Document:

Exhibit
10.25

 

ASSET
PURCHASE AGREEMENT

 

BETWEEN

 

MDU
COMMUNICATIONS (USA) INC.

 

AND

 

DIRECT
SATELLITE, INC.

 

 

MAY
18, 2004

 

 

ASSET
PURCHASE AGREEMENT

 

This Asset Purchase
Agreement (this “Agreement”) is made and entered into this 18th day
of May 2004 between Direct Satellite, Inc., an Illinois corporation (“Seller”),
and MDU Communications (USA) Inc., a Washington corporation (“Buyer”). (Each of
Buyer and Seller may be referred to herein individually as a “Party” and
collectively as the “Parties.”)

 

W I T N E S S E T
H

 

WHEREAS, Buyer is a
provider of digital satellite television and high-speed Internet services to
the United States multi-dwelling unit marketplace; and

 

WHEREAS, Seller owns and
operates certain private telecommunications video systems and the rights to
provide video and Internet services at the multi-dwelling unit properties (the
“Properties”) identified in Exhibit A (collectively, the “Systems”); and

 

WHEREAS, Seller desires
to sell and transfer to Buyer and Buyer desires to purchase certain assets and
assume certain liabilities of Seller relating to such assets or used in
connection with Seller’s operation of the Systems;

 

NOW THEREFORE, the
parties hereto agree as follows:

 

ARTICLE I

Definitions and Interpretation

 

1.1                                 Interpretation.
When a reference is made in this Agreement to a Section, Schedule or
Exhibit, such reference shall be to a Section, Schedule or Exhibit of this
Agreement unless otherwise indicated. The headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words “included,” “includes” or
“including” are used in this Agreement, they shall be deemed to be followed by
the phrase “without limitation.” When used in this Agreement, the word
“primarily” shall be deemed to be followed by the phrase “or exclusively.” All
accounting terms not defined in this Agreement shall have the meanings
determined by United States generally accepted accounting principles. The
Parties acknowledge that both Parties have participated in the drafting and
preparation of the Transaction Documents (as hereinafter defined) to which they
are parties and agree that any rule of construction to the effect that
ambiguities are to be construed against the drafting party shall not be applied
to the construction or interpretation of such agreements. Whenever the word
“Agreement” appears it shall mean this Agreement together with all Schedules
and Exhibits hereto.

 

ARTICLE II

Purchase and Sale of Acquired Assets

 

2.1                                 Acquired
Assets. Effective as of the Closing Date (as hereinafter defined) and upon
the terms and subject to the conditions of this Agreement, Seller shall sell,
assign, transfer,

 

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convey and deliver to
Buyer free and clear of all liens, and Buyer shall purchase, assume and acquire
from Seller, all of Seller’s right, title and interest in, to and under the
Acquired Assets as the same shall exist on the Closing Date. “Acquired Assets”
shall mean:

 

(a)                                  Equipment.
All equipment and other personal property owned by Seller which comprises the
Systems and is located at the Properties, including satellite dishes, antennae,
microwave equipment, headend equipment, origination equipment, transmission and
electronic equipment, signal delivery equipment, distribution and drop lines,
amplifiers, power supplies, conduit, vaults, pedestals, grounding and pole
hardware, routers, customer devices (including converters, set top boxes,
subscriber units and taps, and cable data terminals) and any other similar
equipment used in the operation of the Systems.

 

(b)                                 Inventory.
All operating inventory, supplies and other inventories of every kind and
nature owned by Seller and used in the operation of the Systems which is (i)
located at the Properties, (ii) in the possession of any of Seller’s
contractors who service the Systems, or (iii) located at 3825 North Elston
Ave., Chicago, IL 60618 (“Seller’s Headquarters”). A general list of the
Inventory and the locations thereof is set forth on Exhibit B.

 

(c)                                  Subscribers.
The names of Seller’s subscribers listed by Property and by services subscribed
for are set forth on Exhibit C.

 

(d)                                 Acquired
Contracts. All of the rights and benefits of Seller under the contracts and
commitments listed on Exhibit D (the “Acquired Contracts”) which are
comprised of:

 

(i)                                     Agreements
with owners of the Properties pursuant to which Seller is granted an exclusive
or non-exclusive right of entry to such Properties to provide video, DIRECTV,
Internet or other services (the “MDU Agreements”);

 

(ii)                                  Seller’s
agreements with subscribers for video or Internet service in effect as of the
Closing Date;

 

(iii)                               Seller’s
unfilled service orders for services to be provided to subscribers or
prospective subscribers on or after the Closing Date;

 

(iv)                              All
of the rights and benefits of Seller under letters of intent or similar
documentation relating to the provision by Seller of video, DIRECTV, Internet,
or other services to properties not presently served by Seller;

 

(v)                                 Certain
programming and service agreements to which Seller is a party.

 

(vi)                              All
outstanding purchase orders for Inventory or other supplies to

 

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be delivered on or after
the Closing Date.

 

(e)                                  Acquired
Records. Except for the Excluded Records (as hereinafter defined) and the
documents described in Section 2.2(d), all records, including all files,
books, records, manuals, correspondence, property files, price lists,
subscriber lists, prospective customer lists, prospective subscriber lists,
sales information regarding prospective properties and new property owner
contacts, mailing lists, purchasing materials and related records, papers,
construction and engineering maps and data, schematics and blueprints
pertaining to the Systems and other data owned by Seller as of the Closing Date
and related to the Systems.

 

(f)                                    Intangible
Assets.  All of Seller’s intangible
assets, including all intellectual property and other proprietary information,
copyrights (whether registered or unregistered), trademarks, trade names,
service marks, domain names, registrations, registration applications, trade
secrets, web addresses and sites and all goodwill associated with the Seller.
To the extent required by applicable law, Seller agrees to file all
retransmission applications and include these rights herein.

 

(g)                                 Prepaid
Insurance.  All prepayments in
respect of the insurance policies listed on Exhibit E.

 

(h)                                 Accounts
Receivable. All accounts receivable relating to the Systems due to Seller
that relate to periods on or after the Closing Date.

 

2.2                                 Excluded
Assets. Notwithstanding anything contained in Section 2.1 to the
contrary, the following assets (the “Excluded Assets”) shall not be included in
the Acquired Assets:

 

(a)                                  Cash.
Cash, cash equivalents on hand or in bank accounts owned by Seller,
certificates of deposit, bank or savings and loan accounts, securities or
investments held by Seller.

 

(b)                                 Bonds
and Insurance. Bonds and insurance policies furnished by Seller pursuant to
any authorization or agreement, except for the policies listed on Exhibit E.

 

(c)                                  Tax
Refunds and Insurance Claims. Rights to (i) tax refunds for taxable periods
ending on or prior to the Closing Date; and (ii) insurance claims or rights to
payment arising thereunder.

 

(d)                                 Corporate
Documents. The articles of incorporation, bylaws, minute books, stock
ledgers, corporate seal, stock certificates, tax returns, tax records and other
records relating to the existence or governance of Seller in any jurisdiction.

