Party is providing
cable television service within the regions in which any System operates and (ii) no Person other than
a Seller Party has been granted a franchise to provide cable television service within the regions in
which any System operates.
Section 3.10 Programming and Promotional Campaigns.
(a) Seller has made available to Buyer a true and complete copy of the
channel line-up and rate card for each System as of the date of this Agreement. Each
programming service carried by the Systems is carried pursuant to a Programming Agreement,
Retransmission Consent Agreement, "must -carry" election, or other arrangement.
(b) Schedule 3.10(b) sets forth any and all discount, promotional or special,
one-time bundling offers (excluding ordinary upgrade packages) currently offered by any Seller
Party as of the date of this Agreement.
(c) Seller's discount or promotional offers under any promotional or
marketing campaigns or programs have been provided only in the ordinary course of business
and substantially consistent with its past practices.
Section 3.11 Retransmission Consent and Must -Carry; Rate Regulation; Copyright
Compliance.
(a) Each Seller Party is permitted under all applicable Laws, including the
Communications Laws and Section III of the Copyright Act, to receive and retransmit the video
programming and other information that it currently makes available to the customers of its
Systems. Set forth on Schedule 3.I I(a) is a list of the broadcast television stations (including
separate identification of any multicast streams) carried on each System within such System's
television markets (as defined by FCC regulation) that have elected "must -carry" or
retransmission consent status pursuant to the Cable Act. Except as described on
Schedule 3.1 1(a), each station carried by the System is carried pursuant to a retransmission
consent agreement, "must -carry" election (including default must -carry elections, where no
election was made) or other programming agreement.
(b) Except as described on Schedule 3.11(b), all required statements of
account and other documents and instruments with respect to the System that were required to
have been filed with the U.S. Copyright Office since December 31, 2010, have been filed in
accordance with the Copyright Act and regulations promulgated pursuant thereto, and all royalty
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( iii 7l(U91, u
fees, supplemental royalty fees, and other fees and sums payable with respect to the Systems
since December 31, 2010, have been paid. Seller has made available to Buyer copies of all
statements of account referred to in this Section 3.11(b).
(c) Each Seller Party is permitted under all applicable Laws, including the
Communications Laws, to utilize all frequencies generated by the operation of its Systems, and,
where required, is licensed to operate all the facilities required by applicable Laws to be licensed
by the FCC. Except as described on Schedule 3.1 I(c), since December 31, 2010, Seller has not
received any written notice that, and Seller has no Knowledge that: (i) any System is not or has
not been in compliance in all material respects with the Communications Act and the FCC's rules
and regulations: or (ii) Seller has not made all material filings, reports, applications or other
submissions required to be made by it with the FCC or another Governmental Entity in
connection with the Business or the Systems or provided all material notices to customers of the
Systems required under the Communications Act and the FCC's rules and regulations or other
applicable Law. To Seller's Knowledge, no written requests have been received by any Seller
Party from any Governmental Entity challenging or questioning the right of any Seller Party's
operation of the Business or the Systems. Seller has not, since December 31, 2010, received any
notice that any System rates are not permitted rates under the rules and regulations of the FCC.
To Seller's Knowledge, as of the date of this Agreement, there are no pending rate complaints on
file at the FCC with respect to the Systems.
Section 3.12 Employee Plans
(a) Schedule 3.12(a) sets forth all Employee Plans. Seller has made available
to Buyer, with respect to each Employee Plan, correct and complete copies, where applicable, of
(i) all plan documents and amendments, trust agreements and insurance and annuity contracts and
policies, (ii) the most recent summary plan description, and all summaries of material
modification thereto, (iii) the most recent Internal Revenue Service determination or opinion
letter, (iv) the Annual Report (Fonn 5500 Series) and accompanying schedules, as filed, and the
actuarial valuations and financial statements, for the most recently completed year, and (v) any
non -routine filings or correspondence with a Governmental Entity.
(b) Except as set forth on Schedule 3.12(6), each Employee Plan has been
operated and administered in all material respects in accordance with the terms of such Employee
Plan and applicable Law, including ERISA and the Code. No event has occurred and no
condition exists in connection with any Employee Plan that could subject the Buyer or its
Affiliates to any Taxes, fines, Encumbrances, penalties or other similar liability.
(c) No Employee Plan (i) constitutes a "multiemployer plan" (as defined in
Section 3(37) or 4001(a)(3) of ERISA), (ii) is maintained in connection with a trust described in
Section 501(c)(9) of the Code or welfare benefit fund described in Section 419 of the Code, (iii)
is subject to Title IV of ERISA or to the minimum finding standards of ERISA or the Code, or
(iv) provides post -employment or post -retirement medical, health, life or other welfare benefits
(other than to the extent necessary to comply with Section 601-609 of ERISA and Section 4980B
of the Code). Seller and each ERISA Affiliate have made full and timely payment of all amounts
required to be contributed under the terms of each Employee Plan or under applicable Law, or if
not yet due, such contributions have been properly reflected in the financial statements. Neither
Seller nor any ERISA Affiliate has incurred any liability under Title IV of ERISA arising in
connection with the termination of, or complete or partial withdrawal from, any plan covered or
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('III 7401?91, N
previously covered by Title IV of ERISA, except for any liabilities which have been satisfied in
their entirety or waived. There is no Encumbrance upon any Transferred Asset outstanding
pursuant to Section 412(n) of the Code or otherwise in favor of any employee benefit plan,
program or arrangement. No Transferred Asset has been provided as security for any employee
benefit plan, program or arrangement pursuant to Section 401(a)(29) of the Code or otherwise.
(d) Each Employee Plan that is intended to be qualified under Section 401 of
the Code (i) is so qualified and, to Seller's Knowledge, no fact or event has occurred that could
reasonably be expected to cause the loss of such qualified status, and (ii) either (A) has received a
currently effective favorable determination letter from the Internal Revenue Service to the effect
that such Employee Plan is qualified and any trust thereunder is exempt from Federal income
taxes under Section 501 of the Code, or (B) is entitled to rely on a favorable opinion letter from the
Internal Revenue Service to such effect. No such determination or opinion letter has been revoked
nor has revocation been threatened by the Internal Revenue Service.
(e) There is no pending or, to Seller's Knowledge. threatened Action or
other claim relating to any Employee Plan (other than ordinary course claims for benefits), and to
Seller's Knowledge, no facts or circumstances exist that would reasonably be expected to give
rise to any Action or claim relating to any Employee Plan (other than ordinary course claims for
benefits).
(t) Neither Seller nor any ERISA Affiliate has, with respect to any Employee
Plan, engaged in or been a party to any non-exempt "prohibited transaction," as such term is
defined in Section 4975 of the Code or Section 406 of ERISA.
(g)
Subsidiary maintains
Employees.
Except as described on Schedule 3.12(a), neither Seller nor any
any severance plan, practice or policy with respect to the Business
(h) No liability has been incurred by Seller or any of its ERISA Affiliates,
and, no event has occurred and no condition exists, which could reasonably be expected to
subject Buyer to liability at or after the Closing Time under Title IV of ERISA, Section 302 of
ERISA or Sections 412 or 4971 of the Code.
(i) Except as set forth on Schedule 3.12(i), neither the execution and delivery
of this Agreement nor the consummation of the Transactions, either alone or in combination with
another event, will result in the acceleration or creation of any rights of any Business Employee
to payments or benefits or increases in any payments or benefits or any accelerated funding or
loan forgiveness. No amount paid or payable (whether in cash, in property, or in the form of
benefits) by Seller or any Subsidiary in connection with the Transactions (either alone or upon
the occurrence of any additional or subsequent events) will be an "excess parachute payment"
within the meaning of Section 280G of the Code, or would constitute an "excess parachute
payment' if such amounts were subject to the provisions of Section 280G of the Code. None of
Seller or any Subsidiary has any obligation to make a "gross -up" or similar payment in respect of
any Taxes that may become payable under Section 4999 of the Code.
J) All Employee Plans that are subject to Section 409A of the Code have
been operated and administered in compliance with the requirements of Section 409A and the
regulations, rulings and notices thereunder.
33
('III 7-401?91, 14
(k) Schedule 3.12(k) sets forth (i) the name of each individual (whether an
employee or beneficiary) who as of the date hereof has elected continuation coverage pursuant to
Section 601 ct seq. of ERISA or any similar state continuation coverage requirements (collectively,
"COBRA") under a health plan maintained by Seller or any of its Affiliates, (ii) the date of such
election and (iii) the date on which such coverage is anticipated to expire. Schedule 3.12(k) also sets
forth (i) the name of each individual who has experienced a "qualifying event" within the meaning of
COBRA as of the date hcrcof under a health plan maintained by Seller or any of its Affiliates, who
has not elected COBRA continuation coverage but who as of the date hcrcof remains eligible to elect
COBRA continuation coverage and (ii) the date on which such individual's period for election of
COBRA continuation coverage shall expire.
(I) The representations and warranties contained in this Section 3.12 and
Section 3.13 are the only representations and warranties being made with respect to compliance
with or liability under Laws applicable to any of the Employee Plans, including ERISA and the
Code.
Section 3.13 Labor and Employment Matters.
(a) Except as set forth on Schedule 3.13(a), as of the date hereof (I) neither
Seller nor any Subsidiary is a signatory or party to, or otherwise bound by, any collective
bargaining or other labor union agreement that covers any of the Business Employees; (ii) neither
Seller nor any Subsidiary has agreed to any union or other collective bargaining unit with respect
to any of the Business Employees; (iii) no union or other collective bargaining unit has been
certified as representing the Business Employees; (iv) within the last five years, neither Seller nor
any Subsidiary has experienced, and to Seller's knowledge, there has not been threatened, any
strike, work stoppage, slowdown, lockout, picketing, leafleting, boycott, other labor dispute,
union organization attempt, demand for recognition from a labor organization or petition for
representation under the National Labor Relations Act or applicable state or local Law; and (v)
no grievance, demand for arbitration or arbitration proceeding arising out of or under any
collective bargaining agreement relating to the Business Employees is pending or, to Seller's
knowledge, has been threatened.
(b) Except as set forth on Schedule 3.13(b), as of the date hereof: (i) there
are no pending or, to Seller's Knowledge. threatened, Actions relating to any alleged violation of
any Law pertaining to labor relations or employment matters relating to any of the Business
Employees former Business Employees, or applicants for employment in the Business.
(c) Except as set forth on Schedule 3.13(c). there are no Contracts between
Seller or any Subsidiary and any Business Employee or consultant (other than the Management
Agreement) with respect to the Business or Systems, including employment agreements, loans or
promissory notes, change in control agreements, stay agreements, separation pay agreements,
consulting agreements, non -competition or non -solicitation agreements and similar agreements,
nor are there any long term incentive arrangements, stock options or stock purchase plans or
similar arrangements or plans of any kind in favor of any Business Employees or consultant with
respect to the Business or Systems.
(d) The duties of each Business Employee are primarily in support of the
Business or Systems, and within the one year period prior to the date of this Agreement, none of
Seller or any Subsidiary has transferred any person to the Business from another business of
34
cui uoi:vn u
Seller or any Subsidiary who is now a Business Employee. There are no employees of Seller or
any of its Affiliates other than the Business Employees.
(e) Each Business Employee has been paid in full all wages, salaries, bonuses
and commissions due and payable to such employee and Seller has fully reserved in its books of
account (including the latest Financial Statements) all amounts for wages, salaries, bonuses and
commissions due but not yet payable to such Business Employees.
(f) The employment of any former Business Employee has been terminated
in material compliance with any applicable contract terms and applicable Law, and neither Seller
nor any Subsidiary has any liability under any such contract or applicable Law toward any such
former Business Employee.
(g) Except as set forth in Schedule 3.13(g) to Seller's Knowledge, no
Business Employee has any plans to terminate his or her employment.
(h) Seller and its subsidiaries have complied in all material respects at all
times with all applicable Laws relating to employment and employment practices and those
relating to the calculation and payment of wages (including overtime pay, maximum hours of
work and child labor restrictions), equal employment opportunity (including Laws prohibiting
discrimination and/or harassment or requiring accommodation on the basis of race, color,
national origin, religion, gender, disability, age, sexual orientation or otherwise), affirmative
action and other hiring practices, occupational safety and health, workers' compensation,
unemployment compensation, the payment of social security and other Taxes, and unfair labor
practices under the National labor Relations Act or applicable state or, Local Law. Baja
Broadband Management has no workers' compensation claims pending against it or, to Seller's
Knowledge, any facts that would reasonably give rise to such a claim. To Seller's Knowledge,
no Business Employee is subject to any noncompetition agreement or any other agreement or
restriction of any kind that would impede in any way the ability of such employee to carry out
fully all activities of such employee in furtherance of the Business. All consultants to the
Business have been properly classified as independent contractors.
(i) Except for the one Business Employee who is identified as a foreign
national or alien on the schedule delivered by Seller to Buyer pursuant to Section 5.5(a), no
Business Employee is a foreign national or alien. For each Business Employee hired after
November 6, 1986, Seller or at least one of its Subsidiaries has retained an Immigration and
Naturalization Service Form 1-9, completed in accordance with applicable Law.
(j) There has been no work reduction program undertaken by or on behalf of
Seller or any Subsidiary in the past two years, and no such program has been adopted or publicly
announced by Seller or any Subsidiary. Seller and all Subsidiaries are in compliance with the
Workers Adjustment and Retraining Notification Act and all similar state or local Laws
("WARN Act") and have no liabilities pursuant thereto. Neither Seller nor any Subsidiary have
implemented or been involved in any "mass layoff' or "plant closing" as defined in the WARN
Act within the last twelve (12) months
35
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Section 3.14 Real Property.
(a) Schedule 3.14(a) lists each parcel of Real Property owned by each Seller
Party (the "Owned Real Property"). No Seller Party is obligated or bound by any options,
obligations or rights of first refusal or contractual rights to sell, lease or acquire any real property.
(b) Except as set forth on Schedule 3.14(b): (i) a Seller Party has, or will
have as of the Closing Time, good and valid fee simple title to each parcel of the Owned Real
Property, free and clear of all Encumbrances other than Permitted Encumbrances; (ii) to Seller's
Knowledge, each Seller Party has fulfilled and performed in all material respects all of its
obligations binding upon the Owned Real Property that are required to be performed prior to the
Closing Date, and no Seller Party has received written notice from any Governmental Entity that
the Owned Real Property or its current use is not in material compliance with all applicable
Laws, except for such failures to comply, if any, which have been remedied; and (iii) there is no
pending or to Seller's Knowledge, written threat of condemnation or similar proceeding affecting
the Owned Real Property or any portion thereof
(c) Schedule 3.14(c) lists each parcel of Real Property leased, subleased,
licensed or occupied by any Seller Party (the "Leased Real Property").
(d) Except as set forth on Schedule 3.14(d): (i) a Seller Party has, or will have
as of the Closing Time, a valid leasehold estate in all material Leased Real Property, free and
clear of all Encumbrances other than Permitted Encumbrances; (ii) all Leases in respect of the
material Leased Real Property are in full force and effect; (iii) no Seller Party is in material
breach of any material Lease and no Seller Party has received any written notice of a material
breach or default thereunder, and to Seller's Knowledge, no event has occurred that, with notice
or lapse of time or both, would constitute a material breach or default thereunder; (iv) to Seller's
Knowledge, there is no pending or written threat of condemnation or similar proceeding affecting
the material Leased Real Property or any portion thereof; and (v) there has not been any sublease,
license, occupancy agreement, pledge, transfer or assignment entered into by Seller or any
Subsidiary in respect of any Lease relating to the Leased Real Property.
(e) To Seller's Knowledge, the use and occupancy of the Real Property by
the Seller Parties and the conduct of the Business thereat as presently conducted does not violate
in any material respect any applicable Laws. Except as disclosed on Schedule 3.14(e), there are
no leases, subleases, licenses, or other agreements granting to any Person the right of use or
occupancy of any portion of the Owned Real Property. No written notice from any
Governmental Entity has been received by any Seller Party concerning the possible imposition of
any special assessments on the Real Property. To Seller's Knowledge, all buildings, structures,
facilities and improvements located on the Owned Real Property and all buildings, structures,
facilities and improvements owned by a Seller Party and located on Leased Real Property,
including in each case any such buildings, structures, facilities and improvements which are
under construction (collectively, "Improvements"), comply in all material respects with valid
and current certificates of occupancy or similar permits to the extent required by Laws for the use
thereof by such Seller Party, and conform in all material respects with all applicable Laws; and to
Seller's Knowledge, the Improvements are in all material respects (A) in good operating
condition and repair (ordinary wear and tear excepted) and (B) suitable and adequate for
continued use in the manner in which they are presently being used by such Seller Party. Within
thirty (30) days after the date of this Agreement, Seller shall deliver or otherwise make available
36
('III 7-401?91, 14
to Buyer true and complete copies of the most recent title opinions or commitments, policies of
title insurance or the equivalent, SNDAs, estoppels, surveys and appraisals that, to Seller's
Knowledge, are in the possession, control or custody of any Seller Party with respect to the
Owned Real Property and Leased Real Property.
