ASSET PURCHASE AGREEMENT
by and between
RIDGELINE WIRELESS HOLDINGS LLC, as Seller,
and
NORTHGATE WIRELESS AMERICAS INC., as Buyer
Dated as of September 22, 2022
Execution Version
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this "Agreement" or "APA") is made and entered into as of September 22, 2022 (the "Effective Date"), by and between:
RIDGELINE WIRELESS HOLDINGS LLC, a limited liability company duly organized and existing under the laws of the State of Nevada (Nevada Secretary of State Entity No. E0428716302), with its principal office located at 450 South Virginia Street, Suite 800, Reno, Nevada 89501 (hereinafter referred to as "Seller" or "Assignor");
and
NORTHGATE WIRELESS AMERICAS INC., a corporation duly organized and existing under the laws of the State of Delaware (Delaware Division of Corporations File No. 7284619), with its offices located at 2200 Wilson Boulevard, Suite 1450, Arlington, Virginia 22201 (hereinafter referred to as "Buyer" or "Assignee").
Seller and Buyer are each referred to herein individually as a "Party" and collectively as the "Parties."
RECITALS
A. Seller holds fourteen (14) Federal Communications Commission ("FCC") Wireless Radio Service licenses issued under Part 27 of the FCC's Rules (47 C.F.R. Part 27) in the Advanced Wireless Services-3 (Meridian Technologies-3) band (Band 66), comprising thirty-nine megahertz (39 MHz) of paired spectrum (39 MHz uplink / 39 MHz downlink, 78 MHz total paired bandwidth), under FCC Call Signs WQAB201 through WQAB214 (collectively, the "Licenses"), covering Economic Areas in Nevada, eastern California, and southern Oregon with a total covered population of approximately 3,840,000 POPs (the "License Portfolio").
B. Seller operates a regional wireless telecommunications business serving approximately 142,000 subscriber accounts in rural and semi-urban markets within the coverage area of the License Portfolio. The subscriber accounts and Seller's operating business are not being acquired hereunder, and Seller shall retain all assets, liabilities, and operations related thereto. This Agreement contemplates the purchase and sale of the License Portfolio only, as bare spectrum licenses, and Buyer has no interest in and is not acquiring any of Seller's operational assets, customer relationships, infrastructure, equipment, intellectual property, contracts, employees, or any other assets of Seller other than the Licenses themselves.
C. Buyer is a wholly owned subsidiary of Northgate US Holdings LLC, a Delaware limited liability company ("NUS Holdings"), which is in turn a wholly owned subsidiary of Northgate Telecommunications PLC, a public limited company organized under the laws of England and Wales (Companies House No. 08473291) ("Parent" or "NTP"), listed on the London Stock Exchange (LSE: NGTL), with headquarters at 14 Cavendish Square, London W1G 0BX, United Kingdom.
D. Seller and Parent entered into a non-binding Letter of Intent dated June 15, 2022, setting forth the principal terms of the proposed transaction contemplated hereby. The Letter of Intent was non-binding in all respects except with respect to provisions relating to confidentiality, exclusivity, and governing law, which remain in effect in accordance with their terms until superseded by this Agreement.
E. The assignment of the Licenses from Seller to Buyer requires the prior consent of the Federal Communications Commission pursuant to Section 310(d) of the Communications Act of 1934, as amended, 47 U.S.C. § 310(d), and the Parties intend to file FCC Form 603 (Application for Assignment of Authorization) promptly following execution of this Agreement, in accordance with the covenants set forth in Article VI hereof.
F. In connection with the FCC application, Buyer intends to file a petition for declaratory ruling under 47 U.S.C. § 310(b)(4) seeking approval for up to one hundred percent (100%) indirect foreign ownership of Buyer by Parent, as more particularly described in Section 5.6 and Section 6.2 of this Agreement. Parent is organized under the laws of England and Wales, a WTO-member country, and Buyer anticipates that the FCC will apply the presumption of approval applicable to WTO-member-country ownership in considering such petition.
G. The members of Seller — Garrett Nolan (sixty-two percent (62%)), Diane Chua (eighteen percent (18%)), Pinnacle Growth Capital Fund II LP (twelve percent (12%)), and Crestwood Family Office LLC (eight percent (8%)) — have, or will concurrently herewith, consented to the transactions contemplated by this Agreement as required under the Seller's limited liability company agreement (the "LLC Agreement"), including the approval of the sale of the License Portfolio and the execution and delivery of this Agreement.
NOW, THEREFORE, in consideration of the premises set forth above, the mutual representations, warranties, covenants, and agreements herein contained, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the Parties agree as follows:
ARTICLE I — DEFINITIONS AND INTERPRETATION
Section 1.1 — Definitions
As used in this Agreement, the following terms shall have the meanings set forth below:
"Affiliate" means, with respect to any Person, any other Person that directly or indirectly, through one or more intermediaries, Controls, is Controlled by, or is under common Control with, such Person. For purposes of this definition, "Control" (including the terms "Controlled by" and "under common Control with") means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract, or otherwise.
"Agreement" means this Asset Purchase Agreement, including all Exhibits and Schedules hereto, as the same may be amended, modified, or supplemented from time to time in accordance with the terms hereof.
"Anti-Trafficking Rules" means the rules and policies of the FCC set forth in 47 C.F.R. § 1.2111 and related provisions, including any rules, policies, or orders governing the assignment or transfer of control of licenses acquired at auction and the obligations relating to unjust enrichment payments to the U.S. Treasury.