 

(e)                                  Other
Contracts. All agreements to which Seller is a party other than

 

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Acquired
Contracts.

 

(f)                                    Rights
under Transaction Documents. All rights of Seller under this Agreement and
the other Transaction Documents to which it is a party.

 

(g)                                 Rights
Related to Retained Liabilities. All rights related to the Retained
Liabilities (as hereafter defined).

 

(h)                                 Excluded
Records. All of Seller’s records which are not related to the Systems, and
all records which are received from or directed to Seller’s legal counsel, or
which are or are purported to be privileged pursuant to an attorney/client
privilege.

 

(i)                                     Loss
Carryforwards. All losses, loss carryforwards and rights to receive
refunds, credits and loss carryforwards with respect to all taxes.

 

(j)                                     Software.
Seller’s software systems and licenses wherever used or located.

 

(k)                                  Vehicle.
Title to Seller’s truck.

 

(l)                                     Seller’s
Headquarters. Title to Seller’s Headquarters.

 

(m)                               Miscellaneous.
All furniture, office equipment and personal effects located at Seller’s
Headquarters.

 

(n)                                 Telephone
System.  The telephone system at
Seller’s Headquarters, provided that Buyer will have the right to use this
system (at its expense) during the term of the Lease.

 

(o)                                 Telephone
Number.  Seller’s telephone number
(773-539-6000), provided that Buyer will have the right to use this number
without charge on a shared basis with Cablecom/Spacelink Inc. and/or Cablecom
Corporation (“Cablecom”) during the twelve (12) months following the Closing.

 

(p)                                 Receivables.  All accounts and notes receivable due to
Seller that relate to periods prior to the Closing Date.

 

2.3                                 Third
Party Consents or Assignments. Nothing in this Agreement shall be construed
as an attempt by Seller to assign any Acquired Contract to the extent that by
the terms thereof such Acquired Contract is not assignable without the consent,
authorization or approval of the other party or parties thereto or of any
governmental authority. Prior to the Closing Date, Seller shall use
commercially reasonable efforts (and, to the extent required, Buyer shall
cooperate with Seller) to obtain from third parties and governmental
authorities all requisite consents and acknowledgements to the assignment by
Seller of the MDU Agreements and the other Acquired Contracts in forms
reasonably acceptable to Buyer.

 

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2.4                                 Exclusion
of Acquired Contracts and Purchase Price Adjustment. If within ninety (90)
days after the Closing Date Seller fails to obtain the requisite consent of any
third party to the assignment or transfer of MDU Agreement, then such MDU
Agreement, the assets comprising the related System and all related assets,
rights and obligations shall be deemed Excluded Assets for all purposes, and
the purchase price shall be adjusted as provided in the Escrow Agreement (as
defined herein).

 

2.5                                 Audit.
Seller agrees to undertake an audit of Seller’s financial statements for its
past two fiscal years, by an independent accountant or auditing firm, and to
have that audit completed within forty-five (45) days after the Closing Date.
Buyer and Seller shall split the cost of the audit, provided that in no event
shall Seller be required to pay more than $10,000 of such costs.

 

ARTICLE III

Assumption of Liabilities

 

3.1                                 Assumption
of Liabilities. Upon the terms and subject to the conditions of this
Agreement, effective as of the Closing Date, Buyer shall assume, pay, perform
and discharge when due all of the following liabilities, responsibilities and
obligations of Seller relating to the Acquired Assets arising on or subsequent
to the Closing Date (the “Assumed Liabilities”):

 

(a)                                  Acquired
Contracts. All of Seller’s liabilities and obligations under the Acquired
Contracts which arise on or after the Closing Date.

 

(b)                                 Operating
Liabilities. All liabilities, obligations, costs and expenses arising from
or related to the operation of the Systems or the ownership, operation, use or
maintenance of the Acquired Assets on or after the Closing Date and programming
costs incurred prior to the Closing Date that relate to periods on or after the
Closing Date.

 

3.2                                 Excluded
Liabilities. Other than the Assumed Liabilities, Buyer shall not assume,
pay, discharge, perform or in any way be responsible or liable for any
liabilities or obligations of Seller (the “Excluded Liabilities”).
Notwithstanding anything to the contrary contained in this Agreement, Buyer
does not assume any liability of Seller related to the ownership, operation,
use or maintenance of the Acquired Assets or the operation of the Systems prior
to the Closing Date or otherwise except those specifically referenced in this
Agreement.

 

ARTICLE IV

Purchase Price

 

4.1                                 Consideration.
The purchase price to be paid by Buyer to Seller for the Acquired Assets shall
be Two Million Four Hundred Thousand Dollars ($2,400,000), subject to
adjustment as set forth in Section 4.3 (the “Purchase Price”).  The Purchase Price represents a payment of
$431.50 for each unit comprising the Properties.

 

4.2                                 Payment
of Purchase Price. Buyer shall pay the Purchase Price as follows:

 

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(a)                                  Two
Million One Hundred Sixty Thousand Dollars ($2,160,000) less an amount (the
“Holdback Amount”) calculated in accordance with the Escrow Agreement in
respect of all third party consents required for the assignment of MDU
Agreements that are not obtained on or prior to the Closing Date will be paid
to Seller at the Closing by wire transfer of immediately available funds to an
account designated by Seller; provided, however, that in no event shall the
Holdback Amount exceed One Million Seven Hundred Sixty Thousand Dollars
($1,760,000).

 

(b)                                 The
sum of Two Hundred Forty Thousand Dollars ($240,000) plus the Holdback Amount
(collectively, the “Escrow Amount”) will be paid to First Midwest Bank (the
“Escrow Agent”) by wire transfer of immediately available funds to an account
designated by Escrow Agent, which funds shall be held by the Escrow Agent and
disbursed by the Escrow Agent pursuant to the terms of an Escrow Agreement in
the form of Exhibit F among Seller, Buyer and the Escrow Agent.

 

4.3                                 Purchase
Price Adjustment.

 

(a)                                  Within
sixty (60) days after the Closing Date, Buyer shall prepare and deliver to
Seller a statement (the “Adjustment Statement”) setting forth Buyer’s good
faith determination as of the Closing Date of (i) the actual number of private
cable subscribers, (ii) the actual number of Internet subscribers and (iii) the
actual number of DIRECTV subscribers, compared to the number of subscribers set
forth in Exhibit C. To the extent the number of subscribers as of the
Closing Date reflected on the Adjustment Statement is less than the number of
subscribers set forth on Exhibit C, the Purchase Price shall be reduced
in accordance with the Escrow Agreement. The Adjustment Statement shall become
final and binding upon both Parties on the tenth (10th) day
following delivery thereof (without counting such day of delivery) to Seller
unless Seller gives written notice of disagreement with the Adjustment
Statement (a “Notice of Disagreement”) to Buyer prior to such date. Any Notice
of Disagreement shall specify in reasonable detail the nature of any
disagreement so asserted and relate solely to the review of the Adjustment
Statement and the calculation of the Purchase Price adjustment. Each of Seller
and Buyer promptly shall provide the other Party with access during normal
business hours to any books, records, working papers or other information in
its possession after the Closing Date reasonably necessary or useful in the
preparation of the Adjustment Statement and Notice of Disagreement.