Section 3.15 Intellectual Property
(a) Schedule 3.15(x) accurately identifies all Registered Intellectual Property
owned by Seller (the "Seller Registered Intellectual Property") and the jurisdiction in which
such item of Registered Intellectual Property has been registered or filed. All registrations,
issuances and applications for the Seller Registered Intellectual Property required to be listed on
Schedule 3.15: (i) have been duly filed or registered (as applicable) with the applicable
Governmental Entity and properly maintained, including the timely submission of all necessary
filings and payment of fees in accordance with the Laws in the appropriate jurisdictions; (ii) have
not lapsed or expired or been canceled or abandoned; and (iii) are valid and in force and, with
respect to all applications, are pending and in good standing and, to Seller's Knowledge, all
without challenge of any kind. Seller has the sole and exclusive right to bring actions for
infringement, misappropriation, dilution, violation or unauthorized use of the Seller Registered
Intellectual Property and there is no basis for any such action.
(b) Seller has good and valid title to all of the Seller Owned Intellectual
Property free and clear of any Encumbrances (other than Permitted Encumbrances and licenses
granted in the ordinary course of business and licenses granted pursuant to Contracts listed on
Schedule 3.19(a)).
(c) Seller is not in material breach of any Contract pursuant to which third -
party Intellectual Property Rights that are used in the Business are licensed to Seller (other than
agreements relating to commercially -available, off -the -shelf Software), and to Seller's
Knowledge, Seller has not taken any action that would materially impair or otherwise materially
adversely affect its rights in the Seller Intellectual Property.
(d) To Seller's Knowledge, no third party is infringing or violating or
misappropriating any of the Seller Owned Intellectual Property. No Seller Party has sent any
notice to or asserted or threatened any Action against any person involving or relating to any of
the Seller Owned Intellectual Property. Each Seller Party has taken reasonable measures to
maintain in confidence all Trade Secrets and confidential information comprising a part of the
Seller Owned Intellectual Property.
(e) To Seller's Knowledge, the conduct of the Business by the Seller Parties,
as presently conducted, does not, in any material respect, infringe or violate or constitute a
misappropriation of, and has not, in any material respect, infringed, violated or constituted a
misappropriation of, any Intellectual Property Rights of any third party. Since December 31,
2010, no Seller Party has received any written or. to the Knowledge of Seller, oral claim or notice
alleging any such infringement, violation or misappropriation of any Intellectual Property Rights
of any third party, or received any offer from a third party to take a license to any Patent Rights
of any third party. There is no pending or, to the Knowledge of Seller, currently threatened
claim, interference, opposition or demand of any third party challenging the ownership, validity
or scope of any of the Seller Owned Intellectual Property. Seller has not been served with or
provided written or, to the Knowledge of Seller, oral notice that any of the Seller Owned
37
( iii 7l(U91, u
Intellectual Property is the subject of any judicial, administrative or arbitral order, writ, judgment,
award, decree, injunction or stipulation ("Order"). and Seller is not subject to any Order barring
or limiting Seller's use of any of the Seller Owned Intellectual Property.
(f) Part (xiii) of Schedule 3.19(a) contains a list and description of all
material Software owned by Seller or used in connection with the Business Products; provided
that pan (xiii) of Schedule 3.19(a) does not list mass market Software licensed to Seller that is
commercially available and subject to "shrink-wrap" or "click -through" license agreements. No
source code (other than source code for open source Software or non -material portions of source
code) for any Business Product has been delivered, licensed, or made available to any escrow
agent or other third Person who is not an employee or contractor of Seller.
(g) To the extent any Open Source Software has been or is incorporated by
Seller into any Business Product, the manner and form that any such Open Source Software
currently or previously has been incorporated, distributed or used with Business Products by
Seller (i) will not require that the source code of any Business Products (other than such Open
Source Software itself) be disclosed or distributed to comply with the applicable Open Source
Software license and (ii) shall comply with the terms of the applicable Open Source Software
licenses. "Open Source Software" means any software or materials that are made available under
the terms of any form of any "copyleft" obligations that requires or conditions the use or
distribution of such software on the disclosure, licensing, or distribution of the source code of
such software (and/or of any software used in conjunction or combination with such software),
including but not limited to the GNU General Public License (GPL), GNU Lesser General Public
License (LGPL), or the Mozilla Public License.
(h) Seller has not granted to any third Person any ownership rights, options,
exclusive rights, rights to sublicense, or any other right or interest in, any of the Seller Owned
Intellectual Property relating to the Business.
Section 3.16 Governmental Authorizations; Regulatory and Copyright
Compliance.
(a) Seller has all Franchises and material Licenses necessary to operate the
Business and the Systems as currently operated by Seller. Schedule 3.16(a) sets forth a list of all
Franchises, material Licenses, and other material Governmental Authorizations. Seller has made
available to Buyer complete and correct copies of all (i) Franchises, Licenses and other
Governmental Authorizations listed on Schedule 3.16(a), (ii) all amendments, assignments and
consents thereto to which any Seller Party is a party or by which any Seller Party is bound, and
(iii) any notices from Governmental Entities or their representatives received by any Seller Party
since December 31, 2010, alleging non-compliance, breach or default with the requirements of
any such Franchise, License or Governmental Authorization. Except as set forth on
Schedule 3.16(a), (i) the Franchises listed on Schedule 3.16(a) contain all of the material, binding
and written commitments and obligations of Seller or any Subsidiary to the applicable grantor
thereof relating to the construction, ownership and operation of the Systems, (ii) all upgrades and
rebuilds required by each Franchise have been completed and no Seller Party is obligated to
undertake any additional material capital expenditures, capital additions, or betterments to a
System under any Franchise, (iii) since December 31, 2010, Seller or a Subsidiary has paid all
franchise, PEG (Public, Educational and Government) and other fees required to be paid under
the applicable Franchise when due and payable, except for such fees as are being contested by
3K
(iii 7-401?91, N
Seller or such Subsidiary in good faith by appropriate proceedings as set forth on
Schedule 3.16(a), and (iv) there are no Encumbrances on or arising pursuant to any Franchise
except for Permitted Encumbrances or as may be set forth in such Franchise.
(b) Schedule 3.16(b) lists the Franchises that have expired or will expire on
the dates shown. Except as set forth on Schedule 3.16(6), the notice contemplated by Section
626 of the Communications Act (47 U.S.C. Section 546) has been timely filed with respect to all
Franchises that have expired prior to, or will expire within thirty (30) months after, the date of
this Agreement. No Seller Party has received any written correspondence from the grantor of
any Franchise stating or indicating that such Franchise will not be renewed in the ordinary course
or that the applicable grantor has challenged or raised any objection to any request for renewal of
such Franchise under Section 626 of the Communications Act. With respect to any Franchise
that has expired or that will expire within thirty-six (36) months after the date of this Agreement,
a Seller Party has duly and timely complied in all material respects with any and all inquiries and
demands received by a Seller Party from any Governmental Entity made in connection with the
renewal of such Franchise.
(c) Schedule 3.16(c) sets forth each Community which is served by a System
without a Franchise or other License. Except as set forth on Schedule 3.16(c), (i) Seller has no
Knowledge of the Governmental Entity for any such Community requesting any Seller Party to
obtain a Franchise to serve such Community, (ii) Seller has no Knowledge that any such
unfranchised operation does not qualify for the exception set forth in Section 621(6)(2) of the
Communications Act, and (iii) no Seller Party is providing cable service to any such Community
in reliance on the exception to the definition of "cable system" set forth in Section 602(7)(B) of
the Communications Act.
(d) Seller does not make any representation or warranty with respect to music
licensing with respect to the Business and the Systems.
(e) No Seller Party holds, or is required to hold, any certifications or
authorizations from any state agency in connection with any System's provision of Telephony
Services. No Seller Party offers any service under any tariffs on file with any state agency. No
Seller Party offers circuit switched voice service, either directly or by resale, in any of the
Communities.
Section 3.17 Taxes. Except as set forth on Schedule 3.17, Seller and each
Subsidiary has, in a timely manner, filed all income Tax Returns and other material Tax Returns and
reports required of it under all federal, state, local and foreign Tax laws in connection with the
Transferred Assets and its operation of the Business. All such Tax Returns and reports are correct
and complete in all material respects. Seller or a Subsidiary has paid in full all Taxes required to be
paid in respect of the Transferred Assets and the Business, including all Taxes that Seller or a
Subsidiary is obligated to withhold from amounts paid or payable to or benefits conferred upon
employees, creditors and third parties. There is no lien for Taxes on any of the Transferred Assets
other than Permitted Encumbrances. Except as set forth on Schedule 3.17, there is no dispute or
claim concerning any liability for Taxes paid, collected or remitted by Seller or any Subsidiary with
respect to the Business. No Seller Party has been a United States real property holding corporation
within the meaning of Section 897(c)(2) of the Code during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code. Neither Seller nor any Subsidiary has waived or been requested to
waive any statute of limitations in respect of Taxes associated with the Transferred Assets or the
39
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Business. None of the Transferred Assets is properly treated as owned by persons other than Seller
or other Seller Party for income tax purposes. None of the Transferred Assets is "tax-exempt use
property" within the meaning of Section 168(h) of the Code. Seller has at all times since the date it
was organized been classified as a partnership for federal and applicable state income tax purposes.
Carolina Broadband and Baja Broadband Operating have at all times since the date they were
organized been classified as disregarded entities for federal and applicable state income tax purposes.
The representations and warranties contained in Section 3.12 and this Section 3.17 are the only
representations and warranties being made with respect to compliance with or liability under Laws
applicable to Taxes in connection the operation of the Business by the Seller Parties.
Section 3.18 Environmental Matters. Except as set forth on Schedule 3.18: (i)
Seller and each Subsidiary is in compliance in all material respects with all applicable Environmental
Laws; (ii) Seller and each Subsidiary have made all material filings, and maintain all material
training programs and plans (including pollution prevention plans), required under Environmental
Laws for the operation of the Business or the ownership or use of the Transferred Assets; (iii) there
are no Actions pursuant to any Environmental Law pending or, to Seller's Knowledge, threatened
against any Seller Party in connection with the conduct or operation of the Business or the ownership
or use of the Transferred Assets; (iv) Seller or a Subsidiary has all Governmental Authorizations
pursuant to all applicable Environmental Laws that are required and held for use in the conduct of the
Business and the operation of the Systems as conducted as of the date hereof, and is in material
compliance with such Governmental Authorizations; (v) no parcel of Owned Real Property or Leased
Real Property is listed or, to Seller's Knowledge, proposed for listing on any U.S. federal, state or
local "superfund" list or any other similar list of hazardous or toxic waste sites published by any
Governmental Entity; and (vi) there is not present in, on or under any parcel of Owned Real Property
or, to Seller's Knowledge, Leased Real Property any Hazardous Substances in violation in any
material respect of any applicable Environmental Laws. The representations and warranties
contained in this Section 3.18, and Section 3.6 in respect of liabilities arising under applicable
Environmental Laws, are the only representations and warranties being made with respect to
compliance with or liability under Environmental Laws or with respect to any environmental or
occupational health or safety matter, including natural resources, related to the Business, the
Transferred Assets or the ownership or operation thereof by any Seller Party.
Section 3.19 Contracts.
(a) Schedule 3.19(a) lists each of the following written Contracts (it being
understood that, except as required by clause (xii)(A) below, Schedule 3.19(a) does not list any
agreements with Subscribers, including any Bulk -Billed Subscribers, for Subscriber Services
provided by the Systems in the ordinary course of business) (collectively, the "Material
Contracts"):
(I) all of the Pole Attachment Agreements to which any Seller Party is a
party that (x) are in effect as of the date of this Agreement or (y) were in effect within the last two
years pursuant to which Seller has existing material obligations. Except as set forth on Schedule
3.19(a)(i), there is no pending or, to Seller's Knowledge, threatened, audit with respect to any pole
attachments under any Pole Attachment Agreement to which any Seller Party is a party, or any
unresolved dispute with respect to any such audit, in each case which is likely to result in material
liability to any Seller Party. Except as set forth on Schedule 3.19(a)(i), Seller has not received
written notice as of the date of this Agreement of any such planned audit, or that any of the Systems'
pole attachments are not in accordance, in all material respects, with the terms of the applicable Pole
40
(ill 7!01391, N
Attachment Agreement and which matter has not been substantially waived, dismissed, abandoned,
settled or cured. To Seller's Knowledge,
(A) no event or circumstance has occurred which, with the
passage of time would, if uncured, constitute a material default of Seller under such Pole
Attachment Agreements, and
(B) there does not exist any material default under or breach of,
and no event or circumstances has occurred that, with notice, laps of time or both, would
constitute a material default under or breach of, any Pole Attachment Agreements by any other
party thereto.
(ii) all material easements, material wire crossing agreements and other
material real property -related agreements in favor of a Seller Party reasonably necessary for the
operation of the Business (the "Related Real Property Agreements") as currently operated as of the
date of this Agreement. To Seller's Knowledge, the Related Real Property Agreements are in full
force and effect, and, to Seller's Knowledge:
(A) no event or circumstance has occurred which, with the
passage of time would, if uncured, constitute a material default of Seller under such Related Real
Property Agreements, and
(B) there does not exist any material default under or breach of,
and no event or circumstances has occurred that, with notice, laps of time or both, would
constitute a material default under or breach of, any Related Real Property Agreements by any
other party thereto.
(iii) any Contract relating to any Seller Party's use of any third party
microwave, satellite or terrestrial communications circuits, backbone connections or other
transmission or transport facilities or service, or any third party tower or similar facilities; any
Contract creating the indefeasible right to use third party fiber optic, conduit or similar facilities; and
any Contract related to the purchase or use of telecommunications services or the interconnection of
a System with third party facilities;
(iv) any Contract for the purchase, lease or use of Real Property or the
purchase, sale, lease or use of Tangible Personal Property or any option to purchase Real Property or
to purchase or sell Tangible Personal Property, in each case, providing for aggregate payments by or
to any Seller Party in an amount in excess of S50,000, or any Contract to sell any parcel of Owned
Real Property regardless of dollar amount:
(v) any installment sale Contract or liability for the deferred purchase
price of property with respect to any of the Transferred Assets involving payments exceeding
S50,000 under any individual Contract;
(vi) any Contract not otherwise required to be disclosed on Schedule
3.19(a) involving aggregate payments in an annual or one-time amount in excess of $50,000 and that
is not terminable on 90 days' notice or less;
41
(III 7!01391, IJ
(vii) any Contract for the provision of services or internal connections to
schools, school districts or other public bodies, including under the Schools and Libraries Program of
the Universal Service Administrative Company;
(viii) any Contract that contains an exclusivity, most favored nations,
non -competition, non -solicitation or other similar provisions (other than channel placement
covenants in Programming Agreements);
(ix) any Contract pursuant to which a System receives advertising sales
representation services;
(x) any Contract pursuant to which a Subsidiary has constructed or
agreed to construct for one or more third parties an institutional network or other facilities or
provides to one or more third parties telecommunications, transmission or terrestrial transport
facilities or services (other than installation agreements where services are provided by a Seller Party
in the ordinary course of business on an as -needed basis):
(xi) any Contract relating to the sale of cablecast time to third parties for
advertising or other purposes, local origination programming, leased channel access, or
retransmission consent, or a Contract of substantially equivalent effect;
(xii) any Contract (A) with any multiple dwelling trait or commercial
establishment that accounts for S4,000 or more in monthly recurring revenue, or (B) with any
Governmental Entity not otherwise required to be disclosed on Schedule 3.19(a): or
(xiii) any Contract pursuant to which material third -party Intellectual
Property Rights that are used in the Business are licensed to a Seller Party (other than agreements
relating to commercially -available, off -the -shelf Software); or
(xiv) any Contract in which a Seller Party has granted any license under, or
otherwise transferred or conveyed any right or interest in, any Seller Owned Intellectual Property to
any third party (other than licenses granted in the ordinary course of business which are in a standard
form).
(b) Except as set forth on Schedule 3.19(6): (i) each Material Contract is
valid and binding on Seller or the Subsidiary party thereto and is in full force and effect and
enforceable against Seller or the Subsidiary party thereto in accordance with its respective terms,
except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights generally and by general principles of
equity (regardless of whether considered in a proceeding in equity or at law): (ii) neither Seller
nor any Subsidiary is in material breach of, or material default under, any Material Contract to
which it is a party; and (iii) no Contract is being treated by any Seller Party as a capitalized lease
under GAAP.
Section 3.20 System Information. Schedule 3.20 sets forth as of December 31,
2012, a true and complete statement of the following information with respect to each System: (i) an
accurate statement of the number, stated separately, of Video Subscribers, HSI Subscribers, and
Telephony Subscribers served by such System; (ii) the bandwidth capacity specified in MHz that the
System is capable of passing in accordance with the performance standards set forth in 47 C.F.R. Part
42
( III 7!01391, N
76: (iii) a materially accurate statement of aerial and underground plant miles and the number of
homes passed: (iv) the make, model, vintage and identification number of the vehicles used in the
operation of such System and included in the Transferred Assets: and (v) the coordinates, height,
registration number, and other pertinent information concerning the FCC -registered communications
towers or antenna structures owned by a Seller Party and used in the operation of such System. To
Seller's Knowledge, as of the date of this Agreement there are no troop deployments pending or
planned involving any significant number of Military Subscribers except as set forth on Schedule
3.20.
Section 3.21 Bonds; Letters of Credit. Schedule 3.21 sets forth a list of all
franchise, construction, fidelity, performance and other bonds, guaranties in lieu of bonds and letters
of credit posted by Seller or its Affiliates in connection with the operation of the Systems (the
"Guarantees").
