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Exhibit 10.27
STOCK PURCHASE AGREEMENT
among
CRAIG WIRELESS HONOLULU INC.,
CRAIG WIRELESS NEVADA INC.,
CRAIG WIRELESS SYSTEMS INC.,
and
FIXED WIRELESS HOLDINGS, LLC
Dated as of September 30, 2004
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TABLE OF CONTENTS
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Page
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ARTICLE 1 DEFINITIONS
................................................... 1
ARTICLE 2 PURCHASE AND SALE OF SHARES
................................... 7
Section 2.1 Purchase and Sale of the Shares ......................
7
Section 2.2 Purchase Price .......................................
7
Section 2.3 Payment of Purchase Price ............................
7
Section 2.4 Closing ..............................................
7
ARTICLE 3 REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY
.......... 7
Section 3.1 Organization and Power; Subsidiaries and
Investments .......................................... 7
Section 3.2 Authorization; Enforceability ........................
8
Section 3.3 Capitalization. ......................................
8
Section 3.4 No Breach ............................................
9
Section 3.5 No Conflict of Interest ..............................
9
Section 3.6 Financial Statements .................................
10
Section 3.7 FCC Matters. .........................................
10
Section 3.8 Leases ...............................................
12
Section 3.9 Tower Leases. ........................................
12
Section 3.11 Brokers ..............................................
14
Section 3.12 Litigation; Proceedings ..............................
14
Section 3.13 Tax Returns and Payments .............................
14
Section 3.14 Environmental Protections ............................
15
Section 3.15 Disclosure ...........................................
16
Section 3.16 Purchaser's Acknowledgement ..........................
16
ARTICLE 4
...............................................................
17
REPRESENTATIONS AND WARRANTIES OF EACH RELATED PARTY
.................... 17
Section 4.1 Authorization of Transactions ........................
17
Section 4.2 Absence of Conflicts .................................
17
Section 4.3 Litigation ...........................................
17
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF PURCHASER
................... 17
Section 5.1 Organization and Power ...............................
17
Section 5.2 Authorization; Enforceability ........................
18
Section 5.3 Absence of Conflicts .................................
18
Section 5.4 Litigation ...........................................
18
Section 5.5 Brokers ..............................................
18
ARTICLE 6 COVENANTS AND OTHER AGREEMENTS
................................ 18
Section 6.1 Covenants of Seller ..................................
18
Section 6.2 Exclusivity ..........................................
19
Section 6.3 Consummation of Transactions .........................
19
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Section 6.4 Compliance with Law ..................................
20
Section 6.5 Certain Notices ......................................
20
Section 6.6 Confidentiality ......................................
20
Section 6.7 Further Assurances ...................................
21
Section 6.8 FCC Qualifications ...................................
21
Section 6.9 Consents .............................................
21
Section 6.10 Employee Matters .....................................
21
Section 6.11 U.S. Reorganization ..................................
21
Section 6.12 Assumed Liabilities ..................................
22
Section 6.13 Change of Name .......................................
22
Section 6.14 Canadian Reorganization ..............................
22
ARTICLE 7 CONDITIONS TO CLOSING
......................................... 22
Section 7.1 Conditions to the Obligations of Both Parties ........
22
Section 7.2 Conditions to the Obligations of Seller ..............
23
Section 7.3 Conditions to the Obligations of Purchaser ...........
23
ARTICLE 8
...............................................................
24
TERMINATION
.............................................................
24
Section 8.1 Termination ..........................................
24
Section 8.2 Effect of Termination ................................
25
ARTICLE 9 SURVIVAL AND REMEDIES
......................................... 25
Section 9.1 Survival .............................................
25
Section 9.2 Seller Indemnification ...............................
25
Section 9.3 Purchaser Indemnification ............................
27
Section 9.4 Tax Matters. .........................................
27
Section 9.5 Indemnification Procedures ...........................
29
Section 9.6 Offset Against Equipment Lease Agreement Obligation. .
30
ARTICLE 10 MISCELLANEOUS
................................................ 30
Section 10.1 Entire Agreement .....................................
30
Section 10.2 Amendments and Waivers ...............................
30
Section 10.3 Remedies Cumulative ..................................
30
Section 10.4 Assignment ...........................................
30
Section 10.5 Notices ..............................................
30
Section 10.6 Governing Law; Jurisdiction; Waiver of Jury Trial. ...
31
Section 10.7 Expenses .............................................
32
Section 10.8 Invalidity ...........................................
32
Section 10.9 Counterparts .........................................