 

(b)                                 If
the Parties cannot negotiate a mutually acceptable resolution of the proposed
Purchase Price adjustment, Seller and Buyer shall submit to an independent
public accounting firm (the “Independent Accountants”) for review and
resolution all matters arising under this Section 4.3 that remain in
dispute. The Independent Accountants shall be a nationally recognized certified
public accounting firm agreed upon by Seller and Buyer, which firm shall not
have performed services for either Party or their respective affiliates during
the preceding three (3) years. The Independent Accountants shall render a
decision resolving the matters submitted to the Independent Accountants

 

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within thirty (30)
days following submission thereto (or as soon thereafter as reasonably
practicable). The fees and expenses of the Independent Accountants shall be
shared equally by Buyer and Seller.

 

(c)                                  If
a Purchase Price reduction is required pursuant to Section 4.3(a), the
amount of such reduction shall be paid by the Escrow Agent to Buyer from the
Escrow Amount within two (2) business days. 
If the Purchase Price reduction exceeds $240,000, Seller shall pay to
Buyer the balance of the Purchase Price reduction on or prior to the expiration
of such two (2) business day period.  If
the Purchase Price reduction is less than $240,000, the Escrow Agent shall pay
to Seller such difference (together with all interest thereon).  If no Purchase Price reduction is required
to be made pursuant to Section 4.3(b), the Escrow Agent shall release the
$240,000 (together with all interest thereon) to Seller within two (2) business
days.

 

(d)                                 Promptly
following the receipt thereof, Seller shall deliver to Buyer each third party
consent required for the assignment of an MDU Agreement.  Within two (2) business days following
delivery of joint written notice to the Escrow Agent of receipt of each such
consent, the Escrow Agent shall release to Seller the portion of the Holdback
Amount relating to the applicable MDU Agreement (together with all interest
thereon) specified by Buyer and Seller in such joint written notice. If within
ninety (90) days after the Closing Date Seller has not delivered all such
consents to Buyer, within two (2) business days following delivery of joint
written notice thereof to the Escrow Agent, the Escrow Agent shall release to
Buyer in accordance with the Escrow Agreement that portion of the Holdback
Amount relating to the applicable MDU Agreements (together with all interest
thereon).

 

4.4                                 Allocation
of Consideration. No later than ninety (90) days subsequent to the Closing
Date, Buyer and Seller shall use their good faith efforts to agree to the
allocation of the Consideration, the Assumed Liabilities and other relevant
items to individual assets or classes of assets within the meaning of
Section 1060 of the Internal Revenue Code (the “Allocation”). If Buyer and
Seller cannot agree to an Allocation, Buyer and Seller covenant and agree to
file all tax returns consistent with each of Buyer and Seller’s good faith
allocations, unless otherwise required because of a change in applicable law.

 

ARTICLE V

Representations and Warranties of
Seller

 

Seller represents and
warrants to Buyer as follows:

 

5.1                                 Organization,
Standing and Power.  Seller is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Illinois, having the requisite power and authority to own,
lease, operate and transfer its properties, including the Acquired Assets, and
to conduct its business as currently conducted. Seller is qualified to do
business and is in good standing in each state in which the nature of the
business conducted by it in such state requires such qualification or
registration, except where the failure to be so qualified would not 

 

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reasonably be expected to
have a Material Adverse Effect (as hereinafter defined).

 

5.2                                 Authority.
Seller has all corporate power and authority necessary to execute this
Agreement, the Escrow Agreement, the Bill of Sale, Assignment and Assumption
Agreement and the Lease (such agreements, together with the Employment
Agreement, the Stock Option Agreement, the Consulting Agreement and the
Subscription Agreement, being collectively referred to herein as the
“Transaction Documents”) and to consummate the transactions contemplated hereby
and thereby. The execution and delivery of the Transaction Documents to which
Seller is a party and the consummation by Seller of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action. This Agreement constitutes, and the other Transaction
Documents to which Seller is a party (when executed and delivered by Seller)
will constitute, valid and binding obligations of Seller, enforceable against
Seller in accordance with their respective terms, except as such enforceability
may be limited by bankruptcy, insolvency, reorganization, moratorium, or
similar laws of general application affecting creditors’ rights and the
application of general principles of equity.

 

5.3                                 No
Breach or Conflict. Neither the execution, delivery and performance of the
Transaction Documents to which Seller is a party nor the consummation of the
transactions contemplated hereby and thereby will (i) cause Seller to breach
any material contract, law or court order that is applicable to the Systems,
(ii) conflict with or result in a violation of Seller’s Articles of
Incorporation or Bylaws, (iii) subject to obtaining the consents referred to in
Section 5.4, conflict with or result in a breach of any Acquired Contract,
or (iv) result in the creation of any material lien, or give to others (other
than Buyer) any interest or rights, in or with respect to any of the Acquired
Assets.

 

5.4                                 Consents.
Schedule 5.4 contains a list of (i) each person or entity whose
consent is required to permit Seller to assign to Buyer an MDU Agreement or
other Acquired Contract, and (ii) each person or entity whose acknowledgement
will be requested to permit Seller to assign to Buyer an MDU Agreement or other
Acquired Contract.

 

5.5                                 Receivables/Customer
Deposits. All of Seller’s outstanding accounts receivable were created in
the ordinary course of business consistent with past practice. A list of such
accounts receivable which identifies the account debtor and the amount of each
such receivable is set forth in Schedule 5.5(a). A list of customer
deposits held by Seller which identifies each customer and the amount of such
deposit is set forth in Schedule 5.5(b).

 

5.6                                 Title,
Encumbrances and Quality. Except as set forth on Schedule 5.6,
Seller has good and marketable title to all of the Acquired Assets and owns all
of the Acquired Assets free and clear of all liens and encumbrances. All
tangible Acquired Assets are in good operating condition and repair, normal
wear and tear excepted.

 

5.7                                 Claims,
Litigation and Disputes. There is no claim, litigation, action or legal proceeding
pending before any governmental entity or, to Seller’s knowledge, threatened,
affecting (i) Seller’s ability to perform its obligations under the Transaction
Documents to which it is a party, (ii) the rights granted to Seller under the
Acquired Contracts, (iii) the financial

 

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condition or business
operations of the Systems or (iv) the ownership, use, maintenance or operation
of the Acquired Assets and the Systems by Buyer, that in any such case if
determined adversely to Seller, would reasonably be expected to have a Material
Adverse Effect on Seller’s ability to consummate the transactions contemplated
hereby. “Material Adverse Effect” means a material adverse effect on the
financial condition or business operations of the Systems or the Acquired
Assets, taken as a whole.