Section 3.22 Transactions with Affiliates. Except as set forth on Schedule 3.22,
neither Seller nor any Subsidiary is a party to any Contract with the sole member of Seller or any
Affiliate of such sole member other than Seller and the Subsidiaries, has any claim or right against
any of such Persons, or has any indebtedness owing to any of such Persons arising from or relating to
the operation of the Business or the Systems, and no such Person has any claim or right against, or
any indebtedness owing, to Seller or any Subsidiary arising from or relating to the operation of the
Business or the Systems.
Section 3.23 No Brokers. Except for RBC Daniels / RBC Capital Markets LLC,
the fees of which shall be paid by Seller, no broker, agent, finder or investment banker that has been
retained by or is authorized to act on behalf of any Seller Party is entitled to any brokerage, finder's
or other fee or commission in connection with the Transactions.
Section 3.24 Insurance. Schedule 3.24 lists all insurance policies now in force and
held or owned by any Seller Party relating to the Transferred Assets, the Systems or the operation of
the Business, specifying the insurer, the amount of and nature of coverage, and the risk insured
against. No Seller Party has been refused or denied renewal of any of such insurance coverage or
received any written correspondence refusing or denying renewal of any such insurance coverage.
Section 3.25 No Other Representations or Warranties; Disclaimer. EXCEPT AS
EXPRESSLY PROVIDED IN THIS ARTICLE III, SELLER MAKES NO REPRESENTATIONS
OR WARRANTIES OF ANY KIND, NATURE OR DESCRIPTION, EXPRESS OR IMPLIED,
AND SELLER EXPRESSLY DISCLAIMS ANY REPRESENTATIONS OR WARRANTIES
WITH RESPECT TO ANY PROJECTIONS OR FUTURE FINANCIAL OR OPERATIONAL
PERFORMANCE OF THE SYSTEMS, THE BUSINESS OR ANY SUBSIDIARY OR AS TO THE
CONDITION, VALUE OR QUALITY OF THE BUSINESS OR THE TRANSFERRED ASSETS,
INCLUDING, ANY WARRANTY OF TITLE, MERCHANTABILITY, USAGE, SUITABILITY
OR FITNESS OF ANY ASSET FOR A PARTICULAR PURPOSE WITH RESPECT TO SUCH
ASSETS, ANY PART THEREOF, THE WORKMANSHIP THEREOF, AND THE ABSENCE OF
ANY DEFECTS THEREIN, WHETHER LATENT OR PATENT. THE REPRESENTATIONS
AND WARRANTIES OF SELLER SET FORTH IN THIS ARTICLE III ARE THE ONLY
REPRESENTATIONS AND WARRANTIES OF SELLER TO BUYER WITH RESPECT TO THE
ASSETS AND LIABILITIES OF SELLER, THE SUBSIDIARIES, THE SYSTEMS, THE
BUSINESS, THE SUBJECT MATTER OF THIS AGREEMENT AND THE TRANSACTIONS.
BUYER SHALL RELY ON ITS OWN EXAMINATIONS AND INVESTIGATIONS THEREOF.
43
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller as follows:
Section 4.1 Organization and Qualification. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of Delaware and has all
requisite corporate power and authority to own, lease and operate its properties and to carry on its
business as currently conducted.
Section 4.2 Authority. Buyer has full corporate power and authority to execute
and deliver this Agreement and each of the Ancillary Agreements to which it will be a party, to
perform its obligations hereunder and thereunder and to consummate the Transactions. The
execution and delivery by Buyer of this Agreement and each of the Ancillary Agreements to which it
will be a party and the consummation by Buyer of the Transactions have been duly and validly
authorized by all necessary corporate action. This Agreement has been, and upon their execution
each of the Ancillary Agreements to which Buyer will be a party will have been, duly and validly
executed and delivered by Buyer. This Agreement constitutes, and upon their execution each of the
Ancillary Agreements to which Buyer will be a party will constitute, the legal, valid and binding
obligations of Buyer, enforceable against Buyer in accordance with their respective terms, except as
enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' rights generally and by general principles of equity (regardless of
whether considered in a proceeding in equity or at law).
Section 4.3 No Conflict; Required Filings and Consents.
(a) The execution, delivery and performance by Buyer of this Agreement and
each of the Ancillary Agreements to which Buyer will be a party, and the consummation of the
Transactions, do not and will not:
(i) conflict with or violate the organizational documents (such as the
certificate of incorporation or bylaws or equivalent documents) of Buyer;
(ii) conflict with or violate in any material respect any Law applicable to
Buyer or by which any property or asset of Buyer may be bound or affected; or
(iii) conflict with, violate in any material respect, result in any material
breach of, constitute a material default (or an event that, with notice or lapse of time or both, would
become a material default) under, accelerate performance required by the terms of or result in the
termination, suspension or modification of, require any consent of any Person pursuant to, or give to
others any rights of termination, acceleration or cancellation of, any material contract or agreement to
which Buyer is a party or by which Buyer or its assets is bound.
(b) Buyer is not required to file, seek or obtain any notice, authorization,
approval, order, permit or consent of or with any Governmental Entity in connection with the
execution, delivery and performance of this Agreement by Buyer and each of the Ancillary
Agreements to which Buyer will be a party or the consummation of the Transactions or in order
to prevent the termination of any right, privilege, license or qualification of Buyer, except (i) for
any filings required to be made under the HSR Act or to obtain any LFA Approval or other
44
( III 7!01391' N
Required Consent of any Governmental Entity, (ii) where failure to obtain such consent,
approval, authorization or action, or to make such filing or notification, would not, individually
or in the aggregate, reasonably be expected to have a Buyer Material Adverse Effect, or (iii) as
may be necessary as a result of any facts or circumstances relating to Seller or any of its
Affiliates.
Section 4.4 Financing. Buyer has, or will have at the Closing, sufficient funds to
permit Buyer to consummate the Transactions. Notwithstanding anything to the contrary contained
herein, the parties acknowledge and agree that it shall not be a condition to the obligations of Buyer
to consummate the Transactions that Buyer have sufficient funds for payment of the Purchase Price.
Buyer acknowledges and agrees that it shall be Buyer's obligation to have funds on hand at the
Closing sufficient to enable Buyer to pay the Purchase Price and Buyer's failure to have such funds
at Closing shall constitute a breach by Buyer that gives rise to the failure of a condition set forth in
Section 6.2 for the purposes of Section 7.1(b).
Section 4.5 No Brokers. No broker, agent, finder or investment banker that has
been retained by or is authorized to act on behalf of Buyer in connection with the Transaction, and no
such broker. agent, finder or investment banker is entitled to any brokerage, finder's or other fee or
commission in connection with the Transactions.
Section 4.6 Litigation and Claims. Except for investigations and rule -making
proceedings affecting the cable television industry or the telecommunications industry generally,
there are no civil, criminal or administrative actions, suits, demands, claims, hearings, arbitrations,
proceedings or investigations by or against Buyer pending or, to Buyer's knowledge, threatened
against Buyer or any of its Affiliates that, individually or in the aggregate, would impair or delay the
ability of Buyer to effect the Closing. Neither Buyer nor any of its Affiliates is subject to any
judicial, administrative or arbitral order, writ, judgment, award, decree, injunction, lawsuit,
proceeding or stipulation that, individually or in the aggregate, would impair or delay the ability of
Buyer to effect the Closing or would affect the legality, validity or enforceability of this Agreement
or any Ancillary Agreement or the consummation of the Transactions.
Section 4.7 No On -Sale Agreements. Buyer and its Affiliates have not entered
into any discussions, negotiations, agreements or understandings with any Person (other than Seller)
with respect to a purchase and sale transaction, whether by merger, stock sale, asset sale or
otherwise, involving any of the Transferred Assets.
Section 4.8 Buyer Acknowledgement. Buyer has no knowledge or reason to
believe that any of the representations or warranties of Seller contained in ARTICLE III as of the
date hereof are untrue, incomplete or inaccurate. Except for the representations and warranties of
Seller contained in ARTICLE III, Buyer acknowledges that neither Seller nor any other Person on
behalf of Seller makes any other express or implied representation or warranty with respect to Seller,
the Subsidiaries, the Business, the Transferred Assets, the Excluded Assets, the Assumed Liabilities
or the Excluded Liabilities, or with respect to any other information provided to Buyer in connection
with the Transactions contemplated by this Agreement. Buyer specifically disclaims any obligation
or duty by Seller to make any disclosures of fact not required to be disclosed pursuant to the specific
representations and warranties expressly made by Seller and set forth in ARTICLE Ill of this
Agreement. Buyer is acquiring the Transferred Assets subject only to the specific representations
and warranties expressly made by Seller and set forth in ARTICLE III of this Agreement as further
limited by the specifically bargained -for exclusive remedies as set forth in ARTICLE VIII.
45
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Section 4.9 No Other Representations or Warranties. Except for the
representations and warranties contained in this ARTICLE IV, neither Buyer nor any other Person
makes any other express or implied representation or warranty on behalf of Buyer.
ARTICLE V
COVENANTS
Section 5.1 Conduct of Business Prior to the Closnm'. Between the date of this
Agreement and the Closing Date, unless Buyer shall otherwise agree in writing (such agreement not
to be unreasonably withheld, conditioned or delayed), and except as otherwise permitted in this
Section 5.1, Seller covenants that the Business shall be conducted only in the ordinary course of
business consistent with past practice. Without limiting the generality of the foregoing, except as set
forth on Schedule 5.1 or except with the prior written consent of Buyer (which consent shall not be
unreasonably withheld, conditioned or delayed), between the date of this Agreement and the Closing
Date, neither Seller nor any Subsidiary shall in connection with the Business or the Systems:
(a) sell, transfer, encumber or otherwise dispose of any Transferred Assets or
any interest therein, other than immaterial dispositions or encumbrances in the ordinary course of
business consistent with past practice;
(b) materially change inventory levels from the inventory levels maintained
in the ordinary course of business: provided however, that Seller will maintain at least 30 days of
inventory of customer premise and customer installation equipment. For avoidance of doubt, the
amount of inventory on hand at Closing will be determined in accordance with GAAP by
reference to historical usage over the past two (2) years. Nothing in this Agreement will be
deemed to be a guarantee that the inventory included in the Transferred Assets will be sufficient
for 30 days following Closing;
(c) enter into, materially modify, renew, terminate, suspend or materially
amend any Lease or any Contract that would be a Material Contract, except in the ordinary
course of business: provided, that entering into, renewing or amending programming agreements
with increased rates that are generally consistent with the past practice of Seller and the
Subsidiaries shall be deemed to be in the ordinary course of business; Buyer shall be deemed to
have consented to any such action if Buyer has not granted or denied its consent within two (2)
Business Days following the receipt by Buyer of a written request (including a request sent via
email) from Seller;
(d) make any loans, investments, contributions or advances in or to any
Person, except contributions with respect to Employee Plans in the ordinary course of business
consistent with past practice:
(e) except as required by applicable Law or the terms of an Employee Plan in
existence on the date hereof, (i) except in the ordinary course of business consistent with past
practice, increase the compensation payable to or other benefits provided to, or grant any bonus
to, the employees or consultants (other than consultants of Manager) with respect to the Business
or Systems, (ii) accelerate the vesting or payment of, or fund or in any other way secure, any
deferred compensation payable to or other benefits provided to the employees or consultants
(other than consultants of Manager) with respect to the Business or Systems, (iii) grant any rights
to severance or termination pay or notice, or enter into or amend any employment agreement or
46
( iii 7l(U91, u
severance agreement with respect to an employee or consultant (other than consultants of Manager)
with respect to the Business or Systems, (iv) terminate, adopt, establish, amend or enter into any
Employee Plan with respect to any employee or consultant (other than consultants of Manager) with
respect to the Business or Systems (provided that any such changes shall not be taken into account in
determining whether Buyer has complied with its obligations under Section 5.5) or (v) except in the
ordinary course of business consistent with past practice, terminate (other than for cause), promote,
demote or otherwise change the title of any Business Employees:
(f) hire for or transfer to the Business any individual, other than any such
individual who is hired or transferred to the Business to fill a position that is open as of the date
hereof or that becomes open in the ordinary course of business after the date hereof due to the
termination of a Business Employee;
(g) make any material change in any method of accounting or accounting
practice or policy that has a material impact on the Transferred Assets, except in accordance with
Seller's then current practice or as required by GAAP, or make or change any material Tax
election except as required by Law;
(h) fail to maintain in full force and effect existing bonds and policies of
insurance with respect to the Business or adequate replacement bonds and insurance;
(i) fail to deliver to Buyer true, correct and complete copies of the monthly
financial statements customarily prepared by Seller promptly after such statements become
available to Seller;
(j) fail to pay Taxes when due in a manner consistent with past practices;
(k) implement any material increase or decrease in the rates charged to
subscribers of the Systems except to reflect any changes in rates in Programming Agreements
that are generally consistent with industry practice, or make any material changes in
programming or give any notices to subscribers or local Governmental Entities concerning any
material changes in rates or programming, or make any commitment regarding changes in or
continuation of rates or programming, except as obligated or permitted by FCC rules, regulations
or orders or pursuant to applicable Law or Material Contracts and other than marketing or
promotional activities in the ordinary course of business:
(I) settle any material Action relating to the Business or the Systems;
(m) fail to duly and timely file a valid notice of renewal under Section 626 of
the Cable Act with the appropriate Governmental Entity with respect to any Franchise that will
expire within 36 months after any date between the date of this Agreement and the Closing Date;
and
(n) agree or commit to do any of the foregoing.
Section 5.2 Covenants Regarding* Access and Information.
(a) From the date of this Agreement until the Closing Time, upon reasonable
notice, Seller shall afford Buyer and its managers, members, general partners, directors, officers,
employees, agents, accountants, attorneys, advisors, bankers and other representatives
47
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(collectively, "Representatives") reasonable access to the properties, offices, plants and other
facilities of the Systems, and the books and records of Seller and the Subsidiaries to the extent
related to the Business or Systems, and shall furnish Buyer with such financial, operating and
other data and information to the extent related to the Business or the System as Buyer may
reasonably request; provided, however, that any such access or furnishing of information shall be
conducted at Buyer's sole expense, during normal business hours and under the supervision of
Seller's or its Affiliates' personnel and in such a manner as does not unreasonably interfere with
the normal operations of any Seller Party or the Business: and provided, further, that without
Seller's prior written consent, which consent shall not be unreasonably withheld, conditioned or
delayed, prior to the Closing, except as otherwise expressly permitted by this Agreement, Buyer
and its representatives shall not have any contact or otherwise communicate with the employees,
customers, suppliers and other business relations of the Subsidiaries about the Subsidiaries or
their respective assets, properties, operations or Business in connection with the Transactions.
Buyer shall use all subscriber information (as hereafter defined) obtained from Seller or the
Subsidiaries only in compliance with Sections 222 and 631 of the Communications Act and all
other Laws governing the use, collection, disclosure and storage of such information. For
purposes hereof, "subscriber information" means personally identifiable information pertaining
to customers, including names, telephone numbers, e-mail and billing addresses, credit card
numbers and expiration dates and bank account numbers and routing numbers. Notwithstanding
anything to the contrary in this Agreement, Seller shall not be required to disclose any
information to Buyer or its Representatives if such disclosure would (i) reasonably be expected to
jeopardize any attorney -client or other legal privilege, (ii) contravene any applicable Law or (iii)
relate to any Excluded Asset or Excluded Liability. Any access shall be at the risk of Buyer and
its Representatives, and in connection therewith, Buyer hereby agrees to indemnify and hold
harmless Seller Indemnified Parties with respect to any Losses resulting from or arising out of
such access. All requests made pursuant to this Section 5.2(a) shall be directed to such Person or
Persons as may be designated by Seller to Buyer from time to time. All information received
pursuant to this Section 5.2(a) shall be subject to the terms and conditions of Section 5.6.
(b) For a period of seven years after the Closing Date or, if shorter, the
applicable period specified in Buyer's document retention policy, Buyer shall (i) retain the Books
and Records relating to the Business relating to periods prior to and including the Closing Date
and (ii) upon reasonable notice afford Seller or its Representatives reasonable access (including
the right to make, at Seller's sole expense, photocopies), during normal business hours, to such
books and records to the extent related to the Business: provided, however, that Buyer shall
notify Seller in writing at least thirty (30) days in advance of destroying any such books and
records prior to the seventh anniversary of the Closing Date in order to provide Seller the
opportunity to copy such Books and Records in accordance with this Section 5.2(b).
(c) For a period of seven years after the Closing Date or, if shorter, the
applicable period specified in Seller's document retention policy, Seller shall, and shall cause
each Subsidiary to, (i) retain the books and records relating to the Business relating to periods
prior to and including the Closing Date to the extent not included in the Transferred Assets and
(ii) upon reasonable notice, afford Buyer or its Representatives reasonable access (including the
right to make, at Buyer's sole expense, photocopies), during normal business hours, to such
books and records to the extent related to the Business; provided, however, that Seller shall notify
Buyer in writing at least thirty (30) days in advance of destroying any such books and records
prior to the seventh anniversary of the Closing Date in order to provide Buyer the opportunity to
copy such books and records in accordance with this Section 5.2(c).