"APA" means this Asset Purchase Agreement.
"Applicable Law" means all applicable federal, state, and local laws, statutes, rules, regulations, codes, ordinances, orders, judgments, writs, injunctions, decrees, and governmental approvals, including the Communications Act, the FCC Rules, and any rules or regulations of any other Government Authority having jurisdiction over the Parties or the Transaction.
"Assignee" means Buyer (Northgate Wireless Americas Inc.).
"Assignor" means Seller (Ridgeline Wireless Holdings LLC).
"Buildout Requirements" means, collectively, all interim and final construction benchmarks and performance requirements applicable to the Licenses under the FCC Rules, including (a) the interim construction benchmark requiring the provision of reliable signal coverage and service to a specified percentage of the population in each license area by the interim benchmark deadline of March 2025 and (b) the final construction deadline requiring the provision of reliable signal coverage and service to a specified percentage of the population in each license area by March 2028, in each case as set forth in the FCC's applicable rules, orders, and license conditions.
"Business Day" means any day other than a Saturday, a Sunday, or a day on which banking institutions in New York, New York or Reno, Nevada are authorized or required by Applicable Law to remain closed, and excluding any federal holiday observed in the United States.
"Buyer" means Northgate Wireless Americas Inc., a Delaware corporation.
"Call Signs" means, collectively, the FCC call signs WQAB201, WQAB202, WQAB203, WQAB204, WQAB205, WQAB206, WQAB207, WQAB208, WQAB209, WQAB210, WQAB211, WQAB212, WQAB213, and WQAB214.
"Closing" means the consummation of the purchase, sale, and assignment of the License Portfolio contemplated by this Agreement, as described in Article IX.
"Closing Date" has the meaning set forth in Section 9.1.
"Communications Act" means the Communications Act of 1934, as amended, 47 U.S.C. § 151 et seq., including the Telecommunications Act of 1996 and all subsequent amendments thereto.
"Deposit" means the Earnest Money Deposit of Four Million Five Hundred Thousand Dollars ($4,500,000) as defined in Section 3.2.
"Earnest Money Deposit" has the meaning set forth in Section 3.2.
"Escrow Agent" means Meridian National Bank, N.A., a national banking association, located at 333 South Hope Street, Suite 4800, Los Angeles, California 90071.
"Escrow Agreement" means that certain Escrow Agreement to be entered into among Buyer, Seller, and the Escrow Agent, substantially in the form attached hereto as Exhibit B, governing the deposit, investment, holding, release, and disposition of the Earnest Money Deposit.
"FCC" means the Federal Communications Commission of the United States, or any successor agency thereto.
"FCC Consent" has the meaning set forth in Section 7.1(a).
"FCC Form 603" means the FCC's Application for Assignment of Authorization (FCC Form 603), as may be amended, supplemented, or replaced from time to time.
"FCC Rules" means the rules and regulations of the FCC, as set forth in Title 47 of the Code of Federal Regulations (47 C.F.R.), as amended from time to time, and any orders, policy statements, public notices, or other pronouncements of the FCC having the force and effect of law.
"Final Order" means an action or order of the FCC (a) that has not been reversed, stayed, enjoined, set aside, annulled, or suspended, (b) with respect to which no requests for stay, petitions for rehearing, reconsideration, or review, appeals, or similar proceedings are pending, and (c) as to which the time for filing any such request, petition, appeal, or institution of proceedings shall have expired.
"Government Authority" means any federal, state, local, municipal, tribal, or foreign government, or any governmental, quasi-governmental, regulatory, administrative, or self-regulatory body, agency, department, bureau, commission, court, tribunal, or arbitral body, including the FCC, the Department of Justice, the Federal Trade Commission, any state public utility commission, and any foreign governmental authority.
"Interim Buildout Benchmark" means the interim construction milestone applicable to the Licenses under the FCC Rules requiring the provision of reliable signal coverage and service to a specified percentage of the population in each license area by March 2025.
"Knowledge of Seller" or "Seller's Knowledge" means the actual knowledge of Garrett Nolan (Founder and Managing Member of Seller) and Diane Chua (Co-Managing Member and Chief Operating Officer of Seller) after reasonable inquiry of those employees and agents of Seller who would reasonably be expected to have knowledge of the relevant matter. For purposes of clarity, "reasonable inquiry" shall include, but not be limited to, inquiry of Seller's regulatory counsel, Seller's director of engineering (or equivalent position), and review of Seller's FCC files and regulatory correspondence.
"License Portfolio" means, collectively, the fourteen (14) FCC Wireless Radio Service licenses described in Schedule A and identified by Call Signs WQAB201 through WQAB214, together with all rights, privileges, authorizations, and benefits appurtenant thereto, including any construction permits, renewals, modifications, or extensions thereof.
"Licenses" has the meaning set forth in Recital A.
"Lien" means any mortgage, pledge, lien, security interest, charge, claim, restriction, encumbrance, option, right of first refusal, right of first offer, conditional sale or other title retention agreement, or other similar encumbrance of any kind or nature whatsoever.
"LLC Agreement" means the Limited Liability Company Agreement of Ridgeline Wireless Holdings LLC, as amended, restated, supplemented, or otherwise modified from time to time.
"Long-Stop Date" means March 15, 2023, as such date may be extended pursuant to Section 10.1(d) of this Agreement.