 

5.8                                 MDU
Agreements. A list of all MDU Agreements currently in effect is set forth
in Exhibit A. Except as set forth in Schedule 5.8, or except
as would not have a Material Adverse Effect, (i) each MDU Agreement is valid
and binding upon Seller and in full force and effect, and (ii) neither Seller
nor, to the knowledge of Seller, any other party to an MDU Agreement is in
material breach thereof or default thereunder and there does not exist, to
Seller’s knowledge, any event, occurrence, condition, or act that, with the
giving of notice, the lapse of time, or the happening of any further event or
condition, would become a material breach or default under an MDU Agreement.
Except as set forth in Schedule 5.8, as of the date hereof, Seller
has not received any verbal or written notice a material breach of or default
under an Acquired Contract by Seller or of the intention of any party to
terminate any Acquired Contract.

 

5.9                                 Compliance
With Laws. The Systems are in compliance with all material laws applicable
to the Systems, except where the failure to be in compliance would not have a
Material Adverse Effect. Seller has not received any written notice within the
past twelve (12) months relating to violations or alleged violations or
defaults under any applicable rule, regulation, code, law or court order. No
Federal Communications Commission licenses are required for the operation of
the Systems.

 

5.10                           Taxes,
Fees and Utilities.  

 

(a)                                  All
tax returns required to be filed by Seller prior to the Closing Date have or
will be timely filed, all such tax returns were or will be true, correct and
complete in all material respects when filed, and all taxes shown as due and
payable on such tax returns have been or will be paid by Seller when required
by applicable law, and there are no tax liens upon any of the Systems.

 

(b)                                 With
respect to the operation of the Systems, Seller has paid in full all applicable
license fees and utility bills.

 

5.11                           No
Material Adverse Change. There has been no material adverse change in the
financial condition or results of operations of Seller since November 20,
2003.

 

5.12                           Free
Services. Schedule 5.12 is a materially accurate list of
persons or entities to whom Seller has agreed to provide free video or Internet
services, complimentary accounts or demonstration accounts.

 

5.13                           Brokerage
Fees. Except for Faurot & Associates, Inc., whose fee will be paid by
Seller pursuant to a separate agreement, no person or other entity acting on
behalf of Seller is

 

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entitled to any brokerage
or finder’s fee or commission in connection with the transactions contemplated
by this Agreement.

 

5.14                           Conduct
of Business. Since April 14, 2004, the date on which Seller executed a
letter agreement with respect to the transactions contemplated hereby, Seller
has operated the Systems substantially in the manner as theretofore conducted.
Since such date, Seller has used commercially reasonable efforts to preserve
existing business relationships with its subscribers, property owners,
suppliers, employees and others having business relationships with Seller in
connection with the Systems, has preserved and maintained the Acquired Assets
on a basis consistent, in all material respects, with past practice and kept
the tangible Acquired Assets, in all material respects, in good working
condition, ordinary wear and tear excepted.

 

ARTICLE VI

Representations and Warranties of
Buyer

 

Buyer represents and
warrants to Seller as follows:

 

6.1                                 Organization,
Standing and Power. Buyer is a corporation duly organized, validly existing
and in good standing under the laws of the state of Washington, has the
requisite power and authority to conduct its business as currently conducted
and as contemplated by this Agreement, and to own, lease, operate and hold the
Acquired Assets. Buyer is duly qualified or registered and in good standing in
every jurisdiction where the character of the properties owned or leased by, or
the nature of the business conducted by, Buyer makes qualification to do
business as a foreign entity necessary, except such jurisdictions where a
failure to so qualify could not reasonably be expected to have a Material
Adverse Effect upon Buyer, its properties or business.

 

6.2                                 Authority.
Each of Buyer and MDU Communications International, Inc. (“Parent”) has all
corporate power and authority to execute the Transaction Documents to which it
is a party and to consummate the transactions contemplated hereby and thereby.
The execution and delivery by each of Buyer and Parent of the Transaction
Documents to which it is a party and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action. This Agreement constitutes, and, upon execution, the other
Transaction Documents to which Buyer or Parent is a party will constitute,
valid and binding obligations of Buyer or Parent, as the case may be,
enforceable against Buyer or Parent, as the case may be, in accordance with
their respective terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium, or similar laws of general
application affecting creditors’ rights and the application of general principles
of equity.

 

6.3                                 No
Breach or Conflict. The execution, delivery and performance by each of
Buyer and Parent of the Transaction Documents to which it is and the
consummation of the transactions contemplated hereby and thereby will not (i)
cause Buyer or Parent to violate any law or court order, (ii) conflict with or
result in a violation of the Certificate or Articles of Incorporation or Bylaws
of Buyer or Parent, or (iii) conflict with or result in a material breach of
any of the terms, conditions or provisions of any contract to which Buyer or
Parent is a party or by which it may be

 

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bound, or constitute a
default thereunder, which breach, conflict, default or creation would
materially affect Buyer’s or Parent’s ability to perform its obligations under
the Transaction Documents to which it is a party.

 

6.4                                 Claims,
Litigation and Disputes. There is no claim or litigation or investigative
proceeding pending or, to the knowledge of Buyer, threatened against Buyer or
Parent which would materially affect Buyer’s or Parent’s ability to perform its
obligations under the Transaction Documents to which it is a party.

 

6.5                                 Brokerage
Fees. Except for Morgan, Joseph & Co. Inc, whose fee will be paid by
Buyer pursuant to a separate agreement, no person or other entity acting on
behalf of Buyer is entitled to any brokerage or finder’s fee or commission in
connection with the transactions contemplated by this Agreement.

 

6.6                                 Financial
Capability. Buyer has or has available to it sufficient funds to pay the
Purchase Price and otherwise consummate the transactions contemplated hereby.

 

ARTICLE VII

Conditions to Seller’s Obligations

 

The obligation of Seller
to consummate transactions contemplated hereby shall be subject to the
fulfillment, prior to or at Closing, of each of the following conditions unless
waived by Seller in writing:

 

7.1                                 Buyer’s
Representations and Warranties. Each representation and warranty made by
Buyer shall be true and correct in all material respects (except for those
representations that contain a materiality qualification, which representations
shall be true and correct) on and as of the Closing Date with the same effect
as though each such representation or warranty had been made or given on and as
of the Closing Date, other than representations and warranties made as of a
specific date, which shall be true and correct as of such specific date.

 

7.2                                 Buyer’s
Performance.  Buyer shall have
performed and complied in all material respects with all of its covenants,
agreements and obligations hereunder through the Closing Date.

 

7.3                                 Buyer’s
Deliveries. Buyer shall have paid the Purchase Price and delivered to
Seller the agreements and other documents listed in Article XI hereof.