32
Section 10.10 Headings
............................................. 32
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SCHEDULES AND EXHIBITS
Exhibit A - Canadian Reorganization
Schedule A - Leases
Schedule B - Tower Sites
Schedule 3.3 - Capitalization
Schedule 3.4 - No Breach
Schedule 3.5 - No Conflict
Schedule 3.7(a) - Licenses and Leases
Schedule 3.7(b) - Applications
Schedule 3.7(c) - Claims
Schedule 3.7(d) - Interference
Schedule 3.8 - Leases
Schedule 3.9 - Tower Leases
Schedule 3.10 - Agreements
Schedule 3.14 - Environmental Protections
Schedule 6.12 - Assumed Liabilities
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STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of September 30, 2004 (the
"Effective
Date"), by and among Craig Wireless Honolulu Inc., a Hawaii
corporation (the
"Company"), Craig Wireless Nevada Inc., a Nevada corporation
("Seller"), Craig
Wireless Systems Inc., a Canadian federal corporation ("CWS"), and
Fixed
Wireless Holdings, LLC, a Delaware limited liability company
("Purchaser").
Seller, the Company, CWS and Purchaser may be referred to herein as
"Parties" or
each a "Party."
A. The Company owns and operates a wireless cable system using MMDS
and
ITFS channels (each as defined below) to serve the Island of Oahu
("System").
B. Seller owns all of the issued and outstanding shares of the
capital
stock of the Company (the "Shares"). CWS owns all of the
outstanding shares of
the capital stock of Seller.
C. Seller desires to sell to Purchaser (or Purchaser's designee),
and
Purchaser desires to acquire from Seller, all of the Shares, all on
the terms
and subject to the conditions set forth herein.
D. Prior to the Closing, the Company intends to sell all its
equipment,
settle certain of its accounts payable, terminate its employees and
operations
and transfer any excess cash to the Seller and the Buyer
acknowledges such
intended actions.
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants, conditions and agreements
hereinafter
set forth, the Parties agree as follows:
ARTICLE 1
DEFINITIONS
As used in this Agreement, the following terms shall have the
meanings set
forth or referenced below:
"Actual Knowledge" means (i) in the case of Seller, the Company or
any
Related Party, the actual knowledge of Boyd Craig and Gord
Johannson, without
having made due enquiry (ii) in the case of Purchaser, the actual
knowledge of
Noelle Beams without having made due enquiry.
"Acquisition Proposal" means any offer or proposal for, or any
indication
of interest in (i) a merger, consolidation, share exchange,
business
combination, reorganization, recapitalization or other similar
transaction
involving the Company or (ii) the acquisition, directly or
indirectly, of (A) an
interest in the voting securities of the Company or (B) any
interest in the
Licenses or Leases, other than the Transactions.
"Affiliate" means, with respect to any Person, any other Person
that,
directly or indirectly, alone or through one or more
intermediaries, controls,
is controlled by or is under common control with that Person. For
purposes of
this definition, "control" (including the
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terms "controlling" and "controlled") means the power to direct or
cause the
direction of the management and policies of a Person, directly or
indirectly,
whether through the ownership of securities or partnership or other
ownership
interests, by contract or otherwise.
"Agreement" means this Purchase Agreement and all Exhibits and
Schedules
hereto, as amended, supplemented or otherwise modified from time to
time in
accordance with the terms hereof.
"Agreement Regarding Manitoba Operations" means the Agreement
Regarding
Manitoba Operations dated on or about the Effective Date, among the
Parties to
this Agreement.
"Ancillary Documents" means the Loan Documents, the Equipment
Lease
Agreement, the Investment Documents, and any documents executed or
delivered by
a Party pursuant thereto.
"Assumed Liabilities" is defined in Section 6.12.
"Balance Sheet" is defined in Section 3.6.
"Balance Sheet Date" is defined in Section 3.6.
"Best of the Knowledge" means (i) in the case of Seller, the
Company or any
Related Party, the knowledge of Boyd Craig and Gord Johannson,
after due enquiry
(ii) in the case of Purchaser, the knowledge of Noelle Beams after
due enquiry.
"Business" means the Company's business of operating the
System.
"Business Day" means any day, other than a Saturday or Sunday, on
which
commercial banks and foreign exchange markets are open for business
in Seattle,
Washington.
"Canadian Reorganization" means the steps described in the attached
Exhibit
A.
"Channels" means the ITFS Channels and the MMDS Channels.
"Claim" is defined in Section 9.5(a).
"Closing" is defined in Section 2.4.
"Closing Date" is defined in Section 2.4.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" is defined in the preamble.
"Confidential Information" means any and all information regarding
the
business, finances, operations, products, services, business plans,
market
launch schedules, product
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pricing, and customers of either Party or its Affiliates, in
written or oral
form or in any other medium.
"Consents" means all consents and approvals of Governmental
Authorities or
other third parties necessary to authorize, approve or permit the
Parties hereto
to consummate the Transactions.
"Damages" means any and all losses, claims, demands,
liabilities,
obligations, actions, suits, orders, statutory or regulatory
compliance
requirements, or proceedings asserted by any Person, and all
damages, costs,
expenses, assessments, judgments, recoveries and deficiencies,
including
interest, penalties, investigatory expenses, consultants' fees, and
reasonable
attorneys' fees and costs, of every kind and description,
contingent or
otherwise.