"Losses" means any and all damages, losses, liabilities, costs, penalties, fines, judgments, settlements, claims, demands, actions, suits, proceedings, deficiencies, interest, awards, and expenses (including reasonable attorneys' fees, expert fees, consultant fees, and court costs), whether or not arising out of any claim by a third party.
"Material Adverse Effect" means any event, circumstance, condition, development, change, occurrence, or effect that, individually or in the aggregate with all other events, circumstances, conditions, developments, changes, occurrences, or effects, is or would reasonably be expected to be materially adverse to (a) the Licenses or the License Portfolio, including the validity, enforceability, or continued effectiveness of any License, or (b) the ability of either Party to consummate the Transaction on or before the Long-Stop Date; provided, however, that none of the following, either alone or in combination, shall be deemed to constitute, or shall be taken into account in determining whether there has been, a Material Adverse Effect: (i) changes in general economic, financial, or market conditions in the United States or globally; (ii) changes in conditions generally affecting the wireless telecommunications industry in the United States; (iii) changes in Applicable Law or FCC Rules of general applicability (not specifically directed at the License Portfolio or the Transaction); (iv) changes resulting from the announcement or pendency of the Transaction; (v) changes arising from acts of war, armed hostilities, sabotage, terrorism, military action, or any escalation or worsening of any such acts; (vi) epidemics, pandemics (including COVID-19 and its variants), or public health emergencies; or (vii) natural disasters, earthquakes, hurricanes, floods, or other force majeure events; provided, further, that the exceptions set forth in clauses (i) through (vii) shall not apply to the extent that such event, circumstance, or condition has a disproportionate and material adverse effect on the License Portfolio relative to other comparable spectrum license portfolios.
"NTP" or "Parent" means Northgate Telecommunications PLC, a public limited company organized under the laws of England and Wales (Companies House No. 08473291), listed on the London Stock Exchange under ticker symbol NGTL, with headquarters at 14 Cavendish Square, London W1G 0BX, United Kingdom.
"NUS Holdings" means Northgate US Holdings LLC, a Delaware limited liability company formed on August 30, 2022, which is a wholly owned subsidiary of NTP and the direct parent of Buyer.
"Permitted Encumbrances" means (a) the rights of the FCC under the Communications Act and the FCC Rules, including any conditions, restrictions, or obligations set forth in the Licenses themselves; (b) Buildout Requirements; (c) any Lien or encumbrance that will be released at or prior to the Closing; and (d) any encumbrances set forth in Schedule A to the extent expressly identified as Permitted Encumbrances.
"Person" means any natural person, corporation, limited liability company, partnership, limited partnership, joint venture, association, trust, estate, unincorporated organization, Government Authority, or other entity of any kind.
"Purchase Price" has the meaning set forth in Section 3.1.
"Section 310(b)(4) Petition" means the petition for declaratory ruling to be filed by Buyer with the FCC pursuant to 47 U.S.C. § 310(b)(4) and the FCC's rules and procedures governing foreign ownership of common carrier, aeronautical en route, and aeronautical fixed radio station licensees, seeking approval for up to one hundred percent (100%) indirect foreign ownership of Buyer by Parent.
"Seller" means Ridgeline Wireless Holdings LLC, a Nevada limited liability company.
"Spectrum" means the Meridian Technologies-3 (Band 66) spectrum covered by the Licenses, consisting of 39 MHz of paired spectrum (39 MHz uplink and 39 MHz downlink, 78 MHz total paired bandwidth).
"Tax" means any federal, state, local, or foreign income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental, customs, duties, capital stock, franchise, profits, withholding, social security, unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add-on minimum, estimated, or other tax of any kind whatsoever, including any interest, penalty, or addition thereto, whether disputed or not, and including any obligation to indemnify or otherwise assume or succeed to the Tax liability of any other Person.
"Team Telecom" means the Committee for the Assessment of Foreign Participation in the United States Telecommunications Services Sector, established by Executive Order 13913 (April 4, 2020), as reconstituted or replaced from time to time, together with any successor committee, task force, or body performing a similar function.
"Transaction" means the purchase, sale, and assignment of the License Portfolio from Seller to Buyer as contemplated by this Agreement, including all ancillary transactions contemplated hereby.
"Transfer" means the assignment of the Licenses from Seller to Buyer, as approved by the FCC.
"Unjust Enrichment" means any payment or other obligation that may be owed to the United States Treasury under 47 C.F.R. § 1.2111 or any similar FCC rule, order, or policy in connection with the assignment or transfer of control of licenses originally acquired at FCC auction with the benefit of bidding credits, designated entity discounts, or other auction-specific preferences.
Section 1.2 — Rules of Interpretation
(a) Headings. The headings of Articles, Sections, Exhibits, and Schedules contained in this Agreement are for convenience of reference only and shall not affect the meaning or interpretation of this Agreement.
(b) Including. The word "including" (and correlative words such as "include" and "includes") means "including without limitation" and shall not be construed to limit any general statement that it follows to the specific or similar items or matters immediately following it.
(c) Singular and Plural. Unless the context otherwise requires, words importing the singular include the plural and vice versa, and words importing any gender include all genders.
(d) References to Sections, Articles, Exhibits, and Schedules. Unless otherwise specified, all references in this Agreement to "Sections," "Articles," "Exhibits," and "Schedules" are to the Sections, Articles, Exhibits, and Schedules of and to this Agreement. All Exhibits and Schedules are incorporated in and made a part of this Agreement as if set forth in full herein.