 

ARTICLE VIII

Conditions to Buyer’s Obligations

 

The obligation of Buyer
to consummate the transactions contemplated hereby shall be subject to the
fulfillment, prior to or at Closing, of each of the following conditions unless
waived by Buyer in writing:

 

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8.1                                 Seller’s
Representations and Warranties. Each representation and warranty made by
Seller shall be true and correct in all material respects (except for those
representations that contain a materiality qualification, which representations
shall be true and correct) on and as of the Closing Date with the same effect
as though each such representation and warranty had been made or given on and
as of the Closing Date, other than representations and warranties made as of a
specific date, which shall be true and correct as of such specific date.

 

8.2                                 Seller’s
Performance. Seller shall have performed and complied in all material
respects with all of its covenants, agreements and obligations hereunder
through the Closing Date.

 

8.3                                 Seller’s
Deliveries. Seller shall have delivered to Buyer the agreements and other
documents listed in Article X hereof.

 

8.4                                 Consents.  Seller shall have delivered to Buyer all
consents and acknowledgements set forth on Schedule 5.4, in a form
acceptable to Buyer, required or requested for the assignment to Buyer of the
MDU Agreements and the other Acquired Contracts.

 

ARTICLE IX

Closing

 

9.1                                 Closing.
The closing of the transactions contemplated by this Agreement (the “Closing”)
shall take place at Buyer’s offices at 60-D Commerce Way, Totowa, New Jersey or
at such other location as may be mutually agreed upon by the parties at 10:00
a.m., local time, on May 20, 2004 or on such other date or such other time as
agreed to by the Parties.

 

9.2                                 Further
Assurances. Subject to the terms and conditions of this Agreement, the
Parties will use all reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated by the Transaction Documents and the
other documents and instruments to be delivered pursuant hereto.

 

9.3                                 Bulk
Sales Laws. Buyer and Seller waive compliance with applicable laws under
any version of Article 6 of the Uniform Commercial Code adopted by any
state or any similar law relating to the sale of inventory, equipment or other
assets in bulk in connection with the sale of the Systems and the other
Acquired Assets.

 

9.4                                 Transition.  Buyer and Seller shall reasonably cooperate
subsequent to the Closing Date to effectuate a smooth transition of the
Acquired Assets and cutover of services to Buyer’s systems.

 

 

13

 

ARTICLE X

Seller’s Deliveries at Closing

 

10.1         At the Closing, Seller shall deliver to
Buyer the following:

 

(a) Bring-Down
Certificate. A bring-down certificate executed by an executive officer of
Seller certifying that the conditions specified in Sections 8.1 and 8.2 have
been satisfied.

 

(b) Secretary’s
Certificate. A certificate executed on behalf of Seller by Seller’s
Secretary certifying as to the incumbency, and authenticating the signatures
of, officers executing this Agreement and certificates delivered hereunder on
behalf of Seller, and certifying as to the adoption and continuing effect of
appropriate resolutions authorizing Seller’s execution, delivery and
performance of this Agreement and the other agreements contemplated hereby.

 

(c) Bill of
Sale, Assignment and Assumption Agreement. A Bill of Sale, Assignment and
Assumption Agreement in the form attached hereto as Exhibit G duly
executed by Seller.

 

(d) Employment
Agreement. An Employment Agreement between Buyer and Tom Looney in the form
attached hereto as Exhibit I duly executed by Tom Looney.

 

(e) Stock
Option Agreement. A Stock Option Agreement between Parent and Tom Looney in
the form attached hereto as Exhibit J duly executed by Tom Looney.

 

(f) Escrow
Agreement. An Escrow Agreement among Buyer, Seller and the Escrow Agent in
the form attached hereto as Exhibit F duly executed by Seller.

 

(g) Subscription
Agreement. A Subscription Agreement between Parent and Cablecom, in the
form attached hereto as Exhibit K duly executed by Cablecom.

 

(h) Lease.  A Lease between Buyer and the owner of the
property relating to the use of Seller’s Headquarters in the form attached
hereto as Exhibit L duly executed by the property owner.

 

(i) Consulting
Agreement.  A Consulting Agreement
between Buyer and Cablecom in the form attached hereto as Exhibit M duly
executed by Cablecom.

 

(j) Acquired
Contracts, Acquired Records and Intangible Acquired Assets.  If not previously delivered to Buyer, or
unless other arrangements for delivery have been made, all original Acquired
Contracts, Acquired Records and documents embodying the intangible Acquired
Assets.

 

(k)  Release of Liens. Release of all
Liens relating to the Acquired Assets.

 

14

 

ARTICLE XI

Buyer’s Deliveries at Closing

 

11.1 At Closing, Buyer
shall deliver to Seller the following (or to the Escrow Agent in the case of
(b) below):

 

(a) Purchase
Price. Payment of the Purchase Price in accordance with
Section 4.2(a).

 

(b) Escrow
Amount. Payment of the Escrow Amount to the Escrow Agent in accordance with
Section 4.2(b).

 

(c) Bring-Down
Certificate. A bring-down certificate executed by an executive officer of
Buyer certifying that the conditions specified in Sections 7.1 and 7.2 have
been satisfied.

 

(d) Secretary’s
Certificate. A certificate executed on behalf of Buyer by Buyer’s Secretary
certifying as to the incumbency, and authenticating the signatures of, officers
executing this Agreement and certificates delivered hereunder on behalf of
Buyer, and certifying as to the adoption and continuing effect of appropriate
resolutions authorizing Buyer’s execution, delivery and performance of this
Agreement.

 

(e) Bill of
Sale; Assignment and Assumption Agreement. A Bill of Sale, Assignment and
Assumption Agreement in the form attached hereto as Exhibit G duly
executed by Buyer.

 

(f) Employment
Agreement. An Employment Agreement between Buyer and Tom Looney in the form
attached hereto as Exhibit I duly executed by Buyer.

 

(g) Stock
Option Agreement. A Stock Option Agreement between Parent and Tom Looney in
the form attached hereto as Exhibit J duly executed by Parent.

 

(h) Escrow
Agreement. An Escrow Agreement among Buyer, Seller and the Escrow Agent in
the form attached hereto as Exhibit F duly executed by Buyer.

 

(i) Subscription
Agreement. A Subscription Agreement between Parent and Cablecom in the form
attached hereto as Exhibit K duly executed by Parent.

 

(j) Lease.  A Lease between Buyer and the owner of the
property relating to the use of Seller’s Headquarters in the form attached
hereto as Exhibit L duly executed by Buyer.

 

(k) Consulting
Agreement.  A Consulting Agreement
between Buyer and Cablecom in the form attached hereto as Exhibit M duly
executed by Buyer.

 

(l) Stock
Certificates. Stock Certificates evidencing the shares of common stock of
Parent issuable pursuant to the Subscription Agreement.

 

15

 

ARTICLE XII

Tax Matters

 

12.1                           Filing
of Tax Returns. In connection with the preparation and filing of tax
returns as of and after the Closing Date, Buyer and Seller shall cooperate and
exchange information reasonably required to accomplish the matters contemplated
by this Article.