4K
( iii 7!01391, IJ
(d) Seller acknowledges and agrees that, within forty-five (45) days of the
date of this Agreement, Buyer may commission, at Buyer's sole cost and expense. a Phase I
environmental site assessment (as such term is described in the American Society of Testing and
Materials Standard E1527-05) of any parcel of Real Property (a "Phase I Assessment"). If
Buyer reasonably determines that a Phase I Assessment indicates that further assessment
(including collection and analysis of environmental media) or other additional testing or analysis
of any parcel of Real Property (a "Phase II Assessment") is advisable, Buyer may elect to cause
its Representatives to conduct such testing and analysis at Buyer's sole cost and expense;
provided, however, that Buyer must obtain Seller's prior written consent to conduct any Phase II
Assessment, tank tightness testing or any other environmental investigation, sampling, testing or
assessment of any kind at any Real Property, which consent shall not be unreasonably withheld,
conditioned or delayed. Seller will use commercially reasonable efforts to comply with any
reasonable request for information made by Buyer or its Representatives in connection with any
such investigation. Upon reasonable request by Buyer. Seller will afford Buyer and its
Representatives access to such Real Property at reasonable times and in a reasonable manner in
connection with any such investigation (subject, in the case of any Leased Real Property, to the
consent rights of the applicable landlord, which Seller shall use commercially reasonable efforts
to obtain if so requested by Buyer); provided, however, that Buyer shall not unreasonably
interfere with a Seller's Party's use and operation of the Real Property. Should Buyer
commission Phase I Assessments, such Phase I Assessments will have no effect upon the
representations and warranties made by Seller in Section 3.18 of this Agreement, except that if
any Phase I Assessment documents an environmental condition that would reasonably be
construed to be a breach of such representations or warranties and such breach is capable of
being cured, Buyer shall promptly so notify Seller and provide to Seller a copy of such Phase I
Assessment, and Seller will be deemed not to have breached such representation or warranty if
Seller cures or commences to cure such breach prior to the Closing. Any access to the Real
Property shall be at the risk of Buyer and its Representatives, and in connection therewith, Buyer
hereby agrees to indemnify and hold harmless Seller Indemnified Parties with respect to any
Losses directly resulting from or arising out of Buyer's access (but not any findings as a result
thereof, unless the condition associated with such findings is materially exacerbated by Buyer) to
the Real Property as authorized by this Section 5.2(d).
(e) All information collected and generated as a result of the environmental
due diligence authorized by Section 5.2(d) will be subject to the terms and conditions of Section
5.6 hereof and the Confidentiality Agreement. Buyer will provide to Seller copies of all work
plans, draft and final reports, assessments and other information composed or compiled by Buyer
or Buyer's Representatives pursuant to Section 5.2(d) within five Business Days after Buyer's
receipt of copies thereof
(f) Notwithstanding anything to the contrary contained in this Agreement,
Seller shall have the right to retain one copy of all Contracts, books, records, literature, lists
(other than customer lists, all of which shall be delivered to Buyer), and any other written or
recorded information constituting Transferred Assets or which otherwise relates to the Business,
the Systems or the Assumed Liabilities (including the Books and Records), in each case for (i)
the administration by Seller or its Affiliates of any Action relating to the Business, (ii) the
administration by Seller and its Affiliates of any regulatory filing or matter or (iii) any other
reasonable legal or business purpose of Seller and its Affiliates.
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(g) For a period of thirty (30) days following the Closing Date, Buyer shall
grant to Seller and its Representatives access to the hard drives and other electronic information
storage devices included in the Transferred Assets for the purpose of obtaining copies thereof.
Buyer shall not erase or otherwise eliminate any information contained on such hard drives and
other electronic information storage devices until the expiration of such 30 -day period. The
parties shall reasonably cooperate in determining the manner and the times of access by Seller
and its Representatives so as not to interfere with the normal operation of Buyer's business.
Section 5.3 Update of Disclosure Schedules; Knowledge of Breach. Between the
date hereof and the Closing Date, if any of the individuals named on Schedule 1.1(b) becomes
actually aware of (i) any matter, event, condition, fact, circumstance or development that arose prior
to the date hereof that was required to be set forth on any Disclosure Schedule attached hereto as of
the date hereof but was omitted (the "Existing Information"), or (ii) any matter, event, condition,
fact, circumstance or development that arises after the date hereof (other than as a result of or due to
a breach of any covenant in this Agreement by Seller) that, had it existed on the date hereof, would
have been required to be set forth on a Disclosure Schedule as of the date hereof (the "New
Information"), then Seller shall promptly disclose such Existing Information or New Information to
Buyer. Such disclosure shall be in the form of an amendment or supplement to the Disclosure
Schedules specifying the sections of ARTICLE III to which the Existing Information and/or New
Information is responsive (the `Schedule Supplement"). If any Existing Information or New
Information described in any Schedule Supplement constitutes a breach of any representation or
warranty of Seller such that Buyer would have the right to terminate this Agreement pursuant to
Section 7.1(c), then Buyer, in its sole discretion, may either (i) terminate this Agreement or (ii)
assuming the conditions to Closing set forth in ARTICLE VI are otherwise satisfied or waived in
accordance with ARTICLE VI, consummate the Closing. Buyer must exercise its right to terminate
this Agreement by written notice to Seller delivered within ten (10) Business Days after the date the
Schedule Supplement is delivered to Buyer. If, within such period, Buyer does not notify Seller that
it has elected to terminate this Agreement, Buyer will have irrevocably waived its right to terminate
this Agreement on the basis of the information contained in such Schedule Supplement, and if the
Closing thereafter occurs, then (x) with respect to New Information only, the representations and
warranties contained in ARTICLE III shall be deemed to have been qualified by such New
Information to the extent set forth in the Schedule Supplement, and Buyer shall be deemed to have
waived any right to seek indemnification under ARTICLE VIII with respect to any breach of such
representations and warranties with respect to such New Information and (y) with respect to Existing
Information only, the representations and warranties contained in ARTICLE III shall not be deemed
to have been qualified by such Existing Information, and to the extent such Existing Information
represents a breach of any representation or warranty in ARTICLE III, Buyer shall have the right to
seek indemnification from Seller for any Losses arising out of or resulting from such Existing
Information in accordance with Section 8.2(a) and subject to the other provisions of ARTICLE VIII.
If', prior to the Closing, Buyer shall have reason to believe that any breach of a representation or
warranty of Seller has occurred (other than through notice from Seller), Buyer shall promptly so
notify Seller, in reasonable detail.
Section 5.4 Notification of Certain Matters. Until the Closing, each party hereto
shall promptly notify the other party in writing of any (a) fact, change, condition, circumstance or
occurrence or nonoccurrence of any event of which it becomes actually aware that will or is
reasonably likely to result in any of the conditions set forth in ARTICLE VI of this Agreement
becoming incapable of being satisfied, and (b) any Action that is instituted or threatened against such
party to restrain, prohibit or otherwise challenge the legality or propriety of any Transaction.
50
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Section 5.5 Employees.
(a) Seller has made available to Buyer a schedule listing each Business
Employee as of February 20, 2013, which indicates for each such employee, that employee's
hourly wage or annual salary (as applicable), any other compensation payable (including
compensation paid for the immediately preceding calendar year pursuant to bonus, incentive,
deferred compensation or commission arrangements and target bonus, incentive, deferred
compensation or commission arrangements for the current calendar year), date of hire, position,
the scheduled number of hours that the employee is to work per week, whether the employee is
on leave and if so, the type of leave, when the leave commenced, and when the leave is expected
to end, and whether the employee is subject to an employment agreement, a collective bargaining
agreement, and/or is represented by a labor organization. Seller has made available to Buyer a
schedule listing each consultant with respect to the Business or Systems as of the date of this
Agreement, its, his, or her respective work locations, and rates of compensation.
(b) Business Employees. Buyer or its Affiliate shall make offers of
employment, contingent upon the Closing and satisfaction of any reasonable background checks
(including driving record) and drug screening that Buyer deems appropriate, to all Business
Employees who remain employed by Seller or a Subsidiary at the Closing Date. The offers of
employment shall provide for employment commencing on the Closing Date, except with respect
to offers of employment to any Business Employee on an approved short or long term disability
or workers' compensation leave of absence as of the Closing Date (a "Leave Employee"), which
shall provide for employment commencing as of the date that the Leave Employee returns to
active employment; provided that the Leave Employee returns to active employment within six
months following the Closing Date. Buyer and its Affiliates shall have no obligation to employ
any Leave Employee who does not return to active employment within six months following the
Closing Date. Effective as of the Closing Date, Seller's or applicable Subsidiary's employment
of the Business Employees other than the Leave Employees shall cease. Buyer shall, or shall
cause its appropriate Affiliate to, hire each Business Employee who accepts Buyer's offer of
employment with substantially similar responsibilities and at least the same base salary as of the
Closing and at the same general geographic location as such employee's primary place of
employment as of the Closing. Buyer and its Affiliates shall indemnify and hold harmless the
Seller Indemnified Parties from and against any and all Losses arising from or relating to (I) any
claim by any Business Employee directly related to Buyer's decision not to hire such Business
Employee, other than any liabilities and obligations (i) with respect to any severance
compensation that may be payable to such Business Employee or (ii) resulting from or relating to
faulty information regarding such Business Employee provided by Seller, or (2) any claim by any
Hired Employee related to the termination of employment of such Hired Employee by Buyer or
its Affiliate after the Closing Time. For clarification, such indemnification shall not extend to
Losses arising from or relating to such Hired Employee's employment prior to the Closing Date
or the termination of employment of such Hired Employee by Seller or a Subsidiary. Seller and
Buyer agree to utilize the standard procedure set forth in Revenue Procedure 2004-53 with
respect to wage reporting of the Business Employees in the calendar year that contains the
Closing Date, and without unreasonable delay, Seller shall provide Buyer with such information
regarding employment taxes paid for the calendar year that contains the Closing Date with
respect to the Hired Employees as Buyer may reasonably request.
(c) Service Credit. Buyer shall cause each benefit plan maintained,
sponsored, adopted or contributed to by Buyer or its Affiliates in which Hired Employees are
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eligible to participate (collectively, the "Buyer Benefit Plans"), including any severance benefit
plan, to take into account for all purposes under the Buyer Benefit Plans (but not for purposes of
defined benefit pension accruals under any defined benefit plan) the service of such employees
with Seller or its Affiliates to the same extent as such service was credited for the applicable
purpose by Seller or the applicable Affiliate, provided that no service credit shall be granted to
the extent any duplication of benefits results.
(d) Employee Benefits Generally. As of the Closing Time, Buyer or its
Affiliate shall make available to Hired Employees employee benefits that generally are no less
favorable than those provided by Seller or any Subsidiary to such Hired Employees immediately
prior to the Closing (without taking into account, for such purpose, any equity compensation
arrangements, defined benefit pension plan, or retiree welfare plan maintained by Seller or any
Subsidiary). Seller shall bear the expense of and responsibility for all liabilities arising from
claims by the Hired Employees for benefits attributable to periods prior to the Closing Date or
resulting from the Closing under the Employee Plans maintained by Seller or its Affiliates, and
Buyer shall bear the expense of and responsibility for all liabilities arising from claims by the
Hired Employees for benefits attributable to periods on or after the Closing Date under the
benefit plans maintained by Buyer or its Affiliates, including any claims under such plans
relating to severance from employment with Buyer and its Affiliates after the Closing Time. For
purposes of the foregoing, a medical/dental claim shall be considered incurred when the services
are rendered, the supplies are provided or medication is prescribed, and not when the condition
arose. A disability or worker's compensation claim shall be considered incurred before the
Closing Time if the injury or condition giving rise to the claim occurs before the Closing Time.
Except as may be required by this Agreement or by applicable Law, Buyer shall not be obligated
to continue to provide any particular employee benefits to any Hired Employee.
(e) Severance Obligations. If any Hired Employee is discharged by the
Buyer or its Affiliate without cause within one hundred eighty (180) days after the Closing, then
Buyer shall pay or shall cause to be paid severance benefits to such Hired Employee that are at
least equal to those that would have been provided in accordance with Buyer's severance benefit
plan as set forth in Schedule 5.5(e) giving effect to such employee's past service with Seller or
its Affiliate as required by Section 5.5(c), but subject to the requirement that the applicable Hired
Employee execute and not revoke a release of all claims in Buyer's then standard form. Seller
solely shall be responsible for, and have all Liability with respect to, any severance or similar
obligation with respect to or arising from the termination of employment of the Business
Employees by Seller or any Subsidiary. For purposes of this Section 5.5, "cause" shall have the
meaning set forth in Buyer's employment policies, procedures or agreements applicable to
Buyer's employees who are similarly -situated to the discharged Hired Employee.
(f) Welfare Benefit Plans.
(i) For any welfare benefit plans of Buyer or its Affiliates in which Hired
Employees are eligible, including medical, dental, life insurance, and short- and long-term disability,
to the extent applicable, (all of such welfare plans, the "Buyer Welfare Benefit Plans"), Buyer shall
use commercially reasonable efforts to ensure that all waiting periods and pre-existing condition
clauses shall be waived under Buyer Welfare Benefit Plans for the Hired Employees and their
eligible dependents who were participating in comparable welfare benefits plans and programs of
Seller and its Affiliates (the "Seller Welfare Benefit Plans") immediately before the Closing Date
and not subject to waiting periods or pre-existing condition clauses thereunder. Buyer shall cause
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Buyer Welfare Benefit Plans to recognize any out-of-pocket medical and dental expenses incurred by
each of the Hired Employees and their eligible dependents on or prior to the Closing Date and during
the calendar year in which the Closing Date occurs for purposes of determining deductibles and out-
of-pocket maximums under Buyer Welfare Benefit Plans for the calendar year in which the Closing
Date occurs (Seller shall provide such information to Buyer at or prior to the Closing).
(ii) Seller and Buyer acknowledge and agree that Buyer may
desire that the Baja Broadband Management, Inc. Medical, Dental and Vision Plans be
transferred and assigned to Buyer or its Affiliate, effective as of the Closing Time (the
"Transfer"). If Buyer elects that the Transfer occur, Buyer shall provide written notice of such
election to Seller no later than forty-five (45) days prior to the Closing Date. If and after such
election notice is given by Buyer, Seller and Buyer each shall take such actions necessary to
effectuate the Transfer, including using commercially reasonable efforts to secure any required
consent from the applicable insurance carrier of such plan to the Transfer. If the Transfer is
effected, then effective as of the Closing Time, Buyer and its Affiliates shall become liable for
all responsibilities and obligations for continuation coverage under Section 601 et seq. of ERISA
and any similar state continuation coverage requirements (the "COBRA Obligations") with
respect to (A) the Hired Employees and their beneficiaries, (B) the Business Employees
immediately prior to the Closing Time who do not become Hired Employees and their
beneficiaries and (C) former employees of a Seller Party and their beneficiaries for whom a
qualifying event had occurred prior to the Closing Time. If the Transfer is not is effected for a
reason other than that the Buyer in its sole discretion did not deliver the election notice
contemplated by the second sentence of this Section 5.5(f)(ii), Seller and Buyer acknowledge
and agree that (I) Buyer and its Affiliates shall be liable for the COBRA Obligations with
respect to the Hired Employees and their beneficiaries with respect to qualifying events that
occur after the Closing Time; (2) Seller shall be liable for the COBRA Obligations with respect
to qualifying events that occur prior to the Closing Time and (3) during the eighteen (18) month
period following the Closing Date, Seller will not terminate, and cause its Affiliates not to
terminate, the Broadband Management, Inc. Medical, Dental and Vision Plans. For the
avoidance of doubt, no provision of this Section 5.5(f)(ii) shall cause Buyer and its Affiliates to
assume responsibility for COBRA Obligations or any other responsibilities, obligations or
liabilities of Seller and its Affiliates (or any failure of Seller and its Affiliates to satisfy such
responsibilities, obligations or liabilities) under the Broadband Management, Inc. Medical,
Dental and Vision Plans with respect to periods prior to the date of the Transfer (if any), and
Seller acknowledges and agrees that Seller and its Affiliates solely shall be responsible for, and
indemnifies and holds harmless Buyer and its Affiliates from any and all Losses arising from or
related to, any such responsibilities, obligations or liabilities.
(g) Paid Time -Off. As of the Closing Date, and to the extent permitted by
Law, Buyer shall, or shall cause its appropriate Affiliate to, assume all obligations to each Hired
Employee with respect to the paid time off earned but not yet used by each Hired Employee as of
the Closing Date. In connection with the foregoing, Buyer shall, or shall cause its appropriate
Affiliate to, (i) credit and immediately make available to each Hired Employee the paid -time off
time earned but not yet used by such employee as of the Closing Date and (ii) waive any service
requirements or other applicable internal guidelines to allow each Hired Employee to begin using
such earned paid -time off on or immediately following the Closing Date in accordance with
Buyer's or its Affiliates' paid time off policy. In the event that Seller becomes legally required
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under applicable Law to make any payment to any Hired Employee for any earned but unused
paid time off Seller shall make such payment and Buyer shall make a corresponding debit to the
employee's paid time off accrual with Buyer and shall reimburse Seller in full for such payments.
(h) WARN Act. Buyer shall be responsible for providing any required notice
and for making any required payments and discharging other related liabilities under the WARN
Act with any such statute with respect to any "plant closing" or "mass layoff' (as defined in the
WARN Act) or group termination or similar event affecting the Hired Employees and occurring
after the Closing Time. Seller agrees to cooperate in preparing and distributing any notices that
Buyer may desire to provide prior to the Closing Date in connection with actions by Buyer after
the Closing Time that would result in a notice requirement under such Laws.