(e) References to Statutes. Any reference in this Agreement to a statute, regulation, or rule shall be deemed to include any amendment, modification, replacement, or re-enactment thereof, any regulation or rule promulgated thereunder, and any successor statute, regulation, or rule, in each case as in effect from time to time.
(f) Business Day Adjustments. If the last day for the giving of any notice or the performance of any act required or permitted under this Agreement is a day that is not a Business Day, the time for the giving of such notice or the performance of such act shall be extended to the next succeeding Business Day.
(g) Parties. References to any Party include such Party's successors and permitted assigns.
(h) Dollars. All references to dollar amounts or "$" herein shall refer to United States dollars.
(i) Knowledge. Where any representation, warranty, or other provision of this Agreement is qualified by the phrase "to Seller's Knowledge," "to the Knowledge of Seller," or words of similar import, such qualification shall have the meaning ascribed to such terms in Section 1.1.
(j) Time Periods. In the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including" and the words "to" and "until" each mean "to but excluding."
(k) Drafting. The Parties have participated jointly in the negotiation and drafting of this Agreement, and in the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties, and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any provision of this Agreement.
ARTICLE II — PURCHASE AND SALE OF LICENSES
Section 2.1 — Agreement to Purchase and Sell
Subject to the terms and conditions of this Agreement and the grant of FCC Consent, Seller agrees to sell, assign, convey, transfer, and deliver to Buyer, and Buyer agrees to purchase, accept, and acquire from Seller, all of Seller's right, title, and interest in and to the License Portfolio, free and clear of all Liens other than Permitted Encumbrances and the rights of the FCC. The License Portfolio consists of fourteen (14) FCC Wireless Radio Service licenses issued under Part 27 of the FCC's Rules (47 C.F.R. Part 27) in the Advanced Wireless Services-3 (Meridian Technologies-3) band (Band 66), identified by Call Signs WQAB201 through WQAB214, and more fully described in Schedule A attached hereto. The Licenses collectively cover Economic Areas in Nevada, eastern California, and southern Oregon, with an aggregate covered population of approximately 3,840,000 POPs and comprising 39 MHz of paired spectrum (39 MHz uplink / 39 MHz downlink, 78 MHz total paired bandwidth). The assignment of the Licenses from Seller to Buyer is subject to the prior approval of the FCC pursuant to Section 310(d) of the Communications Act. Until the FCC grants its consent and the Closing occurs, Seller shall retain full legal title to, and remain the licensee of record for, each License in the License Portfolio.
Section 2.2 — Excluded Assets
The Parties expressly acknowledge and agree that Buyer is acquiring only the License Portfolio (i.e., the bare FCC spectrum licenses) and no other assets of Seller. All other assets of Seller are expressly excluded from the Transaction and shall be retained by Seller (collectively, the "Excluded Assets"), including without limitation:
(a) all subscriber accounts, customer contracts, and customer relationships of Seller, including the approximately 142,000 subscriber accounts served by Seller's wireless telecommunications business;
(b) all network infrastructure, equipment, towers, antenna systems, base stations, cell sites, distributed antenna systems, small cells, fiber optic cables, switches, routers, servers, and all other telecommunications equipment and facilities owned, leased, licensed, or used by Seller;
(c) all contracts, agreements, and arrangements with subscribers, vendors, suppliers, tower companies, landlords, contractors, and other third parties;
(d) all intellectual property rights of Seller, including patents, trademarks, service marks, trade names, trade dress, domain names, copyrights, trade secrets, proprietary technology, software, and all goodwill associated therewith, including the "Ridgeline Wireless" name and brand;
(e) all cash, cash equivalents, bank accounts, accounts receivable, and working capital of Seller;
(f) all employees, officers, and consultants of Seller, and all employment agreements, independent contractor agreements, employee benefit plans, pension plans, retirement plans, stock option plans, and all liabilities and obligations associated therewith;
(g) Seller's operating wireless telecommunications business in its entirety, including all revenues, operations, and business activities;
(h) all real property (owned or leased), including office space, warehouse space, and land;
(i) all insurance policies and insurance proceeds;
(j) all books and records of Seller, other than FCC filings and regulatory records relating specifically and exclusively to the License Portfolio (copies of which shall be provided to Buyer at or prior to Closing); and
(k) all other assets of Seller not specifically included in the License Portfolio.
Nothing in this Agreement shall be construed to grant Buyer any right, title, or interest in or to any of the Excluded Assets, and Seller shall retain full ownership of and responsibility for all Excluded Assets from and after the Closing.
Section 2.3 — Assumed Liabilities; Excluded Liabilities
(a) Assumed Liabilities. As of the Closing, Buyer shall assume and agree to pay, perform, and discharge when due the following obligations and liabilities (and only the following obligations and liabilities) (collectively, the "Assumed Liabilities"):
(i) all obligations arising under the Licenses from and after the Closing Date, including all future Buildout Requirements (including the Interim Buildout Benchmark due March 2025 and the final construction deadline due March 2028), reporting obligations, renewal obligations, and all other regulatory obligations imposed by the FCC or arising under the FCC Rules with respect to the Licenses;
(ii) all obligations to pay regulatory fees assessed by the FCC with respect to the Licenses for periods commencing on or after the Closing Date; and
(iii) any other liabilities or obligations expressly assumed by Buyer under this Agreement.
