Exhibit 2
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of the 23rd day
of July, 1996, by and among CS WIRELESS SYSTEMS, INC., a Delaware corporation
("Buyer"), having an address at 000 Xxxxxxxx Xxxxx, Xxxxx, Xxxxx 00000,
XXXXXXXXX X. XXXXXXXX of X.X. Xxx 0000, 000 Xxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx
00000-0000 ("Xxxxxxxx") and USA WIRELESS CABLE, INC., a Nebraska corporation
("Target"), having an address at X.X. Xxx 0000, 000 Xxxxxxx Xxxxxx, Xxxxxxx,
Xxxxxxxx 00000-0000.
W I T N E S S E T H:
WHEREAS, Target has entered into channel lease agreements with the FCC
licensees of, and/or FCC-license applicants for, ITFS Channels in the Markets,
in each case contemplating the lease by Target from such licensees and/or FCC-
license applicants of "excess capacity" on each such Channel;
WHEREAS, Target has entered into channel usage agreements with the FCC
licensees of LPTV Channels in Radcliffe, Iowa, contemplating the lease from such
licensees of the entirety of the channel capacity on each of such LPTV Channels;
WHEREAS, the Target has entered into channel lease agreements with the FCC
licensees of, and/or FCC-license applicants for, MMDS and MDS Channels in all of
the Markets except Scottsbluff, Nebraska, contemplating the lease from such
licensees and/or FCC-license applicants of the entirety of the channel capacity
on each of such Channels;
WHEREAS, Xxxxxxxx has been granted licenses for commercial ITFS Channels in
the Scottsbluff, Nebraska Market which licenses will be transferred to and/or
assigned to Target in accordance with this Agreement;
WHEREAS, Target was the winning bidder for the Rochester-Austin-Albert LEA,
Minnesota, Grand Island-Kearney, Nebraska and Kalispell, Montana BTA's in the
recently concluded FCC auction for MDS/MMDS channels in these areas (the "BTA
Markets");
WHEREAS, Buyer desires to operate a subscription video programming service
to be offered to subscribing members of the public via transmission capacity
provided through non-cable TV over-the-air transmission technology through LPTV,
ITFS, MMDS and/or MDS Channels in the Markets and the BTA Markets;
WHEREAS, certain assets and liabilities of Target are to be transferred or
otherwise conveyed to other entities prior to the Closing Date which assets
include all of Target's assets in Elm Creek (Kearney), Nebraska, Xxxxxx Springs,
Kansas, Xxxxxxxx, Kansas, Waseca, Minnesota and Gaylord, Minnesota, Target's
rights to and interest in the Grand Island-Kearney, Nebraska BTA, all
applications related thereto and the transmission tower listed on Schedule
4(e)(v) (the "Transferred Assets"); and
-------
WHEREAS, the parties wish to effect a merger transaction in a
reorganization pursuant to Sections 368(a)(1)(A) and 368(a)(2)(E) of the Code,
in which Target will merge with and into a wholly-owned subsidiary of Buyer, on
the terms and conditions herein contained.
-2-
NOW THEREFORE, in consideration of their mutual promises, and for other
good and valuable consideration, the parties, intending to be legally bound,
agree as follows:
1. DEFINITIONS. For purposes of this Agreement, the following words or
-----------
terms shall have the definitions indicated below.
(a) ASSIGNED CHANNELS. "Assigned Channels" shall have the meaning as
-----------------
set forth in Section 9.
-
(b) (i) BTAs. "BTAs" means the Basic Trading Areas designated by
----
the FCC as the geographic areas containing vacant MDS and/or MMDS spectrum,
the rights to which were auctioned to the highest bidders in the FCC
auction concluded on March 28, 1996.
(b) (ii) BTA AUTHORIZATION. "BTA Authorization" means the
-----------------
authorization issued by the FCC to a winning bidder that authorizes that
party to develop any vacant MDS and MMDS spectrum in the BTA into channels
that can be utilized to transmit video programming to subscribers.
(b) (iii)BTA MARKETS. "BTA Markets" shall have the meaning set
-----------
forth in the fifth WHEREAS clause on page 1 hereof, including, but not
limited to, any pending applications for vacant MDS and MMDS spectrum in
such BTA's.
(c) BUYER. "Buyer" shall have the meaning as set forth in the
-----
introductory paragraph hereof.
(d) CS SHARES; CS VALUE PER SHARE. "CS Shares" means shares of CS
-----------------------------
Wireless Systems, Inc. common stock; the "CS Value Per Share" means
Eighteen Dollars and Eighty Cents ($18.80) for each CS Share.
(e) CHANNEL LEASES. "Channel Leases" means the lease agreements as
--------------
listed on Schedule 4(h).
----
(f) CHANNELS. "Channels" means the ITFS Channels, LPTV Channels,
--------
MMDS Channels and the MDS Channels specified on Schedule 4(g) attached
----
hereto.
(g) CLOSING. "Closing" shall have meaning as set forth in Section
-------
13.
--
(h) CLOSING DATE. "Closing Date" shall have meaning as set forth in
------------
Section 13.
--
(i) COBRA. "COBRA" shall have the meaning as set forth in Section
-----
5(g).
----
(j) CODE. "Code" means the Internal Revenue Code of 1986, as amended
----
from time to time, and any successor thereto, and the rules and regulations
promulgated thereunder from time to time.
(k) COMMISSION. "Commission" means the Securities and Exchange
----------
Commission.
-3-
(l) CONTRACTS. "Contracts" shall have the meaning as set forth in
---------
Section 4(i).
----
(m) CONVERSION AMOUNT. The "Conversion Amount" shall be the
-----------------
aggregate amount of consideration for the acquisition of Target as provided
for in Section 3(a).
----
(n) COPYRIGHT ACT. "Copyright Act" shall have the meaning as set
-------------
forth in Section 4(t).
----
(o) CURRENT EMPLOYEES. "Current Employees" shall have the meaning as
-----------------
set forth in Section 5(e).
----
(p) EFFECTIVE TIME. "Effective Time" shall have the meaning as set
--------------
forth in Section 2(c)(i).
-------
(q) ENVIRONMENTAL LAW(S). "Environmental Law(s)" means any statute,
--------------------
law, ordinance, regulation, order, rule or legally enforceable requirement
of any authority relating to the regulation or protection of property,
person or the environment or to emissions, discharges, releases or
threatened releases of Hazardous Substances into the environment (including
ambient air, soil, surface water, ground water, wetlands, land or
subsurface strata), or otherwise relating to the management, manufacture,
distribution, treatment, storage or recycling, of any Hazardous Substances.
(r) ERISA. "ERISA" shall have the meaning as set forth in Section
-----
5(c).
----
(s) ERISA AFFILIATES. "ERISA Affiliates" shall have the meaning as
----------------
set forth in Section 5(a).
----
(t) ESCROW AGREEMENT. "Escrow Agreement" shall have the meaning as
----------------
set forth in Section 14.
--
(u) EXCHANGE ACT. "Exchange Act" means the Securities Exchange Act
------------
of 1934, as amended.
(v) FAA. "FAA" shall have the meaning as set forth in Section 4(o).
--- ----
(w) FACILITIES. "Facilities" shall have the meaning as set forth in
----------
Section 4(w).
----
(x) FEDERAL COMMUNICATIONS COMMISSION or FCC "Federal Communications
--------------------------------- ---
Commission" or "FCC" means the federal agency created pursuant to Section 1
of the Federal Communications Act of 1934, as amended, 47 U.S.C. Sec. 151.
(y) FINAL FCC ORDER. "Final FCC Order" means an order of the FCC
---------------
without any materially adverse or onerous conditions and which has not been
stayed and, by lapse of time or otherwise, is no longer subject to
administrative or judicial consideration, review, appeal or stay.
(z) FINANCIAL STATEMENTS. "Financial Statements" shall have the
--------------------
meaning as set forth in Section 4(f)(i).
-------
-4-
(aa) FINANCING. "Financing" means the indebtedness incurred by Buyer
----------
to repay the Indebtedness; provided, however, if the Indebtedness exceeds
fifty percent (50%) of the Conversion Amount, Buyer may repay such excess
Indebtedness, or any portion thereof, in cash, and the number of CS Shares
payable pursuant to Section 3(b) shall be decreased in respect of any such
----
cash payment in accordance with such Section.
(bb) HAZARDOUS SUBSTANCE. "Hazardous Substance" means any and all
-------------------
pollutants, toxic or hazardous wastes or any other substances that might
pose a hazard to health or safety, the removal of which may be required or
the generation, manufacture, refining, production, processing, treatment,
storage, handling, transportation, transfer, use, disposal, release,
discharge, spillage, seepage, or filtration of which is or shall be
restricted, prohibited or penalized by any applicable law (including
asbestos, radioactive materials, ACMs, PCBs and urea formaldehyde foam
insulation).
(cc) XXXXXXXX. "Xxxxxxxx" shall have the meaning as set forth in the
--------
introductory paragraph hereof.
(dd) INDEBTEDNESS. "Indebtedness" shall have the meaning as set forth
-------------
in Section 4(f)(iii).
---------
(ee) INDEMNITY SHARES. "Indemnity Shares" shall have the meaning as
----------------
set forth in Section 14.
--
(ff) INTELLECTUAL PROPERTY. "Intellectual Property" shall have the
---------------------
meaning as set forth in Section 4(s).
----
(gg) ITFS CHANNELS. "ITFS Channels" means those channels in the
-------------
Instructional Television Fixed Service that use the frequency bands 2500
MHz to 2596 MHz and 2644 MHz to 2686 MHz and associated response channels.
(hh) XXXXXXX; XXXXXXX AFFILIATES. "Xxxxxxx" means Xxxxxxx Holdings,
---------------------------
Inc., a corporation with a principal office at 000 Xxxx Xxxxxx, Xxx Xxxx,
Xxx Xxxx 00000; "Xxxxxxx Affiliates" means Xxxxxxx Southwest and Xxxxxxx
New York (both collectively and individually).
(ii) LEASE. "Lease" shall have the meaning as set forth in Section 9.
----- -
(jj) LEASED CHANNELS. "Leased Channels" shall have the meaning as set
---------------
forth in Section 4(h).
----
(kk) LENDERS. "Lenders" shall have the meaning as set forth in
-------
Section 4(f)(iii).
---------
(ll) LICENSES. "Licenses" means the licenses, permits, authorizations
--------
and other grants of authority issued by the FCC as listed on Schedule 4(g)
----
hereto and pending applications for new station licenses to be issued by
the FCC.
-5-
(mm) LPTV CHANNELS. "LPTV Channels" means the Channels in the
-------------
Low Power Television Service that use frequency band 470 MHz to 806 MHz.
(nn) MARKETS. Markets shall mean the Effingham, Kansas,
-------
Wellsville, Kansas, Radcliffe, Iowa, Scottsbluff, Nebraska, Kalispell,
Montana and Rochester, Minnesota markets.
(oo) MATERIAL ADVERSE EFFECT. "Material Adverse Effect" means, when
-----------------------
related to or applied to Target, a set of circumstances or a change of
circumstance or circumstances which have or may have a significant, unusual
or unforseen adverse effect on the Target's condition (financial or
otherwise), assets, Wireless Cable Service or prospects; provided, however,
(i) that the foregoing definition, when related or applied in this
Agreement to a particular subject matter or matters, shall mean such a set
of circumstances or change of circumstance or circumstances which have or
may have such an effect on such subject matter or matters; and (ii) that
any such effect caused by circumstances arising from or relating to general
competitive or general economic conditions shall be deemed not to fall
within this definition.
(pp) MDS AUCTION. "MDS Auction" means the auction conducted by the
-----------
FCC from November 12, 1995 to March 28, 1996 in which 487 BTA's and 6
additional BTA-like areas were auctioned off to the highest bidders.
(qq) MDS CHANNELS. "MDS Channels" means those multipoint distribution
------------
service channels that use the frequency bands 2150 MHz to 2162 MHz and 2650
MHz to 2680 MHz, and associated response channels.
(rr) MERGER. "Merger" shall have the meaning as set forth in Section
------
2(a).
----
(ss) MERGER SUB. "Merger Sub" shall have the meaning as set forth in
----------
Section 2(a).
----
(tt) MMDS CHANNELS. "MMDS Channels" means those multipoint
-------------
distribution service channels that use the frequency band 2596 MHz to 2644
MHz and associated response channels.
(uu) NON-COMPETITION AGREEMENT. "Non-Competition Agreement" shall
-------------------------
have the meaning as set forth in Section 3(d).
----
(vv) OFFERING MEMORANDUM. "Offering Memorandum" shall have the
-------------------
meaning as set forth in Section 4(x).
-----
(ww) OPTION. "Option" shall have the meaning as set forth in Section
------
9.
-
(xx) PENSION PLANS. "Pension Plans" shall have the meaning as set
-------------
forth in Section 5(a).
----
(yy) REDUCTION AMOUNT. "Reduction Amount" shall have the meaning as
-----------------
set forth in Section 3(b).
----
-6-
(zz) SECURITIES ACT. "Securities Act" means the Securities Act of
--------------
1933, as amended.
(aaa) SEC FILINGS. "SEC Filings" shall have the meaning as set forth
-----------
in Section 6(e)(i).
-------
(bbb) SUBSCRIBER. "Subscriber" means the total of all Qualified Basic
----------
Subscribers and Equivalent Basic Subscribers determined as follows:
(i) The term "Qualified Basic Subscriber" shall mean a
subscriber (individual or household) of a Market that is an active
subscriber to basic cable television service and whose account is not
more than forty-five (45) days past due from the due date of payment,
who has paid Target's standard deposit and installation fees for such
service (in accordance with Target's ordinary business practices), and
who has made at least one (1) monthly payment at Target's normal
monthly service charge.
(ii) The term "Equivalent Basic Subscriber" shall mean a bulk or
commercial subscriber or a subscriber who otherwise pays other than
the full nondiscounted rate in effect in a Market (pursuant to a
regularly discounted rate which would otherwise meet all of the
requirements to be a Qualified Basic Subscriber). The number of
Equivalent Basic Subscribers shall be determined according to the
following formula: the monthly revenue from such subscribers solely
for the delivery of the basic cable service they receive (i.e.,
excluding any revenues received for installation or reconnection,
additional outlets, pay services, cable guides, or other premium
services or special items, and any taxes and other pass-through
charges) shall be divided by the monthly nondiscounted rate for such
level(s) of cable service.