"Disclosing Party" is defined in Section 6.6.
"Effective Date" is defined in the introductory paragraph.
"Equipment Lease Agreement" means the Equipment Lease Agreement
between
Purchaser or its designee and the Joint Venture with respect to the
Joint
Venture's lease or use of NextNet Base Station Equipment, in form
and substance
satisfactory to Purchaser in its sole discretion.
"Employees" means the employees of the Company.
"FCC" means the Federal Communications Commission or any successor
agency
thereof.
"Final Order" means an action or decision of the FCC as to which
(i) no
request for a stay or similar request is pending, no stay is in
effect, the
action or decision has not been vacated, reversed, set aside,
annulled or
suspended and any deadline for filing such request that may be
designated by
statute or regulation has passed, (ii) no petition for rehearing
or
reconsideration or application for review is pending and the time
for the filing
of any such petition or application has passed, (iii) the FCC does
not have the
action or decision under reconsideration on its own motion and the
time within
which it may effect such reconsideration has passed, and (iv) no
appeal is
pending, including other administrative or judicial review, or in
effect and any
deadline for filing any such appeal that may be designated by
statute or rule
has passed.
"Financial Statements" is defined in Section 3.6.
"GAAP" means Generally Accepted Accounting Principles in the United
States.
"Governmental Authority" means a Federal, state or local court,
legislature, governmental agency (including the United States
Department of
Justice), commission or regulatory or administrative authority
or
instrumentality.
"Indebtedness" means, with respect to any Person at any date,
without
duplication: (i) all obligations of such Person for borrowed money
or in respect
of loans or advances;
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(ii) all obligations of such Person evidenced by bonds, debentures,
notes or
other similar instruments (including, without limitation, any
seller notes,
deferred purchase price obligations or earn-out obligations issued
or entered
into in connection with any acquisition undertaken by such Person);
(iii) all
obligations in respect of letters of credit, whether or not drawn,
and bankers'
acceptances issued for the account of such Person; (iv) all
capitalized lease
liabilities of such Person, but not leases characterized as
operating leases on
such Person's financial statements; (v) all interest rate
protection agreements
of such Person (valued on a market quotation basis); (vi) all
obligations of
such Person secured by a contractual lien; (vii) all guarantees of
such Person
in connection with any of the foregoing; (viii) all outstanding
checks that will
ultimately be funded through such Person's line of credit or other
borrowed
money and (ix) any accrued interest, prepayment premiums or
penalties related to
any of the foregoing.
"Indemnification Threshold" is defined in Section 9.5(d).
"Investment Documents" means the agreements pursuant to which
Purchaser, or
Purchaser's designee, acquires an ownership interest in the Joint
Venture.
"ITFS" means Instructional Television Fixed Service to be known as
the
Educational broadband Service on the effective date of the FCC's
new rules
adopted in Docket 03-66.
"ITFS Channels" means each channel listed in the ITFS Licenses.
"ITFS Licenses" means the licenses granted by the FCC authorizing
the
construction and operation of ITFS Channels in the markets listed
in Schedule
3.7(a), covering the households per ITFS Channel listed
therein.
"Joint Venture" means the entity in which Seller is, or will be,
an
investor, that will be used to develop wireless spectrum
opportunities in
Manitoba, Canada.
"Law" means applicable common law and any statute, ordinance, code
or other
law, rule, permit, permit condition, regulation, order, decree,
technical or
other standard, requirement or procedure enacted, adopted,
promulgated, applied
or followed by any Governmental Authority.
"Leases" means the lease agreements pursuant to which the Company
holds the
rights under the ITFS Licenses and which are listed in Schedule
A.
"Licenses" means the the MMDS Licenses and any other FCC
authorizations
held by the Company.
"Liens" means any mortgage, pledge, security interest, conditional
sale or
other title retention agreement, encumbrance, lien, easement,
option, debt,
charge, claim or restriction of any kind.
"Loan" is defined in Section 2.3.
4
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"Loan Documents" means the Loan Agreement between the Parties and
the other
agreements and documents that relate to the Loan and that are
referred to in the
Loan Agreement.
"Material Adverse Effect" means any event, circumstance, change,
occurrence
or effect (collectively, "Events") that, individually or taken
together with all
other Events, has or would be reasonably anticipated to have in the
future a
material and adverse effect upon the assets, liabilities, financial
condition,
operating results of the Company.
"MMDS" means Multipoint Distribution Service to be known as the
Broadband
Radio Service upon the effective date of the FCC's new rules
adopted in Docket
03-66.
"MMDS Channels" means each channel listed in the MMDS Licenses.
"MMDS Licenses" means the licenses granted by the FCC authorizing
the
Company to construct and operate MMDS Channels in the markets
listed in Schedule
3.7(a), covering the households per MMDS Channel listed
therein.
"NextNet Base Station Equipment" means the equipment identified in
the
Equipment Lease Agreement.