(b) Excluded Liabilities. Other than the Assumed Liabilities, Buyer shall not assume and shall not be liable or responsible for, and Seller shall retain and remain solely liable and responsible for, all debts, obligations, liabilities, claims, and commitments of Seller of any kind or nature whatsoever, whether known or unknown, absolute, accrued, contingent, or otherwise, whether arising before, on, or after the Closing Date (collectively, the "Excluded Liabilities"), including without limitation:
(i) all liabilities arising out of or relating to Seller's operating wireless telecommunications business, including liabilities to subscribers, vendors, employees, landlords, and all other third parties;
(ii) all liabilities for Taxes arising from or attributable to Seller's ownership or operation of the Licenses or the License Portfolio for any period ending on or before the Closing Date;
(iii) all Unjust Enrichment obligations or any other payment obligations to the United States Treasury arising under 47 C.F.R. § 1.2111 or any other FCC rule, order, or policy in connection with the original acquisition of any License at FCC auction, including any obligation to return bidding credits or designated entity discounts;
(iv) all liabilities arising from any breach or default by Seller under any contract, agreement, or arrangement to which Seller is a party;
(v) all employment-related liabilities, including wages, salaries, benefits, severance, and workers' compensation claims;
(vi) all litigation, claims, and proceedings pending or threatened against Seller as of the Closing Date; and
(vii) all other liabilities of Seller not expressly included in the Assumed Liabilities.
The Parties expressly acknowledge and agree that Seller shall be solely responsible for all Unjust Enrichment obligations, if any, arising under 47 C.F.R. § 1.2111 with respect to the original acquisition of any License at FCC auction, and that such obligations are Excluded Liabilities to be retained by Seller.
ARTICLE III — PURCHASE PRICE AND PAYMENT
Section 3.1 — Purchase Price
(a) The aggregate purchase price for the License Portfolio shall be One Hundred Twenty-Six Million Five Hundred Thousand Dollars ($126,500,000) (the "Purchase Price").
(b) The Purchase Price is a fixed amount and shall not be subject to any adjustment, modification, escalation, revision, true-up, earn-out, or revision for any reason whatsoever, including without limitation any change in spectrum valuations or market conditions, any competing bids or offers for all or any portion of the License Portfolio, any change in the regulatory status of any License, any revaluation of individual Licenses within the License Portfolio, any change in the covered population or service area boundaries of any License, or any other event or circumstance occurring before or after the date of this Agreement.
(c) The Parties acknowledge that the Purchase Price equates to approximately $0.845 per MHz-POP, based on the License Portfolio's covered population of approximately 3,840,000 POPs and 39 MHz of paired spectrum, yielding approximately 149,760,000 MHz-POPs. The per-MHz-POP calculation is provided for informational purposes only and shall not be used to adjust or modify the Purchase Price.
(d) The Parties acknowledge that the Purchase Price was determined by arm's-length negotiation between sophisticated parties, informed by, among other things, (i) the independent spectrum valuation report prepared by Vantage Spectrum Consultants Inc., dated September 12, 2022, which was commissioned by Seller; (ii) Buyer's independent analysis of comparable spectrum transactions; and (iii) each Party's assessment of the value of the License Portfolio in light of the Buildout Requirements, market conditions, and the strategic value of the Spectrum.
Section 3.2 — Earnest Money Deposit
(a) Within five (5) Business Days following the execution of this Agreement (i.e., on or before September 29, 2022), Buyer shall deposit, or cause to be deposited, the sum of Four Million Five Hundred Thousand Dollars ($4,500,000) (the "Earnest Money Deposit" or "Deposit") into escrow with Meridian National Bank, N.A. (the "Escrow Agent"), by wire transfer of immediately available funds to the escrow account designated by the Escrow Agent, pursuant to and in accordance with the terms of the Escrow Agreement.
(b) The Earnest Money Deposit represents approximately 3.56% of the Purchase Price and shall serve as security for Buyer's obligation to consummate the Transaction and pay the Purchase Price at the Closing.
(c) The terms governing the holding, investment, release, and disposition of the Earnest Money Deposit, including the conditions under which the Deposit shall be released to Seller or returned to Buyer, are set forth in the Escrow Agreement to be entered into among Buyer, Seller, and the Escrow Agent substantially in the form attached hereto as Exhibit B. The Escrow Agreement shall be executed and delivered by the Parties and the Escrow Agent concurrently with (or within five (5) Business Days following) the execution of this Agreement.
(d) The annual escrow fee of the Escrow Agent in the amount of Twelve Thousand Five Hundred Dollars ($12,500) shall be borne solely by Buyer. Any investment earnings on the Earnest Money Deposit while held in escrow shall accrue for the benefit of the Party ultimately entitled to receive the Deposit, as determined in accordance with the Escrow Agreement and this Agreement.
Section 3.3 — Payment at Closing
(a) At the Closing, Buyer shall pay to Seller (or to such account or accounts as Seller may direct in writing) an amount equal to the Purchase Price less the Earnest Money Deposit, being One Hundred Twenty-Two Million Dollars ($122,000,000) (the "Closing Payment"), by wire transfer of immediately available funds in United States dollars to an account or accounts designated by Seller in a written notice delivered to Buyer no later than two (2) Business Days prior to the Closing Date.
(b) Simultaneously with the Closing, the Earnest Money Deposit (together with any investment earnings thereon) shall be released from escrow to Seller (or credited against the Purchase Price) in accordance with the Escrow Agreement and joint written instructions delivered by Buyer and Seller to the Escrow Agent.