(iii) For purposes of determining whether a Subscriber is
more than forty-five (45) days past due, it shall be assumed that a
Subscriber's payment is due on the first day of each month as to which
each such payment applies. Forgiveness of an undisputed past due
balance will not be considered a payment for purposes of calculating
an arrearage.
(ccc) SURVIVING CORPORATION. "Surviving Corporation" shall have the
---------------------
meaning as set forth in Section 2(b).
----
(ddd) TARGET. "Target" shall have the meaning as set forth in the
------
introductory paragraph hereof.
(eee) TARGET EMPLOYEE BENEFIT PLANS. "Target Employee Benefit Plans"
-----------------------------
shall have the meaning as set forth in Section 5(a).
----
(fff) TARGET EMPLOYEES. "Target Employees" shall have the meaning as
----------------
set forth in Section 5(a).
----
(ggg) TARGET/XXXXXXXX PAYABLE. "Target/Xxxxxxxx Payable" shall
-----------------------
have the meaning as set forth in Section 3(a).
----
-7-
(hhh) TARGET/XXXXXXX PAYABLE. "Target/Xxxxxxx Payable" means an amount
----------------------
owed by Target to Xxxxxxx and/or the Xxxxxxx Affiliates equal to five
hundred thousand dollars ($500,000).
(iii) TARGET STOCK. "Target Stock" shall mean all of the issued and
------------
outstanding capital stock of the Target immediately before the Merger.
(jjj) TAXES. "Taxes" means (i) any and all taxes, levies, fees,
-----
imposts and other governmental charges of any kind or nature whatsoever
imposed by any federal, state, local or foreign government, or political
subdivision or taxing authority thereof (including any interest, penalties
or additions to tax imposed in connection therewith or with respect
thereto), and shall include taxes imposed on, or measured by, income,
franchise, profits or gross receipts, and shall also include ad valorem,
value added, sales, use, service, real or personal property, capital stock,
license, payroll, withholding, employment, social security, workers'
compensation, unemployment compensation, utility, severance, production,
excise, stamp, occupation, premium, windfall profits, transfer and gain
taxes, and customs duties; and (ii) liability for the payment of any
amounts described in (i) above as a result of being a member of an
affiliated group of corporations, or as a result of being included or
includable in a combined or consolidated Tax Return with any other person,
or as a result of being or having been owned, in whole or in part, by a
foreign person.
(kkk) TAX RETURN. "Tax Return" means any return, report, information
----------
statement or other documentation (including any additional or supporting
material) filed or maintained, or required to be filed or maintained, in
connection with the calculation, determination, assessment or collection of
any Tax.
(lll) TRANSFERRED ASSETS; TRANSFERRED ASSETS TRANSACTIONS.
---------------------------------------------------
"Transferred Assets" shall have the meaning as set forth in the seventh
WHEREAS clause which begins on page 1 hereof; "Transferred Assets
Transactions" shall have the meaning as set forth in Section 4(e)(v).
-------
(mmm) USA II. "USA II" shall have the meaning as set forth in Section
------
9.
-
(nnn) WIRELESS CABLE SERVICE. "Wireless Cable Service" means the
----------------------
multichannel video entertainment distribution services provided or to be
provided on the Channels in the Markets and BTA Markets.
Terms defined in this Agreement in the singular shall have a
comparable meaning when used in the plural and vice versa.
2. THE TRANSACTION.
---------------
(a) THE MERGER. At the Effective Time, Target will merge with and
----------
into a wholly-owned subsidiary ("Merger Sub") of Buyer (the "Merger") in
accordance with the terms and conditions of this Agreement; the Merger Sub
shall be a corporation organized under the laws of the State of Delaware.
-8-
(b) SURVIVING CORPORATION. Target shall be the surviving corporation
---------------------
of the Merger (the "Surviving Corporation") and shall continue to be
governed by the laws of the State of Nebraska, and the Merger shall be
effected pursuant to Sections 368(a)(1)(A) and 368(a)(2)(E) of the Code.
(c) EFFECT OF THE MERGER.
--------------------
(i) EFFECTIVE TIME. Appropriate certificates of merger shall be
--------------
executed and verified by each party to the Merger and thereafter
delivered to the Secretary of State of Nebraska, and to the Secretary
of the State of Delaware, for filing and recording in accordance with
applicable law as soon as practicable on or after the Closing Date.
The Merger shall become effective for purposes of the law of the
States of Delaware and Nebraska, respectively, at the date and time of
the completion of the filing of the applicable certificate of merger
in each such state as set forth above (the "Effective Time").
(ii) CERTIFICATE OF INCORPORATION OF THE SURVIVING CORPORATION.
---------------------------------------------------------
The certificate of incorporation of the Surviving Corporation shall be
the certificate of incorporation of Target immediately prior to the
Effective Time.
(iii) BYLAWS OF THE SURVIVING CORPORATION. The bylaws of
-----------------------------------
the Surviving Corporation shall be the bylaws of Target immediately
prior to the Effective Time.
(iv) BOARD OF DIRECTORS AND OFFICERS OF THE SURVIVING
------------------------------------------------
CORPORATION. The members of the board of directors and officers of
-----------
Target immediately prior to the Effective Time shall become the board
of directors and the officers of the Surviving Corporation,
respectively, immediately upon the Effective Time, and such persons
shall serve in such positions for the respective terms provided by law
or in the bylaws of the Surviving Corporation and until their
respective successors are elected and qualified, provided that
immediately prior to the Effective Time, Buyer shall have the right to
require Target's board of directors to resign and to designate
Target's board of directors and officers.
3. CONVERSION.
----------
(a) CONVERSION AMOUNT. The aggregate consideration for the Target
-----------------
Stock is Seventeen Million and Twelve Thousand Dollars ($17,012,000) (the
"Conversion Amount") payable as set forth below.
(b) CONVERSION TERMS. Subject to the Conversion Amount adjustment
----------------
set forth in Section 3(f) and to the last sentence of this Section 3(b), at
---- ----
and as of the Effective Time, the Target Stock shall be converted into the
right to receive the Conversion Amount minus (i) the Indebtedness
-----
(exclusive of the Target/Xxxxxxxx Payable); (ii) any trade payable
obligations and other accrued liabilities outstanding at and as of the
Effective Time; (iii) five thousand dollars
-9-
($5,000), the value of the Non-Competition Agreement described in Section
3(d); (iv) the value of the Target/Xxxxxxxx Payable i.e., seven hundred
----
fifty-five thousand dollars ($755,000), payable pursuant to Section
13(a)(ii); (v) any cash payments made by Buyer to any Lender in excess of
---------
the Financing; and (vi) the Target/Xxxxxxx Holdings, Inc. Payable. The
Conversion Amount so determined shall be payable in the number of CS Shares
calculated by dividing such Conversion Amount by the CS Value Per Share.
It is understood and agreed that: (x) the Indebtedness will be calculated
as of the Closing Date, and (y) based upon such calculation, the number of
CS Shares issued to Xxxxxxxx will be adjusted (up or down as the case may
be) to take into account the actual amount of the Indebtedness.
Notwithstanding anything to the contrary contained in this subparagraph
(b), to the extent that the number of Subscribers on the Closing Date
---
calculated pursuant to Section 3(f)(ii) exceeds thirty-six hundred (3,600),
--------
the trade payable obligations and other accrued liabilities shall be
reduced by the extent of such excess multiplied by fifteen hundred dollars
($1,500) (the "Reduction Amount"); provided, however, that (A) no such
reduction shall apply to the extent any such Subscribers total more than
four thousand (4,000), (B) if the Reduction Amount exceeds the total of the
trade payable obligations and other accrued liabilities at and as of the
Closing Date, any such excess shall be applied as a credit against any
reduction in the Conversion Amount calculated pursuant to Section 3(f) and
----
(C) if any such excess remains after any such credit is applied, such
remaining excess shall increase the number of CS Shares to which Xxxxxxxx
shall be entitled under this subparagraph (b); such increase shall be
---
determined by dividing any such excess by the CS Value Per Share. It is
further understood and agreed that there shall be added to the Conversion
Amount any Channel Lease fees paid by Target prior to the Closing Date to
the extent, but only to the extent, such fees are paid with respect to
periods beginning on and following the Closing Date.
(c) EFFECT OF CONVERSION ON TARGET STOCK. All such shares of Target
------------------------------------
Stock, when so converted at the Effective Time, shall no longer be
outstanding and shall automatically be canceled and retired and shall cease
to exist.
(d) NON-COMPETITION AGREEMENT. At the Closing, Buyer shall pay an
-------------------------
aggregate amount of five thousand dollars ($5,000) pursuant to the non-
competition agreement (the "Non-Competition Agreement") between Buyer and
Xxxxxxxx substantially in the form attached hereto as Exhibit A and which
-
five thousand dollars ($5,000) shall be allocated to Xxxxxxxx'x obligations
under the Non-Competition Agreement. Such payment shall be made in the
form of a note payable to Xxxxxxxx, which note will provide for payment on
Xxxxxxxx'x demand at any time on or after the Closing Date.
(e) NO FRACTIONAL SHARES. No fractional shares shall be issued upon
--------------------
surrender for exchange of certificates for Target Stock, and in lieu of any
such fractional shares the Buyer will pay Xxxxxxxx a cash payment in an
amount equal to such fraction multiplied by the Share Price.
(f) SUBSCRIBER DEFICIENCY ADJUSTMENT. In addition to the provisions
--------------------------------
of Section 3(b), the Conversion Amount shall be adjusted in accordance with
----
the following:
(i) The Conversion Amount shall be reduced by a product of (1)
the number of Subscribers less than thirty-six hundred (3,600) to be
determined as of the Closing Date as set forth in subparagraph (B)
-
below (and, pursuant to the definition of Subscriber as set forth in
Section 1(bbb)) multiplied by (2) fifteen hundred dollars ($1,500).
------
Except as set
-10-
forth in Section 3(b), the Conversion Amount shall in no event be
----
increased irrespective of any increase in the number of Subscribers
between the date of this Agreement and the Closing Date, or otherwise.
(ii) On the Closing Date, Xxxxxxxx shall provide to Buyer (x) a
list, subject to verification by Buyer, of Subscribers qualifying
under the definition of Subscriber set forth in Section 1(bbb) and (y)
------
a list, subject to verification by Buyer, of subscribers Xxxxxxxx
believes will be deemed to be Subscribers within the time period
indicated below. Xxxxxxxx acknowledges that such verification may not
occur for at least one hundred five (105) days following the Closing
Date. By way of illustration, a person may be added as a Subscriber
between execution of this Agreement and the Closing Date; however, the
determination of whether such person so qualifies is dependent upon
verification that such person is not more than forty-five (45) days
past due on his account and had made at least one (1) monthly payment
as contemplated in the definition of Subscriber set forth in Section
1(bbb), which verification may require review of such person's account
------
up to one hundred five (105) days after such person becomes a
Subscriber. Any such persons added as Subscribers between the date of
this Agreement and the Closing Date, who qualify as Subscribers as of
the Closing Date pursuant to the definition set forth in Section
1(bbb) of this Agreement, shall be counted in determining whether at
------
least thirty-six hundred (3,600) Subscribers exist as of the Closing
Date.
(g) IRREVOCABLE PROXY. With respect to the CS Shares received by
-----------------
Xxxxxxxx under this Agreement, on the Closing Date, Xxxxxxxx shall execute
an irrevocable proxy, the form of which is attached hereto as Exhibit B.
-
4. REPRESENTATIONS AND WARRANTIES OF TARGET AND XXXXXXXX. Target and,
-----------------------------------------------------
where specifically indicated, Xxxxxxxx, hereby make the following
representations and warranties to Buyer, which are correct and complete as of
the date hereof and shall continue to be correct and complete in all material
respects on the Closing Date:
(a) DUE ORGANIZATION. Target is a corporation duly organized,
----------------
validly existing and in good standing under the laws of its state of
organization and is duly licensed and qualified to do business and is in
good standing as a foreign corporation in each jurisdiction where the
nature of property owned or leased by it or the conduct of its business
requires such qualification, each of which is set forth on Schedule 4(a)
----
hereto.
(b) AUTHORIZATION OF AGREEMENT. The execution, delivery and
--------------------------
performance of this Agreement by Target, and the consummation by Target of
the transactions contemplated hereby have been duly authorized by all
necessary corporate action of Target, including, without limitation, the
approval of Xxxxxxxx as sole stockholder of Target, and this Agreement
constitutes a valid and binding obligation of Target and Xxxxxxxx
enforceable against it and him in accordance with its terms.
(c) NON-CONTRAVENTION. Neither the execution, delivery and
-----------------
performance of this Agreement by Target and Xxxxxxxx nor the consummation
of the transactions contemplated hereby will:
-11-
(i) Except as set forth on Schedule 4(c), violate any provision
----
of Target's certificate of incorporation or bylaws, or conflict with,
or result in the breach or termination of, or accelerate the right to
terminate, or constitute a default under, any lease, agreement,
contract, commitment or other instrument, or any order, judgment or
decree, to which either Target or Xxxxxxxx is a party or by which
either of them or any of Target's properties or assets may be bound or
affected;
(ii) Subject to subsection (v) below, constitute a violation by
---
Target of any law or regulation applicable to it;
(iii) Result in the creation of any lien, charge or
encumbrance upon any of the Target Stock or result in the acceleration
of any indebtedness or other obligation of Target;
(iv) Result in the creation of any lien, charge or encumbrance
upon any asset of Target, other than liens, charges or encumbrances
that do not in the aggregate materially detract from the value of, or
materially interfere with, such assets; or
(v) Require any consent or approval of any other person or
entity, except for the required consents set forth on Schedule 4(c).
----
(d) CAPITALIZATION. The entire authorized capital stock of Target is
--------------
as appears on Schedule 4(d) hereto. No equity securities of Target, other
----
than the Target Stock, are issued and outstanding. All of the Target Stock
has been duly authorized and validly issued, and is fully paid and
nonassessable, and is held of record by Xxxxxxxx. The Target Stock is not
issued in violation of any preemptive rights. Xxxxxxxx is the lawful owner
of the Target Stock, free and clear of any liens other than the
restrictions on transfer imposed by federal and state securities laws.
Xxxxxxxx has full legal right, power and authority to sell the Target Stock
in accordance with the terms and subject to the conditions of this
Agreement. There are no outstanding or authorized options, warrants,
purchase rights, subscription rights, conversion rights, exchange rights,
or other contracts or commitments that could require Target to issue, sell,
or otherwise cause to become outstanding any of its capital stock. There
are no outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar rights with respect to Target. There are no
voting trusts, proxies, or other agreements or understandings with respect
to the voting of the capital stock of Target. Target does not own,
directly or indirectly, any shares of stock or any other equity or long-
term debt securities of any corporation or have any equity interest in any
firm, partnership, joint venture, association or other entity.