"Noncompete Agreement" means the Noncompete Agreement between the
Joint
Venture and Seller, CWS and their Affiliates (the "Noncompete
Parties") entered
into in connection with the Joint Venture and the Investment
Agreements,
pursuant to which the Noncompete Parties agree not to compete with
the business
of the Joint Venture.
"Party" or "Parties" is defined in the preamble.
"Person" means any general partnership, limited partnership,
limited
liability company, corporation, joint venture, trust, business
trust,
Governmental Authority, cooperative, association, individual or
other entity,
and the heirs, executors, administrators, legal representatives,
successors, and
assigns of such person as the context may require.
"Pre-Closing Tax Period" is defined in Section 9.4.
"Proceeding" means any action, suit, litigation, arbitration
proceeding
(including any civil, criminal, administrative, investigative or
appellate
proceeding), hearing, inquiry, audit, examination or investigation
commenced,
brought, conducted or heard by or before, or otherwise involving
any court or
other Government Agency or any arbitrator or arbitration panel.
"Purchase Price" is defined in Section 2.2.
"Purchaser" is defined in the preamble.
"Purchaser Indemnified Parties" is defined in Section 9.2.
"Receiving Party" is defined in Section 6.6.
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"Rejected Liabilities" is defined in Section 6.12.
"Related Party" means CWS and, following the execution and delivery
of
joinders to this Agreement as contemplated under Section 6.11, each
of CWI and
Newco and, subsequent to the Canadian Reorganization, and following
the
execution and delivery of a joinder to this Agreement as
contemplated under
Section 6.14, means New Holdco as referred to therein.
"Seller" is defined in the preamble.
"Seller Indemnified Parties" is defined in 9.3.
"Shares" is defined in Recital B.
"System" is defined in Recital A.
"Taxes" means all taxes, however denominated, including any
interest,
penalties or other additions to tax that may become payable in
respect thereof,
imposed by any federal, territorial, state, local or foreign
government or any
agency or political subdivision of any such government, which taxes
shall
include, without limitation, all income or profits taxes (including
but not
limited to federal and state income taxes), real property gains
taxes, payroll
and employee withholding taxes, unemployment insurance taxes,
social security
taxes, sales and use taxes, ad valorem taxes, excise taxes,
franchise taxes,
gross receipts taxes, business license taxes, occupation taxes,
real and
personal property taxes, stamp taxes, environmental taxes, transfer
taxes,
workers' compensation, Pension Benefit Guaranty Corporation
premiums, and other
taxes or similar governmental charges.
"Tower Leases" means the agreements relating to the use by the
Company of
Transmission Towers or other transmission equipment (and the
embedded software
and intellectual property rights incorporated therein) on the Tower
Sites.
"Tower Sites" means any real property used or occupied by the
Company on
which Transmission Towers used by the Company are located, which
may include
separate towers, building roof-tops and other locations and which
are listed in
Schedule B.
"Tower Subleases" means the agreements under which the Company is a
lessor,
sublessor or licensor of, or makes available for use to any Person,
any Tower
Site or portion thereof that is the subject of a Tower Lease.
"Transmission Towers" means any towers or other "antenna
structures" as
defined by the FCC in Part 17 of the FCC Rules.
"Transactions" means the transactions contemplated by this
Agreement and
the Ancillary Documents.
"U.S. Reorganization" shall mean the transactions described below
and any
transaction in furtherance thereof:
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(a) Craig Wireless Systems Inc. will incorporate a new
subsidiary
("Newco") under the Canada Business Corporations Act;
(b) CWS will transfer the shares it holds in Craig Wireless Nevada
Inc. to
Newco in exchange for shares of Newco;
(c) Craig Wireless International Inc. ("CWI") will transfer the
shares it
holds in SkyCable International Inc. ("SkyCable") to Newco in
exchange
for shares of Newco;
(d) Seller and SkyCable will merge; and
(e) The proceeds of the sale of the equipment owned by the Company
will be
distributed to Seller.
ARTICLE 2
PURCHASE AND SALE OF SHARES
Section 2.1 Purchase and Sale of the Shares. Subject to the terms
and
conditions set forth herein and on the basis of the
representations, warranties,
covenants and agreements contained herein, at the Closing, the
Seller shall sell
to Purchaser, and Purchaser shall purchase from the Seller, the
Shares, free and
clear of all Liens (other than any restrictions under the
Securities Act of
1933, as amended).
Section 2.2 Purchase Price. The purchase price for the Shares shall
be Ten
Million Dollars ($10,000,000) (the "Purchase Price").
Section 2.3 Payment of Purchase Price. The Purchaser is making a
loan to
Seller prior to the Closing, in the amount of $10,000,000 (the
"Loan"), upon the
terms and subject to the conditions stated in the Loan Documents.
The Purchase
Price shall be payable at the Closing by means of a credit against
the
outstanding balance of the Loan.