(i) Rollover of 401(k) Plan Accounts. Seller shall take any and all action as
may be required to vest, in full, each Hired Employee's account balance under the 401(k) plan
sponsored by Seller covering the Business Employees (the "Seller 401(k) Plan"), effective as of
the Closing. Prior to the Closing Date and thereafter (as applicable), Seller and Buyer shall take
any and all action as may be required, including amendments to the Seller 401(k) plan and/or the
tax -qualified defined contribution retirement plan designated by the Buyer (the "Buyer 401(k)
Plan"), to permit each Hired Employee to make rollover contributions of "eligible rollover
distributions" (within the meaning of Section 401(a)(31) of the Code, but excluding plan loans)
in cash in an amount equal to the eligible rollover distribution portion of the account balance
distributed to such Hired Employee from the Seller 401(k) Plan to the Buyer 401(k) Plan.
(j) Sick Pay and Disability. Seller shall be solely responsible for sick pay
and disability (whether long-term or short-term) coverage of a Business Employee who does not
become a Hired Employee because he or she does not return to active employment within six
months following the Closing Date.
(k) Employee Communications. From the date hereof through the Closing
Date, (i) Seller shall provide Buyer with reasonable access during normal business hours to, and
shall facilitate meetings with, Business Employees for purposes of making announcements
concerning and preparing for the consummation of the Transactions, it being understood that
Seller shall be entitled to attend any such meetings and (ii) Seller and Buyer shall cooperate in
good faith regarding any broadly distributed communication to Business Employees relating to
the Transactions and employment, benefits and compensation with Buyer and its Affiliates
following the Closing Date.
(I) No Third -Party Beneficiaries; No Plan Amendments. Without limiting
the generality of Section 9.7, nothing express or implied by this Agreement shall confer upon any
Business Employee, or legal representative thereof, or any other Person any rights or remedies,
including any right to employment or benefits for any specified period, or under any specified
terms, of any nature or kind whatsoever, under or by reason of this Agreement, and Seller and
Buyer agree that all provisions of this Section 5.5 are included for the sole benefit of Seller,
Buyer and their respective Affiliates. In no event shall the terms of this Agreement be deemed to
(i) establish, amend, or modify any Employee Plan or any "employee benefit plan" as defined in
Section 3(3) of ERISA, or any other benefit plan, program, agreement or arrangement maintained
or sponsored by Buyer, Seller or any of their respective Affiliates; (ii) alter or limit the ability of
Buyer, Seller or any of their respective Affiliates to amend, modify or terminate any Employee
Plan or any other benefit, compensation or employment plan, program, agreement or arrangement
54
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after the Closing Date; or (iii) confer upon any current or former employee, officer, director or
consultant, including any Business Employee, any right to employment or continued employment
or continued service with the Business or any promise with respect to the terms thereof, or
constitute or create an employment agreement with any employee.
Section 5.6 Confidentiality
(a) Each of the parties shall hold, and shall cause its respective
Representatives to hold, in confidence all documents and information furnished to it by or on
behalf of the other party in connection with the Transactions pursuant to the terms of the
confidentiality and non -disclosure agreement, dated October 19, 2012, between Buyer and Seller
(the "Confidentiality, Agreement"), which shall continue in full force and effect until the
Closing Date, at which time such Confidentiality Agreement and the obligations of the parties
under this Section 5.6 shall terminate only in respect of that portion of the documents and
materials referenced therein exclusively relating to the Business or the Transferred Assets. The
Confidentiality Agreement shall otherwise continue in full force and effect with respect to all
other Confidential Information (as defined in the Confidentiality Agreement), including the terms
of this Agreement. If for any reason this Agreement is terminated prior to the Closing Date, the
Confidentiality Agreement shall nonetheless continue in full force and effect in accordance with
its terms.
(b) From and after the Closing, Seller will, and will cause its Affiliates and
Representatives to, maintain the confidentiality of the Confidential Information included in and
related to the Business or the Transferred Assets (the "Transferred Confidential Information")
at all times, and will not, directly or indirectly, use any Transferred Confidential Information for
its own benefit or for the benefit of any other Person or reveal or disclose any Transferred
Confidential Information to any Person other than authorized Representatives of Buyer, except in
connection with this Agreement or with the prior written consent of Buyer and except to the
extent the Transferred Confidential Information includes information regarding the Excluded
Assets or other assets, business or properties of Seller or its Affiliates. As used herein,
"Transferred Confidential Information" includes information concerning the Transferred Assets,
the Business or the Systems and relating to customers, suppliers, independent contractors or
employees, customer lists, and pending projects and proposals relating to the Transferred Assets,
the Business or the Systems. The covenants in this Section 5.6(b) will not apply to Transferred
Confidential Information that: (i) is or becomes available to the general public through no breach
of this Agreement by Seller, its Affiliates or any of their respective Representatives or, to Seller's
Knowledge, breach by any other Person of a duty of confidentiality to Buyer; or (ii) Seller is
required to disclose by applicable Law; provided, however, that Seller will notify Buyer in
writing of such required disclosure as much in advance as practicable in the circumstances and
cooperate with Buyer to limit the scope of such disclosure.
Section 5.7 Consents and Filings; Further Assurances.
(a) Each of the parties shall use all commercially reasonable efforts to take,
or cause to be taken, all appropriate action to do, or cause to be done, all things necessary, proper
or advisable under applicable Law or otherwise to consummate and make effective the
Transactions as promptly as practicable, including to (i) obtain the Required Consents and (ii)
promptly make all necessary filings, and thereafter make any other required submissions, with
respect to this Agreement required under applicable Law. For purposes of the preceding
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sentence, Seller's commercially reasonable efforts shall require Seller to arrange for, or otherwise
direct, the Manager to cooperate and assist the parties to obtain the Required Consents. All fees
to be paid and costs incurred in connection with obtaining the Required Consents and making
such filings shall be borne equally by Seller and Buyer unless otherwise specified herein. Except
with respect to the Franchises, which are the subject of Section 2.10, if and to, the extent that
Seller fails to obtain all Required Consents on or prior to the Closing, then, for a period of six
months following the Closing Date, Seller shall continue to use commercially reasonable efforts,
at Buyer's request, to obtain such Required Consents in accordance with this Section 5.7.
(b) Section 5.7(a) notwithstanding, Seller and Buyer shall prepare and file, or
cause to be prepared and filed, within fifteen (15) Business Days after the date of this Agreement,
all applications (including FCC Forms 394 or other appropriate forms, to the extent Seller
determines such forms are necessary or appropriate) required to be filed with the FCC or any
other Governmental Entity that are necessary for the assignment and transfer of control to Buyer
of the Franchises and the Licenses in connection with the consummation of the Transactions, free
and clear of all Encumbrances. Within ten (10) business days after the date of this Agreement,
Buyer shall provide to Seller all information deemed reasonably necessary by Seller for the
completion of the FCC Forms 394 required to be filed in order to obtain the LFA Approvals
(including information required by the terms of the Franchises), and agrees to cooperate
reasonably, diligently, and in good faith with Seller in the preparation of such FCC Forms 394
and such other FCC applications related to the Licenses to permit the filing of such FCC Forms
394 and such other applications no later than fifteen (15) Business Days after the date of this
Agreement.
(c) (i) Seller shall deliver with each FCC Form 394 a transmittal letter and a
proposed Franchise transfer resolution, each in form and substance reasonably satisfactory to
Buyer and Seller. Seller shall deliver to each Governmental Entity that has granted a Franchise
whose consent is not required to assign the Franchise to Buyer a notice letter in form and
substance reasonably satisfactory to Buyer and Seller. Seller shall request or cause to be
requested all other Required Consents not related to Franchises by letter in form and substance
reasonably satisfactory to Buyer and Seller.
(ii) Buyer agrees that, if in connection with the process of obtaining any
Required Consent, a Governmental Entity or other Person purports to require any condition or any
change to a Governmental Authorization or Contract to which such Required Consent relates that
would be applicable to either Buyer or a Seller Party as a requirement for granting such Required
Consent, which condition or change involves a monetary payment or monetary commitment to such
Governmental Entity or other Person, Buyer may elect, in its sole discretion, or Seller may elect,
subject to the prior written approval of Buyer, to satisfy the full amount of such monetary payment or
monetary commitment (notwithstanding the obligation to equally share costs set forth in Section
5.7(a)), in which case, the other party shall be deemed to accept such condition or change to the
extent so satisfied.
(iii) Subject to the terms of subsection (ii) above, Seller shall not agree,
without Buyer's prior written consent, which consent shall not be unreasonably withheld,
conditioned or delayed, to any material change to the terms of any Governmental Authorization or
Contract as a condition to obtaining any Required Consent to the transfer or assignment of such
Governmental Authorization or Contract to Buyer or to extend or to toll the time limits applicable to
a Governmental Entity's consideration of any FCC Form 394. If in connection with obtaining any
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Required Consent, a Governmental Entity or other third party seeks to impose any material change to
any Governmental Authorization or Contract to which such Required Consent relates that would be
applicable to Buyer as a requirement for granting such Required Consent, Seller will promptly notify
Buyer of such fact and Seller shall not agree to such change unless Buyer shall, in its reasonably
exercised discretion, consent to such change in writing.
(iv) If in connection with the process of obtaining any Required Consent,
a Franchising Authority requires a Seller Party to cure specified past violations under a Franchise, the
parties shall use commercially reasonable efforts to negotiate with such Franchising Authority, and if
it is ultimately determined, by the parties or by an Order from a court having jurisdiction over the
matter, that there is any outstanding liability for any such specified past violations that must be paid
by Buyer after the Closing (such liabilities, "Retained Franchise Liabilities"), Buyer shall be
entitled to recover from the Escrow Fund the amount it pays to the Franchising Authority to satisfy
such Retained Franchise Liabilities.
(d) Buyer shall promptly, but in no event more than ten (10) days after
receipt of such request, furnish to any Governmental Entity or other Person from which a
Required Consent is requested such accurate and complete information regarding Buyer,
including financial information relating to Buyer, as such Governmental Entity or other Person
may reasonably require in connection with obtaining such Required Consent.
(e) Section 5.7(a) notwithstanding, Seller and Buyer shall, promptly after the
execution and delivery of this Agreement, but in no event later than fifteen (15) Business Days
after the date of this Agreement, complete and file, or cause to be completed and tiled, with the
FTC and the Antitrust Division any notification and report required to be filed under the HSR
Act with respect to the Transactions. Each of Buyer and Seller shall coordinate with the other
with respect to its filings, shall cooperate to prevent inconsistencies between their respective
filings and shall furnish to each other such necessary information and reasonable assistance as the
other may reasonably request in connection with its preparation of necessary filings or
submissions under the HSR Act. The parties shall use commercially reasonable efforts to
respond as promptly as practicable to any requests received from the FTC or the Antitrust
Division for additional information or documentation and respond as promptly as practicable to
inquiries and requests received from other Governmental Entities with respect to antitrust
matters. Without limiting the generality of the parties' undertaking pursuant to Section 5.7(a),
each of Buyer and Seller shall use commercially reasonable efforts to resolve objections, if any,
as may be asserted by any United States or non -United States governmental antitrust authority so
as to enable the parties hereto expeditiously to close the Transactions. Section 5.7(a)
notwithstanding, Buyer shall pay all HSR Act fees relating to the Transactions.
(f) Each of the parties shall promptly notify the other party of any
communication it or any of its Affiliates receives from any Governmental Entity relating to any
filing made pursuant to Section 5.7(b) or Section 5.7(e) and, subject to the Confidentiality
Agreement, permit each other party to review in advance any proposed written communication to
any Governmental Entity, in each case concerning this Agreement or the Transactions. Neither
party shall agree to participate in any meeting (which includes any phone call, as "meeting" is
used in this Section 5.7, other than a phone call the purpose of which is to schedule a meeting or
to respond to an informal inquiry) with any Governmental Entity in respect of any FCC Form
394 filed pursuant to Section 5.7(b) or any filings, investigation or other inquiry under the HSR
Act unless it consults with the other party in advance and, to the extent permitted by such
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Governmental Entity, gives the other party the opportunity to attend and participate at such
meeting, provided that if the Governmental Entity does not permit such participation by the other
party, or if all parties agree that such joint participation would not be advisable, each party shall
allow outside counsel for the other party to attend and participate to the extent permitted by the
Governmental Entity. Subject to the Confidentiality Agreement, the parties will coordinate and
cooperate fully with each other in exchanging such information and providing such assistance as
the other party may reasonably request in connection with the foregoing. Subject to the
Confidentiality Agreement, the parties will provide each other with copies of all correspondence,
filings or communications between them or any of their Representatives, on the one hand, and
any Governmental Entity or members of its staff, on the other hand, with respect to any filings
made pursuant to Section 5.7(b) or Section 5.7(e).
(g) Seller and Buyer will use their commercially reasonable efforts to timely
send or cause to be sent all required renewal letters pursuant to Section 626 of the
Communications Act to the appropriate Franchising Authorities with respect to all applicable
Franchises of the Systems that are due to expire within 36 months after any date between the date
of this Agreement and the Closing Date.
(h) Notwithstanding the provisions of this Section 5.7, Seller shall not have
any further obligation to obtain Required Consents: (i) with respect to any Pole Attachment
Agreement where the licensing party shall not, after Seller's exercise of commercially reasonable
efforts, consent to an assignment of such Pole Attachment Agreement but requires that Buyer
enter into a new Pole Attachment Agreement with such licensing party, in which case, Buyer
shall use its commercially reasonable efforts to enter into such agreement prior to the Closing or
as soon as practicable thereafter and Seller shall reasonably cooperate with and assist Buyer in
obtaining such agreement; and (ii) for any business radio license that Seller reasonably expects
can be obtained within one hundred twenty (120) days after the Closing Date and so long as a
temporary or conditional authorization is available to Buyer under FCC rules with respect
thereto.
Section 5.8 Release of Guarantees. Seller and its Affiliates that are a party to
each of the Guarantees shall use their commercially reasonable efforts to cause each such Guarantee
to be revoked or terminated as of or promptly after the Closing Date and Buyer shall be responsible
for securing replacement guarantees. In the event any of the Guarantees are not released prior to or
at the Closing, Buyer shall indemnify and hold Seller and its Affiliates harmless for any and all
payments required to be made under, and costs and expenses incurred in connection with, such
Guarantee by Seller or its Affiliates until such Guarantee is released to the extent such payment and
costs are attributable to Buyer's acts or omissions after the Closing Time or arise from any other
event occurring after the Closing Time that is unrelated to Seller's acts or omissions occurring prior
to the Closing Time.
Section 5.9 Implementation and Completion of Certain Projects. Without
limiting the generality of the covenant in the first sentence of Section 5.1, between the date of this
Agreement and the Closing Date, Seller shall, and shall cause its Affiliates and the Business, to
continue to make all necessary or appropriate and reasonable expenditures or commitments for
capital expenditures relating to, and to use commercially reasonable efforts to complete the
milestones for, each of the projects identified on Schedule 53 (the "Projects") as if the Transactions
(or any similar alternative transactions) were not going to occur. Without limiting the generality of
the foregoing, between the date of this Agreement and the Closing Date, Seller shall and shall cause
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its Affiliates and the Business, to use its commercially reasonable efforts to complete each milestone
identified on Schedule 5.9 with respect to each Project identified on Schedule 5.9.
Section 5.10 Refunds and Remittances. After the Closing: (i) if Seller or any of its
Affiliates receive any refund or other amount that is a Transferred Asset or is otherwise properly due
and owing to Buyer in accordance with the terms of this Agreement, Seller promptly shall remit, or
shall cause to be remitted, such amount to Buyer; and (ii) if Buyer or any of its Affiliates receive any
refund or other amount that is an Excluded Asset or is otherwise properly due and owing to Seller or
any of its Affiliates in accordance with the terms of this Agreement, Buyer promptly shall remit, or
shall cause to be remitted, such amount to Seller.
Section 5.1 I Cooperation on Subscriber Reimbursements. Following the Closing, if
a Seller Party is required, pursuant to any applicable Law, settlement or otherwise, to reimburse or
provide in -kind or another form of consideration to any subscribers of a System in respect of any
subscriber payments previously made by them, including fees for cable television service, late fees and
similar payments, Buyer agrees that it shall make such reimbursement or provide such in -kind or other
form of consideration through Buyer's billing system on terms specified by Seller, and Seller shall
reimburse Buyer, at cost, for all such payments and other consideration made by Buyer following the
Closing and for Buyer's reasonable out-of-pocket expenses incurred in connection therewith. Such
reimbursements, requirements and related expenses shall be reflected in the calculation of Current Assets
and Current Liabilities in the Preliminary Closing Statement and Final Closing Statement, to the extent
then known. For any reimbursements, requirements or and related expenses incurred after completion of
the Final Closing Statement, Seller shall reimburse Buyer within sixty (60) days after receipt of a
statement therefor. Buyer shall provide Seller with all information in Buyer's possession that is
reasonably required by Seller in connection with such reimbursement.
Section 5.12 Cooperation on Pending Litigation. Except with respect to any
Action between Buyer and Seller and subject to Section 5.2(f), with respect to any defense or
prosecution of any litigation or legal proceeding with respect to Seller or any Subsidiary that relates
to the period prior to the Closing Time and for which Seller is responsible pursuant to this
Agreement, Buyer shall cooperate with and assist Seller and its Affiliates, upon reasonable request,
by making witnesses available and providing all information in its possession (including access to
employees with information regarding such proceedings and access to books and records that may
relate to the proceedings) that Seller and its Affiliates may reasonably require in connection with
such litigation or legal proceedings or in response to any complaint, claim, inquiry, order or
requirements of any Governmental Entity or other third party. Seller shall pay Buyer for its
reasonable costs and expenses in connection with any such cooperation or assistance.