(e) TAX MATTERS.
-----------
(i) Except as set forth on Schedule 4(e), Target has filed all
----
Tax Returns that it was required to file through the date hereof. All
such Tax Returns were correct and complete in all respects. Except as
set forth on Schedule 4(e), all Taxes owed by Target (whether or not
----
shown on any Tax Return) have been paid. Except as set forth on
Schedule 4(e), Target is not currently the beneficiary of any
----
extension of time within which to file any tax return. No claim has
ever been made by an authority in a jurisdiction where Target does not
file Tax Returns that it is or may be subject to taxation by that
jurisdiction. There are no security interests on any of the assets of
Target or the
-12-
Target Stock that arose in connection with any failure (or alleged
failure) by Target to pay any Tax.
(ii) Target has withheld and paid all Taxes required to have been
withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder, or other
third party.
(iii) No director or officer (or employee responsible for tax
matters) of Target has received oral or written notice that any
authority intends to assess any additional Taxes for any period for
which Tax Returns have been filed. There is no dispute or claim
concerning any Tax liability of Target either (A) except as set forth
on Schedule 4(e) claimed or raised by any authority in writing or
----
orally or (B) as to which Xxxxxxxx or any of the other directors and
officers (and employees responsible for tax matters) of Target has
knowledge based upon personal contact with any agent of such
authority. Schedule 4(e) lists all federal, state, local, and foreign
----
income Tax Returns filed with respect to Target for all taxable
periods, indicates those Tax Returns that have been audited, and
indicates those Tax Returns that currently are the subject of an
audit. Target has delivered to the Buyer correct and complete copies
of all federal and state income Tax Returns, examination reports, and
statements of deficiencies assessed against or agreed to by Target.
(iv) Target has not waived any statute of limitations in respect
of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency.
(v) All of the consideration received by Target in connection
with the Transferred Assets Transactions was received and retained by
Target. The Transferred Assets Transactions did not and will not give
rise to any liability for Taxes applicable to Target, except any such
liability as will be fully covered by net operating loss carryforwards
available to Target. Schedule 4(e)(v) sets forth a description of the
-------
Transferred Assets Transactions, and a list of all of the agreements
and documents related thereto, true and correct copies of which have
been provided to Buyer.
(vi) Target has no liability for the Taxes of any person other
than Target under Treas. Reg. Sec. 1.1502-6 or any similar provision
of state or local law, as transferee or successor, by contract or
otherwise, and Target is not a party to any tax allocation or tax
sharing agreement with respect to any affiliated group of corporations
to which it is or has been a member.
(f) GENERAL BUSINESS REPRESENTATIONS.
--------------------------------
(i) Target has provided to Buyer true and complete copies of the
audited and unaudited financial statements of Target, and of any
predecessor of Target (the "Financial Statements"), which taken as a
whole present fairly the financial condition and results of operation
and cash flows as of the dates and for the periods set forth therein,
in each case in accordance with generally accepted accounting
principles, applied in a consistent manner throughout the periods;
-13-
(ii) Target has, except as disclosed on Schedules 4(f)(ii) and
--------
4(f)(iii) hereto, only the liabilities disclosed on its Financial
---------
Statements and has no other material liabilities, actual or
contingent, of any kind or nature whatsoever including any liabilities
to Xxxxxxxx;
(iii) Schedule 4(f)(iii) sets forth Target's indebtedness of
---------
any kind, other than trade payables and other accrued liabilities not
exceeding in the aggregate seven hundred eighty-eight thousand two
hundred fifty-three dollars and sixty-six cents ($788,253.66), and
including the indebtedness to the lenders (the "Lenders") listed on
such Schedule (the "Indebtedness").
(iv) Except as disclosed on Schedule 4(f)(iv),Target does not
--------
engage in any other business than the Wireless Cable Service; and
(v) Except as disclosed on Schedule 4(f)(v), since December 31,
-------
1995 there has been no Material Adverse Effect on Target, and Target
has not declared or paid any dividends or distributions or repurchased
any of the Target Stock.
(g) FCC LICENSES. The FCC has granted the Licenses listed on
------------
Schedule 4(g) for construction and/or operation of transmission facilities
----
utilizing the Channels. Except as set forth on Schedule 4(g), each of the
----
Licenses described therein is in full force and effect, and the Licenses
include all of the licenses, permits and authorizations from the FCC
associated with operation of the Wireless Cable Service as currently
conducted. No other license, permit or authorization is required from any
other governmental or regulatory agency or body for the operation of the
Wireless Cable Service as currently conducted. Except as set forth on
Schedule 4(g), there are no existing proceedings (other than proceedings of
----
general applicability), complaints or investigations pending or, to the
knowledge of Target and Xxxxxxxx, threatened before or by the FCC or any
other local, state or federal governmental authority relating to any of the
Licenses that, if adversely determined, would have a Material Adverse
Effect on the Channels or their associated transmission facilities or the
Wireless Cable Service.
Except as set forth on Schedule 4(g), all applications, reports and other
----
disclosures required by the FCC or with respect to each of the Channels
licensed to Xxxxxxxx have been duly and timely filed. Except as set forth
on Schedule 4(g), to the best of Target's and Xxxxxxxx'x knowledge, all
----
applications, reports and other disclosures required by the FCC or with
respect to the Leased Channels have been duly and timely filed since Target
acquired the Wireless Cable Service (except for those the non-filing or
late filing of which could not reasonably have a Material Adverse Effect).
Target was a duly qualified bidder in the MDS Auction, and was the winning
bidder for the BTAs identified on Schedule 4(g). Prior to the commencement
----
of the MDS Auction, Target timely filed all requisite certifications and
disclosures to fully qualify it to be an eligible bidder in the MDS Auction
and to be awarded a BTA Authorization for each BTA identified on Schedule
4(g). Both before, during and after the MDS Auction, Target was in full
----
compliance with the FCC's anti-collusion rules applicable to bidders in the
MDS Auction. Following the close of the Auction, Target timely submitted
all requisite down payments and submitted one (1) or more Long Form
Applications or a Statement of Intention, as that term is defined by the
FCC, for each BTA Authorization for each BTA identified on Schedule 4(g).
----
On or before the due dates established by the FCC for each BTA identified
on Schedule 4(g), and subject to the FCC grant of its Long
----
-14-
Form Applications and the provisions of this Agreement, Target has
submitted or will submit the balance of the payments required for each such
BTA to enable Target to be issued a BTA Authorization for each BTA
identified on Schedule 4(g). Except as set forth on Schedule 4(g), Target
---- ----
knows of no reason why it will be deemed unable to assign to Buyer each BTA
Authorization identified on Schedule 4(g) upon the filing with the FCC of
----
all necessary and appropriate applications for consent to assign such BTA
Authorizations to Buyer.
To the extent of Target's knowledge, except as disclosed in Schedule 4(g),
----
no conditions exist that would cause, or might cause, the FCC to decline to
issue such authorizations as may be necessary or desirable to keep the
Licenses in full force and effect or to issue the BTA Authorizations
identified on Schedule 4(g), without material adverse alteration or
-----
modification, other than a material adverse alteration or modification
resulting from changes in the FCC's rules or policies of general
applicability or from the FCC grant of applications disclosed in Schedule
4(g). Target is not aware of any pending rulemaking or other proceeding
----
(other than proceedings of general applicability), except as listed in
Schedule 4(g), which might have an adverse affect on the terms and
----
conditions of any such License.
(h) CHANNEL LEASES. Target has entered into Channel Leases providing
--------------
for lease of channel capacity on the Channels, a list of which is set forth
on Schedule 4(h) attached hereto (the "Leased Channels"). Except as set
----
forth on Schedule 4(h), the Channel Leases constitute valid and binding
----
obligations of Target and, to the best of Target's knowledge, of each of
the other respective parties thereto, and are in unconditional full force
and effect as of the date hereof. Except as set forth on Schedule 4(h),
----
each of the Channel Leases have remaining terms which exceed five (5) years
from the date of this Agreement. To the best of Target's knowledge,
neither Target nor any other party to the aforementioned Channel Leases is
in material default under, or material breach or violation of, any such
Channel Lease, and Target has not received nor has Target given notice of
any such material default, breach or violation under any such Channel Lease
from or to any of the other parties thereto and does not have oral or
written notice that any such notice will be received during the term of any
such Channel Lease. There are no existing proceedings, complaints or
investigations pending or, to the best of Target's knowledge, threatened
before or by the FCC that would have a Material Adverse Effect on any of
the Channel Leases (other than proceedings of general applicability).
Except as set forth on Schedule 4(h), to Target's knowledge there are no
----
material violations of the Communications Act of 1934, as amended, or of
the rules, regulations and/or published policies of the FCC that would have
a Material Adverse Effect on the Target, the Surviving Corporation or any
of the Channel Leases. Notwithstanding the foregoing, Target and Xxxxxxxx
make no representation as to whether the activity conducted pursuant to the
Channel Leases leaves the lessor/licensee with that degree of control
necessary to comply with FCC rules, regulations and published policies.
(i) CONTRACTS. Set forth on Schedule 4(i) attached hereto is a list
--------- ----
of all agreements (excluding the Channel Leases, the Facilities and
Programming Agreements) material to the operation of the Wireless Cable
Service, including transmission tower leases, and any other material
agreement to which Target is a party (collectively, along with the
Facilities and Programming Agreements, the "Contracts"). For purposes of
this Section 4(i), "material" shall mean any transmission tower lease and
----
any other agreement that cannot be fully performed or terminated without
penalty within one (1) year from the Closing Date or individual agreements
involving an aggregate amount in excess of $25,000.
-15-
(i) To Target's knowledge, each of the Contracts is in full
force and effect and is valid, binding and enforceable in accordance
with its respective terms, except as may be limited by bankruptcy,
insolvency or other similar laws effecting the enforcement of
creditors' rights in general and subject to general principles of
equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
(ii) Target has, and, to the best of Target's knowledge, each
other party to each of the Contracts has, complied with all material
commitments and obligations on its part to be performed or observed
under each Contract.
(iii) To Target's knowledge, no party to any of the Contracts
is in material default under, or material breach or violation of, any
of the Contracts, and Target has not received nor has Target given
notice of any such default, breach or violation under any of the
Contracts from or to any of the other parties thereto and neither
Target nor Xxxxxxxx have oral or written notice that any such notice
will be received during the term of the Contracts.
(iv) There is no security interest, lien, encumbrance or claim of
others created or suffered to exist on the leasehold interest created
under any Contract.
(v) None of the Contracts will be adversely affected by the
execution of this Agreement or the consummation of the Merger or the
other transactions contemplated hereby.
(vi) Except as disclosed on Schedule 4(i), Target shall have
----
performed and discharged all material obligations due or accrued under
each Contract prior to or attributable to all periods predating the
Closing.
(j) EQUIPMENT. Except as otherwise disclosed on Schedule 4(j),
--------- ----
Target has good and marketable title to, or a valid leasehold interest in,
all properties, assets and equipment utilized in or relating to the
Wireless Cable Service. Except for those held by the Lenders, which are
disclosed on Schedule 4(j) and shall be released at the Closing, there are
----
no security interests, liens, encumbrances or claims of others created or
existing on the properties, assets or equipment utilized in or relating to
the Wireless Cable Service. Except or otherwise provided in this Section
4(j), such equipment shall be conveyed hereunder on "AS-IS" basis.
----
(k) LITIGATION. Except as otherwise disclosed on Schedule 4(k),
---------- ----
there is no suit (at law or in equity), action, or legal, administrative,
arbitration or other proceeding or governmental investigation pending, or
to the knowledge of Xxxxxxxx and Target threatened, or any judgment or
outstanding order, injunction, decree, stipulation or award (whether
rendered by a court or administrative agency, or by arbitration), which (i)
questions the validity of the capital stock of Target, this Agreement or
the Merger or any action taken or to be taken by Xxxxxxxx or Target in
connection with this Agreement or the Merger or (ii) would, individually or
in the aggregate, have a Material Adverse Effect on the Target, the
Surviving Corporation's business, the Channel Leases or Licenses, the
operation of the Channels and transmission facilities relating thereto
and/or the Wireless Cable Service.
-16-
(l) FCC COMPLIANCE. Except as disclosed on Schedules 4(g) and 4(h),
-------------- -------------
the commercial ITFS Channels for which Xxxxxxxx is the licensee or
permittee have, since being acquired by Xxxxxxxx, been operated in all
material respects in accordance with the terms and conditions of their
respective FCC licenses and other authorizations, the Communications Act of
1934, as amended, and the rules, regulations and published policies of the
FCC applicable to those facilities. Except as disclosed on Schedule 4(g),
----
to the best of Target's and Xxxxxxxx'x knowledge, since the Wireless Cable
Service was acquired by Target, the Licenses have been and are in material
compliance with their respective FCC authorizations, the Communications Act
of 1934, as amended, the rules, regulations and published policies of the
FCC applicable to those facilities and the terms of the Channel Leases.
(m) COMPLIANCE WITH LAW. Except as disclosed on Schedules 4(g) and
------------------- ----
4(h), the Licenses, Channel Leases and Contracts conform in all material
----
respects to all applicable laws, ordinances, licenses, codes, licensing
requirements, rules and regulations, and Target has not received any notice
to the contrary. Target has complied in all material respects with all
laws, ordinances, regulations, licensing requirements, rules, decrees,
awards or orders relating to its operation of the Wireless Cable Service
(as currently provided), and there is not and, to Target's knowledge, there
will not be any liability arising from or relating to any material
violation thereof. No notice from any governmental body or other person of
any violation of any law, ordinance, code, rule or regulation or requiring
or calling attention to the necessity of any work, repairs, new
construction, installation or alteration has been served.
(n) ACCURACY OF INFORMATION. No written statement made by Target
-----------------------
or, where specifically indicated, Xxxxxxxx herein, including in any
schedule or exhibit attached hereto, contains any untrue statement of a
material fact or omits a material fact necessary to make the statements
contained herein not misleading. There is no fact known to Target or,
where specifically indicated, Xxxxxxxx that relates to any information
contained herein, including in any schedule or exhibit hereto, (other than
information concerning the wireless cable industry generally) that Target
or Xxxxxxxx has withheld from Buyer that has a Material Adverse Effect on,
or, so far as Target or Xxxxxxxx can reasonably foresee, will have a
Material Adverse Effect on, the Target, the Surviving Corporation or the
Wireless Cable Service.