Section 2.4 Closing. Upon the terms and subject to the conditions
hereof,
the closing of the sale of the Shares ("Closing") shall take place
at the
offices of Davis Wright Tremaine LLP, 2600 Century Square, 1501
Fourth Avenue,
Seattle, WA 98101, within five (5) Business Days following the date
on which the
last condition under Article 7 has been satisfied or waived, or at
such other
time and place as the Parties may mutually agree. The date on which
Closing
occurs is called the "Closing Date."
ARTICLE 3
REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY
As a material inducement to Purchaser to enter into this Agreement
and
purchase the Shares to be purchased by it hereunder, Seller and the
Company
represents and warrants to Purchaser that:
Section 3.1 Organization and Power; Subsidiaries and Investments.
Each of
Seller and the Company is a corporation duly organized, validly
existing and in
good
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standing under the laws of the jurisdiction of its organization.
Hawaii is the
only jurisdiction in which the ownership of properties or the
conduct of the
Business requires the Company to be so qualified, except where the
failure to be
so qualified would not have a Material Adverse Effect. Seller and
the Company
have all requisite power and authority and all licenses, permits
and
authorizations necessary to own and operate their respective assets
and to carry
on the Business as now conducted. Seller and the Company have all
requisite
power and authority to execute and deliver this Agreement and the
Ancillary
Documents and to perform their respective obligations hereunder and
thereunder.
The Company does not own or control (directly or indirectly) any
stock,
partnership interest, joint venture interest, equity participation
or other
security or interest in any other Person. The articles of
incorporation and
bylaws of the Company that have previously been furnished to
Purchaser reflect
all amendments thereto and are correct and complete. The corporate
records and
minute books of the Company (complete and up-to-date copies of
which were
provided to the Purchaser and its counsel for review) contain
complete and
accurate minutes of all meetings of the directors and shareholders
of the
Company held since its incorporation, and original signed copies of
all
resolutions and by-laws duly passed or confirmed by the directors
or
shareholders of the Company other than at a meeting. The stock
ledgers and
register of directors and any similar corporate records of the
Company are
complete and accurate.
Section 3.2 Authorization; Enforceability. The execution, delivery
and
performance by Seller and the Company of this Agreement, the
Ancillary Documents
and each of the Transactions have been duly and validly authorized
by Seller and
the Company and, other than the Consents, no other act or
proceeding on the part
of Seller and the Company or their boards of directors or
stockholders is
necessary to authorize the execution, delivery or performance by
Seller and the
Company of this Agreement or any Ancillary Document or the
consummation of any
of the Transactions. This Agreement has been duly executed and
delivered by
Seller and the Company, and this Agreement constitutes, and the
Ancillary
Documents upon execution and delivery by Seller and/or the Company,
as
applicable, will each constitute, a valid and binding obligation of
Seller
and/or the Company, respectively, enforceable against each in
accordance with
its terms, subject to bankruptcy, insolvency, fraudulent
transfer,
reorganization, moratorium and similar laws of general
applicability relating to
or affecting creditors' rights and to general equity
principles.
Section 3.3 Capitalization.
(a) The attached Schedule 3.3 accurately sets forth the authorized
and
outstanding equity of the Company and the name and number of shares
held by
Seller as at the Effective Date.
(b) All of the issued and outstanding shares of the Company (i)
have
been duly authorized, are validly issued, fully paid and
nonassessable, (ii) are
not subject to, nor were they issued in violation of, any
preemptive rights, and
(iii) are owned of record and beneficially by Seller.
(c) Except for this Agreement and as may be set forth on Schedule
3.3,
there are no outstanding or authorized options, warrants, rights,
contracts,
pledges, calls, puts, rights to subscribe, conversion rights or
other agreements
or commitments to which the
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Company is a party or which is binding upon the Company providing
for the
issuance, disposition or acquisition of any of its equity or any
rights or
interests exercisable therefor.
(d) There are no outstanding or authorized equity appreciation,
phantom stock or similar rights with respect to the Company.
(e) Except as set forth on Schedule 3.3, there are no voting
trusts,
proxies or any other agreements or understandings with respect to
the voting of
the equity of the Company.
(f) The Company is not subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire or retire any of its
equity. At
the Closing, Purchaser shall receive all capital stock of the
Company free and
clear of all Liens (other than restrictions on transfer arising
under the
Securities Act of 1933, as amended, and state or foreign securities
laws and
restrictions on transfer imposed or regulated by the FCC).
(g) Except as set forth on Schedule 3.3, there are no statutory
or
contractual preemptive rights, rights of first refusal or similar
rights or
restrictions with respect to the sale of the Shares hereunder.
(h) The Company has not violated any applicable federal or
state
securities laws in connection with the offer, sale or issuance of
any of its
capital stock, and the offer and sale of the Shares hereunder does
not require
any registration under any applicable federal or state securities
laws.