(c) For the avoidance of doubt, the aggregate amount payable to Seller at the Closing (the Closing Payment plus the release of the Earnest Money Deposit) shall equal the full Purchase Price of $126,500,000 (plus any investment earnings on the Deposit, which shall accrue for the benefit of Seller upon release).
Section 3.4 — Allocation of Purchase Price
(a) The Purchase Price shall be allocated among the individual Licenses comprising the License Portfolio in accordance with Schedule B attached hereto. The Parties shall negotiate in good faith to finalize the allocation set forth in Schedule B no later than thirty (30) days prior to the anticipated Closing Date. If the Parties are unable to agree on the allocation, the allocation shall be determined by an independent appraiser mutually selected by the Parties, the costs of which shall be borne equally by the Parties.
(b) Each Party agrees to (i) file all Tax returns (including IRS Form 8594, if applicable, and any comparable state or local forms) consistently with the agreed-upon allocation and (ii) not take any position inconsistent with such allocation on any Tax return, in any Tax proceeding, or otherwise, unless required to do so by a final determination of a Government Authority. Each Party shall promptly notify the other Party of any challenge by any Government Authority to the agreed-upon allocation and shall cooperate in good faith in responding to any such challenge.
(c) To the extent that the allocation is later adjusted by a Government Authority, the Parties shall cooperate in good faith to reflect such adjustment in a manner consistent with the purposes of this Section 3.4 and Applicable Law.
ARTICLE IV — REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer as follows, as of the date of this Agreement and as of the Closing Date (except where a representation or warranty is expressly made as of a specific date, in which case as of such date):
Section 4.1 — Organization and Good Standing
Seller is a limited liability company duly organized, validly existing, and in good standing under the laws of the State of Nevada (Nevada Secretary of State Entity No. E0428716302). Seller has all requisite limited liability company power and authority to own, lease, and operate its properties and assets and to carry on its business as currently conducted. Seller is duly qualified or licensed to do business and is in good standing in each jurisdiction in which the nature of its business or the ownership, leasing, or operation of its properties or assets makes such qualification or licensing necessary, including the States of Nevada, California, and Oregon. Seller has heretofore made available to Buyer true, correct, and complete copies of its Certificate of Organization and the LLC Agreement, each as currently in effect.
Section 4.2 — Authority; Enforceability
(a) Seller has full limited liability company power and authority to execute, deliver, and perform this Agreement and each of the other agreements, instruments, and documents to be executed and delivered by Seller in connection with the Transaction, and to consummate the Transaction contemplated hereby.
(b) The execution, delivery, and performance of this Agreement by Seller, and the consummation of the Transaction, have been duly and validly authorized by all necessary limited liability company action on the part of Seller, including the approval of the Managing Members and all necessary consents under the LLC Agreement (subject to delivery of the side letters referenced in Section 4.3).
(c) This Agreement has been duly and validly executed and delivered by Seller and constitutes the legal, valid, and binding obligation of Seller, enforceable against Seller in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, and similar laws affecting creditors' rights generally and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity).
Section 4.3 — Member Consents
(a) Seller has obtained, or will obtain at or prior to the Closing, all consents, approvals, and authorizations required under the LLC Agreement from its members in connection with the execution, delivery, and performance of this Agreement and the consummation of the Transaction, including:
(i) the consent of Garrett Nolan, Founder and Managing Member of Seller, holding a sixty-two percent (62%) membership interest in Seller, which consent has been duly delivered;
(ii) the consent of Diane Chua, Co-Managing Member and Chief Operating Officer of Seller, holding an eighteen percent (18%) membership interest in Seller, which consent has been duly delivered;
(iii) the consent of Pinnacle Growth Capital Fund II LP, holding a twelve percent (12%) membership interest in Seller, which entity has consent rights over change-of-control transactions and material asset dispositions under Section 8.4 of the LLC Agreement (such consent to be delivered via a separate side letter in form and substance reasonably satisfactory to Buyer); and
(iv) the consent of Crestwood Family Office LLC, holding an eight percent (8%) membership interest in Seller (such consent to be delivered via a separate side letter in form and substance reasonably satisfactory to Buyer).
(b) Seller shall use its commercially reasonable efforts to deliver, or cause to be delivered, the side letters referenced in clauses (iii) and (iv) above no later than fifteen (15) days following the date of this Agreement. Notwithstanding the foregoing, the delivery of all required member consents is a condition to Buyer's obligation to close as set forth in Section 7.2(f).
Section 4.4 — Title to Licenses
(a) Seller is the lawful holder of record of each License in the License Portfolio and has good and marketable title to each such License, free and clear of all Liens, encumbrances, restrictions, conditions, options, rights of first refusal, and other similar rights of any kind, other than (i) Permitted Encumbrances and (ii) the rights of the United States Government and the FCC under the Communications Act and the FCC Rules.
(b) Schedule A sets forth, with respect to each License, the call sign, service area (by Economic Area designation), state(s) covered, spectrum block designation, amount of paired MHz, original grant date, and current expiration date.
(c) No Person other than Seller holds any right, title, or interest (legal or equitable) in or to any License in the License Portfolio, and no Person has any option, warrant, right of first refusal, or other contractual right to acquire any License or any interest therein (other than the rights of Buyer under this Agreement).
(d) At the Closing, Seller will convey to Buyer good and marketable title to each License, free and clear of all Liens other than Permitted Encumbrances and the rights of the FCC.