(o) TECHNICAL FACILITIES. Each of the Licenses issued, or to be
--------------------
issued, by the FCC for the transmission facilities relating to the Channels
authorizes, or will authorize, such transmission facilities to transmit
with a transmitter power output of at least ten (10) xxxxx. Except as
disclosed on Schedule 4(o), Target or, in the case of the Leased Channels,
-----
the underlying licensee or permittee, has applied for and/or obtained a
determination of no hazard from the Federal Aviation Administration ("FAA")
for each transmitter site, where such authorization and determination are
required under the rules and regulations of the FCC or the FAA. To the
best of Target's knowledge, said transmitter sites are and have been
properly lighted and painted in accordance with the terms of their Licenses
and the FAA and FCC rules and regulations.
(p) XXXXXXXX'X CONTROL. Xxxxxxxx has voting control of Target and
------------------
owns all of the issued and outstanding capital stock of Target.
(q) SUBSCRIBERS. Target serves a total of thirty-six hundred
-----------
(3,600) Subscribers in the Markets.
-17-
(r) PATENTS, TRADEMARKS, ETC. Other than the Licenses, Target does
------------------------
not own or hold any patents, patent applications, trademarks, service
marks, trade names, or copyrights, or licenses or any rights therein.
(s) INTELLECTUAL PROPERTY. Target owns and has the unrestricted
---------------------
right to use all trade secrets, know-how, technology (including all other
unpatented and/or unpatentable proprietary or confidential information,
systems or procedures), inventions, designs, processes, works of
authorship, computer programs and technical data and information, not
including any patents, patent applications, trademarks, service marks,
trade names, copyrights and licenses (collectively, "Intellectual
Property") material to the Wireless Cable Service, free and clear of and
without violating any right, claimed right, charge, encumbrance, pledge,
security interest, defect, restriction, equity or lien of any kind
whatsoever of others. Target has taken reasonable security measures to
protect the secrecy, confidentiality and value of all Intellectual
Property. Neither Target nor Xxxxxxxx has received any notice of
infringement of or conflict with asserted rights of others with respect to
any Intellectual Property.
(t) COPYRIGHT ACT. Except as disclosed on Schedule 4(t), Target has
------------- ----
submitted all requisite notices (if any are required) under the Copyright
Act of 1976, as amended (the "Copyright Act"), for the carriage of all
broadcast stations as currently carried by the Wireless Cable Service.
Except as disclosed on Schedule 4(t), Target has filed in a timely manner
----
with the Copyright Office all required documents, instruments and
statements of account, and has remitted payments of all required royalty
fees with respect to the compulsory licenses provided for in Section 111 of
the Copyright Act for the carriage of broadcast signals in connection with
the Wireless Cable Service. Target is not liable for copyright
infringement under the Copyright Act as a result of its business
operations. Except as disclosed on Schedule 4(t), there have been no
----
unresolved inquiries received from the Copyright Office, or any other
party, which questioned such statements of account or any copyright royalty
payments made by Target with respect to the Wireless Cable Service, and no
claim, action or demand for copyright infringement or for non-payment of
royalties is pending or, to Target's knowledge, threatened against Target
with respect to the Wireless Cable Service.
(u) ENVIRONMENTAL MATTERS. Except as disclosed on Schedule 4(u):
--------------------- ----
(i) Target and, to the best of Target's knowledge, any
predecessor thereof, are conducting and have conducted their
respective businesses and operations in compliance with all applicable
Environmental Laws.
(ii) Neither Target nor, to the best of Target's knowledge, any
predecessor thereof, has managed or released any Hazardous Substances
at, on, in, to or from any property or business now or previously
owned, operated, leased, controlled, used, occupied or conducted by
Target or any predecessor thereof in violation of any applicable
Environmental Law or in any manner which could give rise to liability
under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, the Resource Conservation Recovery
Act of 1976, as amended, or any similar state or local law.
(iii) Schedule 4(u) lists all environmental permits,
----
certificates, licenses, approvals, registrations and authorizations
required under Environmental Laws for
-18-
operation of the businesses of Target ("Environmental Permits"), and
all such Environmental Permits are in full force and effect, and
Target is in full compliance with the terms thereof.
(iv) No PCBs or ACMs are or have been present at any property or
business now or previously owned, operated, leased, controlled, used,
occupied or conducted by Target or, to the best of Target's knowledge,
any predecessor thereof, nor are there any underground storage tanks,
active or abandoned, at the property now or previously owned,
operated, leased, controlled, used, occupied or conducted by Target
or, to the best of Target's and Xxxxxxxx'x knowledge, any predecessor
thereof; provided, however, that this representation shall be limited
by Target's knowledge in respect of any property leased by Target.
(v) No notice, citation, summons or order has been issued, no
complaint has been filed, no penalty has been assessed and no
investigation or review is pending or threatened by any governmental
or other entity with respect to any alleged violation or other
liability by Target or, to the best of Target's knowledge, any
predecessor thereof, of or under any Environmental Law. Neither
Target nor Xxxxxxxx know of any facts or circumstances related to
environmental matters concerning their properties or businesses now or
previously owned, operated, leased, controlled, used, occupied or
conducted by Target or any predecessor thereof that could lead to any
future environmental claims, liabilities or responsibilities against
the Buyer or the Surviving Corporation or against Target or any
predecessor thereof.
(v) PROGRAMMING AGREEMENTS. Schedule 4(v) sets forth a true and
---------------------- ----
complete list of all agreements for programming to which Target is a party,
and for each programming agreement (i) the name of the programmer and (ii)
the programming service.
(w) FACILITIES. Target does not own, lease, operate, use or have any
----------
interest in any real property (including, without limitation, any
buildings, fixtures or other improvements thereon) other than the
facilities set forth on Schedule 4(w) (the "Facilities"). All of the
----
Facilities are leased by Target. Schedule 4(w) sets forth a complete list
----
of all the Facilities, and for each Facility (i) the names of the owner,
the lessor and the lessee, (ii) the address, (iii) the lease payments, (iv)
the term and any rights for early termination or extensions of the term of
any party thereto, and (v) the location and description of, or sites for
the erection of, all transmission towers, TVROs, head-ends and any other
facility for the reception or broadcast of programming. Each lease for a
Facility is in full force and effect and has not been assigned, modified,
supplemented or amended except as set forth on Schedule 4(w), and neither
----
the lessor nor the lessee is in default under any of such leases, and no
circumstances or state of facts exist which, with the giving of notice or
passage of time, or both, would permit the lessor under any such lease to
terminate the lease.
(x) INVESTMENT MATTERS.
------------------
(i) Xxxxxxxx has such knowledge and experience in financial and
business matters that he is capable of evaluating and has evaluated
and understands the merits and risks of his acquisition of the CS
Shares, including the risk of losing his entire investment in the CS
Shares. Xxxxxxxx can afford such a loss. Xxxxxxxx understands that
the CS Shares
-19-
have not been registered under the Securities Act by reason of a
specific exemption thereunder which depends among other things on his
investment intent and the representations made in this Agreement.
Xxxxxxxx is receiving the CS Shares for his own account for investment
and not with a view toward or for sale in connection with any
distribution thereof, or with any present intention of distributing or
otherwise transferring the CS Shares. Xxxxxxxx agrees that the CS
Shares may not be sold, transferred, offered for sale, pledged (in
connection with a loan transaction or otherwise), hypothecated or
otherwise disposed of without registration under the Securities Act,
except pursuant to an opinion of counsel, if such opinion shall be
reasonably satisfactory to counsel to Buyer, that an exemption from
such registration is available under the Securities Act, and state
securities or blue sky laws to the extent applicable. Xxxxxxxx
acknowledges and confirms that Buyer has made available to Xxxxxxxx
the Offering Memorandum dated February 16, 1996 related to the
offering of $400,000,000 in Senior Discount Notes and 110,000 shares
of Buyer's common stock (the "Offering Memorandum") as well as the SEC
Filings. Xxxxxxxx confirms that Buyer has made available to Xxxxxxxx
the opportunity to ask questions of the officers and management
employees of Buyer and to acquire additional information about Buyer's
business, including, but not limited to, such Offering Memorandum and
SEC Filings and its financial condition (to the extent Buyer and its
officers and management employees possessed such information or could
acquire it without unreasonable effort or expense), necessary to
verify the accuracy of any information furnished to him or to which he
had access and all such questions have been answered to his complete
satisfaction and he does not need or require any additional
information concerning Buyer, the such Offering Memorandum and SEC
Filings or the CS Shares, and Xxxxxxxx confirms that he has been given
full opportunity to ask questions of the senior management of Buyer
about the foregoing transactions, the financial impact thereof on
Buyer and Buyer's business plans.
(ii) Xxxxxxxx hereby consents to the placement of the following
legend on each certificate representing the CS Shares delivered to
Xxxxxxxx hereunder:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED ("ACT"),
OR UNDER ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE
OFFERED OR SOLD EXCEPT PURSUANT TO (I) AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT AND SUCH STATE SECURITIES LAWS, (II) TO
THE EXTENT APPLICABLE, RULE 144 UNDER THE ACT (OR SIMILAR RULE
UNDER SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES) OR
(III) AN OPINION OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY
SATISFACTORY TO COUNSEL TO THE COMPANY, THAT AN EXEMPTION FROM
REGISTRATION UNDER SUCH ACT AND SUCH STATE SECURITIES LAWS IS
AVAILABLE."
(iii) Xxxxxxxx is an "Accredited Investor" as defined in Rule
501 under the Securities Act.
-20-
(iv) Xxxxxxxx has received no oral representations or warranties
on which he is relying in connection with his acquisition of CS Shares
and is in no way relying on any general solicitation or general
advertising in connection with his acquisition of the CS Shares.
(v) Xxxxxxxx understands that no federal or state agency has
made any determination as to the fairness of the offering of CS Shares
for investment or any recommendation or endorsement of the CS Shares.
(vi) Xxxxxxxx hereby represents that he has no current plan or
intention to sell, exchange, or otherwise dispose of, reduce the risk
of loss by short sale or otherwise, enter into any contract or
arrangement with respect to, or consent to the sale, exchange or
disposition of any interest in any share of the CS Shares received by
him in the Merger.
(y) RETRANSMISSION CONSENTS. Schedule 4(y) sets forth a true and
----------------------- ----
complete list of all retransmission consents to which Target is a party,
and for each retransmission consent (i) the name of the party permitting
retransmission of its signal and (ii) the expiration date of any applicable
agreement.
5. EMPLOYEE BENEFITS/EMPLOYMENT MATTERS.
------------------------------------
(a) Schedule 5(a) lists (i) all "employee benefit plans" as defined
----
in Section 3(3) of ERISA (as hereinafter defined) and all such other
compensation and benefit plans, contracts, policies, programs, agreements,
commitments and other arrangements sponsored, maintained, contributed to or
with respect to which there is or was an obligation to contribute by Target
or to which its employees are subject including, without limitation, all
pension, profit sharing, savings and thrift, bonus, equity compensation,
phantom stock, incentive or deferred compensation, severance pay or
benefit, vacation, sick pay, sick leave, disability, post-retirement
benefits, seniority, fringe benefit, and medical and life insurance plans
or arrangements (including self-insured arrangements) in which any current
or former employees of Target (collectively, "Target Employees")
participate (collectively, "Target Employee Benefit Plans") and (ii) all
"employee pension benefit plans" as defined in Section 3(2) of ERISA
sponsored, maintained, contributed to or with respect to which there is or
was an obligation to contribute to by Target or any trade or business
(whether or not incorporated) which is under common control with or which
is treated as a single employer with Target under Section 414(b), (c), (m)
or (o) of the Code (such trades or businesses hereinafter referred as
"ERISA Affiliates") ("Pension Plans").
(b) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
payment (including, without limitation, severance, unemployment
compensation, golden parachute or otherwise) becoming due from Target or
Buyer under any Target Employee Benefit Plan or Pension Plan, (ii)
materially increase any benefits otherwise payable under any Target
Employee Benefit Plan or Pension Plan or (iii) result in the acceleration
of the time of payment or vesting of any such benefits to any material
extent.
-21-
(c) No Target Employee Benefit Plan or Pension Plan is or during the
preceding six (6) years has been subject to Title IV of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), Part 3 of
Title I of ERISA or Section 412 of the Code or is intended to be qualified
under Section 401(a) of the Code.
(d) Each Target Employee Benefit Plan and Pension Plan has been
maintained in substantial compliance with applicable laws, with its terms
and with the requirements prescribed by any and all statutes, orders, rules
and regulations which are applicable to such Target Employee Benefit Plans
and Pension Plans.
(e) Schedule 5(e) lists all current employees of Target. True,
----
correct and complete copies of the following documents, with respect to
each of the Target Employee Benefit Plans and Pension Plans have been made
available or delivered to Buyer by Target: (A) any plans and related trust
documents, and amendments thereto, (B) summary plan descriptions, (C)
material written communications to employees relating to the Target
Employee Benefit Plans and Pension Plans and (D) written descriptions of
all non-written agreements relating to the Target Employee Benefit Plans
and Pension Plans. Other than as set forth on Schedule 5(a), there are no
----
Target Employee Benefit Plans or Pension Plans for which IRS Form 5500,
actuarial validations or financial statements are required, and there are
no Target Employee Benefit Plans or Pension Plans for which an Internal
Revenue Service determination letter can be received.
(f) Target does not maintain retiree life or retiree health insurance
plans which are Target Employee Benefit Plans and which are "welfare
benefit plans" within the meaning of Section 3(1) of ERISA and which
provide for continuing benefits or coverage for any participant or any
beneficiary of a participant, except as may be required under the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended
("COBRA"), and at the sole expense of the participant or the participant's
beneficiary. Each Target and any ERISA Affiliate which maintains a
"benefit plan" within the meaning Section 5000(b)(1) of the Code has
complied with the notice and continuation requirements of Section 4980B of
the Code, COBRA and the regulations thereunder.
(g) Neither Target or any ERISA Affiliate has any contract, plan, or
commitment, whether legally binding or not, to create any additional Target
Employee Benefit Plan or Pension Plan or to modify any existing Target
Employee Benefit Plan or Pension Plan.
(h) There are no pending actions, claims or lawsuits which have been
asserted or instituted against the Target Employee Benefit Plans or Pension
Plans, the assets of any of the trusts under such plans or the plan sponsor
or the plan administrator, or against any fiduciary of the Target Employee
Benefit Plans or Pension Plans with respect to the operation of such plans
(other than routine benefit claims), nor does Xxxxxxxx or Target have
knowledge of facts which could form the basis for any such claim or
lawsuit.
6. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer hereby makes the
---------------------------------------
following representations and warranties to Xxxxxxxx, which are correct and
complete as of the date hereof and shall continue to be correct and complete on
the Closing Date:
-22-
(a) DUE ORGANIZATION. Buyer is a corporation duly organized, validly
----------------
existing and in good standing under the laws of the State of Delaware and
is duly licensed and qualified to do business as a foreign corporation in
each jurisdiction where the nature of property owned or leased by it or the
conduct of its business requires such qualification, and it has the full
corporate power and authority to enter into and perform this Agreement in
accordance with its terms.
(b) AUTHORIZATION OF AGREEMENT. The execution, delivery and
--------------------------
performance of this Agreement by Buyer and the consummation by Buyer of the
transactions contemplated by this Agreement have been duly authorized by
all necessary corporate action of Buyer, and this Agreement constitutes the
valid and binding obligation of Buyer enforceable against Buyer in
accordance with its terms.
(c) NON-CONTRAVENTION. Neither the execution, delivery and
-----------------
performance of this Agreement by Buyer nor the consummation of the
transactions contemplated hereby will:
(i) Violate any provision of Buyer's certificate of
incorporation or bylaws, or conflict with, or result in the breach or
termination of, or constitute a default under, any lease, agreement,
contract, commitment or other instrument, or any order, judgment or
decree, by which Buyer is bound, or is a party;
(ii) Subject to subsection (iv) below, constitute a violation by
----
Buyer of any law or regulation applicable to it;
(iii) Result in the creation of any lien, charge or
encumbrance upon any of the CS Shares or on any asset of Buyer or
result in the acceleration of any indebtedness or other obligation of
Buyer, other than liens, charges or encumbrances that do not in the
aggregate materially detract from the value of, or materially
interfere with, such interests; or
(iv) Require any consent or approval of any other person or
entity, except for the required consents set forth on Schedule 6(c).
----
(d) CAPITALIZATION. The entire authorized capital stock of Buyer and
--------------
the record owners thereof as of the date hereof are as appears on Schedule
6(d) hereto. All of the issued and outstanding CS Shares have been duly
----
authorized, and validly issued, and are fully paid and nonassessable.
Except as set forth on Schedule 6(d), as of the date hereof there are no
----
outstanding or authorized options, warrants, purchase rights, subscription
rights, conversion rights, exchange rights, or other contracts or
commitments that could require Buyer to issue, sell, or otherwise cause to
become outstanding any of its capital stock. Except as set forth in the
disclosure documents described in Section 4(x), there are no voting trusts,
----
proxies, or other agreements or understandings with respect to the CS
Shares or the voting capital stock of Buyer, and Buyer does not own,
directly or indirectly, any shares of stock or other equity or long-term
debt securities of any corporation or have an equity interest in any firm,
partnership, joint venture, association or any entity.
(e) GENERAL BUSINESS REPRESENTATIONS. Except as disclosed on
--------------------------------
Schedule 6(e) hereto:
----
-23-
(i) Buyer will, upon Xxxxxxxx'x request, provide to Xxxxxxxx
Buyer's Form S-1, filed with Commission on April 5, 1996 and Amendment
No. 1 to Buyer's Form S-1, filed with the Commission on July 8, 1996
(the "SEC Filings"), and the information contained in the SEC Filings
as of the date of such filing did not contain any untrue statement of
material fact nor omit a fact necessary to make the statements
contained therein not misleading.
(ii) The audited and unaudited financial statements of Buyer
incorporated into the SEC Filings, taken as a whole, present fairly in
all material respects the financial condition and results of operation
and cash flows as of the dates and for the periods set forth therein,
in each case in accordance with generally accepted accounting
principles, applied in a consistent manner throughout the periods
subject, in the case of unaudited financial statements, to normal and
non-material year-end audit adjustments.
(iii) Except as disclosed in the SEC Filings, since the dates
thereof there has been no Material Adverse Effect on Buyer, and Buyer
has not declared or paid any dividends or distributions or repurchased
any of Buyer's capital stock.
(f) LITIGATION. Except as set forth on Schedule 6(f), there is no
---------- ----
suit (at law or in equity), action, or legal, administrative, arbitration
or other proceeding or governmental investigation pending or, to the
knowledge of Buyer, threatened, or any judgment or outstanding order,
injunction, decree, stipulation or award (whether rendered by a court or
administrative agency, or by arbitration), which would, individually or in
the aggregate, have a Material Adverse Effect on the Buyer, or which
questions the validity of Buyer's capital stock, this Agreement, the Merger
or any action taken or to be taken by Buyer in connection with this
Agreement or the Merger.
(g) ACCURACY OF INFORMATION. No written statement made by Buyer
-----------------------
herein, including in any schedule or exhibit attached hereto, contains any
untrue statement of a material fact or omits a material fact necessary to
make the statements contained herein not misleading. There is no fact
known to Buyer that relates to any information contained herein, including
in any schedule or exhibit hereto or in the SEC Filings, (other than
information concerning the wireless cable industry generally) that Buyer
has withheld from Target or Xxxxxxxx, that has a Material Adverse Effect
on, or, so far as Buyer can reasonably foresee, will have a Material
Adverse Effect on Buyer or the Wireless Cable Service.
(h) INVESTMENT MATTERS.
------------------
(i) Buyer has such knowledge and experience in financial and
business matters that it is capable of evaluating and has evaluated
and understands the merits and risks of its acquisition of the Target
Stock, including the risk of losing its entire investment in the
Target Stock. Buyer can afford such a loss. Buyer understands that
the Target Stock has not been registered under the Securities Act by
reason of a specific exemption thereunder which depends among other
things on its investment intent and the representations made in this
Agreement. Buyer is receiving the Target Stock for investment and not
with a view toward or for sale in connection with any distribution
thereof, or with any present intention of distributing the Target
Stock. Buyer agrees that the Target Stock may not be sold,
transferred, offered for sale, pledged, hypothecated or
-24-
otherwise disposed of without registration under the Securities Act,
except pursuant to an exemption from such registration available under
the Securities Act, and state securities or blue sky laws to the
extent applicable. Buyer confirms that Target and Xxxxxxxx have made
available to Buyer the opportunity to ask questions of the officers
and management employees of Target and Xxxxxxxx and to acquire
additional information about Target's business and its financial
condition (to the extent Target and Xxxxxxxx and their respective
officers and management employees possessed such information or could
acquire it without unreasonable effort or expense) necessary to verify
the accuracy of any information furnished to it or to which it had
access, and all such questions have been answered to its complete
satisfaction, and it does not need or require any additional
information concerning Target or the Target Stock.
(ii) Buyer is an "Accredited Investor" as defined in Rule 501
under the Securities Act.
(iii) Buyer has received no oral representations or
warranties on which it is relying in connection with its acquisition
of the Target Stock and is in no way relying on any general
solicitation or general advertising in connection with its acquisition
of the Target Stock.
(iv) Buyer understands that no federal or state agency has made
any determination as to the fairness of the offering of the Target
Stock for investment or any recommendation or endorsement of the
Target Stock.
(i) CS SHARES. The CS Shares when issued will be validly issued,
---------
fully paid and non-assessable and issued in compliance with all applicable
state corporate laws, and state and federal securities laws.
(j) MERGER SUB REPRESENTATIONS AND WARRANTIES. Buyer agrees to cause
-----------------------------------------
the Merger Sub to make the representations and warranties set forth in
Sections 6(a) - 6(i) (to the extent they are applicable to the Merger Sub),
-----------
which representations and warranties shall be as of the date the Merger Sub
is formed, which date shall be no later than the Closing Date.
(k) BTA AUTHORIZATIONS. Except as set forth on Schedule 6(k), Buyer
------------------ ----
knows of no reason why it will be deemed unable to have assigned to it each
BTA Authorization identified on Schedule 4(g) upon the filing with the FCC
----
of all necessary and appropriate applications for consent to assign such
BTA Authorizations to Buyer.
7. CERTAIN COVENANTS.
-----------------
(a) OPERATION OF TARGET PRIOR TO THE CLOSING DATE. Except for the
---------------------------------------------
transactions related to the Transferred Assets Transactions, from the date
hereof through the Closing Date:
(i) Target shall not engage in any practice, take any action or
enter into any transaction other than in the customary and ordinary
course of business, without the consent of Buyer.
-25-
(ii) Target shall keep its business, properties and business
relationships substantially intact.
(iii) Target shall use its best efforts to preserve, protect
and maintain its rights and interests in the Licenses, Channels Leases
and Contracts, including but not limited to filing or having licensees
file with the FCC any and all reports, applications or other documents
necessary to preserve the Licenses in full force and effect. Buyer
shall not, prior to Closing, directly or indirectly control,
supervise, or direct or attempt to control, supervise or direct the
operation of any Channels, which shall comply in all material respects
with the rules, regulations and published policies of the FCC and the
Communications Act of 1934, as amended.
(iv) Target shall not enter into, amend or terminate, or agree to
enter into, amend, or terminate any License, Channel Lease or
Contract, without the consent of Buyer, except as required to comply
with the rules, regulations and published policies of the FCC or
facilitate the transactions contemplated hereby, in which case Target
shall promptly notify Buyer of such action.
(v) Neither Target nor Xxxxxxxx shall negotiate, solicit,
entertain or enter into any agreements, arrangements or understandings
with any other person or entity that would have as a purpose, intent
or effect, the circumvention of the terms of this Agreement or the
transactions contemplated hereby.
(vi) Neither Target nor Xxxxxxxx shall take any action that, or
omit from taking any action the omission of which, would adversely
affect the value of the Target Stock.
(vii) Target shall not declare or pay any dividends or
repurchase any of the Target Stock or make any other distributions
consisting of cash or marketable securities or any combination
thereof, or issue, sell or agree to sell any shares of its capital
stock, or any securities convertible into, or options with respect to,
or warrants to purchase, or rights to subscribe for, any shares of its
capital stock.
(viii) Target shall not sell, lease, transfer or otherwise
dispose of any of its assets, except as provided for in, or
contemplated by, this Agreement.
(ix) Target shall not increase in any manner the base
compensation of, or enter into any new employment, deferred
compensation, bonus or incentive agreement or arrangement with, any of
its directors, officers or employees, pay bonuses to any such
director, officer or employee, or pay any salaries except in the
ordinary course of business of Target.
(x) Xxxxxxxx shall not transfer the Target Stock.
(xi) Target shall not incur any debt other than trade obligations
incurred in the normal course of business.
-26-
(xii) Target shall not create, adopt, maintain or contribute
to any new, or amend any existing, Target Employee Benefit Plan or
Pension Plan, except as required by law.
(xiii) Target and Xxxxxxxx shall notify Buyer promptly in the
event of a breach or violation of or default under any Channel Lease
or Contract.
(b) CONSENTS. Except as otherwise provided herein, the parties
--------
hereto shall fully cooperate and use their best efforts to obtain all
consents, governmental authorizations and approvals and shall make such
filings as may be necessary by virtue of the transactions contemplated by
this Agreement on or before the Closing Date, so as to ensure that the
Surviving Corporation will continue to enjoy all of the rights and
privileges currently enjoyed by Target under each of the Channel Leases and
Contracts, which consents are listed on Schedule 4(c). Upon request of
----
Target, Buyer shall provide reasonable assistance to Target (without
incurring any costs relating to such assistance other than Buyer's out-of-
pocket costs related to such assistance) in obtaining from each of the
other respective parties to each of such Channel Leases and Contracts
estoppel certificates certifying that Target is not in material breach or
violation of or in material default under any of such Channel Leases or
Contracts and that it would not be by virtue of the transactions
contemplated hereby.
(c) GRANT, RENEWAL OR EXTENSION OF FCC AUTHORIZATIONS. Consistent
-------------------------------------------------
with Schedule 4(g), Target and Xxxxxxxx shall:
----
(i) Timely file all applications, reports and other submissions
in such form and with such information as may be required by the FCC,
including but not limited to renewal applications, applications for
extensions of time to complete construction and annual reports, to
assure that all commercial ITFS Channels licensed or authorized to
Xxxxxxxx remain in full force and effect without material alteration
or modification, except to the extent that such alteration or
modification results from changes in the FCC's rules or policies of
general applicability. Subject to Section 9, Target shall also make
-
all requisite down-payments, installments and/or full payments, as
appropriate, and take all other actions which are reasonably necessary
and appropriate to be awarded the BTA Authorizations listed on
Schedule 4(g). Upon the execution of this Agreement, Target and
----
Xxxxxxxx shall file, at the request of and as an accommodation to
Buyer (and at Buyer's sole expense), such applications for
modification of their outstanding licenses, permits or applications as
are reasonably necessary to implement the purposes contemplated
hereunder. Target and Xxxxxxxx and, to the extent reasonable and
appropriate, the Buyer, shall utilize best efforts to diligently and
properly prosecute in good faith all applications, reports and
submissions submitted in accordance with this Section 7(c).
----
(ii) Use their best efforts to assure that the licensees or
permittees of the Leased Channels timely file all applications,
reports and other submissions in such form and with such information
as may be required by the FCC, including but not limited to renewal
applications, applications for extensions of time to complete
construction and reports, to assure that the Licenses for all the
Leased Channels remain in full force and effect without material
adverse alterations or modification, except to the extent that such
material adverse alteration or modification results from changes in
the FCC's rules or policies of general applicability or from the FCC
grant of applications disclosed in
-27-
Schedule 4(g). Upon the execution of this Agreement, Target shall use
----
its best efforts to have the licensees of the Leased Channels file, at
the request of and as an accommodation to Buyer (and at Buyer's sole
expense), such applications for modification of their outstanding
licenses, permits or applications as are reasonably necessary to
implement the purposes contemplated hereunder. Target and, to the
extent reasonable and appropriate, the Buyer, shall use best efforts
to assure that the licensees or permittees of the Leased Channels
diligently prosecute in good faith all such applications, reports and
submissions.
(d) TARGET AUDIT. Target hereby assigns and transfers to Buyer all
------------
of its right, title and interest in and to the work product of McGladrey &
Xxxxxx, Cheyenne, Wyoming with respect to the audit of the Wireless Cable
Service and hereby agrees to authorize to release such work product to
Buyer and to take such action and execute such documents necessary to
effectuate the foregoing.