 

12.2                           Access
to Books and Records. After the Closing Date, upon reasonable notice, each
Party will give to the representatives, employees, counsel and accountants of
the other Party, access, during normal business hours, to records relating to
periods prior to or including the Closing Date, and will permit such persons to
examine and copy such records, in each case to the extent reasonably requested
by the other Party in connection with tax and financial reporting matters
(including any tax returns and related information), audits, legal proceedings
and governmental investigations (including such financial information and any receipts
evidencing payment of taxes as may be requested by Seller to substantiate any
claim for tax credits or refunds); provided,
however, that nothing herein will obligate either Party to take
actions that would unreasonably disrupt the normal conduct of its business or
violate the terms of any contract to which it is a party or to which any of its
assets is subject. Seller and Buyer will cooperate with each other in the
conduct of any tax audit or similar proceedings involving or otherwise relating
to the operation of the Systems or the ownership of the Acquired Assets prior
to the Closing Date (or the income therefrom or assets thereof) with respect to
any tax.

 

12.3                           Allocation
of Liabilities for Taxes.  Seller
shall be liable for taxes arising from or pertaining to the operation of the
Systems or ownership of the Acquired Assets for all taxable periods (or
portions thereof) ending prior to the Closing Date, and Buyer shall be liable
for taxes arising from or pertaining to the operation of the Systems or
ownership of the Acquired Assets for all taxable periods (or portions thereof)
ending on or after the Closing Date.

 

ARTICLE XIII

Indemnification

 

13.1                           Definitions;
Survival of Representations and Warranties.  For purposes of this Agreement, (i) “Indemnification Payment”
means the amount of Indemnifiable Losses required to be paid pursuant to this
Agreement, (ii) “Indemnitee” means any person or entity entitled to
indemnification under this Agreement, (iii) “Indemnifying Party” means the
Party required to provide indemnification under this Agreement, and (iv)
“Indemnifiable Losses” means any losses, liabilities, damages, costs and
expenses (including reasonable attorneys’ fees and expenses) actually incurred
by an Indemnitee.

 

(a)                                  Each
of the representations and warranties contained in Article V and
Article VI will terminate, without further action, on the date which is
two (2) years following the Closing Date. All covenants of the Parties,
including those relating to the payment of the Assumed Liabilities by Buyer,
the payment of the Excluded Liabilities by

 

16

 

Seller and the
indemnification obligations contained in this Article XIII will survive
the Closing Date and remain in full force and effect indefinitely or until the
expiration of the applicable statute of limitation.

 

(b)                                 Unless
a claim for indemnification with respect to any alleged breach of any
representation or warranty is asserted by notice given as herein provided that
specifically identifies a particular breach and the underlying facts relating
thereto, which notice is given within the applicable period of survival for
such representation or warranty, such claim may not be pursued and is
irrevocably waived after such time. Without limiting the generality or effect
of the foregoing, no claim for indemnification with respect to any
representation or warranty will be deemed to have been properly made except (i)
to the extent it is based upon a Third Party Claim (as hereinafter defined),
such claims is made prior to the expiration of the survival period for such
representation or warranty, or (ii) to the extent based on Indemnifiable Losses
actually incurred by an Indemnitee, such claim is made prior to the expiration
of the survival period for such representation or warranty.

 

13.2                           Indemnification.
Seller and Buyer shall cooperate with each other with respect to resolving any
claim or liability with respect to which one Party is obligated to indemnify
the other Party hereunder, including by making commercially reasonable efforts
to mitigate or resolve any such claim or liability.

 

(a)                                  Following
the Closing and subject to the other sections of this Article XIII, Seller
will indemnify, defend and hold harmless Buyer and its respective directors,
officers, and agents from and against all Indemnifiable Losses relating to,
resulting from or arising out of (i) any inaccuracy in any of the
representations and warranties made by Seller herein, (ii) any breach by Seller
of any covenant or agreement of Seller contained in this Agreement, which
covenant or agreement requires performance by Seller at or after the Closing,
and (iii) any of the Excluded Liabilities.

 

(b)                                 Following
the Closing and subject to the other sections of this Article XIII, Buyer
will indemnify, defend and hold harmless Seller and its respective directors,
officers, and agents from and against all Indemnifiable Losses relating to,
resulting from or arising out of (i) any inaccuracy in any of the
representations or warranties made by Buyer, (ii) a breach by Buyer of any
covenant or agreement of Buyer contained in this Agreement, which covenant or
agreement requires performance by Buyer at or after the Closing, (iii) any of
the Assumed Liabilities, (iv) the ownership, maintenance or use of the Acquired
Assets on or after the Closing and (v) the operation of the Systems on or after
the Closing Date.

 

13.3                           Limitations
on Indemnification. The indemnification provided for in Section 13.2
is subject to the following limitations:

 

(a)                                  The
aggregate amount of all Indemnification Payments made by Seller pursuant to
clause (i) of Section 13.2 shall not exceed $1,200,000.00.

 

17

 

(b)                                 Neither
Party shall not be liable to indemnify any Indemnitee pursuant to Section 13.2
unless and until the Indemnitees have collectively suffered aggregate
Indemnifable Losses under such clauses of more than $37,500 (the “Basket”) (at
which point, subject to the other limitations herein, such Party shall be
liable for all Indemnifiable Losses in excess of the Basket).

 

(c)                                  Any
payment made by Seller to an Indemnitee pursuant to clause (i) of
Section 13.2 shall be net of any tax savings insurance proceeds and
proceeds from third parties recovered by and paid to such Indemnitee.

 

13.4                           Defense
of Claims.  If any Indemnitee
receives notice of the assertion of any claim or of the commencement of any
action or proceeding by any entity that is not a party to this Agreement (a
“Third Party Claim”) against such Indemnitee, with respect to which an
Indemnifying Party is obligated to provide indemnification under this
Agreement, the Indemnitee will give such Indemnifying Party reasonably prompt
written notice thereof, but in any event not later than ten (10) calendar days
after receipt of notice of such Third Party Claim; provided, however, that the failure of the Indemnitee to
notify the Indemnifying Party shall only relieve the Indemnifying Party from
its obligation to indemnify the Indemnitee pursuant to this Article to the
extent that the Indemnifying Party is materially prejudiced by such failure
(whether as a result of the forfeiture of substantive rights or defenses or
otherwise). Upon receipt of notification of a Third Party Claim, the
Indemnifying Party shall be entitled, upon written notice to the Indemnitee, to
assume the investigation and defense thereof. Whether or not the Indemnifying
Party elects to assume the investigation and defense of any Third Party Claim,
the Indemnitee shall have the right to employ separate counsel and to participate
in the investigation and defense thereof; provided,
however, that the Indemnitee shall pay the fees and disbursements of
such separate counsel unless (i) the employment of such separate counsel has
been specifically authorized in writing by the Indemnifying Party, (ii) the
Indemnifying Party has failed to assume the defense of such Third Party Claim
within a reasonable time after receipt of notice thereof, or (iii) the named
parties to the proceeding in which such claim, demand, action or cause of action
has been asserted include both the Indemnifying Party and such Indemnitee and,
in the reasonable judgment of counsel to such Indemnitee, there exists one or
more defenses that may be available to the Indemnitee that are in conflict with
those available to the Indemnifying Party. Notwithstanding the foregoing, the
Indemnifying Party shall not be liable for the fees and disbursements of more
than one counsel for all Indemnitees in connection with any one proceeding or
any similar or related proceedings arising from the same general allegations or
circumstances. Without the prior written consent of the Indemnitee, the
Indemnifying Party will not enter into any settlement of any Third Party Claim
that would lead to liability or create any financial or other obligation on the
part of the Indemnitee unless such settlement includes as an unconditional term
thereof the release of the Indemnitee from all liability in respect of such
Third Party Claim. If a settlement offer solely for money damages is made by the
applicable third party claimant, and the Indemnifying Party notifies the
Indemnitee in writing of the Indemnifying Party’s willingness to accept the
settlement offer and pay the amount called for by such offer without
reservation of any rights or defenses against the Indemnitee, the Indemnitee
may continue to contest such claim, free of any participation by the
Indemnifying Party, and the