Section 5.13 Public Announcements. Except as may be required by, or as may be
advisable under, any applicable Law or the rules or regulations of any securities exchange, neither
Seller nor Buyer shall issue any press release or other public statement or announcement with respect
to the Transactions without the consent of the other party, such consent not to be unreasonably
withheld, conditioned or delayed. Seller and Buyer will consult with each other concerning the
means by which any Business Employee, customer or supplier of the Business or any other Person
having any material business relationship with the Business will be informed of the Transactions.
Section 5.14 Cooperation on Programming Matters.
(a) Buyer shall execute and deliver to Seller such documents as may be
reasonably requested by Seller to comply with the requirements of its Programming Agreements
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and channel line-up requirements with respect to the divestitures of the Systems. Seller shall
execute and deliver such documents as may be reasonably requested by Buyer to comply with the
requirements of its Programming Agreements and channel line-up requirements with respect to
Buyer's acquisitions of the Systems.
(b) Buyer acknowledges that the Systems currently receive some or all of the
programming services described on Schedule 3.11(a) and Schedule 5.14(b) (the "Programming
Services"), and that Seller has discussed with Buyer the benefits that it may derive from the
continued carriage of each of the Programming Services by the Systems following the Closing.
Buyer further acknowledges that Seller has recommended that Buyer continue to carry the
Programming Services. Buyer understands that Buyer's rights to carry the Programming
Services shall be subject to Buyer reaching mutual agreement with each provider of the
Programming Services where consent is required either for the assignment of the underlying
programming contract to Buyer or to waive a termination upon sale provision in the underlying
programming contract. Buyer agrees to consider Seller's recommendation in good faith and that,
if Buyer chooses to negotiate a programming agreement with any programmer, it shall do so in
good faith.
(c) No party, in the course of its fulfillment of any of its obligations under
this Section 5.14, shall be required to make any payments in respect of the other's obligations to
its programmers.
Section 5.15 Title Commitments and Surveys. After the execution of this
Agreement, Buyer may order at its sole cost and expense: (a) commitments for owner's or lender's
or leasehold title insurance policies (the "Title Commitments") issued by a nationally recognized
title insurance company ("Title Company") on any parcel of Real Property; and (b) a survey (the
"Surveys") on any parcel of Real Property for which a title insurance policy is to be obtained
certified to Buyer and/or the Title Company. Seller shall cooperate in all commercially reasonable
respects with Buyer in obtaining the Title Commitments and Surveys; provided, that no Seller Party
shall be required to provide any representation or warranty other than delivering a customary gap
indemnity and a customary owner's title affidavit to the Title Company. The foregoing affidavits
and indemnities executed by the Seller Parties shall be delivered to the Title Company prior to
Closing. If any Title Commitment or any Survey documents an Encumbrance that is not a Permitted
Encumbrance and would reasonably be construed to be a breach of Seller's representations or
warranties herein, and such breach is capable of being cured, Buyer shall promptly so notify Seller,
Seller promptly shall commence to cure such breach, and Seller will be deemed not to have breached
such representation or warranty if Seller cures such breach prior to the Closing. Seller shall
indemnify Buyer in accordance with Section 8.2(a), and subject to the other provisions of ARTICLE
VIII, with respect to any Losses Buyer incurs after Closing with respect to such Encumbrance that is
not a Permitted Encumbrance.
Section 5.16 Tax Covenants.
(a) Payment of Transfer Taxes. The appropriate party under the applicable
Tax Law will, at its own expense, file when due all necessary Tax Returns and other
documentation with respect to all transfer, documentary, sales, use, stamp, registration and other
similar Taxes and fees that may be imposed or assessed in connection with the transfer of the
Transferred Assets, including interest and penalties thereon (the "Transfer Taxes") and, if
required by applicable Law, the other party will, and will cause its Affiliates to, join in the
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execution of any such properly completed Tax Returns and other documentation. The party
required to pay any Transfer Taxes will pay such Transfer Taxes when due and the other party
shall promptly reimburse such tax -paying party for one-half of such payment upon receipt of
evidence of such payment from the tax -paying party. Buyer and Seller will cooperate (and cause
each of their Affiliates to cooperate), as and to the extent reasonably requested by any other
party, in connection with the filing and preparation of Tax Returns related to any Transfer Taxes
and any Tax audit or proceeding related thereto.
(b) Allocation of Ad Valorem Taxes. All Real Property Taxes, personal
property Taxes or ad valorem obligations and similar recurring Taxes on the Transferred Assets
("Ad Valorem Taxes") will be prorated between Buyer and Seller as of the Closing Date. Seller
will be responsible for all such Taxes on the Transferred Assets to the extent attributable to any
period (or portion thereof) up to and including the Closing Date. Buyer will be responsible for
all such Taxes on the Transferred Assets to the extent attributable to any period (or portion
thereof) commencing after the Closing Date. In the case of any such Taxes that are imposed with
respect to a taxable year or period that does not end on the Closing Date, the portion of Tax that
is allocable to the portion of the period ending on the Closing Date shall be the amount of such
Tax for the entire taxable year or period multiplied by a fraction the numerator of which is the
number of days in the period ending on and including the Closing Date and the denominator of
which is the number of days in the entire taxable year or period. With respect to Ad Valorem
Taxes, Seller shall prepare and timely file, or cause to be prepared and timely filed, all Tax
Returns of each Seller Party that are required to be filed for all taxable periods ending on or
before the Closing Date ("Pre -Closing Tax Periods") and shall control the defense and
settlement of any audit or Action relating to the Tax Returns for each Seller Party for all Pre -
Closing Tax Periods; provided, however, that Seller shall not be entitled to settle, either
administratively or after the commencement of litigation, any such audit or Action which could
adversely affect the liability for Taxes of any Buyer Indemnified Party for any period after the
Closing Date without the prior written consent of Buyer, such consent not to be unreasonably
withheld, conditioned or delayed. Buyer shall provide timely notice to Seller of any
communication from a taxing authority that Buyer may receive with respect to any Pre -Closing
Tax Period. Buyer shall have no authority to amend any Tax Return of a Subsidiary for any Pre -
Closing Tax Period. If one party remits to the appropriate Governmental Entity payment for
Taxes that are subject to proration under this Section 5.16(b), and such payment includes the
other party's share of such Taxes, such other party will promptly reimburse the remitting party
for its share of such Taxes.
Section 5.17 Exclusivity. During the period from the date of this Agreement until
the earlier of the termination of this Agreement or the Closing, Seller shall not, and shall cause its
Affiliates, directors, managers, employees, representatives, and agents not to. directly or indirectly:
(a) take any action to solicit, initiate, encourage or support any inquiries or proposals that constitute,
or would reasonably be expected to lead to, a proposal or offer for a merger, consolidation, business
combination, sale of substantial assets, sale of shares of capital stock (including by way of a tender
offer) or similar transactions involving the Seller Parties, the Transferred Assets, the Systems or the
Business (any of the foregoing inquiries or proposals being referred to herein as a "Transaction
Proposal"); (b) engage in negotiations or discussions concerning, or provide any non-public
information to any Person relating to, any Transaction Proposal; or (c) agree to approve or
recommend any Transaction Proposal, other than, in each such case, in connection with the
Transactions; provided, that Buyer hereby acknowledges that prior to the date of this Agreement,
Seller, its Affiliates and their respective officers, directors, managers, employees, representatives and
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agents have provided information relating to the Seller Parties, the Transferred Assets, the Systems
and the Business and have afforded access to, and engaged in discussions with, other Persons in
connection with a Transaction Proposal and that such information, access and discussions could
reasonably enable another Person to form a basis for a Transaction Proposal without any breach by
Seller of this Section 5.17. Seller shall promptly notify Buyer after receipt by Seller of any
Transaction Proposal. Seller shall, and shall cause its Affiliates, officers, directors, managers,
employees, representatives, and agents to, immediately cease and cause to be terminated any existing
discussions or negotiations with any Persons (other than Buyer) conducted heretofore with respect to
any Transaction Proposal.
Section 5.18 Bulk Transfer Laws. Buyer hereby waives compliance by each Seller
Party with the provisions of any so-called "bulk transfer laws" of any jurisdiction in connection with
the sale of the Transferred Assets to Buyer.
Section 5.19 Transition Services. Within ninety (90) days of execution of this
Agreement, Seller and Buyer shall execute a transition services agreement in form and substance
reasonably satisfactory to Buyer and Seller (the "Transition Services Agreement"), pursuant to
which (a) Buyer and Seller shall provide transition services to each other and (b) Seller shall cause
Manager to provide transition services to Buyer, in each case of (a) and (b), for a period of up to one
hundred twenty (120) days following the Closing Date in connection with the transfer of
management and control of the Business and the Systems to Buyer, including access to and the right
to use the Transferred Assets and Seller's assets to the extent not included in the Transferred Assets
("Transition Services"). The Transition Services Agreement shall require Seller to provide the
Transition Services to Buyer for an amount equal to Seller's cost of providing such services,
including fees paid under the Management Agreement during the transition services period. If and to
the extent any Transferred Assets are used to provide services to any cable system listed on Schedule
2.2 as of the Closing Date, the Transition Services Agreement shall require Buyer to provide
transition services to the appropriate Seller Party as agreed to by both parties, which transition
services shall be provided to such Seller Party for an amount equal to Buyer's cost of providing such
services.
Section 5.20 Programming Changes with respect to the System. Buyer may delete,
add or change the channel position of certain Programming Services with respect to the Systems on
the Closing Date, including the Programming Services set forth on Schedule 5.20. At a mutually
agreeable time prior to Closing, but at least thirty (30) days prior to the Closing Date, Seller shall
provide to the video subscribers of the System a programming change notice, in form reasonably
acceptable to Buyer and Seller and at Buyer's cost, regarding the deletion, addition or change of the
Programming Services listed on Schedule 5.20, including the deletion of any broadcast signal carried
by a System pursuant to a Retransmission Consent Agreement that, due to its terms, is not assignable
to Buyer or for which the required consent of the broadcaster thereunder is being withheld by the
broadcaster, as revised by Buyer no later than sixty (60) days prior to the Closing Date but subject to
the written consent of Seller (which shall not be unreasonably withheld). Seller acknowledges that
its delivery of such notice to the System's video subscribers at least thirty (30) days prior to the
Closing Date will be required in order for Buyer to consummate the transactions contemplated by
this Agreement.
Section 5.21 Certain Excluded Pole Contracts. Buyer may propose to the third
party to any Pole Attachment Agreement that licenses for the attachments of the System to such third
party's poles be included under an existing pole agreement between Seller and such third party or
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that Buyer and such third party enter into a new pole agreement for such attachments on overall
terms reasonably acceptable to Buyer and such third party. If such third party agrees to such
proposal and acknowledges that the Pole Attachment Agreement between Seller and such third party
shall be terminated as of the Closing Date without any termination fee or other penalty to Seller, then
Seller's Pole Attachment Agreement with such third party will not be assigned to Buyer at Closing
and instead will become an Excluded Asset for all purposes under this Agreement.
Section 5.22 Post -Signing and Pre -Closing Reports. After the signing of this
Agreement and before the Closing Date, Seller shall promptly deliver to Buyer correct and complete
copies of all financial, subscriber and other management and operating information, including
monthly billing and programming reports. that are routinely prepared by Seller or any other Seller
Party or otherwise readily available from Seller's or any other Seller Party's automated reporting
systems, including such information or reports as of the close of business on the day prior to the
Closing Date, as Buyer may reasonably request.
Section 5.23 Actions Under the Management Agreement. Except with the prior
written consent of Buyer and except as sct forth on Schedule 5.1. between the date of this Agreement and
the Closing Date, neither Seller nor any of its Affiliates shall authorize or permit the Manager to take any
action contemplated by Section 2.4 of the Management Agreement, as in effect on the datc hcrcof,
without giving effect to any amendment or other modification of such agreement that occurs after the date
hereof.
Section 5.24 Delivery of Rep Letters. Prior to the Closing, Seller shall deliver to
Buyer correct and complete copies of (a) all management representation letters delivered to the
independent auditor in connection with the audit contemplated by Section 6.3(g), and (b) all lawyers'
letters delivered to such independent auditor in connection with such audit.
Section 5.25 Certain Leases.
(a) Between the date of this Agreement and the Closing Date, Seller shall use its
commercially reasonable efforts to cause the Lease for each of the parcels of Leased Real Property set
forth on Schedule 5.25(a) to be assigned to Buyer or its Affiliate assignee in connection with the
Transactions.
(b) Upon request by Buyer, on the thirtieth (30th) day after the date of this
Agreement and on every other Monday thereafter until the Closing Date, Seller shall communicate to
Buyer the status of the actions contemplated by Section 5.25(a).
ARTICLE VI
CONDITIONS TO CLOSING
Section 6.1 General Conditions. The respective obligations of Buyer and Seller
to consummate the Transactions shall be subject to the fulfillment, at or prior to the Closing, of each
of the following conditions, any of which may, to the extent permitted by applicable Law, be waived
in writing by either party in its sole discretion (provided that such waiver shall only be effective as to
the obligations of such party):
(a) No Governmental Entity shall have enacted, issued, promulgated,
enforced or entered any Law (whether temporary, preliminary or permanent) that enjoins,
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restrains, makes illegal or otherwise prohibits the consummation of the Transactions, taken as a
whole.
(b) Any waiting period (and any extension thereof) under the I-ISR Act
applicable to the Transactions shall have expired or shall have been terminated.
(c) The FCC shall have approved, to the extent any approval is necessary, the
consummation of the Transactions and such approvals shall: (i) be free of any terms, conditions
or restrictions that are reasonably unacceptable to Buyer and (ii) have become Final Orders.
Section 6.2 Conditions to Obligations of Seller. The obligations of the Seller
Parties to consummate the Transactions shall be subject to the fulfillment, at or prior to the Closing,
of each of the following conditions, any of which may be waived in writing by Seller in its sole
discretion:
(a) The representations and warranties of Buyer contained in this Agreement
(disregarding any qualifications regarding materiality or Material Adverse Effect set forth
therein) shall be true and correct as of the Closing Date, or in the case of representations and
warranties that are made as of a specified date, such representations and warranties shall be true
and correct as of such specified date, except where the failure to be so true and correct would not,
individually or in the aggregate, reasonably be expected to have a Buyer Material Adverse Effect.
Buyer shall have performed in all material respects all obligations and agreements and complied
in all material respects with all covenants and conditions required by this Agreement to be
performed or complied with by it prior to or at the Closing. Seller shall have received from
Buyer a certificate to the effect set forth in the preceding sentences, signed by an officer thereof.
(b) Seller shall have received the deliveries set forth in Section 2.7(c) hereof
including an executed counterpart of each of the Ancillary Agreements, signed by each party
thereto other than the Seller Parties.
(c) The LFA Approvals with respect to Franchises that represent, in
aggregate, not less than eighty-five percent (85%) of the Video Subscribers in the Systems, (i)
shall have been received, (ii) shall be deemed to have been received in accordance with Section
617 of the Communications Act (47 U.S.C. Section 537), or (iii) shall not be required by
applicable Law (including those areas where the Business is operated without a Franchise) or
under the applicable Franchise, and the 120 -day action period shall have expired with respect to
the FCC Forms 394 filed in connection with requests for LFA Approvals that have not been
obtained. Solely for purposes of determining the applicable percentage of Video Subscribers
under this Section 6.2(c), the parties shall use the number of video subscribers in each Franchise
Area or Community (for an area served by a System other than pursuant to a Franchise) as of
December 31, 2012, as set forth on Schedule 6.2(c).
Section 6.3 Conditions to Obligations of Buyer. The obligations of Buyer to
consummate the Transactions shall be subject to the fulfillment, at or prior to the Closing, of each of
the following conditions, any of which may be waived in writing by Buyer in its sole discretion:
(a) The representations and warranties of Seller contained in this Agreement
(disregarding any qualifications regarding materiality or Material Adverse Effect set forth
therein) shall be true and correct as of the Closing Date, or in the case of representations and
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warranties that are made as of a specified date, such representations and warranties shall be true
and correct as of such specified date, except where the failure to be so true and correct would not,
individually or in the aggregate, reasonably be expected to have a Seller Material Adverse Effect.
Seller shall have performed in all material respects all obligations and agreements and complied
in all material respects with all covenants and conditions required by this Agreement to be
performed or complied with by it prior to or at the Closing. Buyer shall have received from
Seller a certificate to the effect set forth in the preceding sentences, signed by an officer thereof.
(b) Buyer shall have received the deliveries set forth in Section 2.7(b) hereof,
including an executed counterpart of each of the Ancillary Agreements signed by each party
other than Buyer.
(c) As of the Closing Date, the total number of RGUs served by the Systems
shall be no fewer than —.
(d) The LFA Approvals with respect to Franchises that represent, in
aggregate, not less than eighty-five percent (85%) of the Video Subscribers in the Systems, (i)
shall have been received, (ii) shall be deemed to have been received in accordance with Section
617 of the Communications Act (47 U.S.C. Section 537), or (iii) shall not be required by
applicable Law (including those areas where the Business is operated without a Franchise) or
under the applicable Franchise, and the 120 -day action period shall have expired with respect to
the FCC Forms 394 filed in connection with requests for LFA Approvals that have not been
obtained. Solely for purposes of determining the applicable percentage of Video Subscribers
under this Section 6.3(d), the parties shall use the number of video subscribers in each Franchise
Area or Community (for an area served by a System other than pursuant to a Franchise) as of
December 31, 2012, as set forth on Schedule 62(c).