(e) FINANCIAL STATEMENTS. Target shall provide Buyer with such
--------------------
financial statements of, and financial information about, Target as Buyer
shall reasonably request and as Buyer and its independent auditor may
require for inclusion in Buyer's pending registration statement with the
Commission covering the exchange of Buyer's Senior Discount Notes and its
common stock. Without limiting the foregoing, promptly after the execution
of this Agreement, Target shall furnish Buyer with an unaudited profit and
loss statement for the first quarter of 1996 and an unaudited balance sheet
as of March 31, 1996.
(f) SATISFACTION OF CLOSING CONDITIONS. Xxxxxxxx and Target shall
----------------------------------
use their best efforts to satisfy, or cause to be satisfied, the conditions
to Closing in Section 12(a).
-----
8. COVENANT OF BUYER AND MERGER SUB.
--------------------------------
(a) SATISFACTION OF MERGER CONDITIONS. Buyer and Merger Sub shall
---------------------------------
use their best efforts to satisfy, or cause to be satisfied, the conditions
to Closing in Section 12(b).
-----
(b) HEARTLAND WIRELESS COMMUNICATIONS, INC. PETITION. No later than
------------------------------------------------
five (5) business days after the execution of this Agreement, Buyer shall
cause Heartland Wireless Communications, Inc. to withdraw its petition to
deny against Target's long-form applications with the FCC related to
Target's Rochester-Austin-Albert LEA, Minnesota BTA.
9. TRANSFER OF LICENSES AND BTA AUTHORIZATIONS. As soon as is
-------------------------------------------
practicable after the signing of this Agreement, Xxxxxxxx and/or Target shall
file with the FCC one (1) or more applications for consent to the assignment of:
(a) the licenses for the B group channels, call sign WMX685 and the C group
channels, call sign WMX672 (the "Assigned Channels"), and (b) the BTA
Authorizations listed on Schedule 4(g) to USA Wireless II, Inc., a Nebraska
----
corporation wholly-owned by Xxxxxxxx having the same officers and directors as
Target ("USA II"); (USA II shall be formed by Xxxxxxxx no later than five (5)
days after the signing of this Agreement). On or before the Closing Date, USA
II shall lease to Target, for one dollar ($1.00) per month, together with any
fees or payments related to the BTA Authorizations, the Assigned Channels and
the BTA Authorizations listed on Schedule 4(g) (the "Lease") and, in addition,
----
shall give Target an exclusive option to purchase the Assigned Channels and BTA
Authorizations listed on Schedule 4(g) for a total purchase price of one
-----
thousand dollars ($1,000) (the "Option"). Xxxxxxxx, Target and Buyer shall
jointly participate in the drafting of the Lease (including the Option) prior to
its execution by
-28-
Target and USA II, it being understood and agreed that the form and substance of
the Lease shall be fully satisfactory to Buyer, Hilliard, Target and their
respective counsel, in their reasonable discretion, prior to its execution. The
Surviving Corporation shall exercise the Option no earlier than the Effective
Time but not later than five (5) days after the FCC issues a Final FCC Order
granting the transfer of the licenses associated with the Assigned Channels and
the BTA Authorizations listed on Schedule 4(g) to USA II. Upon the exercise of
----
the Option, the Surviving Corporation shall prepare and file one (1) or more
applications with the FCC for consent to the assignment and transfer of the
Assigned Channels and the BTA Authorizations listed on Schedule 4(g) to the
----
Surviving Corporation, and take all other actions necessary and appropriate to
facilitate the earliest possible grant of the assignment or transfer
application(s) by the FCC; Xxxxxxxx shall use his best efforts to assist the
Surviving Corporation in connection with the filing and prosecution of such
application(s). Buyer shall pay or cause the Surviving Corporation to pay: (x)
all FCC filing fees and the Surviving Corporation's legal and engineering fees
associated with such application(s), and (y) any payments associated with the
assignment or transfer of BTA Authorizations listed on Schedule 4(g), including
----
but not limited to unjust enrichment payments, required by the FCC as a result
of the Surviving Corporation not qualifying as a designated entity, as that term
is defined in the FCC's MDS Auction rules.
10. XXXX-XXXXX-XXXXXX ACT FILING. The parties will cooperate in preparing
----------------------------
and filing any Notification and Report Forms and related material that they may
be required to file with the Federal Trade Commission and the Antitrust Division
of the United States Department of Justice under the Xxxx-Xxxxx-Xxxxxx Act, and
will use their respective best efforts to obtain an early termination of the
applicable waiting period, and will make any further filings pursuant thereto
that may be necessary, proper, or advisable.
11. Section 11 has been intentionally deleted.
--
12. CONDITIONS TO CLOSING.
---------------------
(a) BUYER'S CONDITIONS TO CLOSING. As a condition to Buyer's
-----------------------------
obligations to close the Merger on the Closing Date, subject to waiver by
Buyer in its sole discretion:
(i) Target and, where applicable Xxxxxxxx, shall have delivered
the following to Buyer in form and substance satisfactory to Buyer and
its counsel:
(A) A certificate of each of Xxxxxxxx and Target signed by
Xxxxxxxx individually and by the chief executive officer or the
chief financial officer of Target confirming on and as of the
Closing Date, that each of the representations and warranties set
forth in Sections 4 and 5 hereof and to the effect of subsections
- -
(ii), (iii), (iv) and (vi) below are true and correct in all
--------------------------
material respects.
(B) Evidence that the licensees of, or applicants for, the
Leased Channels have, where required by the Channel Leases,
consented to the transactions contemplated herein.
(C) Evidence that substantially all of the estoppel
certificates, in the form attached hereto as Exhibit I, have been
-
executed by the licensees of, or applicants for, the Leased
Channels; provided that, if Target is unable to obtain
-29-
substantially all of the estoppel certificates to be delivered
hereunder on or prior to the Closing Date, Target shall have the
right to provide in lieu thereof, and Buyer shall accept, any of
(i) evidence reasonably satisfactory to Buyer that all payments
under the contract which is the subject of such non-delivered
estoppel certificate have been made during the preceding twelve
(12) months, (ii) copies of all correspondence, if any, received
from the other party to such contract during the preceding twelve
(12) months (none of which shall indicate any default or dispute
has arisen thereunder) or (iii) evidence reasonably satisfactory
to Buyer (such as an invoice or other billing statement) of the
amount owed to such other party.
(D) Evidence that: (i) the Assigned Channels and the BTA
Authorizations have been assigned to USA II; (ii) such assignment
has been approved by the FCC; and (iii) the Lease (including the
Option) has been entered into between Target and USA II.
(E) Information (both oral and written) necessary for Buyer
to prepare Financial Statements in form and substance for filing
with the Commission under the Securities Act and the Exchange Act
and other federal securities laws.
(F) An opinion of counsel to Target and Xxxxxxxx addressed
to Buyer in form and substance reasonably satisfactory to Buyer
and its counsel.
(G) An opinion of FCC counsel to Target and Xxxxxxxx
addressed to Buyer in form and substance reasonably satisfactory
to Buyer and its counsel.
(H) The stock books, stock ledgers, minute books, bylaws,
certificate of incorporation, seal and all original financial,
accounting, personnel, engineering, licensing, marketing and
other corporate records of Target, including but not limited to,
invoices, checks, bank statements, vendor statements, journals,
general ledgers, software and the related hardware (to the extent
owned by Target) where such records are maintained and processed,
agings, cash receipts, records and vouchers.
(I) All necessary and appropriate governmental and third
party consents, approvals and clearances for consummation of the
transactions contemplated herein. All regulatory agencies shall
have taken such action as may be required to permit the
consummation of the transactions contemplated hereby, and such
actions shall remain in full force and effect. All applicable
waiting periods (and any extensions thereof) under the Xxxx-
Xxxxx-Xxxxxx Act shall have expired or otherwise been terminated.
Target and Xxxxxxxx shall use their best efforts to deliver all
such third party consents to Buyer by five (5) business days
before the Closing Date.
(J) A copy of resolutions duly adopted by the board of
directors of Target approving and authorizing execution and
delivery of this Agreement and performance by Target of the
transactions contemplated herein, with such
-30-
resolutions certified by the Secretary of Target as being true
and correct and in effect as of the Closing.
(K) A copy of resolutions duly adopted by the shareholder
of Target approving and authorizing execution and delivery of
this Agreement and performance by Target of the transactions
contemplated herein, with such resolutions certified by the
Secretary of Target as being true and correct and in effect as of
the Closing.
(L) A copy of the Non-Competition Agreement executed by
Xxxxxxxx.
(M) The Escrow Agreement.
(N) UCC termination statements and other documentation from
each of the Lenders necessary to release any and all security
interests, liens, encumbrances or claims of others created or
suffered to exist on the properties, assets and equipment
utilized in or relating to Target's provision of Wireless Cable
Service, including the Licenses, Channel Leases and Contracts and
the Target Stock.
(O) Certificates from Target and Xxxxxxxx in the form
attached hereto as Exhibit F relating to certain tax matters.
-
(ii) The representations and warranties of Xxxxxxxx and Target in
this Agreement shall be correct in all material respects when made and
at the time of the Closing as though made at the time of the Closing.
(iii) Xxxxxxxx and Target shall have performed and complied
with all agreements and conditions contained in this Agreement
required to be performed or complied with by them prior to or at the
Closing.
(iv) The Target shall not have suffered a Material Adverse Effect
from the date hereof through the Closing Date.
(v) Buyer and its counsel shall have approved the form and
substance of the Transferred Assets Transactions.
(vi) The Target/Xxxxxxx Payable shall have been satisfied by
the delivery of thirteen thousand two hundred and ninety-eight
(13,298) CS Shares to Xxxxxxx Southwest and thirteen thousand two
hundred and ninety-eight (13,298) CS Shares to Xxxxxxx New York
provided: (a) it is understood that such CS Shares shall not be
registered under the Securities Act; (b) that prior to any such
delivery the Xxxxxxx Affiliates shall have provided to Buyer
investment representations and other documents in form and substance
satisfactory to Buyer and its counsel such that Buyer and its counsel
are satisfied that such delivery is in accordance with the federal
securities laws, including, without limitation, the Securities Act and
the Exchange Act; and (c) in exchange for such delivery, Xxxxxxx and
the Xxxxxxx Affiliates shall have delivered to Buyer a general release
of claims against Buyer in form and substance reasonably satisfactory
to Buyer and its counsel, relating to
-31-
any dealings, arrangements and agreements among Xxxxxxx, the Xxxxxxx
Affiliates and Buyer prior to the Closing Date.
(vii) Buyer shall have consummated the Financing. In
connection with the Financing, Target and Xxxxxxxx shall have
delivered such documents required by the lender(s) providing the
Financing and such other documents as Buyer's counsel may reasonably
request. As of the Closing Date, Target shall have no debt other than
the indebtedness referred to in Section 4(f)(ii) and the Indebtedness.
--------
(b) TARGET AND XXXXXXXX'X CONDITIONS TO CLOSING. As a condition to
-------------------------------------------
Target's and Xxxxxxxx'x obligations to close the Merger on the Closing
Date:
(i) Buyer and the Merger Sub shall have executed and delivered
to Xxxxxxxx in form and substance satisfactory to Xxxxxxxx'x counsel:
(A) A certificate reaffirming, on and as of the Closing
Date that each of the representations and warranties set forth in
Section 6 hereof are true and correct in all material respects.
-
(B) An opinion of counsel to Buyer addressed to Xxxxxxxx in
form and substance reasonably satisfactory to Xxxxxxxx and his
counsel.
(C) A copy of resolutions duly adopted by the board of
directors of Buyer, approving and authorizing execution and
delivery of this Agreement and performance by Buyer of the
transactions contemplated hereby, with such resolutions certified
by the Secretary of Buyer as being true and correct and in effect
as of the Closing.
(D) A copy of the Non-Competition Agreement executed by
Xxxxxxxx.
(ii) The representations and warranties of Buyer in this
Agreement shall be correct in all material respects when made and at
the time of Closing as though made at the time of the Closing.
(iii) Buyer shall have performed and complied with all
agreements and conditions contained in this Agreement required to be
performed or complied with by it prior to or at the Closing.
(iv) The Buyer shall not have suffered a Material Adverse Effect
from the date hereof through the Closing Date.
(v) Buyer shall have consummated the Financing.
(vi) If, on the Closing Date, Xxxxxxxx has demanded payment of
the notes referred to in Sections 13(a)(i) and 13(a)(ii), Buyer shall
-------- ---------
have paid such notes in cash.
13. CLOSING. Subject to the satisfaction or waiver of all the conditions
-------
to Closing contained in Section 12, the closing of the Merger and related
--
transactions contemplated herein (the "Closing") shall
-32-
take place at the offices of Buyer's counsel or at such other place and such
time as the parties may mutually agree on or about September 1, 1996, but in no
event later than October 15, 1996. The date that the Closing occurs is referred
to herein as the "Closing Date." The September 1, 1996 Closing Date shall be
extended if the conditions contained in Section 12 have not been satisfied or
--
waived by that date.
(a) DELIVERIES BY BUYER. At the Closing Buyer shall deliver:
-------------------
(i) Subject to Section 12(b)(vi), to Xxxxxxxx, the demand note
---------
for five thousand dollars ($5,000), pursuant to the Non-Competition
Agreement and in accordance with Section 3(d);
----
(ii) Subject to Section 12(b)(vi), to Hilliard, the balance
---------
of the Target/Xxxxxxxx Payable, which balance shall be paid in the
form of a note, which note will provide for payment of such balance on
Xxxxxxxx'x demand on or after the Closing Date.
(iii) To Xxxxxxxx, certificates duly completed and executed
by Buyer evidencing that portion of the CS Shares receivable pursuant
to Section 3(b)(ii) less the Indemnity Shares;
--------
(iv) To a mutually agreeable escrow agent, the Indemnity Shares
pursuant to Section 14(e); and
-----
(v) To Xxxxxxxx, those items specified in Section 12(b).
-----
(vi) To the Xxxxxxx Affiliates the CS Shares described in Section
12(a)(vi).
---------
(b) DELIVERIES BY XXXXXXXX AND TARGET. At the Closing, Hilliard and
---------------------------------
Target shall deliver:
(i) To Buyer, certificates representing the Target Stock
evidencing all the equity interests in Target, properly endorsed in
blank for transfer, together with any stock transfer powers or other
instruments, appropriately executed, as may be necessary to transfer
the Target Stock to Buyer;
(ii) To Buyer, those items specified in Section 12(a).
-----
14. INDEMNIFICATION.
---------------
(a) GENERAL.