Section 3.4 No Breach. Except as set forth on Schedule 3.4, the
execution,
delivery and performance by Seller and the Company of this
Agreement and the
Ancillary Documents and the consummation of each of the
Transactions (including,
without limitation, the purchase and sale of the Shares) do not and
will not (a)
violate or conflict with any of their respective certificates or
articles of
incorporation, bylaws or other organizational documents; (b)
violate or conflict
with in any material respect, result in any material breach of,
constitute a
default under, result in the termination or acceleration of, create
in any party
the right to accelerate, terminate, modify or cancel, or require
any notice
under any Lease, License, Tower Lease, Tower Sublease or other
agreement listed
on Schedule 3.10; (c) result in the creation or imposition of any
Lien upon any
assets or any of the equity of the Company; (d) require any
authorization,
consent, approval, exemption or other action by or notice to any
court, other
Governmental Authority or other Person or entity, other than the
Consent of the
FCC, under the provisions of (i) any Law to or by which the Company
or any of
the Company's assets are subject or bound or (ii) any Lease,
License, Tower
Lease, Tower Sublease or other agreement listed on Schedule 3.10;
or (e) violate
in any material respect any law, statute, regulation, rule,
judgment, decree,
order, stipulation, injunction, charge or other restriction of any
Governmental
Authority to or by which Seller or the Company or any of their
assets are
subject or bound.
Section 3.5 No Conflict of Interest. Except as set forth in
Schedule 3.5,
the Company is not indebted, directly or indirectly, to any of its
officers,
directors, stockholders or Employees or to their respective
Affiliates, spouses
or children, in any amount whatsoever
9
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other than in connection with expenses or advances of expenses
incurred in the
ordinary course of business or relocation expenses of Employees.
None of the
Company's officers, directors, stockholders or any members of their
immediate
families are, directly or indirectly, indebted to the Company or
have any direct
or indirect ownership interest in any firm or corporation with
which the Company
is affiliated or with which the Company has a business
relationship, or any firm
or corporation which competes with the Company except that
officers, directors
and/or stockholders of the Company may own stock in (but not
exceeding two
percent of the outstanding capital stock of) any publicly traded
companies that
may compete with the Company. None of the Company's officers,
directors or
stockholders or any members of their immediate families are,
directly or
indirectly, interested in any material contract with the Company.
Except as set
forth on Schedule 3.5, the Company is not a guarantor or indemnitor
of any
indebtedness of any other person, firm or corporation.
Section 3.6 Financial Statements. The Company has provided to
Purchaser the
following financial statements ("Financial Statements"): (a) a
balance sheet at
December 31, 2003, together with the related statements of
operations,
stockholders' equity and cash flows for the fiscal year then ended,
and the
report thereon of Deloittes LLP, chartered accountants and (b) an
unaudited
balance sheet (the "Balance Sheet") at August 31, 2004 (the
"Balance Sheet
Date"), and the related statements of income and cash flows for the
twelve
months then ended, prepared by the Company. Such financial
statements (i) are in
accordance with the books and records of the Company, (ii) present
fairly the
financial condition of the Company at the balance sheet dates and
the results of
its operations for the periods therein specified, and (iii) have,
in all
material respects, been prepared in accordance with GAAP applied on
a basis
consistent with prior accounting periods (except as may be
indicated in the
notes thereto and except for, with respect to unaudited financial
statements,
the absence of footnotes). Specifically, but not by way of
limitation, the
Balance Sheet discloses all of the debts, liabilities and
obligations of any
nature (whether absolute, accrued or contingent and whether due or
to become
due) of the Company at the Balance Sheet Date which, individually
or in the
aggregate, are material and which in accordance with GAAP would be
required to
be disclosed in the Balance Sheet. The Balance Sheet includes
appropriate
reserves for all Taxes and other liabilities accrued at the Balance
Sheet Date
but not yet payable. The Company's books and records are, in all
material
respects, maintained in accordance with GAAP. Nothwithstanding the
foregoing,
the amounts set forth in the Financial Statements relating to
indebtedness owing
to Wellington West promissory notes may not be accurate as they do
not take into
account the exchange rate or the interest rate charged on such
notes.
Section 3.7 FCC Matters.
(a) The information set forth on Schedule 3.7(a) is true, correct,
and
complete. True and complete copies of the Licenses and Leases have
been
delivered to Purchaser. There is no condition imposed by the FCC as
part of any
of the MMDS Licenses, or to the Seller's Actual Knowledge, the ITFS
Licenses,
that is neither set forth on the face of the MMDS or ITFS Licenses
as issued by
the FCC nor contained in the FCC Rules applicable generally to
stations of the
type, nature and class or location of the Station. The Licenses and
the ITFS
Licenses, constitute all authorizations from the FCC necessary or
required for
and/or used in the operations of the Business as of the Effective
Date. The
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MMDS Licenses, and to the Seller's Knowledge, the ITFS Licenses,
have been
granted to the Company by Final Order and are (and will be on the
Closing Date)
in full force and effect.