(e)
obtained or given.
The Required Consents set forth on Schedule 6.3(e) shall have been
(f) The Title Company shall have received the deliveries required from the
Seller Parties set forth in Section 5.15 hereof
(g) Seller shall have delivered to Buyer a true and correct copy of the
Consolidated Financial Report of Baja Broadband Holding Company, LLC, as of and for the year
ended December 31, 2012, as audited in accordance with auditing standards generally acceptable in
the United States of America by an independent auditor engaged by Seller, together with a customary
unqualified opinion by such an independent auditor, which audited financial report shall comply with
the requirements for Financial Statements set forth in Section 3.5(b), without regard to the exception
in Section 3.5(b)(iii).
(h) Seller shall have entered into a new Lease, or an amendment to the expired
Lease, or the landlord thereunder shall have agreed to enter into on the Closing Date a new Lease or
amendment thereto directly with Buyer or the Affiliate assignee of Buyer's rights and interests in this
Agreement, for each of the parcels of Lcascd Real Property set forth on Schedule 6.3(h), in each case,
which Lease or amendment, as applicable, (i) provides for a term of not less than one ( I ) year and (ii)
permits the assignment of such Lease (as amended) at Closing to, or the execution of a new Lease or
amendment thereto at Closing by, Buyer or its Affiliate assignee, in any case, without the further
consent of the landlord under such Lease.
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ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
Section 7.1 Termination. This Agreement may be terminated at any time prior to
the Closing:
(a) by mutual written consent of Buyer and Seller;
(b) by Seller, if Buyer breaches or fails to perform in any respect any of its
representations, warranties or covenants contained in this Agreement and such breach or failure
to perform (i) would give rise to the failure of a condition set forth in Section 6.2, (ii) within
thirty (30) days following Buyer's receipt of written notice of such breach or failure to perform,
(A) it is determined that such breach or failure to perform cannot be cured or (B) Buyer has not
cured or commenced good faith efforts to cure, if an appropriate cure can be affected within
ninety (90) days following Buyer's receipt of written notice thereof, and (iii) has not been waived
by Seller: provided, that no cure period shall apply to Buyer's failure to pay the Estimated
Purchase Price in accordance with Section 2.5(c).
(c) by Buyer, if Seller breaches or fails to perform in any respect any of its
representations, warranties or covenants contained in this Agreement and such breach or failure
to perform (i) would reasonably be expected to have a Material Adverse Effect, (ii) within thirty
(30) days following Seller's receipt of written notice of such breach or failure to perform, (A) it
is determined that such breach or failure to perform cannot be cured or (B) Seller has not cured or
commenced good faith efforts to cure, if an appropriate cure can be affected within ninety (90)
days following Seller's receipt of written notice thereof, and (iii) has not been waived by Buyer;
(d) by either Seller or Buyer if the Closing shall not have occurred by March
31, 2014 (the "Termination Date"); provided, however, that the right to terminate this
Agreement under this Section 7.1(d) shall not be available to a party if such party has breached in
any material respect any of its representations, warranties, covenants or other obligations under
this Agreement in any manner that shall have been the proximate cause of the failure of the
Closing to so occur; or
(e) by either Seller or Buyer in the event that any Governmental Entity shall
have issued an order, decree or ruling or taken any other action restraining, enjoining or
otherwise prohibiting the consummation of the Transactions as a whole, and such Law or other
action shall have become final and nonappealable: provided, however, that the right to terminate
this Agreement under this Section 7.I(e) shall not be available to a party if such party has
breached any of its representations, warranties, covenants (including compliance with Section
5.7) or other obligations under this Agreement in any manner that was the proximate cause of the
issuance of such Law or other action prohibiting the consummation of the Transactions.
The party seeking to terminate this Agreement pursuant to this Section 7.1 (other than Section 7.1(a))
shall give prompt written notice of such termination to the other party.
Section 7.2 Effect of Termination. In the event of termination of this Agreement
as provided in Section 7.1, this Agreement shall forthwith become void and there shall be no liability
on the part of either party except (i) for the provisions of Section 3.23 and Section 4.5 relating to
broker's fees and finder's fees, Section 5.2(a) and Section 5.2(d) relating to expenses and
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indemnities, Section 5.2(e) relating to confidentiality and sharing of information, Section 5.6 relating
to confidentiality, Section 5.13 relating to public announcements, Section 9.1 relating to fees and
expenses, Section 9.4 relating to notices, Section 9.7 relating to third -party beneficiaries, Section 9.8
relating to governing law and this ARTICLE VII, and (ii) that nothing herein shall relieve either
party from liability for any breach of this Agreement or any agreement made as of the date hereof or
subsequent thereto pursuant to this Agreement. Nothing in this ARTICLE VII shall, prior to the
termination of this Agreement in accordance with its terms, diminish either party's rights to
specifically enforce the terms of this Agreement pursuant to Section 9.13.
ARTICLE VIII
INDEMNIFICATION
Section 8.I Survival. The representations, warranties, covenants and agreements
of Seller and Buyer contained in this Agreement and the Ancillary Agreements and any certificate
delivered pursuant hereto or thereto, a party's ability to make claims with respect thereto, and
Buyer's ability to make claims with respect to Excluded Liabilities, shall survive the Closing for a
period of eighteen (18) months after the Closing Date (the "Claims Deadline"), and no claims may
be made with respect thereto after the Claims Deadline: it being understood that in the event notice of
any claim for indemnification under Section 8.2 or Section 8.3 hereof has been given (in accordance
with Section 8.4) on or prior to the Claims Deadline, the representations, warranties and/or covenants
that are the subject of such indemnification claim shall survive with respect to such claim (and solely
with respect to such claim) until such time as such claim is finally resolved. For the avoidance of
doubt, the parties acknowledge and agree that the Claims Deadline is intended to shorten the period
otherwise provided by Law during which claims for breach of representations, warranties and
covenants, and claims with respect to Excluded Liabilities, can be made, and that any such claims
must be made on or prior to the Claims Deadline or be forever barred.
Section 8,2 Indemnification by Seller. From and after Closing, Seller shall save,
defend, indemnify and hold harmless Buyer and its Affiliates and their respective Representatives,
successors and assigns of each of the foregoing (collectively, the "Buyer Indemnified Parties")
from and against any and all losses, damages, liabilities, deficiencies, claims, interest, awards.
judgments, Taxes, penalties. costs and expenses (including reasonable attorneys' fees, costs and other
out-of-pocket expenses incurred in investigating or defending any Third Party Claim, but excluding
all such fees, costs and expenses to the extent relating to the investigation, documentation and
prosecution of claims that are not Third Party Claims unless awarded to the Indemnified Party in
connection with the final determination of a disputed indemnification claim) (hereinafter collectively,
"Losses") to the extent arising out of or resulting from:
(a) any breach of any representation or warranty made by Seller contained in
this Agreement or made by any Seller Party in any Ancillary Agreement or certificate delivered
in connection with this Agreement:
(b) any breach of any covenant or other agreement by Seller contained in this
Agreement or made by any Seller Party contained in any Ancillary Agreement: and
(c) any Excluded Liability.
Section 8.3 Indemnification by Buyer. From and after Closing, Buyer shall save,
defend, indemnify and hold harmless Seller and its Affiliates, direct and indirect equity holders,
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owners, general partners, managers and members of Seller or its Affiliates, and their respective
Representatives, successors and assigns of each of the foregoing (collectively, the "Seller
Indemnified Parties") from and against any and all Losses to the extent arising out of or resulting
from:
(a) any breach of any representation or warranty made by Buyer contained in
this Agreement or made by Buyer in any Ancillary Agreement or certificate of Buyer delivered in
connection with this Agreement:
(b) any breach of any covenant or agreement by Buyer contained in this
Agreement or made by Buyer in any Ancillary Agreement; and
(c) any Assumed Liability.
Section 8.4 Procedures.
(a) A Buyer Indemnified Party or Seller Indemnified Party (each, an
"Indemnified Party") shall make each claim for indemnification under this Agreement or any
Ancillary Agreement in respect of, arising out of or involving a Loss, including with respect to a
claim or demand made by any Person other than Buyer, Seller or their respective Affiliates (a
"Third Party-) against such Indemnified Party (a "Third Party Claim"), by delivering written
notice of such indemnification claim to the party against whom indemnity is sought (the
"Indemnifying Party") promptly after becoming aware of the Loss (if the claim is unrelated to a
Third Party Claim) or promptly after receipt by such Indemnified Party of written notice of the
Third Party Claim (if the claim relates to a Third Party Claim). Such notice shall describe in
reasonable detail the facts and circumstances giving rise to any claim for indemnification
hereunder, the amount and the method of computation of the amount of such claim (if known)
and such other information with respect thereto as the Indemnifying Party may reasonably
request. The failure to provide such notice, however, shall not release the Indemnifying Party
from any of its obligations under this ARTICLE VIII except to the extent that the Indemnifying
Party is prejudiced by such failure.
(b) The Indemnifying Party shall have the right, upon written notice to the
Indemnified Party, to assume the defense thereof at the expense of the Indemnifying Party with
counsel selected by the Indemnifying Party and reasonably satisfactory to the Indemnified Party.
If the Indemnifying Party assumes the defense of such Third Party Claim, the Indemnified Party
shall have the right to employ separate counsel and to participate in the defense thereof, but the
fees and expenses of such counsel shall be at the expense of the Indemnified Party; provided,
however, that if in the reasonable opinion of counsel for the Indemnified Party, there is a conflict
of interest between the Indemnified Party and the Indemnifying Party, the Indemnifying Party
shall be responsible for the reasonable fees and expenses of one counsel to such Indemnified
Party in connection with such defense. If the Indemnifying Party assumes the defense of any
Third Party Claim, the Indemnified Party shall reasonably cooperate with the Indemnifying Party
in such defense and, subject to Section 5.2(f), make available to the Indemnifying Party all
witnesses, pertinent records, materials and information in the Indemnified Party's possession or
under the Indemnified Party's control relating thereto as is reasonably required by the
Indemnifying Party. Whether or not the Indemnifying Party assumes the defense of a Third Party
Claim, the Indemnified Party shall not admit any liability with respect to, or settle, compromise
or discharge, or offer to settle, compromise or discharge, such Third Party Claim without the
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Indemnifying Party's prior written consent, which may be granted or withheld in the
Indemnifying Party's sole discretion. The Indemnifying Party shall not, without the prior written
consent of the Indemnified Party, which may be granted or withheld in the Indemnified Party's
sole discretion, settle, compromise or offer to settle or compromise any Third Party Claim on a
basis that would result in (i) the imposition of a consent order, injunction or decree that would
restrict the future activity or conduct of the Indemnified Party, (ii) a finding or admission of a
violation of Law or violation of the rights of any Person by the Indemnified Party, (iii) a finding
or admission that would have an adverse effect on other claims made or threatened against the
Indemnified Party, (iv) a finding or admission that would have an adverse effect on Buyer's or its
Affiliate's name (including trade names and brands) or reputation, or (v) any monetary liability
of the Indemnified Party that shall not be promptly paid or reimbursed by the Indemnifying
Party. Notwithstanding anything in this Section 8.4(b) to the contrary, Seller shall control the
defense and settlement of any audit or Action relating to the Tax Returns for each Seller Party for
all Pre -Closing Tax Periods; provided, however, that Seller shall not be entitled to settle, either
administratively or after the commencement of litigation, any such audit or Action which could
adversely affect the liability for Taxes of Buyer without the prior written consent of Buyer, such
consent not to be unreasonably withheld, conditioned or delayed.
(c) In the event any Indemnified Party should have a claim against any
Indemnifying Party hereunder that does not involve a Third Party Claim being asserted against or
sought to be collected from such Indemnified Party, the Indemnified Party shall deliver notice of
such claim promptly to the Indemnifying Party, describing in reasonable detail the facts giving
rise to any claim for indemnification hereunder, the amount or method of computation of the
amount of such claim (if known) and such other information with respect thereto as the
Indemnifying Party may reasonably request. The failure to provide such notice, however, shall
not release the Indemnifying Party from any of its obligations under this ARTICLE VIII except
to the extent that the Indemnifying Party is prejudiced by such failure. The Indemnified Party
shall reasonably cooperate and assist the Indemnifying Party in determining the validity of any
claim for indemnity by the Indemnified Party and in otherwise resolving such matters. Such
assistance and cooperation shall include providing reasonable access to and copies of
information, records and documents relating to such matters. furnishing employees to assist in the
investigation, defense and resolution of such matters.
Section 8.5 Limits on Indemnification.
(a) No claim may be asserted against either party for breach of any
representation, warranty or covenant contained in this Agreement or the Ancillary Agreements or
any certificate delivered hereto or thereto, unless written notice of such claim made in accordance
with Section 8.4(a) is received by such party on or prior to the Claims Deadline, in which case
such representation, warranty or covenant shall survive as to such claim until such claim has been
finally resolved.
(b) Notwithstanding anything to the contrary contained in this Agreement:
(i) neither Seller, on the one hand, nor Buyer on the other hand, shall be
liable to any Buyer Indemnified Party or Seller Indemnified Party, as applicable, for any claim for
indemnification relating to breaches of representations or warranties (other than the Fundamental
Representations) unless and until the aggregate amount of indemnifiable Losses that may be
recovered from Seller under Section 8.2(a) or Buyer under Section 8.3(a). as applicable, equals or
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exceeds $1,500,000, after which Seller or Buyer, as applicable, shall be liable for all indemnifiable
Losses incurred by Buyer Indemnified Parties or Seller Indemnified Parties, as applicable;
(ii) the maximum aggregate amount of indemnifiable Losses that may be
recovered by Buyer Indemnified Parties or Seller Indemnified Parties shall be an amount equal to the
Escrow Amount (the "Cap");
(iii) Seller shall not be obligated to indemnify any Buyer Indemnified
Party with respect to any Loss to the extent that such Loss was a Current Liability and/or that an
accrual or reserve for the amount of such Loss was included in the Final Closing Statement (as
finally determined pursuant to Section 2.8): and
(iv) no party hereto shall have any liability under any provision of this
Agreement for any punitive, incidental, consequential, special or indirect damages, including
business interruption, loss of future revenue, profits or income, or other damages calculated on the
basis of any multiple relating to the breach or alleged breach of this Agreement, or any other
damages other than damages that constitute actual damages.
(c) For all purposes of this Agreement, Losses shall be reduced by: (i) any
insurance or other recoveries received by the Indemnified Party or its Affiliates (net of the
Indemnified Party's or its Affiliate's cost of collection or recovery) in connection with the facts
giving rise to the right of indemnification and (ii) any Tax benefit actually recognized by such
Indemnified Party or its Affiliates arising in connection with and in the same taxable year as the
accrual, incurrence or payment of any such Losses. Buyer shall seek full recovery under all
insurance policies covering any Loss to the same extent as it would if such Loss were not subject
to indemnification hereunder.
(d) Buyer and Seller shall cooperate with each other with respect to resolving
any claim or liability with respect to which one party is obligated to indemnify the other party
hereunder, including by making commercially reasonable efforts to mitigate or resolve any such
claim or liability. In the event that Buyer or Seller shall fail to make such commercially
reasonable efforts to mitigate or resolve any claim or liability, then notwithstanding anything else
to the contrary contained herein, the other party shall not be required to indemnify any person for
any loss, liability, claim, damage or expense that could reasonably be expected to have been
avoided if Buyer or Seller, as the case may be, had made such efforts.
(e) Each Buyer Indemnified Party shall seek payment of any amount to
which it may be entitled under this ARTICLE VIII solely from the Escrow Fund and shall not
seek, and shall not be entitled to receive, any payment directly from Seller or any Affiliate of
Seller.
(f) For purposes of determining whether a representation, warranty or
covenant has been breached and for purposes of calculating the amount of Losses arising in
connection with such breach under this ARTICLE VIII, any materiality, Material Adverse Effect
or similar materiality qualifier contained in such representation, warranty or covenant shall be
disregarded.
(g) Notwithstanding anything to the contrary in this Agreement (i) the
limitations set forth in this Section 8.5 shall not be applicable to any Losses incurred as a result
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of knowing and intentional breach of covenant committed by or on behalf of Seller, and (ii) no
Person's liability shall be limited in any way for such Person's intentional fraud or knowing and
intentional concealment.
Scction 8.6 Assignment of Claims. If any Buyer Indemnified Party receives any
payment from Seller in respect of any Losses pursuant to Section 8.2 and Buyer Indemnified Party
could have recovered all or a part of such Losses from a third party (a "Potential Contributor")
based on the underlying claim asserted against Seller, Buyer Indemnified Party shall assign, on a
non -recourse basis and without any representation or warranty, such of its rights to proceed against
the Potential Contributor as are necessary to permit Seller to recover from the Potential Contributor
the amount of such payment. Any payment received in respect of such claim shall be distributed: (i)
first, to Buyer Indemnified Party in the amount of any deductible or similar amount required to be
paid by Buyer Indemnified Party prior to Seller being required to make any payment to Buyer
Indemnified Party (ii) second, to Seller in an amount equal to the aggregate payments made by
Seller to Buyer Indemnified Party in respect of such Loss, plus costs and expenses (including
attorney's costs and expenses) incurred in investigating, defending or otherwise incurred in
connection with addressing such claim; and (iii) the balance, if any, to Buyer Indemnified Party.