-------
(i) Notwithstanding the Closing, and regardless of any
investigation at any time made by or on behalf of Buyer or of any
information Buyer may have, Xxxxxxxx, as an indemnifying party, shall
indemnify and save and hold Buyer, its affiliates, the Surviving
Corporation, their respective officers, directors, employees and
agents, each as an indemnified party, harmless from and against any
damage, liability, loss or deficiency (including, but not limited to,
reasonable attorney's fees, expert witness and consulting fees, and
other costs and expenses incident to any suit, action, proceeding,
inquiry or investigation or the defense of any claim) arising out of,
resulting from or relating to (A)
-33-
any inaccuracy in any representation, any misrepresentation or breach
of any representation or warranty of Target or Hilliard hereunder,
including but not limited to those specifically covered by subsections
(c) and (d) below, or in any certificate delivered by Hilliard or
- -
Target in this Agreement or pursuant hereto, (B) any non-fulfillment
of any agreement or covenant on the part of Hilliard or Target in this
Agreement or in any certificate delivered by Hilliard or Target in
this Agreement or in any certificate delivered by Hilliard or Target
pursuant hereto, (C) any liabilities under any Contracts which arise
prior to, or relate to periods prior to, the Closing Date, (D) all
violations of Environmental Laws or releases of Hazardous Materials
into the environment or workplace occurring prior to the Closing Date,
in connection with the Facilities or any property formerly owned,
leased or used by Hilliard, Target or any predecessor thereof, and (E)
any liabilities with respect to any Target Employee Benefit Plans and
Pension Plans listed on Schedule 5(a) accruing through the Closing
----
Date and with respect to any Target Employee Benefit Plans and Pension
Plans not listed on Schedule 5(a).
----
(ii) Notwithstanding the Closing, and regardless of any
investigation at any time made by or on behalf of Xxxxxxxx or of any
information Xxxxxxxx may have, Buyer, as an indemnifying party, shall
indemnify and save and hold Xxxxxxxx, as an indemnified party,
harmless from and against any damage, liability, loss or deficiency
(including, but not limited to, reasonable attorney's fees, expert
witness and consulting fees, and other costs and expenses incident to
any suit, action, proceeding, inquiry or investigation or the defense
of any claim) arising out of, resulting from or relating to (A) any
inaccuracy in any representation, any misrepresentation or breach of
any representation or warranty of Buyer hereunder or in any
certificate delivered by Buyer in this Agreement or pursuant hereto or
(B) any non-fulfillment of any agreement or covenant on the part of
Buyer in this Agreement or in any certificate delivered by Buyer
pursuant hereto.
(b) THIRD PARTY CLAIMS. If a claim by a third party is made against
------------------
an indemnified party, and if such indemnified party intends to seek
indemnity with respect thereto under this Section, such indemnified party
shall promptly notify the indemnifying party in writing of such claims
setting forth such claims in reasonable detail; provided, however, that
-------- -------
failure of such indemnified party to give such notice shall not result in a
waiver of its indemnity rights unless such failure materially prejudices
the indemnifying party's ability to respond to or defend the claim. The
indemnifying party shall have forty-five (45) days after receipt of such
notice to notify the indemnified party whether or not the indemnifying
party desires to undertake, through counsel of its own choosing (which
shall be reasonably satisfactory to the indemnified party) and at its own
expense, the settlement or defense thereof, and the indemnified party shall
cooperate with it in connection therewith; provided, however, that the
-------- -------
indemnified party may participate in such settlement or defense through
counsel chosen by such indemnified party, provided that the fees and
expenses of such counsel shall be borne by such indemnified party for all
periods following a timely notification by the indemnifying party that it
undertakes the settlement or defense thereof. The indemnifying party will
not pay or settle any claim without the written consent of the indemnified
party, which consent shall not be unreasonably withheld. If the
indemnifying party does not within forty-five (45) days after the receipt
of the indemnified party's notice of a claim of indemnity hereunder
undertake the defense thereof the indemnified party shall have the right to
contest, settle or compromise the claim but shall not thereby waive any
right to indemnity therefor (and for all associated reasonable costs and
attorneys' fees which, in the case of such costs and fees, shall be
reimbursed by the indemnifying party as incurred) pursuant to this
Agreement.
-34-
(c) TAXES. Xxxxxxxx and Target shall be jointly and severally
-----
responsible for and shall have computed, reported and paid any and all
liabilities for Taxes of Target or for which Target could become liable,
attributable to any period ending on or before the Closing Date. Xxxxxxxx,
as an indemnifying party, shall indemnify Buyer, its affiliates, the
Surviving Corporation, their respective officers, directors, employees and
agents, each as an indemnified party and hold them harmless from any and
all liability for Taxes of Target or for which Target could become liable,
including interest and applicable penalties, (i) attributable to periods
ending on or prior to the Closing Date and (ii) in respect of any
activities of or assets owned by Target on or prior to the Closing Date for
any period that includes, but does not end on the Closing Date. If the
Merger fails to qualify as a tax free transaction under Section
368(a)(1)(A) of the Code or otherwise, because of an action or omission by
Xxxxxxxx or Target, then the indemnity provided under this Section 14(c)
-----
shall apply to any Taxes due on income recognized as a result of such
failure.
(d) UNDISCLOSED LIABILITIES. Xxxxxxxx shall indemnify and defend
-----------------------
Buyer, its affiliates, the Surviving Corporation, their respective
officers, directors, employees and agents, each as an indemnified party,
and hold them harmless against any and all liabilities of Target of any
nature whatsoever not fully disclosed in the Financial Statements.
(e) ESCROW. At the Closing, Buyer shall place ten percent (10%) of
------
the Conversion Amount in the number of CS Shares determined by dividing
such amount by the CS Value Per Share (i.e. ninety thousand four hundred
and eighty-nine (90,489) CS Shares) (the "Indemnity Shares"), with a
mutually agreeable escrow agent, to be held in escrow pursuant to the terms
and conditions of the escrow agreement (the "Escrow Agreement") in
substantially the form attached as Exhibit H hereto: (i) for a period of
-
six (6) months from the Closing Date for the potential purpose of paying
any amounts for indemnification by Xxxxxxxx hereunder and any Subscriber
deficiency adjustment pursuant to Section 3(f) and (ii) with respect to the
----
Indemnity Shares applicable to the Assigned Channels and BTA Authorizations
listed on Schedule 4(g) only until five (5) business days after the
----
Surviving Corporation receives a Final FCC Order approving the Surviving
Corporation as a licensee of the Assigned Channels and the BTA
Authorizations listed on Schedule 4(g); if the Final FCC Order does not
----
approve the Surviving Corporation as such a licensee, Buyer shall be
entitled to the Indemnity Shares applicable to such Channels and BTA
Authorizations as set forth in the Escrow Agreement.
(f) NON-RECOURSE OBLIGATIONS. Notwithstanding anything else to the
------------------------
contrary contained in this Agreement, all claims against Xxxxxxxx and all
liabilities of Xxxxxxxx arising hereunder and any Subscriber deficiency
adjustment calculated pursuant to Section 3(f) shall be made only against
----
and shall be limited to the Indemnity Shares; provided, however, that the
foregoing shall not apply to, and any indemnified party is not waiving or
limiting any right or recourse any such party may have against Xxxxxxxx
hereunder for, (i) fraud, (ii) any liabilities described in Sections 14(c)
-----
or 19(g), or (iii) any liability related to the existing indebtedness
--------
described in Schedule 4(f)(iii) with respect to the Elm Creek (Xxxxxxx),
---------
Nebraska Market.
15. REGISTRATION RIGHTS.
-------------------
(a) DEMAND REGISTRATION. If, during the first two (2) years after the
-------------------
Closing Date, the "piggyback" registration rights set forth in Section
---------
15(b) are not exercised by Xxxxxxxx because: (a) a registration statement
-----
filed by Buyer with the Commission under the Securities Act (other than a
registration statement on Form S-4 or Form S-8 or any equivalent
-35-
form then in effect) has not been ordered effective by the Commission, or
(b) because no such registration statement (other than a registration
statement on Form S-4 or Form S-8) has been filed during such two (2) year
period, Xxxxxxxx shall thereafter have the right, exercisable with thirty
(30) days' prior written notice to Buyer, to have Buyer prepare and file
with the Commission, on one (1) occasion, a registration statement on Form
S-1 (or other suitable form) and such other documents, including a
prospectus, as may be necessary in the opinion of counsel for Buyer to
comply with the Securities Act, so as to permit a public offering and sale
of all or a portion of the CS Shares. Buyer may employ underwriters in
connection with such offering. Notwithstanding anything to the contrary
contained in this Section 15(a), if after the Effective Time, Xxxxxxxx, in
-----
any transaction between Buyer and a person or entity (including without
limitation a merger or consolidation between Buyer and such person or
entity), exchanges his CS Shares for the securities of such person or
entity, and such securities are publicly traded on a national securities
exchange, then the provisions of this Section 15(a) shall not apply to the
-----
securities Xxxxxxxx so receives; provided, however, if such securities are
not registered under the Securities Act, Section 15(a) shall continue to
-----
apply so long as such securities are subject to resale restrictions under
Rule 144 under the Securities Act.
(b) PIGGYBACK REGISTRATION.
----------------------
(I) If during the first two (2) years after the Closing Date,
Buyer should propose to file a registration statement with the
Commission under the Securities Act (other than a registration
statement on Form S-4 or Form S-8 or any equivalent form then in
effect), it will give written notice by registered mail, at least
thirty (30) days prior to the filing of such registration statement,
to Xxxxxxxx. If Xxxxxxxx notifies Buyer within twenty (20) days after
receipt of such notice of his desire to include any or all of the CS
Shares held by him in such proposed registration statement, Buyer
shall afford Xxxxxxxx the opportunity to have all such CS Shares
registered under such registration statement. Notwithstanding the
provisions of this Section 15(b), Buyer shall have the right at
-----
anytime after it shall have given written notice pursuant to this
Section 15(b) (irrespective of whether a written request for inclusion
-----
of all or a portion of the CS Shares held by Xxxxxxxx shall have been
made) to elect not to file any such proposed registration statement or
withdraw the same after the filing but not prior to the effective date
thereof.
(ii) If an underwriter seeks in writing to cut back the exercise
of the above piggyback rights by Xxxxxxxx seeking to exercise his
piggyback rights, on the basis that such inclusion would adversely
affect the underwriter's ability to market the securities included in
the registration statement, then the number of shares to be included
in the registration statement shall be reduced pro rata on the basis
of number of shares requested to be included by Xxxxxxxx and all other
persons exercising their respective registration rights. Buyer will
provide Xxxxxxxx with a copy of the written objection received from
the underwriter with respect to the inclusion of CS Shares held by
Xxxxxxxx in the registration statement. Any CS Shares in excess of ten
percent (10%) of the CS Shares received by Xxxxxxxx pursuant to
Section 3(b) cut back pursuant this Section 15(b)(ii) shall be subject
---- ----------
to the registration rights set forth in Section 15(a).
-----
(c) COVENANTS WITH RESPECT TO REGISTRATION. In connection with
--------------------------------------
any registration under this Section 15, Buyer and Xxxxxxxx covenant and
--
agree as follows:
-36-
(i) Buyer shall pay all costs (including, without limitation,
reasonable fees and expenses of one (1) counsel for Xxxxxxxx, selected
by Xxxxxxxx and approved by Buyer in its reasonable discretion, but
excluding any selling fees, expenses or commissions and Commission
filing fees), fees and expenses in connection with all registration
statements filed pursuant to this Section 15 hereof including, without
--
limitation, all National Association of Securities Dealers fees,
Buyer's legal and accounting fees, printing expenses, blue sky fees
and expenses.
(ii) Buyer will endeavor in good faith in cooperation with
Xxxxxxxx to register the CS Shares included in a registration
statement pursuant to this Section 15 for offering and sale under the
--
securities or blue sky laws of such states as are reasonably requested
by Xxxxxxxx, provided that Buyer shall not be obligated to execute or
file any general consent to service of process or to qualify as a
foreign corporation to do business under the laws of any such
jurisdiction.
(iii) Buyer shall use its best efforts, including the filing
with the Commission of any necessary amendments or supplements to the
registration statement filed in connection with Section 15(a), to have
-----
any registration statements declared and remain effective for a period
ending three (3) years after the Closing Date at the earliest possible
time and to cooperate in the sale of the CS Shares so registered, and
shall furnish Xxxxxxxx such number of prospectuses as shall reasonably
be requested. Prior to the filings described above, Buyer will
furnish to Xxxxxxxx and his counsel the registration statement and
amendments and supplements thereto, and any prospectus forming a part
thereof, which documents shall be subject to the review and comment of
Xxxxxxxx and his counsel to the extent such documents contain
statements about Xxxxxxxx.
(iv) Buyer shall have the right to delay the filing or
effectiveness of a registration statement pursuant to this Section 15
--
or to require not to sell under any such registration statement, for
up to ninety (90) days during each twelve (12) month period if (i)
Buyer would, in accordance with the advice of its counsel, be required
to disclose in any prospectus information not otherwise then required
by law to be publicly disclosed, and (ii) in the judgment of Buyer's
board of directors, there is a reasonable likelihood that such
disclosure, or any other action to be taken in connection with such
prospectus, would have a Material Adverse Effect on any existing or
prospective material business situation, transaction or negotiation or
otherwise have a Material Adverse Effect on Buyer.
(v) Buyer shall indemnify Xxxxxxxx against all loss, claim,
damage, expense or liability (including all expenses reasonably
incurred in investigating, preparing or defending against any claim
whatsoever and including reasonable fees and expense of Xxxxxxxx'x
counsel) to which it may become subject under the Securities Act, the
Exchange Act or otherwise, arising from such registration statement;
provided, however, there shall be excluded from the indemnity
obligation of this Section 15(c) any and all losses, claims, damages,
-----
expenses or liabilities arising from information furnished by or on
behalf of Xxxxxxxx, for inclusion in such registration statement.
(vi) Xxxxxxxx shall indemnify Buyer, its officers, directors,
employees, agents, and each person or entity, if any, who controls
Buyer within the meaning of Section 16 of the Securities Act or
Section 21(a) of the Exchange Act, against all loss, claim, damage or
-37-
expense or liability (including all expenses reasonably incurred in
investigating, preparing or defending against any claim whatsoever
including reasonable fees and expenses of Buyer's or such person's or
entity's counsel) to which they may become subject under the
Securities Act, the Exchange Act or otherwise, arising from
information furnished on behalf of Xxxxxxxx, for inclusion in such
registration statement; provided, however, there shall be excluded
from the indemnity obligation of this Section 15(c) any and all
-----
losses, claims, damages, expenses or liabilities arising from
information furnished by or on behalf of Buyer for inclusion in such
registration statement.