(b) Except as set forth on Schedule 3.7(b), no application, action
or
proceeding is pending for the modification of the MMDS Licenses, or
to the
Seller's Actual Knowledge, the ITFS Licenses. Except for actions or
proceedings
affecting MMDS and ITFS facilities generally, no application,
action or
proceeding is pending, or to the Actual Knowledge of Seller and the
Company,
threatened, against Seller or the MMDS Licenses, the ITFS Licenses
or Leases
which could result in (i) the denial of an application for renewal
for the MMDS
Licenses, or to the Seller's Actual Knowledge, the ITFS Licenses,
(ii)
revocation, forfeiture, non-renewal or suspension of the MMDS
Licenses, or to
the Seller's Actual Knowledge, the ITFS Licenses, (iii) issuance of
a
cease-and-desist order, or (iv) the imposition of any fines,
penalty, damages or
other sanctions by a Governmental Authority relating to the
operation of the
MMDS Licenses, or to the Seller's Actual Knowledge, the ITFS
Licenses. There are
no facts or circumstances existing that would give rise to any such
denial,
revocation, suspension or any proceeding with the FCC or any other
Governmental
Authority.
(c) Except as set forth on Schedule 3.7(c), no Person other than
the
Company has any right, title, interest or claim in or to the MMDS
Licenses and,
to the Actual Knowledge of the Seller, no person other than the
applicable ITFS
licencee and the Company has any right, titles, interest or claim
in or to the
ITFS Licenses.
(d) Except as set forth on Schedule 3.7(d), the Company has not
agreed
to accept or allowed any electromagnetic interference from any
other FCC
licensees, permittees or applicants with respect to the MMDS
Licenses, and to
the Seller's Actual Knowledge, the ITFS Licenses and/or Channels.
Except as set
forth on Schedule 3.7(d), no such licensees, permittees or
applicants have
agreed to accept electromagnetic interference from the Company with
respect to
their respective facilities.
(e) The Company is in compliance with all applicable Laws except
for
any non-compliance that, individually or in the aggregate, will not
have a
material adverse effect on the MMDS Licenses, and to the Seller's
Actual
Knowledge, the ITFS Licenses, or the Leases, or on Seller's or the
Company's
ability to consummate the Transactions. Since the filing of the
initial
application for the Licenses, the Company has complied in all
material respects
with FCC Laws applicable to the Licenses, including without
limitation the
Communication Act of 1934, as amended. Since the issuance of the
Licenses, the
Company has complied in all material respects with all of the terms
and
conditions of the Licenses. Except as set forth in Schedule 3.7(a),
the Licenses
are free and clear of all Liens and are unimpaired by any acts or
omissions of
the Company, its agents, assignees and licensees. Except as set
forth in
Schedule 3.7(a), all material documents, FCC applications and
notifications and
annual reports required to be filed at any time by the Company with
the FCC with
respect to the Licenses have been timely filed or the time period
for such
filing has not lapsed. All such documents filed since the date that
the Licenses
were issued are correct in all material respects. All amounts owed
to the FCC in
connection with the Licenses have been timely paid.
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<PAGE>
(f) The facilities subject to the Licenses for which certification
or
modification of completion of construction has been filed with the
FCC are
operating and have been operating, without interruption, except
where such
interruption would not be material and would not put the Licenses
at any risk
before the FCC, in material compliance with the Licenses therefore
and the FCC
Laws. The Company has not deconstructed any station since notifying
the FCC that
such station was constructed. The Company is not transmitting from
or otherwise
operating any facility that is not the subject of a license of the
FCC. None of
the facilities subject to the Licenses, (i) is authorized pursuant
to an
authorization which is subject to successful challenge before the
FCC or any
court of competent jurisdiction or (ii) is subject to any lease,
sublease or any
agreement to make it available to a third party. None of the
facilities subject
to the Licenses are operating pursuant to special temporary or
developmental
authority. To the Company's Actual Knowledge, the ITFS Licenses are
in
compliance with the FCC's educational programming requirements.
Section 3.8 Leases. The Company has delivered to Purchaser true
and
complete copies of the Leases. Except as set forth on Schedule 3.8,
the Leases
are in full force and effect, are free from any claims, liabilities
or Liens and
are unimpaired by any acts or omissions of the Company, its
Affiliates, agents,
assignees and licensees. The Company has valid leasehold interests
in the
Leases. Except as set forth on Schedule 3.8, since entering into
the Leases, the
Company has complied in all material respects with all of the terms
and
conditions of the Leases. Except as set forth on Schedule 3.8,
neither the
Company nor, to the Actual Knowledge of Seller and the Company, any
other party
to any of the Leases has failed to comply with or is in material
breach or
material default thereunder; and, to the Actual Knowledge of Seller
and the
Company, no condition exists or event has occurred and is
continuing as of the
date hereof and the Closing which, with or without the lapse of
time or the
giving of notice, or both, would constitute a material default by
any party
under any Lease.
Section 3.9 Tower Leases.