Section 4.5 — FCC Compliance; Licenses in Good Standing
(a) Each License in the License Portfolio is validly issued and in full force and effect as of the date hereof. No License has been revoked, cancelled, terminated, surrendered, or modified in any material respect, and no License is subject to any conditions or restrictions other than those imposed by the FCC Rules and the terms and conditions set forth on the face of each License as reflected in the FCC's Universal Licensing System.
(b) Seller is in compliance in all material respects with all FCC Rules, orders, and policies applicable to the Licenses and with the terms and conditions of each License, including applicable buildout, construction, operational, and reporting requirements, except as disclosed in Schedule 4.5.
(c) Schedule 4.5 sets forth certain exceptions to the representation in clause (b) above, including the following disclosure: Seller has met the Interim Buildout Benchmark on eleven (11) of the fourteen (14) Licenses in the License Portfolio. Licenses WQAB212, WQAB213, and WQAB214, covering southern Oregon Economic Areas, have not met the Interim Buildout Benchmark (which is due by March 2025). Seller is currently undertaking reasonable efforts to advance construction toward compliance with such benchmarks prior to the applicable deadline but cannot assure compliance. The final construction deadline for all fourteen (14) Licenses is March 2028.
(d) There are no pending, or, to Seller's Knowledge, threatened, FCC enforcement actions, notices of apparent liability, forfeiture proceedings, revocation proceedings, license modification proceedings, or complaints with respect to any License in the License Portfolio or Seller's operation of the Spectrum. Seller has not received any written notice from the FCC or any other Government Authority alleging any violation of the FCC Rules or the terms of any License.
(e) All regulatory fees assessed by the FCC with respect to the Licenses for all periods prior to the Closing Date have been timely paid in full.
Section 4.6 — No Conflicts; Required Consents
(a) The execution, delivery, and performance by Seller of this Agreement, and the consummation of the Transaction, do not and will not (with or without notice, lapse of time, or both): (i) conflict with or violate any provision of Seller's Certificate of Organization or the LLC Agreement; (ii) conflict with, violate, or result in a breach of, or constitute a default under, any Applicable Law or any order, judgment, injunction, or decree of any Government Authority applicable to Seller or the License Portfolio; or (iii) conflict with, violate, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under, any material contract, agreement, lease, or instrument to which Seller is a party or by which Seller or any of its assets is bound.
(b) Other than (i) FCC Consent pursuant to Section 310(d) of the Communications Act, (ii) the member consents described in Section 4.3, and (iii) any filings, consents, or approvals that may be required in connection with Team Telecom review, no consent, approval, authorization, permit, order, filing, or registration with or notification to any Person or Government Authority is required in connection with the execution, delivery, and performance by Seller of this Agreement or the consummation of the Transaction.
Section 4.7 — Anti-Trafficking; Unjust Enrichment
(a) To Seller's Knowledge, Seller has disclosed to Buyer in Schedule 4.7 whether any of the Licenses were acquired at FCC auction at a price that benefited from bidding credits, designated entity discounts, or other auction-specific discounts or preferences that could give rise to Unjust Enrichment obligations under 47 C.F.R. § 1.2111, or any successor rule, upon the assignment of such Licenses to Buyer.
(b) Seller shall be solely responsible for, and shall timely pay when due, any and all Unjust Enrichment payment obligations to the United States Treasury arising from the Transfer, regardless of whether such obligations become due and payable at or before the Closing or thereafter, and such obligations shall constitute Excluded Liabilities for all purposes of this Agreement.
(c) Seller represents that, to Seller's Knowledge, the applicable holding periods under the Anti-Trafficking Rules (47 C.F.R. § 1.2111) have been satisfied with respect to all Licenses in the License Portfolio, or to the extent that any holding period has not been fully satisfied, such circumstance is disclosed in Schedule 4.7. For the avoidance of doubt, any Unjust Enrichment obligation that may arise due to an incomplete holding period shall be the sole responsibility of Seller.
Section 4.8 — Litigation
There are no actions, suits, proceedings, investigations, arbitrations, or claims (whether at law, in equity, or otherwise) pending or, to Seller's Knowledge, threatened in writing against Seller or any of its members, managers, or Affiliates relating to the License Portfolio, the Licenses, or the Transaction before any Government Authority, court, arbitral body, or other tribunal. To Seller's Knowledge, no event has occurred and no condition exists that would reasonably be expected to give rise to any such action, suit, proceeding, investigation, arbitration, or claim.
Section 4.9 — Tax Matters
All material Taxes due and payable by Seller with respect to the License Portfolio and the ownership and operation of the Licenses have been timely paid in full or adequately reserved for in accordance with generally accepted accounting principles. There are no pending or, to Seller's Knowledge, threatened Tax audits, assessments, or proceedings with respect to any Tax relating to the License Portfolio. There are no Liens for Taxes upon any License, other than Liens for Taxes not yet due and payable.
Section 4.10 — Brokers and Finders
Seller has engaged Stonebridge Advisory Group LLC, 555 California Street, Suite 2100, San Francisco, California 94104 (Helen Tran, Managing Director), as its exclusive sell-side financial advisor in connection with the Transaction. Seller is solely responsible for any and all fees, commissions, and expenses payable to Stonebridge Advisory Group LLC in connection with the Transaction. Other than Stonebridge Advisory Group LLC, no broker, finder, investment banker, or other Person is entitled to any brokerage, finder's, or other fee or commission in connection with the Transaction based upon arrangements made by or on behalf of Seller. Buyer shall have no liability or obligation, directly or indirectly, to Stonebridge Advisory Group LLC or any other Person for any such fee, commission, or expense arising from Seller's engagements.