(vii) Xxxxxxxx shall give Buyer prompt written notice of any
such liability, claim or lawsuit which Xxxxxxxx contends is the
subject matter of Buyer's indemnification and Buyer thereupon shall be
granted the right to take any and all necessary and proper action, at
its sole cost and expense, with respect to such liability, claim or
lawsuit, including the right, subject to the written consent of
Xxxxxxxx, which consent shall not be unreasonably withheld, to settle,
compromise or dispose of such liability, claim or lawsuit, excepting
therefrom any and all proceedings or hearings before any regulatory
bodies and/or authorities.
(viii) Buyer shall give Xxxxxxxx written notice of any such
liability, claim or lawsuit which Buyer contends is the subject matter
of Xxxxxxxx'x indemnification and Xxxxxxxx thereupon shall take any
and all necessary and proper action, at his sole cost and expense,
with respect to such liability, claim and lawsuit, including the
right, subject to the written consent of Buyer, which consent shall
not be unreasonably withheld, to settle, compromise or dispose of such
liability, claim or lawsuit, excepting therefrom any and all
proceedings or hearings before any regulatory bodies and/or
authorities.
(d) CONDITIONS TO REGISTRATION. Each of the following shall be a
--------------------------
condition precedent to the obligations of Buyer to take any action pursuant
to this Section 15 to register any of the CS Shares:
--
(i) Xxxxxxxx shall furnish to Buyer such information regarding
himself, the CS Shares held by him, and the intended method of
disposition of such securities as shall be required to effect such
registration.
(ii) All information specifically with respect to Xxxxxxxx
furnished to Buyer by or on behalf of Xxxxxxxx for use in connection
with the preparation of any registration statement hereunder shall be
true and correct in all material respects and shall not omit any
material fact necessary to make such information, in light of the
circumstances under which it was made, not misleading.
(iii) Xxxxxxxx will review carefully any registration
statement relating to the CS Shares and each amendment or supplement
thereto upon receipt thereof from Buyer and will promptly advise Buyer
in writing if: (i) the address of Xxxxxxxx (if required to be
disclosed) is not properly set forth; (ii) Xxxxxxxx knows of any
arrangements made or to be made by any person, or of any transaction
already effected, to limit or restrict the sale of the CS Shares
during the period of the public distribution or to stabilize the
market for the CS Shares; or (iii) Xxxxxxxx has entered into any
material arrangement with a broker-dealer
-38-
for the sale of the CS Shares through a cross or block trade, special
offering, exchange distribution or secondary distribution or a
purchase by a broker-dealer.
(iv) Xxxxxxxx shall not distribute any prospectus or other
offering material in connection with the offering and sale of the CS
Shares other than a prospectus or other material permitted by the
Securities Act and prepared by Buyer.
(v) To the extent applicable, Xxxxxxxx will comply with Rules
10b-6 and 10b-7 under the Exchange Act.
(vi) To assist Buyer in qualifying the CS Shares for sale under
applicable state securities laws, Xxxxxxxx will advise Buyer of each
jurisdiction in which Xxxxxxxx intends to offer or sell any or all CS
Shares, and agrees not to offer or sell any CS Shares in any
jurisdiction where they are not registered or exempt from
registration.
(vii) Xxxxxxxx will inform Buyer in writing of any and all
sales, gifts or other transfers or dispositions of any CS Shares or of
any interest therein, whether pursuant to the registration statement
or otherwise, within fifteen (15) calendar days following each such
disposition, such notification to include the date of the disposition,
the number of CS Shares which were disposed of, and other information
which Buyer may reasonably request.
(viii) Xxxxxxxx will not exercise any registration rights with
respect to the CS Shares that he might otherwise have in connection
with any ownership of Target Stock or options, warrants or rights to
purchase Target Stock.
16. TERMINATION.
-----------
(a) This Agreement may be terminated at any time prior to the Closing
by: (i) the mutual consent of Buyer and Xxxxxxxx; or (ii) either Buyer or
Xxxxxxxx if the Closing has not occurred by October 15, 1996.
(b) If for any reason this Agreement terminates prior to Closing and
Target sells any of its assets, or Xxxxxxxx causes the sale of the Target
Stock, or Target or Xxxxxxxx agrees to enter into a business combination
with any person or entity other than Buyer or its designated affiliate
within twelve (12) months from and after such termination, and the
aggregate value of the consideration received by Target, and/or Xxxxxxxx,
as the case may be, exceeds the Conversion Amount, then Target, and
Xxxxxxxx hereby jointly and severally agree to pay Buyer, upon the
consummation of such sale or business combination, the lesser of (i) two
hundred fifty thousand dollars ($250,000) or (ii) an amount equal to fifty
percent (50%) of the aggregate consideration or value of such business
combination received by Target and Xxxxxxxx in excess of the Conversion
Amount; provided, however, such amount shall not be payable if this
Agreement terminates solely due to the inability of Buyer to satisfy its
conditions to Closing, or if this Agreement terminates as a result of a
material breach thereof by Buyer.
17. FURTHER AGREEMENTS OF THE PARTIES. The parties shall take such action
---------------------------------
and execute, or cause to be executed, such additional documents, before, on or
after the Closing Date including, without limitation, consents and
acknowledgments, as may be necessary or desirable to
-39-
effectuate the terms of this Agreement or to otherwise evidence the sale of
Target to Buyer, or its designee, hereunder.
18. NOTICE PROVISION. Any notices or other communications hereunder or
----------------
with respect to this Agreement shall be in writing and shall be given to the
parties
(i) By hand,
(ii) By facsimile,
(iii) By nationally recognized overnight courier or by
Express, registered or certified mail, postage prepaid, return receipt
requested, addressed as follows:
If to Hilliard or Target:
USA Wireless Cable, Inc.
X.X. Xxx 0000
000 Xxxxxxx Xxxxxx
Xxxxxxx, XX 00000-0000
Fax No.: (000) 000-0000
With copies to:
Simmons, Olsen, Ediger, Selzer,
Xxxxxxxx & Xxxxxx, P. C.
Professional & Business Center
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxx 00000-0000
Attention: Xxxx Xxxxxx, Esq.
Fax No.: (000) 000-0000, and
Xxxx, Xxxxx & Xxxxxxxxxxx, P. C.
Dupont Circle Building
0000 Xxxxxxxxxxx Xxxxxx, X. X.
Xxxxxxxxxx, D. C. 20036
Attention: Xxxxxx X. Xxxxxxxxxxx, Esq.
Fax No.: (000) 000-0000
If to Buyer:
CS WIRELESS SYSTEMS, INC.
000 Xxxxxxxx Xxxxx
Xxxxx, XX 00000
Attention: Xx. Xxxx Xxxxxxxxxx
Fax No.: (000) 000-0000
-40-
With copies to:
Day, Xxxxx & Xxxxxx
Xxx Xxxxxxxxxx Xxxxx
Xxxxxxxx, XX 00000
Attention: Xxxxxx Xxxxxxxxx, III, Esq.
Fax No.: (000) 000-0000, and
Xxxxxx Xxxxxxx-Xxxxxxx, Esq.
CS Wireless Systems, Inc.
0000 Xxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
Fax No.: (000) 000-0000
Notices by facsimile transmission shall be deemed to have been received when
confirmed in writing, whether by manual or electronic re-transmission of
receipt, by the party for whom the transmission is intended and notices by
courier shall be deemed received the following business day after delivery to
the courier. This provision shall not be construed as authorization for service
of process or similar papers by facsimile. Any party hereto may, by giving
written notice to the other parties hereto, change the address to which notices
are to be sent.
19. MISCELLANEOUS PROVISIONS.
------------------------
(a) SURVIVAL. The representations and warranties of the parties
--------
hereunder shall survive the Closing and be fully effective and enforceable
for a period of six (6) months after the Closing Date, provided that those
in Sections 4(d), 4(e), 4 (p), 4(u) and 5 shall survive until the
-----------------------------
expiration of the applicable statute of limitations with respect thereto.
Notwithstanding the foregoing, any representation and warranty of the
parties hereunder shall survive the time at which it would otherwise
terminate if written notice of a claim for indemnification thereunder
setting forth such claim in reasonable detail shall have been given to the
party from which indemnity is sought prior to such termination date.
(b) COUNTERPARTS. This Agreement may be executed in one (1) or more
------------
counterparts, each of which need not contain the signatures of all parties
hereto, and all of such counterparts taken together shall constitute one
agreement. Copies of executed counterparts transmitted by facsimile or
other electronic transmission shall be considered original executed
counterparts for purposes of this subparagraph provided receipt of copies
of such counterparts is confirmed.
(c) GOVERNING LAW. This Agreement shall be governed by and construed
-------------
in accordance with the internal laws of the State of Connecticut, without
regard to conflicts of law rules.
(d) AMENDMENTS. This Agreement may be changed, modified or amended
----------
from time to time only in writing signed by the parties.
-41-
(e) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
----------------------
inure to the benefit of the parties hereto and their respective successors
and permitted assigns. No party hereto shall be permitted to assign its
rights or delegate its obligations under this Agreement without the express
prior written consent of each other party hereto; provided, however, Buyer
shall be permitted to assign its rights and delegate its obligations under
this agreement to an affiliate of Buyer without the consent of the other
parties hereto.
(f) WAIVER. No waiver of any provision of this Agreement or any
------
breach hereunder shall be deemed a waiver of any other provision or
subsequent breach, nor shall any such waiver constitute a continuing
waiver. Delay or failure of any party to insist on strict performance or
observance of any provision of this Agreement or to exercise any rights or
remedies hereunder shall not be deemed a waiver. Any waiver shall be
effective only if in writing and signed by the waiving party.
(g) EXPENSES; BROKER'S FINDERS FEES. Each party hereto shall be
-------------------------------
responsible for its own expenses incurred in connection with this
Agreement. No broker is entitled to any fee or commission in connection
with, or as a result of, the transactions contemplated hereby, other than
Xxxxxxx, whose fee is the responsibility of Xxxxxxxx. Xxxxxxxx will
indemnify and hold harmless the Buyer, its affiliates and the Surviving
Corporation from and against any and all claims or liabilities for
brokerage commissions or finder's fees which may be asserted against any of
them as a result of any dealings, arrangements or agreements by Xxxxxxxx or
Target with any such person, firm, corporation or other entity. Buyer will
indemnify and hold harmless Xxxxxxxx from and against any and all claims or
liabilities for brokerage commissions or finder's fees which may be
asserted against Xxxxxxxx as a result of any dealings, arrangements or
agreements by Buyer with any such person, firm, corporation or other entity
other than Xxxxxxx. Xxxxxxxx represents and warrants that the agreement
covering the fee and any other arrangements applicable to Xxxxxxx is
between Xxxxxxxx and Xxxxxxx and that Target is not a party to such
agreement.
(h) ENTIRE AGREEMENT. This Agreement and the annexed schedules and
----------------
exhibits, together with the letter agreement, dated as of April 22, 1996,
between Xxxxxxxx, Target and Buyer and the letter agreement, dated as of
May 6, 1996, between Buyer and Target, constitute the entire agreement
between the parties relating to the subject matter hereof and supersede all
prior oral and written understandings between the parties relating thereto.
(i) CAPTIONS. Section titles or captions contained in this Agreement
--------
are for convenience of reference only and shall not define, interpret or
limit this Agreement.
(j) LISTS. Any list of one or more items preceded by the words
-----
"include" or "including" shall not be deemed limited to the stated items
but shall be deemed to be without limitation.
(k) SPECIFIC PERFORMANCE. The parties acknowledge that they would be
--------------------
irreparably damaged, and there would be no adequate remedy at law for a
breach by any party to this Agreement, and accordingly, the terms of this
Agreement shall be specifically enforced.
-42-
(l) SEVERABILITY. If any provision hereof is found invalid or
------------
unenforceable by a court of competent jurisdiction, it shall be ineffective
to the extent of such invalidity or unenforceability, without affecting in
any way the remaining provisions hereof.
[balance of page intentionally left blank]
-43-
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day first above written.
CS WIRELESS SYSTEMS, INC.
By:/S/ Xxxx Xxxxxxxxxx
------------------------------------
Xxxx Xxxxxxxxxx
Vice Chairman
/S/ Xxxxxxxxx X. Xxxxxxxx
---------------------------------------
Xxxxxxxxx X. Xxxxxxxx
USA WIRELESS CABLE, INC.
By:/S/ Xxxxxxxxx X. Xxxxxxxx
------------------------------------
Xxxxxxxxx X. Xxxxxxxx
President
List of Schedules
-----------------
Schedule 4(a) - Foreign Qualifications of Target
Schedule 4(c) - Contravention of Leases, Agreements, etc. and
Required Consents of Target
Schedule 4(d) - Capitalization of Target
Schedule 4(e) - Tax Matters of Target
Schedule 4(e)(v) - Transferred Assets Transactions
Schedule 4(f)(ii) - Material Liabilities of Target
Schedule 4(f)(iii) - Indebtedness of Target
Schedule 4(f)(iv) - Other Target Businesses
Schedule 4(f)(v) - Material Adverse Effect
Schedule 4(g) - Licenses and BTAs
Schedule 4(h) - Channel Leases
Schedule 4(i) - Contracts
Schedule 4(j) - Equipment
Schedule 4(k) - Litigation of Target
Schedule 4(o) - Technical Facilities
Schedule 4(t) - Copyright Act Matters
Schedule 4(u) - Environmental Matters
Schedule 4(v) - Programming Agreements
Schedule 4(w) - Facilities
Schedule 4(y) - Retransmission Consents
Schedule 5(a) - Employee Benefits Plans
Schedule 5(e) - Current Employees of Target
Schedule 6(c) - Buyer's Required Consents
Schedule 6(d) - Capitalization of Buyer
Schedule 6(e) - Exceptions to General Business Representation
of Buyer
Schedule 6(f) - Litigation of Buyer
Schedule 6(k) - Buyer's Exceptions to Assignment of BTA
Authorizations
List of Exhibits
----------------
Exhibit A - Non-Competition Agreement
Exhibit B - Irrevocable Proxy
Exhibit C - Intentionally omitted
Exhibit D - Intentionally omitted
Exhibit E - Intentionally omitted
Exhibit F - Tax Certificates
Exhibit G - Intentionally omitted
Exhibit H - Escrow Agreement
Exhibit I - Estoppel Certificate