(a) Schedule 3.9 sets forth a true and complete list of the
following
information in relation to each of the Tower Leases: (i) the market
in which the
lease is used, (ii) the expiration date of the lease, (iii) the
name of the
lessor, (iv) the antenna structure registration number, (v) the
address or
location of the leased premises or Tower Site, and (vi) the
monthly, quarterly
or annual rent, as applicable, payable under such Tower Lease. True
and complete
copies of the Tower Leases have been provided by the Company to
Purchaser. The
Tower Leases set forth on Schedule 3.9 are all of the Tower Leases
that are
necessary to use the equipment associated with each Tower Site, and
to access
such equipment in connection with such use.
(b) Except as set forth in Schedule 3.9(b), with respect to the
Tower
Leases, (i) each of the Tower Leases is valid, binding on the
Company and, to
the Actual Knowledge of Seller and the Company, each other party
thereto and in
full force and effect, enforceable by the Company in accordance
with its terms;
(ii) except as set forth on Schedule 3.9 and as contemplated by
this Agreement,
the Company has not assigned, pledged, transferred, or otherwise
disposed of or
granted any Lien on its rights, titles and interests under any of
the Tower
Leases to any other Person, nor, to the Actual Knowledge of
Seller
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<PAGE>
and the Company, has any other party to the Tower Leases so
assigned, pledged,
transferred, granted any Lien on, or otherwise disposed of any of
its rights,
title and interests thereunder; (iii) neither the Company nor, to
the Actual
Knowledge of Seller and the Company, any other party to any of the
Tower Leases
has failed to comply with or is in material breach or material
default
thereunder; and (iv) except as set forth on Schedule 3.9, to the
Actual
Knowledge of Seller and the Company, no condition exists or event
has occurred
and is continuing as of the date hereof and the Closing which, with
or without
the lapse of time or the giving of notice, or both, would
constitute a material
default by any party under any Tower Lease.
(c) There are no Tower Subleases.
(d) To the Actual Knowledge of Seller and the Company, all of
the
Transmission Towers located on the Tower Sites are
obstruction-marked and
lighted to the extent required by, and in accordance with, the
rules and
regulations of the Federal Aviation Administration (the "FAA") and
the FCC
Rules. To the Actual Knowledge of Seller and the Company,
appropriate
notification to the FAA and registration with the FCC has been made
for each
Transmission Tower located on the Tower Sites and owned, leased or
used by
Seller where required by the rules and regulations of the FAA or
the FCC Rules,
as applicable.
Section 3.10 Agreements.(a) Except as set forth in Schedule 3.5,
and except
as contemplated by the U.S. Reorganization, there are no
agreements,
understandings or proposed transactions between the Company and any
of its
officers, directors, Affiliates or any Affiliate thereof.
(b) Except as set forth on Schedule 3.10, there are no
agreements,
understandings, instruments, contracts or proposed transactions to
which the
Company is a party or by which it is bound that involve (i)
obligations
(contingent or otherwise) of, or payments to, the Company in excess
of $10,000,
(ii) the license of any patent, copyright, trade secret or other
proprietary
right to or from the Company, (iii) the grant of rights to market,
distribute or
sell the Company's services to any other Person or affect the
Company's
exclusive right to market, distribute or sell the Company's
services, or (iv)
the provision of products or services to customers.
(c) Except for those agreements described in reasonable detail
in
Schedule 3.10, the Company is not a party to or bound by any
non-competition
agreement or any other similar agreement or obligation which
purports to limit
in any respect the manner in which, or the localities in which, any
portion of
the business of the Company, is or may be conducted or which
purports to limit
the freedom of the Company to compete in any line of business or
with any
Person. Except for those agreements described in reasonable detail
in Schedule
3.10, there are no agreements, understandings, instruments or
proposed
transactions of the Company in which the Company has granted or
offered to any
other Person most-favored-nation or similar preferential pricing
with respect to
its products and/or services. Except for those agreements described
in
reasonable detail in Schedule 3.10, there are no agreements,
understandings,
instruments or proposed transactions of the Company pursuant to
which the
Company has granted any other Person an exclusive right to market,
distribute or
sell the Company's services.
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(d) The Company is not a party to and is not bound by any
contract,
agreement or instrument, or subject to any restriction under its
articles of
incorporation or bylaws that contains, to the Actual Knowledge of
Seller and the
Company or the Company, terms and conditions more onerous than
those usual and
customary in the industry under similar business or market
conditions current at
the time and that adversely affects its business as now
conducted.
(e) For the purposes of subsections (b) above, all
indebtedness,
liabilities, agreements, understandings, instruments, contracts and
proposed
transactions involving the same person or entity (including persons
or entities
the Company has reason to believe are affiliated therewith) shall
be aggregated
for the purpose of meeting the individual minimum dollar amounts of
such
subsections.
Section 3.11 Brokers. If the Company has engaged a broker in
connection
with the Transactions, Seller shall be solely responsible for all
fees,
commissions and expenses of such broker in connection with the
Transactions.
Sectio
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