Section 4.11 — No Other Representations
Except for the representations and warranties expressly set forth in this Article IV, Seller makes no other representation or warranty, express or implied, at law or in equity, with respect to Seller, the License Portfolio, or the Transaction, and Seller hereby disclaims any such other representations or warranties. Without limiting the generality of the foregoing, Seller makes no representation or warranty regarding any projections, forecasts, estimates, or budgets delivered to or made available to Buyer or any of Buyer's representatives with respect to the License Portfolio, the Spectrum, or any future revenue, profitability, or commercial deployment of the Spectrum by Buyer.
ARTICLE V — REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller as follows, as of the date of this Agreement and as of the Closing Date (except where a representation or warranty is expressly made as of a specific date, in which case as of such date):
Section 5.1 — Organization and Good Standing
Buyer is a corporation duly incorporated, validly existing, and in good standing under the laws of the State of Delaware (Delaware Division of Corporations File No. 7284619). Buyer was incorporated on August 22, 2022, for the specific purpose of holding FCC licenses to be acquired pursuant to this Agreement and conducting wireless telecommunications activities in the United States. Buyer has all requisite corporate power and authority to own, lease, and operate its properties and assets and to carry on its business as currently conducted and as proposed to be conducted following the Closing.
Section 5.2 — Authority; Enforceability
(a) Buyer has full corporate power and authority to execute, deliver, and perform this Agreement and each of the other agreements, instruments, and documents to be executed and delivered by Buyer in connection with the Transaction, and to consummate the Transaction contemplated hereby.
(b) The execution, delivery, and performance of this Agreement by Buyer, and the consummation of the Transaction, have been duly and validly authorized by all necessary corporate action on the part of Buyer, including the approval of Buyer's board of directors and sole stockholder (NUS Holdings).
(c) This Agreement has been duly and validly executed and delivered by Buyer and constitutes the legal, valid, and binding obligation of Buyer, enforceable against Buyer in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, and similar laws affecting creditors' rights generally and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity).
Section 5.3 — Ownership Structure
(a) Buyer is a wholly owned subsidiary of Northgate US Holdings LLC, a Delaware limited liability company formed on August 30, 2022 ("NUS Holdings"). All of the issued and outstanding shares of capital stock of Buyer are owned, directly and beneficially, by NUS Holdings, free and clear of all Liens.
(b) NUS Holdings is a wholly owned subsidiary of Northgate Telecommunications PLC, a public limited company organized and existing under the laws of England and Wales (Companies House No. 08473291), listed on the London Stock Exchange under ticker symbol NGTL, with its registered office and headquarters at 14 Cavendish Square, London W1G 0BX, United Kingdom.
(c) As of the date hereof, the significant shareholders of NTP (i.e., shareholders holding five percent (5%) or more of NTP's outstanding ordinary shares) are as follows:
(i) Thornhill Asset Management LLP: 9.7%;
(ii) Sovereign Capital Partners AG: 6.3%;
(iii) Dunmore Pension Trust: 5.1%; and
(iv) Public float: approximately 78.9%.
(d) NTP's approximate market capitalization as of the third quarter of 2022 is approximately £4.8 billion (British pounds sterling). NTP's audited revenue for the fiscal year ended December 31, 2021 was approximately £2.31 billion, and NTP's projected revenue for the fiscal year ending December 31, 2022 is approximately £2.57 billion.
(e) The foregoing ownership structure information is provided for purposes of the FCC application process, including the Section 310(b)(4) Petition and any Team Telecom review. Buyer shall promptly notify Seller of any material changes to the ownership structure described in this Section 5.3 occurring between the date hereof and the Closing Date.
Section 5.4 — Financial Capability
(a) Buyer (through its Parent, NTP) has, and at the Closing will have, sufficient immediately available funds to pay the full Purchase Price in accordance with Section 3.3 and to perform all of Buyer's other financial obligations under this Agreement, including the Earnest Money Deposit under Section 3.2.
(b) The obligations of Buyer under this Agreement, including the obligation to pay the Purchase Price, are not contingent upon any financing condition or the availability of any debt or equity financing, and Buyer's ability to consummate the Transaction does not depend on Buyer obtaining any loan, credit facility, or other form of third-party financing. NTP has committed to fund, or cause to be funded, all amounts required to be paid by Buyer hereunder through equity contributions to NUS Holdings and NUS Holdings' equity contributions to Buyer.
Section 5.5 — FCC Qualifications
(a) Buyer is qualified, or upon FCC approval of the Section 310(b)(4) Petition will be qualified, to hold the Licenses under the Communications Act, the FCC Rules, and all Applicable Law.
(b) Buyer is not aware of any facts, circumstances, conditions, or events that would disqualify Buyer from holding the Licenses or from obtaining FCC Consent to the assignment of the Licenses from Seller to Buyer, or that would cause the FCC to deny or condition its consent to the Transaction.
(c) Neither Buyer nor any of its Affiliates (including NUS Holdings and NTP) has been the subject of any FCC enforcement action, notice of apparent liability, forfeiture proceeding, license revocation, or debarment proceeding. Neither Buyer nor any of its officers, directors, or key personnel is subject to any order, judgment, or decree of any Government Authority that would impair Buyer's ability to hold the Licenses.
Section 5.6 — Foreign Ownership