Section 8.7 Exclusive Remedy. Subject of Section 8.5(g), after Closing the
indemnification provisions contained in this ARTICLE VIII shall constitute the sole and exclusive
recourse and remedy of the parties for monetary damages for matters arising under this Agreement,
the Ancillary Agreements, and the Transactions, including with respect to any breach of any of the
representations, warranties, covenants or agreements contained in this Agreement or any Ancillary
Agreement, with respect to any statements, communications, disclosures, failures to disclose,
representations or warranties not set forth in this Agreement, or with respect to Losses resulting from,
arising out of, or caused by Excluded Liabilities. All representations and warranties set forth in this
Agreement are contractual in nature only and subject to the sole and exclusive remedies set forth
herein. No Person other than Seller and Buyer is asserting the accuracy of any representation or
warranty set forth in this Agreement; rather, the parties have agreed that should any representations
and warranties of any party prove inaccurate, the other party shall, subject to this Section 8.7, have
the specific rights and remedies herein specified as the exclusive remedy therefore, but that no other
rights, remedies or causes of action (whether in law or in equity or whether in contract or in tort) are
permitted to any party as a result of the inaccuracy of any such representation and warranty. The
provisions of this Section 8.7, together with the provisions of Section 4.8 and Section 9.11 and the
remedies and limitations specified in ARTICLE VIII and Section 9.13, were specifically bargained -
for between Buyer and Seller and were taken into account by Buyer and Seller in agreeing to the
amount of the Base Purchase Price, the adjustments thereto and the other terms and conditions
hereof Seller has specifically relied upon the provisions of this Section 8.7, together with the
provisions of Section 4.8 and Section 9.11 and the remedies and limitations specified in ARTICLE
VIII and Section 9.13, in agreeing to the Base Purchase Price, the adjustments thereto and the other
terms and conditions hereof including in agreeing to provide the specific representations and
warranties set forth herein. The provisions of this ARTICLE VIII are in lieu and substitution of any
other remedies, recourse or entitlements that the parties may have, including common law claims and
damages and statutory rights of contribution, it being agreed that such other remedies, recourse and
entitlements are expressly waived and released by the parties to the fullest extent permitted by law.
The provisions of this ARTICLE VIII will not, however, restrict the right of any party to seek
specific performance or other equitable remedies in connection with any breach of any of the
covenants contained in this Agreement or any Ancillary Agreement.
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Section 8.8 Payments. Subject to Section 8.5(e), the Indemnifying Party shall pay
all amounts payable pursuant to this ARTICLE VIII by wire transfer of immediately available funds,
promptly following receipt from an Indemnified Party of a written payment request, together with all
accompanying reasonably detailed back-up documentation, for each Loss that is the subject of
indemnification hereunder, except to the extent the Indemnifying Party in good faith disputes the
Loss or a portion thereof, in which event it shall so notify the Indemnified Party; provided that the
Indemnifying Party shall promptly pay any portion of such Loss not subject to dispute. In any event,
the Indemnifying Party shall pay to the Indemnified Party, by wire transfer of immediately available
funds, the amount of any Loss for which it is liable hereunder no later than three business days
following any final determination of such Loss and the Indemnifying Party's liability therefor. A
"final determination" shall exist when the parties to the dispute have reached an agreement in
writing, or a court of competent jurisdiction shall have entered a final and non -appealable order or
judgment. All payments made by an Indemnifying Party to an Indemnified Party under this
ARTICLE VIII shall be treated as adjustments to the Purchase Price for Tax purposes unless
otherwise required by Law.
ARTICLE IX
GENERAL PROVISIONS
Section 9.1 Fees and Expenses. Except as otherwise provided herein, all fees and
expenses incurred in connection with or related to this Agreement and the Ancillary Agreements and
the Transactions shall be paid by the party incurring such fees or expenses, whether or not such
transactions are consummated. In the event of termination of this Agreement, the obligation of each
party to pay its own expenses shall be subject to the rights of such party arising from a breach of this
Agreement by the other.
Section 9.2 Amendment and Modification. This Agreement may not be amended,
modified or supplemented in any manner, whether by course of conduct or otherwise, except by an
instrument in writing signed on behalf of each party.
Section 9.3 Waiver. No failure or delay of either party in exercising any right or
remedy hereunder shall operate as a waiver thereof nor shall any single or partial exercise of any
such right or power, or any abandonment or discontinuance of steps to enforce such right or power,
or any course of conduct, preclude any other or further exercise thereof or the exercise of any other
right or power. Except as otherwise provided herein, the rights and remedies of the parties hereunder
are cumulative and are not exclusive of any rights or remedies, which they would otherwise have
hereunder. Any agreement on the part of either party to any such waiver shall be valid only if set
forth in a written instrument executed and delivered by a duly authorized officer on behalf of such
party.
Section 9.4 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed duly given (a) on the date of delivery if delivered personally, or if by
facsimile, e-mail or other electronic means reasonably acceptable to both parties, upon written
confirmation of receipt by facsimile, e-mail or such other means, (b) on the first Business Day
following the date of dispatch if delivered utilizing a next -day service by a recognized next -day
courier or (c) on the earlier of confirmed receipt or the fifth Business Day following the date of
mailing if delivered by registered or certified mail, return receipt requested, postage prepaid. All
notices hereunder shall be delivered to the addresses set forth below, or pursuant to such other
instructions as may be designated in writing by the party to receive such notice:
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(a) if to Seller, to:
Baja Broadband, LLC
1061 521 Corporate Center Drive
Suite 100
Fort Mill, South Carolina 29707
Attention: Peter Kahelin
Facsimile: 980-235-7601
Telephone: 203-364-8120
E-mail: petercclastmile.net
with copies (which shall not constitute notice) to:
M/C Partners
75 State Street, Suite 2500
Boston, Massachusetts 02109
Attention: Lydia Jett
Facsimile: 617-345-7201
Telephone: 617-345-7227
E-mail: IjemC mcpartners.com
and
Columbia Capital Corporation
201 N. Union Street, Suite 300
Alexandria, Virginia 22314
Attention: Jeff Patterson
Facsimile: 703-519-5870
Telephone: 703-519-2000
E-mail: jeffpatterson cccolcap.com
and
Edwards Wildman Palmer LLP
1255 23rd Street, NW, Eighth Floor
Washington, D.C. 20037
Attention: Jeffry L. Hardin
Facsimile: 1-888-325-9133
Telephone: 202-939-7914
E-mail: jhardin@edwardsvildman.cont
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(b) if to Buyer, to:
Telephone and Data Systems, Inc.
30 North LaSalle Street
Suite 4000
Chicago, IL 60602
Attention: Scott H. Williamson
Facsimile: (312) 630-9299
Telephone: (312) 592-5382
Email: scott.williamson o,teldta_com
with a copy (which shall not constitute notice) to:
Sidley Austin LLP
One South Dearborn Street
Chicago, IL 60603
Attention: William S. DeCarlo
Facsimile: (312) 853-7036
Telephone: (312) 853-6094
E-mail: wdecarlo@sidley.com
Section 9.5 Interpretation. When a reference is made in this Agreement to a
Section, Article or Exhibit, such reference shall be to a Section, Article or Exhibit of this Agreement
unless otherwise indicated. The table of contents and headings contained in this Agreement or in any
Exhibit are for convenience of reference purposes only and shall not affect in any way the meaning
or interpretation of this Agreement. All words used in this Agreement shall be construed to be of
such gender or number as the circumstances require. Any capitalized terms used in the Disclosure
Schedules or any Exhibit but not otherwise defined therein shall have the meaning as defined in this
Agreement. All Exhibits annexed hereto or referred to herein are hereby incorporated in and made a
part of this Agreement as if set forth herein. The word "including" and words of similar import when
used in this Agreement shall mean "including, without limitation," unless otherwise specified. All
references to "dollars" or "5" in this Agreement or any Ancillary Agreement refer to United States
dollars, which is the currency used for all purposes in this Agreement and any Ancillary Agreement.
Section 9.6 Entire Agreement. This Agreement (including the Exhibits and
Disclosure Schedules hereto), the Ancillary Agreements and the Confidentiality Agreement
constitute the entire agreement, and supersede all prior written agreements, arrangements,
communications and understandings and all prior and contemporaneous oral agreements,
arrangements, communications and understandings among the parties with respect to the subject
matter of this Agreement. Neither this Agreement nor any Ancillary Agreement shall be deemed to
contain or imply any restriction, covenant, representation, warranty, agreement or undertaking of any
party with respect to the Transactions other than those expressly set forth herein or therein or in any
document required to be delivered hereunder or thereunder, and none shall be deemed to exist or be
inferred with respect to the subject matter hereof Notwithstanding any oral agreement of the parties
or their Representatives to the contrary, no party to this Agreement shall be under any legal
obligation to enter into or complete the Transactions unless and until this Agreement shall have been
executed and delivered by each of the parties.
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Section 9.7 No Third -Party Beneficiaries. This Agreement shall be binding upon
and inure solely to the benefit of each of the parties and their respective successors and assigns, and
nothing in this Agreement, express or implied, is intended to or shall confer upon any other Person
any legal or equitable right, benefit or remedy of any nature under or by reason of this Agreement,
except as provided in ARTICLE VIII.
Section 9.8 Governine Law. THIS AGREEMENT AND ALL DISPUTES OR
CONTROVERSIES ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE INTERNAL LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO THE
LAWS OF ANY OTHER JURISDICTION THAT MIGHT BE APPLIED BECAUSE OF THE
CONFLICTS OF LAWS PRINCIPLES OF THE STATE OF DELAWARE.
Section 9.9 Consent to Jurisdiction. Each of the parties irrevocably agrees that
any legal action or proceeding arising out of or relating to this Agreement and the Transactions or for
recognition and enforcement of any judgment in respect hereof brought by the other party or its
successors or assigns shall be brought and determined in federal court sitting in the United States
District Court for the District of Delaware (or, if such court lacks subject matter jurisdiction, in the
Delaware Court of Chancery or the Delaware Superior Court), and each of the parties hereby
irrevocably submits to the jurisdiction of the aforesaid courts for itself and with respect to its
property, generally and unconditionally, with regard to any such action or proceeding arising out of
or relating to this Agreement and the Transactions (and agrees not to commence any action, suit or
proceeding relating thereto except in such courts). Each of the parties further agrees to accept service
of process in any manner permitted by such courts. Each of the parties hereby irrevocably and
unconditionally waives, and agrees not to assert, by way of motion or as a defense, counterclaim or
otherwise, in any action or proceeding arising out of or relating to this Agreement or the
Transactions: (a) any claim that it is not personally subject to the jurisdiction of the above -named
courts for any reason other than the failure lawfully to serve process, (b) any claim that it or its
property is exempt or immune from jurisdiction of any such court or from any legal process
commenced in such courts (whether through service of notice, attachment prior to judgment,
attachment in aid of execution of judgment, execution of judgment or otherwise) and (c) to the fullest
extent permitted by Law, that (i) the suit, action or proceeding in any such court is brought in an
inconvenient forum, (ii) the venue of such suit, action or proceeding is improper or (iii) this
Agreement, or the subject matter hereof, may not be enforced in or by such courts.
Section 9.10 Disclosure Generally. Notwithstanding anything to the contrary
contained in the Disclosure Schedules or in this Agreement, the information and disclosures
contained in any Disclosure Schedule shall be deemed to be disclosed and incorporated by reference
in any other Disclosure Schedule as though fully set forth in such Disclosure Schedule for which
applicability of such information and disclosure is reasonably apparent on its face. The fact that any
item of information is disclosed in any Disclosure Schedule shall not be construed to mean that such
information is required to be disclosed by this Agreement. Such information and the dollar
thresholds set forth herein shall not be used as a basis for interpreting the terms "material" or
"Material Adverse Effect' or other similar terms in this Agreement. In addition, the fact that any
disclosure in the Disclosure Schedules is not required to be disclosed in order to render the applicable
representation or warranty to which it relates true, or that the absence of such disclosure in the
Disclosure Schedules would not constitute a breach of such representation or warranty, shall not be
deemed or construed to expand the scope of any representation or warranty hereunder or to establish
a standard of disclosure in respect of any representation or warranty. The information contained in
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the Disclosure Schedules is disclosed solely for purposes of this Agreement, and no information
contained in the Disclosure Schedules shall be deemed to be an admission by any party to any third
party of any matter whatsoever (including any violation of applicable Law or breach of contract).
Section 9.11 Personal Liability: Non -Recourse. This Agreement shall not create or
be deemed to create or permit any personal liability or obligation on the part of any direct or indirect
equityholder of Seller or Buyer or any officer, director, employee, Representative or investor of
either party hereto. In furtherance of the foregoing, Buyer agrees that no past, present or future
director, officer, employee, incorporator, member, partner, stockholder, Affiliate, agent, attorney or
representative of Seller or any of its Affiliates shall have any liability (whether in contract or in tort)
for any obligations or liabilities of Seller arising under, in connection with or related to this
Agreement or for any claim based on, in respect of, or by reason of, the Transactions, including any
alleged non -disclosure or misrepresentations made by Seller.
Section 9.12 Assignment; Successors. Neither this Agreement nor any of the
rights, interests or obligations under this Agreement may be directly or indirectly assigned or
delegated, in whole or in part, by operation of law or otherwise, by either party without the prior
written consent of the other party, and any such assignment without such prior written consent shall
be null and void; provided, however, that either party may assign any of its rights or interests in this
Agreement (with respect to Seller, including the right to receive the Purchase Price), to one or more
Affiliates of the assigning party without the prior consent of the other party; provided fiiriher, that (a)
no assignment shall limit the assignor's obligations hereunder, and (b) any assignment by Buyer shall
not require resubmitting or refiling any applications or requests for consents filed or delivered by
either party in accordance with Section 5.7.
Section 9.13 Specific Performance. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. Accordingly, each of the parties
shall be entitled to specific performance of the terms hereof, including an injunction or injunctions to
prevent breaches of this Agreement and to enforce specifically the terms and provisions of this
Agreement in federal court sitting in the United States District Court for the District of Delaware (or,
if such court lacks subject matter jurisdiction, in the Delaware Court of Chancery or the Delaware
Superior Court), this being in addition to any other remedy to which the parties are entitled at law or
in equity. Each of the parties further hereby waives (a) any defense in any action for specific
performance that a remedy at law would be adequate and (b) any requirement under any law to post
security as a prerequisite to obtaining equitable relief To the extent any party hereto brings any
Action to enforce specifically the performance of the terms and provisions of this Agreement when
expressly available to such party pursuant to the teens of this Agreement, the Termination Date shall
automatically be extended by (i) the amount of time during which such Action is pending, plus
twenty Business Days, or (ii) such other time period established by the court presiding over such
Action.
Section 9.14 Severability. Whenever possible, each provision or portion of any
provision of this Agreement shall be interpreted in such manner as to be effective and valid under
applicable Law, but if any provision or portion of any provision of this Agreement is held to be
invalid, illegal or unenforceable in any respect under any applicable Law or rule in any jurisdiction,
such invalidity, illegality or unenforceability shall not affect any other provision or portion of any
provision in such jurisdiction, and this Agreement shall be reformed, construed and enforced in such
76
( iii 7!01391, IJ
jurisdiction as if such invalid, illegal or unenforceable provision or portion of any provision had
never been contained herein.
Section 9.15 Waiver of Jury Trial. EACH OF THE PARTIES TO THIS
AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN
ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE TRANSACTIONS.
Section 9.16 Counterparts. This Agreement may be executed and delivered
(including by facsimile transmission or by means of portable document format (pdf) transmission) in
one or more counterparts, each of which when executed shall be deemed to be an original, but all of
which taken together shall constitute one and the same agreement.
Section 9.17 No Presumption Against Drafting Party. Each of Buyer and Seller
acknowledge that each party to this Agreement has been represented by counsel in connection with
this Agreement and the Transactions. Accordingly, any rule of law or any legal decision that would
require interpretation of any claimed ambiguities in this Agreement against the drafting party has no
application and is expressly waived.
Section 9.18 Further Assurances. Each party covenants that at any time, and from
time to time, after the Closing Date, it will execute such additional instruments and take such actions
as may be reasonable requested by the other party to confirm, perfect or otherwise carry out the
intent and purposes of this Agreement and any Ancillary Agreement.
[Signature Page to Follow]
77
( ill 7l(U91, u
IN WITNESS WHEREOF, Seller and Buyer have caused this Asset Purchase Agreement to
be executed as of the date first written above by their respective officers thereunto duly authorized.
Seller:
BAJA BROADBAND, LLC
By:
Pe
Chief Executive Officer
ter Ka telin
Buyer:
TELEPHONE AND DATA SYSTEMS, INC.
By:
Scott H. Williamson
Senior Vice President —Acquisitions and
Corporate Development
[Signature Page to LLC Purchase Agreement
by and among Baja Broadband, LLC
and Telephone and Data Systems, Inc.]
IN WITNESS WHEREOF, Seller and Buyer have caused this Asset Purchase Agreement to
be executed as of the date first written above by their respective officers thereunto duly authorized.
Seller:
BAJA BROADBAND, LLC
By:
Peter Kahelin
Chief Executive Officer
Buyer:
TCLGI'f{OLF. A 1 Ap. S STEMS, INC.
By: / k/
_ZS ott H. Williamson
Senior Vice President — Acquisitions and
Corporate Development
[Signature Page to LLC Purchase Agreement
by and among Baja Broadband, LLC
and Telephone and Data Systems, Inc.]
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