 

18

 

amount of any ultimate
liability with respect to such Third Party Claim that the Indemnifying Party
has an obligation to pay hereunder shall be limited to the lesser of (A) the
sum of the settlement offer that the Indemnitee declined to accept plus any
Indemnifiable Losses in excess of those relating to the Third Party Claim
through the date of its rejection of the settlement offer or (B) the aggregate
Indemnifiable Losses of the Indemnitee with respect to such claim.

 

13.5                           Exclusive
Remedy.  From and after the Closing,
neither Party shall be liable or responsible in any manner whatsoever to the
other Party, whether for indemnification or otherwise, except for
indemnification as expressly provided in this Article XIII, which provides
the exclusive remedy and cause of action of the parties hereto with respect to
any matter arising out of, or in connection with, this Agreement or the
transactions contemplated hereby; provided, however, that this
Section 13.5 shall not limit or otherwise restrict (i) any remedies for
actual fraud by either Party, (ii) any remedies for the breach of
Section 14.1, or (iii) the right of a Party to seek specific performance
of the other Party’s obligations herein.

 

ARTICLE XIV

Other
Agreements

 

14.1                           Covenant
Not to Compete.  For a period of
five (5) years following the Closing Date, Seller, its officers, directors,
shareholder and affiliates, agree not to compete with Buyer, its subsidiaries
and affiliates in providing entertainment, information or communications
services to the multi-family marketplace (including apartments, condominiums,
cooperatives, college/university residences, senior centers and gated
communities) in the Chicago metropolitan area at any time during such period.

 

14.2                           Seller’s
Employees.  Seller shall make
available to Buyer the services of its current employees for so long as Buyer
reasonably requests, and Buyer shall reimburse Seller promptly upon request
(which shall be delivered to Buyer not more than twice each month) the actual
costs incurred by Seller for compensation paid and benefits provided to such
employees.

 

ARTICLE XV

Miscellaneous

 

15.1                           Expenses.
Except as otherwise expressly provided for in this Section 15.1 or
elsewhere in this Agreement, each Party hereto shall pay its own expenses and
costs relating to the negotiation, execution and performance of this Agreement.
Seller and Buyer shall bear equally the fees and expenses of the Escrow Agent.

 

15.2                           Governing
Law. This Agreement shall be governed by the laws of the State of Illinois
regardless of the laws that might otherwise govern under applicable conflicts
of law principles. Buyer and Seller irrevocably submit to the exclusive
jurisdiction of any Illinois state court located in Cook County, Illinois and
the United States District Court for the Northern District of Illinois.

 

15.3                           Notices.
All notices, requests, demands and other communications hereunder shall be in
writing and shall be deemed to have been duly given when personally delivered
or

 

19

 

transmitted by facsimile,
or five (5) days after mailed, certified or registered mail, with postage
prepaid addressed as follows (or to such other person or address as the Party
to receive such notice may have designated from time to time by notice in
writing pursuant hereto):

 

	
  If to Seller:

  	
   

  	
  Direct Satellite, Inc.

  
	
   

  	
   

  	
  Attn: Tom Looney

  
	
   

  	
   

  	
  3825 North Elston
  Avenue

  
	
   

  	
   

  	
  Chicago, Illinois 60618

  
	
   

  	
   

  	
  Telephone: (773)
  539-6000

  
	
   

  	
   

  	
  Fax: (773) 583-0281

  
	
   

  	
   

  	
   

  
	
  With a copy to:

  	
   

  	
  Schwartz, Cooper,
  Greenberger & Krauss Chartered

  
	
   

  	
   

  	
  180 N. LaSalle Street,
  Suite 2700

  
	
   

  	
   

  	
  Chicago, Illinois 60601

  
	
   

  	
   

  	
  Attn: William M.
  Holzman

  
	
   

  	
   

  	
  Telephone: (312)
  516-4475

  
	
   

  	
   

  	
  Fax: (312) 264-2498

  
	
   

  	
   

  	
   

  
	
  If to Buyer:

  	
   

  	
  MDU Communications
  (USA) Inc.

  
	
   

  	
   

  	
  60-D Commerce Way

  
	
   

  	
   

  	
  Totowa, New Jersey
  07512

  
	
   

  	
   

  	
  Attn: Brad Holmstrom

  
	
   

  	
   

  	
  Tel: (973) 237-9499

  
	
   

  	
   

  	
  Fax: (973) 237-9243

  

 

15.4                           Counterparts;
Third Party Beneficiaries. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument. No provisions of this
Agreement, other than as expressly provided in the indemnification provision of
Article XIII is intended to (i) confer upon any Person other than the
Parties hereto and their successors and permitted assigns, any rights or
remedies hereunder, (ii) relieve or discharge the obligation or liability of
any third party or (iii) give any third party any right of subrogation or
action against Seller or Buyer.

 

15.5                           Entire
Agreement. This Agreement embodies the entire agreement and understanding
between Seller and Buyer with respect to the subject matter hereof and
supersedes all prior agreements and understandings related to the subject
matter hereof. There are no representations, warranties, covenants, promises or
agreements on the part of either Party to the other hereto which are not
explicitly set forth herein.

 

15.6                           Modifications.
Any modification, amendment or waiver of or with respect to any provision of
this Agreement or any agreement, instrument or document delivered pursuant
hereto shall not be effective unless it shall be in writing and signed by
Seller and Buyer and shall designate specifically the terms and provisions so
modified.

 

15.7                           Assignment
and Binding Effect. This Agreement shall be binding upon and inure

 

20

 

to the benefit of the
Parties hereto and their respective successors and permitted assigns, but
neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by Buyer, on the one hand, or Seller, on the other
hand, without the prior written consent of the other.

 

15.8                           Schedules
/ Exhibits. Any matter disclosed on any one Schedule or Exhibit hereto
shall be deemed to be disclosed on all other Schedules or Exhibits hereto.

 

15.9                           Public
Announcements. Seller and Buyer will consult with each other before
issuing, and will provide each other the opportunity to review and comment
upon, any press release or other public statements (or relevant portions
thereof) relating to the transactions contemplated by this Agreement. Neither
party shall issue any such press release or make any such public statement
prior to obtaining the consent of the other party, except as may be required by
applicable law, court process or by obligations pursuant to any listing
agreement with any national securities exchange. Each Party also agrees that it
will not, directly or indirectly, except to the extent required by law,
regulatory process or proceeding or court order (provided prior timely notice
has been provided to the other Party to permit such Party to limit such
disclosure or to seek appropriate protective orders), make use of or divulge,
or permit any of its agents or employees to make use of or divulge, any terms
or conditions of this Agreement. The obligations contained herein are in
addition to and independent of the obligations contained in the Non-Disclosure
Agreement previously executed by Seller and Buyer.

 

 

[The
remainder of this page has been intentionally left blank.]

 

21

 

IN WITNESS WHEREOF, the
Parties, acting through their duly authorized representatives, have executed
this Agreement as of the date first above written.

 

 

	
   

  	
  DIRECT SATELLITE, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MDU COMMUNICATIONS
  (USA) INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

22Exhibit 10.1

 

Rule 10b5-1 Stock Selling Plan

Water Pik Technologies, Inc. Common Stock

 

THIS STOCK SELLING PLAN (the “Plan”) is executed by
                          
(“Executive”), an executive officer and stockholder of Water Pik Technologies,
Inc. (“Water Pik”) to meet the requirements of Rule 10b5-1 under the Securities
Exchange Act of 1934, as amended.

 

Recitals

 

A. Pursuant to the terms of the Water Pik Stock Acquisition and
Retention Program (“SARP”) provisions of the Water Pik Employee Stock Purchase
Plan (“ESPP”), Executive purchased shares of Water Pik Common Stock (the
“Purchased Shares”) through loans from Water Pik (the “SARP Loans”) and
received matching grants of restricted shares of Water Pik Common Stock (the
“Restricted Shares”).  All terms not
otherwise defined in this Plan shall have the meanings set forth in the
ESPP/SARP plan document.

 

B. Prior to entering into this Plan, Executive fully repaid all amounts
owing under his SARP Loans to Water Pik by tendering a portion of his Purchased
Shares to Water Pik, as permitted under the terms of the ESPP/SARP plan
document.

 

C. Pursuant to the terms of the ESPP/SARP plan document, Executive is
permitted to tender Restricted Shares, with such Restricted Shares being valued
at the average of the high and low trading prices of Water Pik Common Stock on
the business day preceding the tender of such Restricted Shares by Executive
(“Fair Market Value”, as more particularly defined in the ESPP/SARP plan
document), to satisfy any withholding or other tax required by law to be
withheld by Water Pik with respect to any income recognized upon the lapse of
restrictions applicable to the Restricted Shares.

 

D. Since the receipt of Restricted Shares by Water Pik for the
foregoing purposes does not require involvement of a broker or other
third-party trustee, Water Pik has agreed to administer this Plan according to
its terms without acknowledging any influence from Executive other than as
permitted under this Plan.

 

Agreement

 

In consideration of the foregoing, Executive agrees to enter into this
Plan in accordance with the following terms and conditions:

 

1.  Trading Plan.

 

Executive requests that Water Pik execute the Trading Plan set forth on
Annex A with respect to Executive’s Restricted Shares.  No transactions may occur under this Plan
until at least thirty (30) days have elapsed following the Effective Date.

 

1

 

2.  Term.

 

This Plan shall become effective on the date executed by the Executive
(the “Effective Date”).  This Plan shall
be terminated and/or suspended as follows:

 

(a)           Termination.  This Plan shall terminate on the earlier to
occur of:

 

(i)                                                          
(date);

(ii)                                  Executive’s death;

(iii)                               one day prior to
completion of any merger, acquisition or reorganization in which Water Pik’s
stock is exchanged or converted;

(iv)                              satisfaction of all
trading objectives set forth in Annex B; or

(v)                                 written notice by the
Executive to Water Pik; provided, however, that such notice may not be provided
earlier than six(6) months after the Effective Date of this Plan or during any
“blackout period” with respect to trading in Water Pik stock.

 

(b)          Suspension.  This Plan shall be suspended in the event of:

 

(i)                                     any sale or tender
which would violate Section 16 or Rule 144 of the Securities and Exchange
Commission (“SEC”) or any other federal or state law or regulation;

(ii)                                  a vote of Water Pik’s
Board of Directors to suspend all trading in Water Pik Common Stock; or

(iii)                               the commencement of a
secondary public offering by Water Pik, in which case the suspension shall last
for the duration of any insider “blackout” period imposed.

 

3.  Covenants.

 

Executive acknowledges and agrees that he/she:

 

(a)                                                        is
entering into this Plan in good faith,

(b)                                                       is
not currently in possession of any material non-public information regarding
Water Pik,

(c)                                                        will
not exert any influence over how, when or whether to effect sales or tenders of
shares under this Plan subsequent to the Effective Date and during the time
period the Plan remains in effect,

(d)                                                       is
not, to the best of his or her knowledge, subject to any contractual
restriction or other obligation that would prevent Water Pik from administering
this Plan in accordance with its terms, and

(e)                                                        is
subject to Water Pik’s insider trading policy, as supplemented and amended from
time to time (the “Policy”).

 

2

 

4.  Filing of Plan.

 

Executive agrees to file a copy of this Plan with the Secretary of
Water Pik.  Executive further
acknowledges and agrees that a copy of this Plan may be filed by Water Pik with
the SEC and disclosed in reports filed by Water Pik with the SEC in the event
Water Pik determines it is necessary or prudent to do so.

 

5.  Advice.

 

Executive acknowledges responsibility for consulting with Executive’s
own advisors as to the legal, tax, business, financial and related aspects of,
and has not relied upon Water Pik or any person affiliated with Water Pik in
connection with, Executive’s adoption and implementation of this Plan.  Executive acknowledges that Water Pik is not
acting as a fiduciary or an advisor for Executive.

 

IN WITNESS WHEREOF, this Plan is executed and effective as of the date
set forth under Executive’s signature below.

 

	
   

  	
  EXECUTIVE

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (type name here)

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Dated:

  	
   

  	
   

  
				

 

Receipt of this Plan is acknowledged

as of
                                

Water Pik Technologies, Inc.

 

	
  By:

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
						

 

 

STATE OF 

COUNTY OF 

 

On this        day of
                    ,
appeared before me in person the above-named person,
                                    ,
who acknowledged the above to be his/her signature and that he/she signed the
above instrument as his voluntary act and deed, and for the uses and purposes
therein set forth.

 

	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Notary Public

  
	
   

  	
   

  	
   

  
	
  (seal)

  	
   

  	
  My Commission expires:

  	
   

  	
   

  
						

 

3

 

Annex A

 

Trading Plan

For

(name of
executive)

 

4

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